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Exam 5: Elasticities of Demand and Supply

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Question 71

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If the price elasticity of demand for a good is 2,then a 10 percent increase in the price of that good ________ the quantity demanded by ________ percent.

A) increases;20
B) decreases;2
C) decreases;10
D) decreases;20
E) increases;8

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Question 72

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Taco Bell firm raises the price of its tacos.The price elasticity of demand for Taco Bell tacos equals 5.0.What happens to the Taco Bell's total revenue?

A) nothing
B) It increases.
C) It decreases.
D) It becomes negative.
E) It might change,but more information is needed to determine if it increases,decreases,or does not change.

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Question 73

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If a Pizza Hut raises the price of a slice of pizza from $3.00 to $3.25,the quantity demanded decreases from 1,500 slices per week to 1,300 slices per week.The demand for slices of pizza is ________ and the total revenue received by this Pizza Hut ________.

The total revenue test says that if a price decrease leads to

The income elasticity of demand for used cars is less than zero,so used cars are

A firm lowers the price it charges.The firm's total revenue decreases.What can we conclude about the price elasticity of demand?

"If the price falls and,as a result,the total revenue decreases,demand is elastic." Is the previous assertion correct?

-The table above gives the demand schedule for a good.Using the midpoint method,find the price elasticity of demand between points A and B,between B and C,between C and D,and between D and E.

If we are trying to determine if two different products are substitutes,complements,or not related at all,we should find the value of the

Which of the following does NOT influence the price elasticity of demand?

Recently the governor of Vermont proposed that cigarette taxes in Vermont should be increased substantially,from 44 cents a pack to 66 cents a pack.He estimates that Vermont can raise $20 million in revenue from this tax hike.He also pointed out that the neighboring state of New Hampshire was considering an increase in cigarette taxes. a.How can it be that an increase in cigarette taxes will increase tax revenue,because,after all,a higher tax will increase cigarette prices and thereby decrease the quantity demanded? b.If New Hampshire chooses not to increase cigarette taxes,is it likely that Vermont can still raise $20 million in tax revenue? Why or why not? Explain

When the price of a burrito increases from $2 to $4,the quantity demanded decreases from 50 to 40.Using the midpoint method,the price elasticity of demand equals

The total revenue test says I.Demand is elastic if a decrease in price results in an increase in total revenue. Ii.Total revenue is maximized when demand is elastic. Iii.Total revenue is minimized when demand is unit elastic.

-The data in the table above give two points on the demand curve for pizza.Using the midpoint method,when the price of a pizza falls from $10 to $9,what is the price elasticity of demand?

For a product with a constant or gently increasing opportunity cost of producing additional units,as more is produced,we expect that

The price of coffee rose 40 percent and the quantity of coffee demanded fell by 20 percent.The quantity of doughnuts demanded also fell by 20 percent.From this information,we can conclude that

-The table above gives the demand schedule for a good.What is the total revenue at point A? At point B? At point C? At point D? At point E?

Natural gas is difficult to store.What implication does this fact have for the elasticity of supply of natural gas?

Which of the following explains why supply is more elastic as more time passes?

Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative.