Download Chapter 5 Quiz

Chapter 5 Quiz
Correct Answers are marked with an “*”.
1. Demand is said to be elastic if
a. the price of the good responds substantially to changes in
demand.
b. demand shifts substantially when income or the expected future
price of the good changes.
c. buyers do not respond much to changes in the price of the
good.
*d. buyers respond substantially to changes in the price of the
good.
2. When the local used bookstore prices economics books at $15.00 each,
they generally sell 70 books per month. If
they lower the price to $7.00, sales increase to 90 books per month.
Given this information, we know that the price
elasticity of demand for economics books is about
a. 2.91, and an increase in price from $7.00 to $15.00 results in
an increase in total revenue.
b. 2.91, and an increase in price from $7.00 to $15.00 results in
a decrease in total revenue.
*c. 0.34, and an increase in price from $7.00 to $15.00 results
in an increase in total revenue.
d. 0.34, and an increase in price from $7.00 to $15.00 results in
a decrease in total revenue.
3. In any market, total revenue is calculated by taking the price of
the good and
a. dividing it by the price elasticity of demand.
b. multiplying it by the price elasticity of demand.
*c. multiplying it by the quantity of the good.
d. multiplying it by the quantity of the good and then
subtracting the costs of production.
4. Which of the following would exhibit the highest price elasticity of
demand?
a. gasoline
*b. crest toothpaste
c. motor oil
d. salt
5. A firm should lower price to increase revenue if
*a. demand is
b. elasticity
c. elasticity
d. elasticity
elastic.
of demand is equal to unity.
of demand is inelastic.
of demand is equal to zero.