Posted by **john** on Monday, November 1, 2010 at 7:06pm.

The producer of X is contemplating a price change and has asked for your advice. After some empirical investigation, you conclude that the price elasticity of demand for X is 0.75. Your advice to the producer is to

Increase price to raise total revenue.

Decrease price to raise total revenue.

Leave price unchanged since it will not influence total revenue.

Question 10 5.34 points Save

If total revenue falls as a result of a fall in price, it follows that demand is

Inelastic

Elastic

Unit Elastic

Question 11 5.34 points Save

A 25% decrease in the price of breakfast cereal leads to a 20% increase in the quantity of cereal demanded. As a result:

total revenue will decrease.

total revenue will increase.

total revenue will remain constant.

the elasticity of demand will increase.

Question 12 5.34 points Save

The price elasticity of demand coefficient for herbal tea is estimated to be equal to 0.5. It is expected, therefore, that a 10% decrease in price would lead to:

a 5% decrease in the quantity of herbal tea demanded.

a 5% increase in the quantity of herbal tea demanded.

a 10% decrease in the quantity of herbal tea demanded.

a 10% increase in the quantity of herbal tea demanded.

a 0.5% increase in the quantity of herbal tea demanded

Question 13 5.34 points Save

If policymakers desire to reduce the quantity of water demanded by 20%, and water has an elasticity coefficient of .5, then the price of water must be

increased by 10%

increased by 20%

increased by 40%

reduced by 10%

increased by 60%

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