Chapter 4 Revenue U3

Chapter 4 Revenue U3

by EconSuperstar's Channel

Multiple Choice

If the price of gas goes up and total revenue goes up, what does that say about the elasticity of gas?

• The demand for gas is elastic

• The demand for gas is inelastic

Multiple Choice

Which of the following is the best definition of REVENUE?

• The total amount of income a business makes from selling products or services

• The amount of money a business has LEFT over after paying for their costs.

• The total amount of money a business spends.

• The amount of money a business loses every month.

Multiple Choice

Total Revenue =

• P x T

• P x Q

• Q x T

Multiple Choice

The formula for average revenue is...

• Total revenue/quantity

• Total costs - total profits

• Price x quantity

• Average cost x price

Multiple Choice

The formula for marginal revenue is...

• $$TR\div Q$$

• $$\Delta TR\div\Delta Q$$

• $$Average\ \cos t\ \div\ quantity$$

Multiple Choice

Marginal revenue can be defined as

• revenue received from selling one extra unit of production

• revenue received from selling two extra units of production

Multiple Choice

Marginal revenue analysis is important for firms because it helps in decision making. You can see how changing one unit of production would affect your total revenue before making the decision.

• True

• False

Multiple Choice

Revenue maximization level of output is at

• MR = AR

• MC = TR

• MR = 0

• MR < AR

Multiple Choice

When the selling price of a good or service is constant, what is true?

• D = TR

• D = AR - MR

• D = AR = MR

Multiple Choice

When price is constant

• the total revenue curve is horizontal.

• the total revenue curve is downward sloping.

• the total revenue curve is upward sloping (linear).

• the total revenue curve is a parabola (upside down U shaped).

Multiple Choice

When price is falling

• the total revenue curve is horizontal.

• the total revenue curve is downward sloping.

• the total revenue curve is upward sloping (linear).

• the total revenue curve is a parabola (upside down U shaped).

Multiple Choice

When price is falling

• D = AR = MR

• D = AR + MR

• D = AR but MR splits off and is twice as steep

Multiple Choice

The formula for PED is:

• % Δ P / % Δ QD

• % Δ QD / % Δ P x 100

• % Δ P / % ΔQD x 100

• % Δ QD / % Δ P

Multiple Choice

For a product with elasticity of -0.2, if the price was increased, what would happen to total revenue?

• Increase

• Decrease

• No change

Multiple Choice

If the price of Vans goes up, and the total revenue goes down, what can we say about the elasticity?

• The demand for Vans is elastic

• The demand for Vans is inelastic

Multiple Choice

Demand is price elastic if a

• relatively large price increase leads to a relatively small decrease in the quantity demanded.

• relatively small price increase leads to a relatively large decrease in the quantity demanded.

• price increase leads to a decrease in the quantity demanded.

• price increase leads to an increase in the quantity demanded.

Multiple Choice

The price elasticity of demand when the price of a popsicle increase from $0.30 to $0.50 and the quantity decrease from 25 to 15 is ________.

• 0

• 0.6

• 0.5

• 2

Multiple Choice

When demand is ________, a decrease in price ________ total revenue.

• elastic; decreases

• inelastic; decreases

• unit elastic; increases

• elastic; does not change

Multiple Choice

The demand for Cheerios cereal is more price-elastic than the demand for cereals as a whole. This is best explained by the fact that:

• Cheerios are a luxury

• there are more substitutes for Cheerios than for cereals as a whole

• cereals are a necessity

• consumption of cereals as a whole is greater than consumption of Cheerios

Multiple Choice

Which of the following two goods is more likely to have inelastic demand?

• Demand for insulin

• Demand for vitamins

Multiple Choice

Suppose that the price of a bus ticket rises from $2.75 to $3.75 and the number of tickets sold falls from 9000 to 7800. The price elasticity of demand is

• 0.464

• –0.527

• zero