Demand analysis: law of demand, elasticity, AR and MR - One Line Questions
1.
If the price of a good is $10 and the quantity demanded is 100, and if the price falls to $8 and the quantity demanded rises to 150, the price elasticity of demand is approximately: —
-1.75
2.
The formula for calculating price elasticity of demand using the point elasticity method is: —
(dQ/dP) * (P/Q)
3.
If a firm sells 10 units for $100 total revenue, its Average Revenue is: —
$10
4.
If a firm sells 5 units for $50 and 6 units for $54, its Marginal Revenue for the 6th unit is: —
$4
5.
If the income elasticity of demand for a luxury good is 2.5, it implies that as income rises by 1%, the quantity demanded rises by: —
2.5%
6.
If the price of a good increases by 10% and the quantity demanded falls by 20%, the price elasticity of demand is: —
-2.0
7.
If the demand for electricity is inelastic, an increase in its price will likely lead to: —
A small decrease in electricity consumption.
8.
When the demand for a product is unit elastic, a price increase will lead to: —
No change in total revenue.
9.
Which of the following best describes the Law of Demand? —
As price increases, quantity demanded decreases, ceteris paribus.
10.
Which factor is assumed to remain constant when stating the Law of Demand? —
Consumer income.
11.
The elasticity of demand for a product is generally higher in the long run than in the short run because: —
Consumers have more time to adjust their consumption habits.
12.
Under perfect competition, the Average Revenue (AR) curve is: —
Horizontal.
13.
Under perfect competition, a firm is a price taker, meaning its MR curve is: —
Equal to its AR curve and horizontal.
14.
A Giffen good is a good for which the demand curve is: —
Upward sloping.
15.
If a firm doubles its output and its total revenue triples, then the demand for its product is: —
Elastic.
16.
If a 5% increase in price leads to a 5% decrease in quantity demanded, the demand is: —
Unit elastic.
17.
Perfectly inelastic demand occurs when the elasticity of demand is: —
Equal to 0.
18.
Perfectly elastic demand occurs when the elasticity of demand is: —
Infinite.
19.
A firm operating in a market where it has to lower prices to sell more will find that its Marginal Revenue (MR) is: —
Less than the price.
20.
When AR is falling, MR is: —
Falling faster than AR.
21.
When a firm sells more units, and the price must be lowered to sell these additional units, Marginal Revenue (MR) will be: —
Less than the price.
22.
In most market structures other than perfect competition, the Average Revenue (AR) curve is: —
Downward sloping.
23.
If the price of coffee increases and the demand for tea decreases, coffee and tea are: —
Substitute goods.
24.
A good with a price elasticity of demand greater than 1 is considered: —
Elastic.
25.
Ceteris paribus, if the price of a good falls, what happens to the quantity demanded according to the Law of Demand? —
It rises.
26.
Demand for a good is likely to be more elastic if: —
There is a short time period.
27.
Cross elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in: —
The price of a related good.
28.
Income elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in: —
Consumer income.
29.
Under what market condition is AR = MR? —
Perfect Competition
30.
Which of the following statements is true regarding the relationship between MR, AR, and Price? —
MR < AR = Price under monopolistic competition.
31.
The relationship between Marginal Revenue (MR) and Average Revenue (AR) is that: —
MR is always less than AR.
32.
The Law of Demand does NOT apply to: —
Giffen goods.
33.
The demand curve for a monopolistic firm is: —
Downward sloping.
34.
For substitute goods, the cross elasticity of demand is: —
Positive.
35.
For complementary goods, the cross elasticity of demand is: —
Negative.
36.
For a normal good, the income elasticity of demand is: —
Positive.
37.
For an inferior good, the income elasticity of demand is: —
Negative.
38.
The total revenue is maximized when Marginal Revenue (MR) is: —
Zero.
39.
Which type of elasticity is relevant when analyzing the impact of advertising on sales? —
Advertising elasticity of demand.
40.
In a monopoly, the Marginal Revenue (MR) curve lies below the Average Revenue (AR) curve because: —
The firm must lower the price for all units to sell an additional unit.
41.
Which of the following is a determinant of price elasticity of demand? —
All of the above.
42.
Elasticity of demand measures: —
The responsiveness of quantity demanded to a change in price.
43.
The relationship between the demand curve and the Average Revenue (AR) curve for a firm is: —
They are identical.
44.
The Marginal Revenue (MR) curve is derived from the: —
Demand curve (or AR curve).
45.
The concept of Average Revenue (AR) is closely related to: —
Price.
46.
What does Average Revenue (AR) represent in economics? —
Total revenue divided by the quantity sold.
47.
What does Marginal Revenue (MR) represent in economics? —
The additional revenue generated by selling one more unit of a good.
48.
Which of the following represents the Average Revenue of a firm? —
TR / Q
49.
The slope of the Marginal Revenue curve is typically: —
Twice the slope of the Average Revenue curve.
50.
The Law of Demand is represented graphically by a demand curve that slopes: —
Downward from left to right.