1

1. If a liquor store owner decides that raising the price of beer can pay for the construction of a new building, then the owner is assuming that the
2. A.percentage increase in the price of beer will cause a smaller percentage decrease in the quantity demanded.
3. B.percentage increase in the price of beer will cause a greater percentage decrease in the quantity demanded.
4. C.demand for his or her beer is elastic.
5. D.percentage increase in the price of beer will cause an equal percentage decrease in the quantity demanded.
6. E.demand for his or her beer is unit-elastic.

QUESTION 2

1. If the price of a good decreases by 5 percent and total revenue does not change, then the price elasticity of demand is
2. A.equal to 0.05.
3. B.perfectly elastic.
4. C.perfectly inelastic.
5. D.equal to 1.05.
6. E.unit-elastic.

QUESTION 3

1. If the quantity effect outweighs the price effect of a price decrease, then:
2. A.the good is price elastic.
3. B.total revenue will rise.
4. C.the measured elasticity must be more than 1.
5. D.All of these are true.

QUESTION 4

1. Along a straight-line demand curve, total revenue reaches a maximum in the range where
2. A.demand is elastic.
3. B.demand is inelastic.
4. C.demand is unitary elastic.
5. D.supply is elastic.
6. E.supply is inelastic.

QUESTION 5

1. A decrease in price:
2. A.causes a decrease in revenue due to the quantity effect.
3. B.causes an increase in revenue due to the price effect.
4. C.does not necessarily have to experience a quantity effect when the demand curve is downward sloping.
5. D.None of these is true.

QUESTION 6

1. A good is inelastic if:
2. A.total revenue increases as a result of a price increase.
3. B.the quantity effect outweighs the price effect of a price increase.
4. C.the measured elasticity is greater than 1.
5. D.None of these is true.

QUESTION 7

1. When demand is perfectly inelastic, an increase in price will result in
2. A.a decrease in total revenue.
3. B.an increase in total revenue.
4. C.no change in total revenue.
5. D.a decrease in quantity demanded.
6. E.an increase in quantity demanded.

QUESTION 8

1. If total revenue increases as a result of a price increase:
2. A.the good is price elastic.
3. B.the good is price inelastic.
4. C.the good is price unit elastic.
5. D.Any of these could be true.

QUESTION 9

1. In 2000, California electricity providers were forced to buy electricity from producers at a time when the price of electricity was extremely high. When the power companies in turn raised their prices, consumers reduced their use of electricity only a little. As a result
2. A.electricity providers found that revenue declined because the price elasticity was inelastic.
3. B.electricity providers found that the price elasticity was very low and thus revenue rose.
4. C.electricity providers had to conclude that the price elasticity of demand was very elastic.
5. D.electricity providers had to conclude that the price elasticity was negative and thus that revenues were going to decline.
6. E.electricity providers found that revenue rose because demand was elastic.

QUESTION 10

1. If demand is inelastic, then an increase in the price of a good will lead to a decrease in total revenue for producers of the good.
2. A.True
3. B.False