Chapter 6

The supply of product X is perfectly inelastic if the price of X rises by: 10 percent and quantity supplied stays the same. 7 percent and quantity supplied rises by 5 percent. 5 percent and quantity supplied rises by 7 percent. 8 percent and quantity supplied rises by 8 percent.

Which of the following is correct? If the demand for a product is inelastic, a change in price will cause total revenue to change in the same direction. The price elasticity coefficient applies to demand, but not to supply. If the demand for a product is inelastic, a change in price may cause total revenue to change in either the opposite or the same direction. If the demand for a product is inelastic, a change in price will cause total revenue to change in the opposite direction.

Which of the following statements is not correct? Total revenue will not change if price varies within a range where the elasticity coefficient is unity. Demand tends to be elastic at high prices and inelastic at low prices. In the range of prices in which demand is elastic, total revenue will diminish as price decreases. If the relative change in price is greater than the relative change in the quantity demanded associated with it, demand is inelastic.

If quantity demanded is completely unresponsive to price changes, demand is: relatively inelastic. perfectly elastic. relatively elastic. perfectly inelastic.

The supply of product X is elastic if the price of X rises by: 5 percent and quantity supplied rises by 7 percent. 10 percent and quantity supplied remains the same. 7 percent and quantity supplied rises by 5 percent. 8 percent and quantity supplied rises by 8 percent.

The price elasticity of demand of a straight-line demand curve is: inelastic but does not change at various points on the curve. elastic in high-price ranges and inelastic in low-price ranges. elastic but does not change at various points on the curve. 1 at all points on the curve.

The narrower the definition of a product: the larger the number of substitutes and the greater the price elasticity of demand. the larger the number of substitutes and the smaller the price elasticity of demand. the smaller the number of substitutes and the smaller the price elasticity of demand. the smaller the number of substitutes and the greater the price elasticity of demand.

In which of the following cases will total revenue increase? Price falls and demand is inelastic. Price rises and demand is elastic. Price rises and demand is inelastic. Price falls and supply is elastic.

Supply curves tend to be: perfectly inelastic in the long run because the law of scarcity imposes absolute limits on production. perfectly elastic in the long run because consumer demand will have sufficient time to adjust fully to changes in supply. less elastic in the long run because there is time for firms to enter or leave an industry. more elastic in the long run because there is time for firms to enter or leave the industry.

We would expect: the demand for Coca-Cola to be more price elastic than the demand for soft drinks in general. no relationship between the price elasticity of demand for Coca-Cola and the price elasticity of demand for soft drinks in general. none of these to hold true. the demand for Coca-Cola to be less price elastic than the demand for soft drinks in general.

If the price elasticity of demand for a product is unity, a decrease in price will: increase the quantity demanded but decrease total revenue. increase the quantity demanded, but total revenue will be unchanged. have no effect upon the amount purchased. increase the quantity demanded and increase total revenue.

It takes a considerable amount of time to increase the production of pork. This implies that: the long-run supply curve for pork is less elastic than the short-run supply curve for pork. a change in the demand for pork will not affect its price in the short run. the short-run supply curve for pork is less elastic than the long-run supply curve for pork. an increase in the demand for pork will elicit a larger supply response in the short run than in the long run.

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range: is of unit elasticity. is inelastic. is elastic. has declined.

A firm can sell as much as it wants at a constant price. Demand is thus: perfectly inelastic. relatively inelastic. relatively elastic. perfectly elastic.

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then: not enough information is given to make a statement about elasticity. demand is inelastic. demand is of unit elasticity. demand is elastic.

(Last Word) Suppose that a firm has "pricing power" and can segregate its market into two distinct groups based on differences in elasticities of demand. The firm might charge: a lower price to the group that has the less elastic demand. a higher price to the group that has the less elastic demand. the same price to both groups but include a "free" related product for the group that has an inelastic demand. the same price to both groups but make it difficult for the group with the more elastic demand to gain access to the product.

The total revenue test for elasticity: is equally applicable to both demand and supply. applies to the short-run supply curve but not to the long-run supply curve. does not apply to demand because price and quantity are inversely related. does not apply to supply because price and total revenue always move together.

The supply of known Monet paintings is: relatively elastic. perfectly elastic. perfectly inelastic. relatively inelastic.

Which of the following is correct? If demand is elastic, an increase in price will increase total revenue. If demand is elastic, a decrease in price will increase total revenue. If demand is inelastic, an increase in price will decrease total revenue. If demand is elastic, a decrease in price will decrease total revenue.

Other things the same, if a price change causes total revenue to change in the opposite direction, demand is: perfectly inelastic. of unit elasticity. relatively elastic. relatively inelastic.

The price elasticity of demand coefficient measures: buyer responsiveness to price changes. how far business executives can stretch their fixed costs. the extent to which a demand curve shifts as incomes change. the slope of the demand curve.