Question 1

If the price of a good is $0, a consumer will

Accepted Answer

A)  consume an infinite quantity. 
B)  consume all units with positive marginal utility. 
C)  consume the entire amount supplied. 
D)  consume until total utility becomes 0. 
A)  consume an infinite quantity. 
B)  consume all units with positive marginal utility. 
C)  consume the entire amount supplied. 
D)  consume until total utility becomes 0.

Question 2

The marginal value of a commodity to a consumer

Accepted Answer

A)  increases as more of the good is consumed. 
B)  is exactly equal to price for all units purchased by the consumer. 
C)  is measured by the height of the individual consumer's demand curve. 
D)  is equal to the area above the price and below the individual consumer's demand curve. 
A)  increases as more of the good is consumed. 
B)  is exactly equal to price for all units purchased by the consumer. 
C)  is measured by the height of the individual consumer's demand curve. 
D)  is equal to the area above the price and below the individual consumer's demand curve.

Question 3

A question on an economics exam asks: What happens in the market for margarine when income rises? Allison, an excellent student, shows the demand for margarine decreasing. Is she necessarily wrong? Why or why not?

Accepted Answer

If we consider Allison's answer wrong, w

Question 4

If the demand for a good is elastic, then total revenue

Accepted Answer

A)  increases as price increases. 
B)  remains constant as quantity demanded increases. 
C)  increases as price decreases. 
D)  decreases as quantity demanded increases. 
E)  decreases as price decreases. 
A)  increases as price increases. 
B)  remains constant as quantity demanded increases. 
C)  increases as price decreases. 
D)  decreases as quantity demanded increases. 
E)  decreases as price decreases.

Question 5

After downing three glasses of lemonade on a hot summer afternoon, Todd says, "You would have to pay me to drink another glass!" This statement best illustrates

Accepted Answer

A)  the law of demand. 
B)  the substitutability among goods. 
C)  the law of diminishing marginal utility. 
D)  that chocolate candy bars are an inferior good. 
A)  the law of demand. 
B)  the substitutability among goods. 
C)  the law of diminishing marginal utility. 
D)  that chocolate candy bars are an inferior good.

Question 6

The demand for a product is likely to be more elastic when

Accepted Answer

A)  the share of the total budget spent on the product is small. 
B)  more complementary products are available. 
C)  the consumer has a short time to adjust to price changes. 
D)  more good substitutes for the product are available. 
A)  the share of the total budget spent on the product is small. 
B)  more complementary products are available. 
C)  the consumer has a short time to adjust to price changes. 
D)  more good substitutes for the product are available.

Question 7

Marginal utility is the change in

Accepted Answer

A)  total utility when an extra unit of output is produced. 
B)  total utility when an extra unit of output is consumed. 
C)  marginal utility when an extra unit of output is produced. 
D)  average utility when an extra unit of output is consumed. 
A)  total utility when an extra unit of output is produced. 
B)  total utility when an extra unit of output is consumed. 
C)  marginal utility when an extra unit of output is produced. 
D)  average utility when an extra unit of output is consumed.

Question 8

If the demand for a product increases as the result of a decline in income, it can be concluded that the

Accepted Answer

A)  product is an inferior good. 
B)  demand for the product is inelastic. 
C)  price elasticity of demand for the product equals unity. 
D)  demand for the product is elastic. 
A)  product is an inferior good. 
B)  demand for the product is inelastic. 
C)  price elasticity of demand for the product equals unity. 
D)  demand for the product is elastic.

Question 9

If demand is inelastic, an increase in the price of a good will cause total expenditures on the good to

Accepted Answer

A)  fall. 
B)  remain constant since the decrease in quantity sold is exactly offset by the price increase. 
C)  rise. 
D)  rise if it is a normal good and fall if it is an inferior good. 
A)  fall. 
B)  remain constant since the decrease in quantity sold is exactly offset by the price increase. 
C)  rise. 
D)  rise if it is a normal good and fall if it is an inferior good.

Question 10

Figure 7-11  
Refer to Figure 7-11. As price falls from P A to P B, which demand curve represents the most elastic demand?

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 11

If the quantity demanded of a product fell from 11,000 to 10,000 when price rose from $9 to $10, the price elasticity of demand over this range is equal to approximately

Accepted Answer

A)  − 0.1. 
B)  − 0.05. 
C)  − 0.9. 
D)  − 1.1. 
A)  − 0.1. 
B)  − 0.05. 
C)  − 0.9. 
D)  − 1.1.

Question 12

Compared to the long run, consumers typically ____ to price changes in the short run.

Accepted Answer

A)  are very responsive 
B)  are more demand sensitive 
C)  are less demand sensitive 
D)  do not respond at all 
E)  overreact 
A)  are very responsive 
B)  are more demand sensitive 
C)  are less demand sensitive 
D)  do not respond at all 
E)  overreact

Question 13

The number of CDs purchased increased by 5 percent when consumer income increased by 10 percent. Assuming other factors are held constant, CDs would be classified as

Accepted Answer

A)  inferior goods. 
B)  normal goods. 
C)  elastic goods. 
D)  inelastic goods. 
A)  inferior goods. 
B)  normal goods. 
C)  elastic goods. 
D)  inelastic goods.

Question 14

Figure 7-16  
Which of the demand curves in Figure 7-16 is unit elastic?

Accepted Answer

A)  the curve in graph a 
B)  the curve in graph b 
C)  the curve in graph c 
D)  the curve in graph d 
E)  the curve in graph e 
A)  the curve in graph a 
B)  the curve in graph b 
C)  the curve in graph c 
D)  the curve in graph d 
E)  the curve in graph e

Question 15

When economists say the price elasticity of supply is elastic, they mean that

Accepted Answer

A)  suppliers are willing to produce much larger amounts of their good. 
B)  suppliers are willing to produce only a small amount more of their good. 
C)  consumers are willing to purchase much larger quantities of the good. 
D)  the change in quantity supplied is relatively small compared to the change in price. 
A)  suppliers are willing to produce much larger amounts of their good. 
B)  suppliers are willing to produce only a small amount more of their good. 
C)  consumers are willing to purchase much larger quantities of the good. 
D)  the change in quantity supplied is relatively small compared to the change in price.

Question 16

Which of the following is not a fundamental that underlies consumer behavior?

Accepted Answer

A)  Goods can be substituted for one another. 
B)  Consumers make decisions purposefully based upon past experience and knowledge. 
C)  The law of diminishing marginal utility applies to all goods. 
D)  Consumers always make choices with perfect information. 
A)  Goods can be substituted for one another. 
B)  Consumers make decisions purposefully based upon past experience and knowledge. 
C)  The law of diminishing marginal utility applies to all goods. 
D)  Consumers always make choices with perfect information.

Question 17

In which of the following cases will the total spending on a good decrease?

Accepted Answer

A)  Demand is inelastic, and price increases. 
B)  Demand is elastic, and price increases. 
C)  Demand is elastic, and price decreases. 
D)  Demand is of unit elasticity, and price decreases. 
A)  Demand is inelastic, and price increases. 
B)  Demand is elastic, and price increases. 
C)  Demand is elastic, and price decreases. 
D)  Demand is of unit elasticity, and price decreases.

Question 18

Which of the following is the best example of the substitution effect?

Accepted Answer

A)  Joe buys fewer apples and more oranges as the result of an increase in the price of apples. 
B)  Joe buys more apples when his income increases. 
C)  Joe buys an apple slicer when the price of apples decreases. 
D)  Joe buys less sugar as the result of an increase in price of apples. 
A)  Joe buys fewer apples and more oranges as the result of an increase in the price of apples. 
B)  Joe buys more apples when his income increases. 
C)  Joe buys an apple slicer when the price of apples decreases. 
D)  Joe buys less sugar as the result of an increase in price of apples.

Question 19

A normal good is defined by economists to be a good

Accepted Answer

A)  with a negatively-sloped demand curve. 
B)  that is purchased by at least 75 percent of the population. 
C)  that is bought by consumers with normal tastes. 
D)  whose demand increases when incomes increase. 
E)  whose demand decreases when incomes increase. 
A)  with a negatively-sloped demand curve. 
B)  that is purchased by at least 75 percent of the population. 
C)  that is bought by consumers with normal tastes. 
D)  whose demand increases when incomes increase. 
E)  whose demand decreases when incomes increase.

Question 20

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A)  The relevant time horizon is short. 
B)  The good is a necessity. 
C)  The market for the good is broadly defined. 
D)  There are many close substitutes for this good. 
A)  The relevant time horizon is short. 
B)  The good is a necessity. 
C)  The market for the good is broadly defined. 
D)  There are many close substitutes for this good.

If the price of a good is $0, a consumer will

The marginal value of a commodity to a consumer

A question on an economics exam asks: What happens in the market for margarine when income rises? Allison, an excellent student, shows the demand for margarine decreasing. Is she necessarily wrong? Why or why not?

If the demand for a good is elastic, then total revenue

After downing three glasses of lemonade on a hot summer afternoon, Todd says, "You would have to pay me to drink another glass!" This statement best illustrates

The demand for a product is likely to be more elastic when

Marginal utility is the change in

If the demand for a product increases as the result of a decline in income, it can be concluded that the

If demand is inelastic, an increase in the price of a good will cause total expenditures on the good to

Figure 7-11 Refer to Figure 7-11. As price falls from P _A to P _B, which demand curve represents the most elastic demand?

If the quantity demanded of a product fell from 11,000 to 10,000 when price rose from $9 to $10, the price elasticity of demand over this range is equal to approximately

Compared to the long run, consumers typically ____ to price changes in the short run.

The number of CDs purchased increased by 5 percent when consumer income increased by 10 percent. Assuming other factors are held constant, CDs would be classified as

Figure 7-16 Which of the demand curves in Figure 7-16 is unit elastic?

When economists say the price elasticity of supply is elastic, they mean that

Which of the following is not a fundamental that underlies consumer behavior?

In which of the following cases will the total spending on a good decrease?

Which of the following is the best example of the substitution effect?

A normal good is defined by economists to be a good

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

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

Exam 7: Consumer Choice and Elasticity

If the price of a good is $0, a consumer will

The marginal value of a commodity to a consumer

A question on an economics exam asks: What happens in the market for margarine when income rises? Allison, an excellent student, shows the demand for margarine decreasing. Is she necessarily wrong? Why or why not?

If the demand for a good is elastic, then total revenue

After downing three glasses of lemonade on a hot summer afternoon, Todd says, "You would have to pay me to drink another glass!" This statement best illustrates

The demand for a product is likely to be more elastic when

Marginal utility is the change in

If the demand for a product increases as the result of a decline in income, it can be concluded that the

If demand is inelastic, an increase in the price of a good will cause total expenditures on the good to

Figure 7-11 Refer to Figure 7-11. As price falls from P A to P B, which demand curve represents the most elastic demand?

If the quantity demanded of a product fell from 11,000 to 10,000 when price rose from $9 to $10, the price elasticity of demand over this range is equal to approximately

Compared to the long run, consumers typically ____ to price changes in the short run.

The number of CDs purchased increased by 5 percent when consumer income increased by 10 percent. Assuming other factors are held constant, CDs would be classified as

Figure 7-16 Which of the demand curves in Figure 7-16 is unit elastic?

When economists say the price elasticity of supply is elastic, they mean that

Which of the following is not a fundamental that underlies consumer behavior?

In which of the following cases will the total spending on a good decrease?

Which of the following is the best example of the substitution effect?

A normal good is defined by economists to be a good

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

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, which demand curve represents the most elastic demand?