1. How does elasticity affect a company’s pricing policy?
a. If demand is inelastic, the company knows that an increase in price would reduce total revenues.
b. If demand is elastic at the current price, the company knows that an increase in price would reduce total revenues.
c. If demand is unitary elastic, the company knows that a decrease in price would decrease total revenues.
d. If demand is unitary elastic, the company knows that an increase price would increase total revenues.
2. What does a company generally do when demand for its goods goes up?
a. It rations goods.
b. It raises prices.
c. It cuts prices.
d. There is no set response.
3. During World War II, the United States used rationing to
a. limit production.
b. meet tremendous shortages.
c. give away goods.
d. stop the black market.
4. If a firm raises the price of a product with elastic demand, what will happen to total revenue?
a. It increases.
b. It decreases.
c. It is unitary.
d. It stays the same
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