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QUESTION 5 Exhibit 5-7 Demand curve for concert tickets 40 Price per 30 ticket (dollars) 20 10 0 Demand curve 10 20 30 40 Quantity of tickets per concert (thousands) In Exhibit 5-7, if promoters raise their prices from $10 to $40 per ticket, then their total revenue will: a increase because demand is elastic in this price range. b. decrease because demand is inelastic in this price range. c. increase because demand is inelastic in this price range. d. decrease because demand is elastic in this price range. QUESTION 6 If Pete raises his price of muffins from $2 to $3 and his total revenue increases from $35,000 to $38,000, then: a. the demand for Pete's muffins in this range is inelastic. b. the demand for Pete's muffins in this range is elastic. c. the demand for Pete's muffins in this range is unit elastic. d. the percentage change in quantity demanded must exceed the percentage change in product price. QUESTION 7 Good A has a price elasticity of demand of 27, while good B has a price elasticity of demand of 29. To raise the most tax revenue, the government should: a. place a unit tax on good A. b. place a unit tax on good B. c. raise the price elasticity of demand for good A. d. subsidize the production of good B. QUESTIONS Exhibit 5-9 Supply and Demand Curves for Good X SUPPLY 400 300 Price per unit (dollars) 0 200 100 O DEMAND 50 100 150 200 250 Quantity of output (units per time period) As shown in Exhibit 5-9, the $200 per unit tax on Good X raises tax revenue per time period totaling a. 560,000 b.$30,000 $10,000 d. 520,000

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