When demand is price inelastic:
a. price and total revenue move in the same direction.
b. price and total revenue move in the opposite direction.
c. total revenue increases whether price goes up or down.
d. total revenue decreases whether price goes up or down.
QUESTION 2The price elasticity of demand for gasoline measures the:
a. responsiveness of gasoline producers to changes in the quality of gasoline.
b. responsiveness of customers to changes in the price of gasoline.
c. responsiveness of consumer preferences to changes in the quality of gasoline.
d. both a and c above.
QUESTION 3If the demand for cigarettes is highly inelastic, this indicates that:
a. higher cigarette prices will increase the demand for cigarettes.
b. the price elasticity coefficient of cigarettes exceeds 1.
c. the price elasticity coefficient of cigarettes equals 1.
d. the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes.
QUESTION 4If a demand curve for a good were completely vertical, it would be considered:
a. perfectly elastic.
b. perfectly inelastic.
c. of unitary elasticity.
d. relatively inelastic.
QUESTION 5A local Krispy Kreme doughnut shop reduced the price of its doughnuts from 4 per dozen to 3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was:
a. elastic.
b. inelastic.
c. of unitary elasticity.
d. indeterminate; more information is needed to determine the price elasticity of demand.
QUESTION 6If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, demand is classified as:
a. unstable.
b. relatively inelastic.
c. relatively elastic.
d. of unitary elasticity.
QUESTION 7Suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is 0.25, by how much would you have to raise the price of water?
a. 10 percent
b. 25 percent
c. 40 percent
d. 100 percent
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