Question 1

A 10 percent increase in the price of sugar reduces sugar consumption by about 5 percent. The increase causes households to

Accepted Answer

A)  spend more on sugar. 
B)  spend less on sugar. 
C)  spend the same on sugar. 
D)  consume more goods like coffee and tea that are complements of sugar. 
A)  spend more on sugar. 
B)  spend less on sugar. 
C)  spend the same on sugar. 
D)  consume more goods like coffee and tea that are complements of sugar. A

Question 2

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

Accepted Answer

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 generate more revenue. 
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 generate more revenue. D

Question 3

Figure 7-12  
Refer to Figure 7-12. An increase in price from $30 to $35 would

Accepted Answer

A)  increase total revenue by $250 
B)  decrease total revenue by $250. 
C)  increase total revenue by $500. 
D)  decrease total revenue by $500. 
A)  increase total revenue by $250 
B)  decrease total revenue by $250. 
C)  increase total revenue by $500. 
D)  decrease total revenue by $500. B

Question 4

Figure 7-12  
Refer to Figure 7-12. When price falls from $50 to $40, it can be inferred that demand between those two prices is

Accepted Answer

A)  inelastic, since total revenue decreases from $8,000 to $5,000. 
B)  inelastic, since total revenue increases from $5,000 to $8,000. 
C)  elastic, since total revenue increases from $5,000 to $8,000. 
D)  unit elastic, since total revenue increases from $5,000 to $8,000. 
A)  inelastic, since total revenue decreases from $8,000 to $5,000. 
B)  inelastic, since total revenue increases from $5,000 to $8,000. 
C)  elastic, since total revenue increases from $5,000 to $8,000. 
D)  unit elastic, since total revenue increases from $5,000 to $8,000.

Question 5

A local restaurant offers an "all you can eat" ribs special. If a person pays $11.95, she can eat as many servings as she desires at no additional cost. Can you infer anything about her marginal utility from observing her eating behavior?

Accepted Answer

Since the marginal cost of consuming an

Question 6

An individual's demand curve for a good is derived by

Accepted Answer

A)  varying the income level and observing the resulting total utility derived from both goods. 
B)  varying the price of one good and observing the resulting quantities of the other good. 
C)  shifting the budget line to the left and calculating the loss in total utility. 
D)  varying the price of one good and observing the resulting quantities demanded of that good. 
A)  varying the income level and observing the resulting total utility derived from both goods. 
B)  varying the price of one good and observing the resulting quantities of the other good. 
C)  shifting the budget line to the left and calculating the loss in total utility. 
D)  varying the price of one good and observing the resulting quantities demanded of that good.

Question 7

Figure 7-11  
Refer to Figure 7-11. As price falls from P A to P B, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

Accepted Answer

A)  D 1 
B)  D 2 
C)  D 3 
D)  All of the above are equally elastic. 
A)  D 1 
B)  D 2 
C)  D 3 
D)  All of the above are equally elastic.

Question 8

The price elasticity of demand for automobiles measures the responsiveness of

Accepted Answer

A)  consumer purchases to a change in the price of automobiles. 
B)  consumer purchases to a change in the quality of automobiles. 
C)  supplier production levels to a change in the price of automobiles. 
D)  consumer purchases of automobiles to a change in their income. 
A)  consumer purchases to a change in the price of automobiles. 
B)  consumer purchases to a change in the quality of automobiles. 
C)  supplier production levels to a change in the price of automobiles. 
D)  consumer purchases of automobiles to a change in their income.

Question 9

Sally is on her college golf team and only uses Titleist golf balls. She states: "I don't care what the price is, I will only buy Titleists." Is this a believable assertion?

Accepted Answer

Probably not. While another golf ball mi

Question 10

A 20 percent increase in the price of sugar reduces sugar consumption by about 10 percent. Such a price increase causes households to

Accepted Answer

A)  spend less on sugar. 
B)  spend more on sugar. 
C)  spend the same amount on sugar as before. 
D)  consume more goods like coffee and tea, which are sugar complements. 
A)  spend less on sugar. 
B)  spend more on sugar. 
C)  spend the same amount on sugar as before. 
D)  consume more goods like coffee and tea, which are sugar complements.

Question 11

When economists say the demand for a good is highly inelastic, they mean that

Accepted Answer

A)  even if the price rose substantially, suppliers would be unwilling to offer much more of the good. 
B)  the facilities utilized by producers of the good are inflexible; producers cannot easily expand their facilities, even in the long run. 
C)  consumers will respond to a change in the price of the good by purchasing substantially more of it. 
D)  a large (percentage) change in the price of a good will result in only a small (percentage) change in the quantity demanded. 
A)  even if the price rose substantially, suppliers would be unwilling to offer much more of the good. 
B)  the facilities utilized by producers of the good are inflexible; producers cannot easily expand their facilities, even in the long run. 
C)  consumers will respond to a change in the price of the good by purchasing substantially more of it. 
D)  a large (percentage) change in the price of a good will result in only a small (percentage) change in the quantity demanded.

Question 12

Suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is − .25, by how much would you have to raise the price of water?

Accepted Answer

A)  10 percent 
B)  25 percent 
C)  40 percent 
D)  100 percent 
A)  10 percent 
B)  25 percent 
C)  40 percent 
D)  100 percent

Question 13

Rebel Records announces it is cutting the prices of its bluegrass album titles by 25 percent. If Rebel is seeking to increase revenues, it must believe that the elasticity of demand for bluegrass albums is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  of unitary elasticity. 
D)  perfectly inelastic. 
A)  elastic. 
B)  inelastic. 
C)  of unitary elasticity. 
D)  perfectly inelastic.

Question 14

Which of the following is true about marginal benefit?

Accepted Answer

A)  A consumer's marginal benefit is equal to the height of her demand curve. 
B)  Consumers will continue to purchase up until the point where marginal benefit equals price. 
C)  Marginal benefit declines as consumption increases because of the law of diminishing marginal utility. 
D)  All of the above are true. 
A)  A consumer's marginal benefit is equal to the height of her demand curve. 
B)  Consumers will continue to purchase up until the point where marginal benefit equals price. 
C)  Marginal benefit declines as consumption increases because of the law of diminishing marginal utility. 
D)  All of the above are true.

Question 15

Use the figure below to answer the following question(s).
Figure 7-6
 
Between $3 and $4, the price elasticity of the demand curve depicted in Figure 7-6 is

Accepted Answer

A)  relatively inelastic. 
B)  approximately equal to − 0.33. 
C)  approximately equal to − 3. 
D)  both a and b. 
A)  relatively inelastic. 
B)  approximately equal to − 0.33. 
C)  approximately equal to − 3. 
D)  both a and b.

Question 16

If consumers would be willing to purchase the same quantity of a good no matter what its price was, the demand curve would

Accepted Answer

A)  be a vertical line, and demand would be perfectly inelastic. 
B)  be a horizontal line, and the demand would be perfectly elastic. 
C)  not exist. 
D)  be identical to the supply curve for the good. 
A)  be a vertical line, and demand would be perfectly inelastic. 
B)  be a horizontal line, and the demand would be perfectly elastic. 
C)  not exist. 
D)  be identical to the supply curve for the good.

Question 17

Since the income elasticity for food is estimated to be 0.51, it appears that the proportion of income spent by poor people on food is ____ the proportion spent by those with higher incomes.

Accepted Answer

A)  greater than 
B)  less than 
C)  about the same as 
D)  about half as great as 
A)  greater than 
B)  less than 
C)  about the same as 
D)  about half as great as

Question 18

Suppose the athletic department wanted to increase revenues by decreasing ticket prices to football games. This would make sense only if the price elasticity of demand for football games was (in absolute value)

Accepted Answer

A)  greater than 1. 
B)  equal to 1. 
C)  less than 1. 
D)  perfectly inelastic. 
A)  greater than 1. 
B)  equal to 1. 
C)  less than 1. 
D)  perfectly inelastic.

Question 19

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

Accepted Answer

A)  Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept. 
B)  Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus. 
C)  Without elasticity, we would not be able to address the direction in which price is likely to move in response to a shortage. 
D)  Without elasticity, it is very difficult to assess the degree of competition within a market. 
A)  Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept. 
B)  Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus. 
C)  Without elasticity, we would not be able to address the direction in which price is likely to move in response to a shortage. 
D)  Without elasticity, it is very difficult to assess the degree of competition within a market.

Question 20

If the quantity of oranges purchased decreases by 30 percent as the result of a 15 percent increase in the price of oranges, the price elasticity of demand for oranges is

Accepted Answer

A)  − 0.25. 
B)  − 0.50. 
C)  − 1.25. 
D)  − 2. 
A)  − 0.25. 
B)  − 0.50. 
C)  − 1.25. 
D)  − 2.

A 10 percent increase in the price of sugar reduces sugar consumption by about 5 percent. The increase causes households to

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

Figure 7-12 Refer to Figure 7-12. An increase in price from $30 to $35 would

Figure 7-12 Refer to Figure 7-12. When price falls from $50 to $40, it can be inferred that demand between those two prices is

A local restaurant offers an "all you can eat" ribs special. If a person pays $11.95, she can eat as many servings as she desires at no additional cost. Can you infer anything about her marginal utility from observing her eating behavior?

An individual's demand curve for a good is derived by

Figure 7-11 Refer to Figure 7-11. As price falls from P _A to P _B, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

The price elasticity of demand for automobiles measures the responsiveness of

Sally is on her college golf team and only uses Titleist golf balls. She states: "I don't care what the price is, I will only buy Titleists." Is this a believable assertion?

A 20 percent increase in the price of sugar reduces sugar consumption by about 10 percent. Such a price increase causes households to

When economists say the demand for a good is highly inelastic, they mean that

Suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is − .25, by how much would you have to raise the price of water?

Rebel Records announces it is cutting the prices of its bluegrass album titles by 25 percent. If Rebel is seeking to increase revenues, it must believe that the elasticity of demand for bluegrass albums is

Which of the following is true about marginal benefit?

Use the figure below to answer the following question(s). Figure 7-6 Between $3 and $4, the price elasticity of the demand curve depicted in Figure 7-6 is

If consumers would be willing to purchase the same quantity of a good no matter what its price was, the demand curve would

Since the income elasticity for food is estimated to be 0.51, it appears that the proportion of income spent by poor people on food is ____ the proportion spent by those with higher incomes.

Suppose the athletic department wanted to increase revenues by decreasing ticket prices to football games. This would make sense only if the price elasticity of demand for football games was (in absolute value)

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

If the quantity of oranges purchased decreases by 30 percent as the result of a 15 percent increase in the price of oranges, the price elasticity of demand for oranges is

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Applying the Basics: Special Topics in Economics

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Exam 7: Consumer Choice and Elasticity

A 10 percent increase in the price of sugar reduces sugar consumption by about 5 percent. The increase causes households to

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

Figure 7-12 Refer to Figure 7-12. An increase in price from $30 to $35 would

Figure 7-12 Refer to Figure 7-12. When price falls from $50 to $40, it can be inferred that demand between those two prices is

A local restaurant offers an "all you can eat" ribs special. If a person pays $11.95, she can eat as many servings as she desires at no additional cost. Can you infer anything about her marginal utility from observing her eating behavior?

An individual's demand curve for a good is derived by

Figure 7-11 Refer to Figure 7-11. As price falls from P A to P B, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

The price elasticity of demand for automobiles measures the responsiveness of

Sally is on her college golf team and only uses Titleist golf balls. She states: "I don't care what the price is, I will only buy Titleists." Is this a believable assertion?

A 20 percent increase in the price of sugar reduces sugar consumption by about 10 percent. Such a price increase causes households to

When economists say the demand for a good is highly inelastic, they mean that

Suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is − .25, by how much would you have to raise the price of water?

Rebel Records announces it is cutting the prices of its bluegrass album titles by 25 percent. If Rebel is seeking to increase revenues, it must believe that the elasticity of demand for bluegrass albums is

Which of the following is true about marginal benefit?

Use the figure below to answer the following question(s). Figure 7-6 Between $3 and $4, the price elasticity of the demand curve depicted in Figure 7-6 is

If consumers would be willing to purchase the same quantity of a good no matter what its price was, the demand curve would

Since the income elasticity for food is estimated to be 0.51, it appears that the proportion of income spent by poor people on food is ____ the proportion spent by those with higher incomes.

Suppose the athletic department wanted to increase revenues by decreasing ticket prices to football games. This would make sense only if the price elasticity of demand for football games was (in absolute value)

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

If the quantity of oranges purchased decreases by 30 percent as the result of a 15 percent increase in the price of oranges, the price elasticity of demand for oranges is

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Applying the Basics: Special Topics in Economics

Filters

Figure 7-11 Refer to Figure 7-11. As price falls from P _A to P _B, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?