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QUESTION
QUESTION 1 If a liquor store owner decides that raising the price of beer can pay for the construction of a new building, then the owner is assuming...
QUESTION 1
- If a liquor store owner decides that raising the price of beer can pay for the construction of a new building, then the owner is assuming that the
- A.percentage increase in the price of beer will cause a smaller percentage decrease in the quantity demanded.
- B.percentage increase in the price of beer will cause a greater percentage decrease in the quantity demanded.
- C.demand for his or her beer is elastic.
- D.percentage increase in the price of beer will cause an equal percentage decrease in the quantity demanded.
- E.demand for his or her beer is unit-elastic.
- If the price of a good decreases by 5 percent and total revenue does not change, then the price elasticity of demand is
- A.equal to 0.05.
- B.perfectly elastic.
- C.perfectly inelastic.
- D.equal to 1.05.
- E.unit-elastic.
- If the quantity effect outweighs the price effect of a price decrease, then:
- A.the good is price elastic.
- B.total revenue will rise.
- C.the measured elasticity must be more than 1.
- D.All of these are true.
- Along a straight-line demand curve, total revenue reaches a maximum in the range where
- A.demand is elastic.
- B.demand is inelastic.
- C.demand is unitary elastic.
- D.supply is elastic.
- E.supply is inelastic.
- A decrease in price:
- A.causes a decrease in revenue due to the quantity effect.
- B.causes an increase in revenue due to the price effect.
- C.does not necessarily have to experience a quantity effect when the demand curve is downward sloping.
- D.None of these is true.
- A good is inelastic if:
- A.total revenue increases as a result of a price increase.
- B.the quantity effect outweighs the price effect of a price increase.
- C.the measured elasticity is greater than 1.
- D.None of these is true.
- When demand is perfectly inelastic, an increase in price will result in
- A.a decrease in total revenue.
- B.an increase in total revenue.
- C.no change in total revenue.
- D.a decrease in quantity demanded.
- E.an increase in quantity demanded.
- If total revenue increases as a result of a price increase:
- A.the good is price elastic.
- B.the good is price inelastic.
- C.the good is price unit elastic.
- D.Any of these could be true.
- In 2000, California electricity providers were forced to buy electricity from producers at a time when the price of electricity was extremely high. When the power companies in turn raised their prices, consumers reduced their use of electricity only a little. As a result
- A.electricity providers found that revenue declined because the price elasticity was inelastic.
- B.electricity providers found that the price elasticity was very low and thus revenue rose.
- C.electricity providers had to conclude that the price elasticity of demand was very elastic.
- D.electricity providers had to conclude that the price elasticity was negative and thus that revenues were going to decline.
- E.electricity providers found that revenue rose because demand was elastic.
- If demand is inelastic, then an increase in the price of a good will lead to a decrease in total revenue for producers of the good.
- A.True
- B.False