Question 1

Yolanda has a price elasticity of demand for gasoline of -0.7 in the short run (over a short period of time) and -1.8 in the long run (over a longer period of time). An increase in the gas tax will

A.raise tax revenue in both the short and long run

B.raise tax revenue in the short run but lower tax revenue in the long run

C.lower tax revenue in the short run but raise tax revenue in the long run

D.lower tax revenue in both the short and long run

Question 2

A company increased the price of their product from $10 to $12, and the amount the company sold fell from 5,000 to 4,500. What do we know about price elasticity of demand and revenue?

A.demand is elastic and revenues increased

B.demand is inelastic and revenues decreased

C.demand is elastic and revenues decreased

D.demand is inelastic and revenues increased

Question 3

Suppose customers consider wine and cheese to be complements. If the price of cheese increased, what do you expect to happen to the market for wine?

A.demand for wine would increase, and the price of wine would increase

B.demand for wine would decrease, and the price of wine would increase

C.demand for wine would increase, and the price of wine would decrease

D.demand for wine would decrease, and the price of wine would decrease

Question 4

Suppose a company estimates that a 10% price reduction will increase sales by 15%. Using this information, what is the estimate of the change in the firm's revenue if price decreases by 10%?

A.revenue will increase by 1.5%

B.revenue will increase by 10%

C.revenue will fall by 10%

D.revenue will increase by 5%

Question 5

Dre enjoys many different types of soft-drinks, but there is only one brand of potato chips that he likes. For Dre, which product is his demand more elastic?

A.not enough information is given to answer this question

B.it depends if soft-drinks and potato chips are complements or substitutes

C.potato chips

D.soft-drinks