Figure 5-2

8. Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

a.	D1
b.	D2
c.	D3
d.	All of the above are equally elastic.

ANS: A

9. Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

a.	D1
b.	D2
c.	D3
d.	All of the above are equally elastic.

ANS: C

10. Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

a.	30%.
b.	40%.
c.	80%.
d.	250%.

ANS: B

Figure 5-5

11. Refer to Figure 5-5. Demand is unit elastic between prices of

a.	$18 and $24.
b.	$24 and $30.
c.	$24 and $36.
d.	$30 and $36.

ANS: C

12. Refer to Figure 5-5. Using the midpoint method, between prices of $12 and $18, price elasticity of demand is

a.	0.33.
b.	0.67.
c.	1.33.
d.	1.89.

ANS: A

13. Refer to Figure 5-5. Using the midpoint method, between prices of $48 and $54, price elasticity of demand is about

a.	0.92.
b.	3.89.
c.	4.33.
d.	5.67.

ANS: D

14. Refer to Figure 5-5. Using the midpoint method, between prices of $30 and $36, price elasticity of demand is about

a.	0.5.
b.	0.82.
c.	1.22.
d.	2.

ANS: C

15. Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of

a.	$18.
b.	$30.
c.	$42.
d.	$48.

ANS: B

16. Refer to Figure 5-5. At a price of $48 per unit, sellers' total revenue amounts to

a.	$150.
b.	$200.
c.	$288.
d.	$364.

ANS: C

17. Refer to Figure 5-5. At a price of $12 per unit, sellers' total revenue amounts to

a.	$150.
b.	$200.
c.	$288.
d.	$364.

ANS: C

18. Refer to Figure 5-5. At a price of $30 per unit, sellers' total revenue amounts to

a.	$150.
b.	$200.
c.	$288.
d.	$450.

ANS: D

19. When the local used bookstore prices economics books at $15.00 each, it generally sells 70 books per month. If it lowers 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.

ANS: C

20. Suppose that when the price of corn is $2 per bushel, farmers can sell 10 million bushels. When the price of corn is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true?

a.	The demand for corn is income inelastic, and so an increase in the price of corn will increase the total revenue of corn farmers.
b.	The demand for corn is income elastic, and so an increase in the price of corn will increase the total revenue of corn farmers.
c.	The demand for corn is price inelastic, and so an increase in the price of corn will increase the total revenue of corn farmers.
d.	The demand for corn is price elastic, and so an increase in the price of corn will increase the total revenue of corn farmers.

ANS: C

21. Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

a.	0.2
b.	1
c.	1.5
d.	All of the above could be correct.

ANS: A

22. Which of the following is not possible?

a.	Demand is elastic, and a decrease in price causes an increase in revenue.
b.	Demand is unit elastic, and a decrease in price causes an increase in revenue.
c.	Demand is inelastic, and an increase in price causes an increase in revenue.
d.	Demand is perfectly inelastic, and an increase in price causes an increase in revenue.

ANS: B