Midterm Exam_2-031

Remembering that demand elasticity is defined as the percentage change in quantity divided by the percentage change in price, if price decreases and, in percentage terms, quantity rises more than price has dropped, total revenue will

• increase.

• decrease.

• remain the same.

• either increase or decrease.

Suppose the price of beans rises from $1.00 a pound to $2.00 a pound, quantity demanded falls from 10 units to 6 units, the coefficient of elasticity of demand for beans using the arc elasticity approach is

• -1.33.

• -0.75.

• -0.4.

• -0.25.

Suppose the price of beans rises from $1.00 a pound to $2.00 a pound, quantity demanded falls from 10 units to 6 units. In this example, the demand for beans is said to be

• relatively elastic.

• relatively inelastic.

• perfectly elastic.

• perfectly inelastic.

The cross-price elasticity of demand for coffee and coffee-cream is likely to be

• greater than zero.

• less than zero.

• zero.

• infinity.

When purchases of tennis socks decline following an increase in the price of tennis sneakers (other things remaining equal), the relationship between these two items can be described as

• substitutable.

• complementary.

• unique.

• ordinary.

The owner of a produce store found that when the price of a head of lettuce was raised from 50 cents to $1, the quantity sold per hour fell from 18 to 8. The arc elasticity of demand for lettuce is

• -0.56.

• -1.15.

• -0.8.

• -1.57.

When total revenue reaches its peak (elasticity equals 1), marginal revenue reaches

• 1.

• zero.

• -1.

• Cannot be determined from the information provided

If the demand for a good is price inelastic and the good price is increased, then the marginal revenue (MR) received by the seller will

• not change.

• decrease.

• increase.

• Cannot be determined from this information

If the price elasticity of supply of a good is elastic and the good price increases, then the increase in the good's supply should be

• greater than the increase in price.

• less than the increase in price.

• the same as the increase in price.

• Cannot be determined from this information

The derived demand curve for a good component will be more inelastic

• the larger is the fraction of total cost going to this component.

• the more inelastic is the demand curve for the final good.

• the more elastic are the supply curves of cooperating factors.

• the less essential is the component in question.