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If the marginal cost of producing vanity license plates is virtually zero (by prison inmat

If the marginal cost of producing vanity license plates is virtually zero (by prison inmates with little else to do), then states would maximize their profits on plate sales at the point on a linear demand curve where

a. demand is inelastic.

b. demand is elastic.

c. demand is unit elastic.

d. the demand curve crosses the horizontal axis.

132. Would a profit-maximizing firm sell where demand is inelastic?

a. No, this would not follow the rule of MC = MR.

b. No, the firm could not profitably raise price.

c. Yes, the firm could profitably lower price to attract sales.

d. Yes, in this case there are few substitutes for the good.

133. A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.91. The administration is considering a tuition increase to help balance the budget. The revenue-maximizing decision is to

a. decrease tuition, which should boost enrollment enough to balance the budget.

b. decrease tuition, which would bring in more revenue.

c. leave tuition as is-an increase would not help balance the budget.

d. increase tuition, which would bring in more revenue.

134. The local symphony recently raised its price for tickets to their summer concerts in the park. At the end of the summer season, the symphony was surprised to see that total revenue had actually decreased. The reason was that the elasticity of demand for tickets was

a. unit elastic.

b. inelastic.

c. elastic.

d. Not enough information is given.

135. John's Bait Shop was surprised to learn that when it raised prices by 10 percent, total revenue was unaffected. This is because the elasticity for bait is

a. unit elastic.

b. inelastic.

c. elastic.

d. Not enough information is given.

136. If demand is unit elastic, revenue

a. and price rise and fall together.

b. rises as price falls.

c. falls as price rises.

d. remains constant as price rises or falls.

137. If, as price increases by 10 percent, total revenue decreases by 10 percent demand is

a. elastic.

b. unit elastic.

c. inelastic.

d. perfectly inelastic.

138. When the price of penicillin tablets increases by $5 per dozen, the drug company's revenue increases by $6 million. Its elasticity of demand (in absolute terms) must be

a. zero.

b. greater than one.

c. less than one.

d. infinitely large.

139. The demand for Exxon gasoline is ____ the demand for all gasoline.

a. exactly as elastic as, and of a different slope from

b. more elastic than

c. less elastic than

d. exactly as elastic and of a different slope from

140. The demand for French Roast coffee is likely to be

a. elastic.

b. inelastic.

c. unit elastic.

d. perfectly inelastic.

Dec 16 2019 View more View Less

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