Question 1

Figure 7-4  
Which of the following is true for the demand curve depicted in Figure 7-4?

Accepted Answer

A)  An increase in price from $2 to $3 will reduce total expenditures on the product. 
B)  In the $2 to $3 range, the price elasticity of the demand curve is approximately unitary. 
C)  At a price of $2, the price elasticity of the demand curve equals approximately − 2.5. 
D)  In the $2 to $3 range, the demand curve is inelastic. 
A)  An increase in price from $2 to $3 will reduce total expenditures on the product. 
B)  In the $2 to $3 range, the price elasticity of the demand curve is approximately unitary. 
C)  At a price of $2, the price elasticity of the demand curve equals approximately − 2.5. 
D)  In the $2 to $3 range, the demand curve is inelastic.

Question 2

Assuming that bus travel is an inferior good, an increase in consumer income, other things being equal, will cause

Accepted Answer

A)  an upward movement along the demand curve for bus travel. 
B)  a downward movement along the demand curve for bus travel. 
C)  a rightward shift in the demand curve for bus travel. 
D)  a leftward shift in the demand curve for bus travel. 
A)  an upward movement along the demand curve for bus travel. 
B)  a downward movement along the demand curve for bus travel. 
C)  a rightward shift in the demand curve for bus travel. 
D)  a leftward shift in the demand curve for bus travel.

Question 3

If the income elasticity of a good is negative, we can conclude that the good is

Accepted Answer

A)  an inferior good. 
B)  a normal good. 
C)  a luxury good. 
D)  a necessity. 
A)  an inferior good. 
B)  a normal good. 
C)  a luxury good. 
D)  a necessity.

Question 4

Elaine values the utility of her first cup of coffee at $1; a second cup, $.75; and a third cup, $.50. If Elaine drinks three cups of coffee for breakfast, her marginal utility is equal to

Accepted Answer

A)  $.50, the value of her last cup of coffee. 
B)  $1.00, the value of her first cup of coffee. 
C)  $2.25. 
D)  $1.50. 
A)  $.50, the value of her last cup of coffee. 
B)  $1.00, the value of her first cup of coffee. 
C)  $2.25. 
D)  $1.50.

Question 5

If people buy less chewing gum at every price when their incomes fall, then

Accepted Answer

A)  chewing gum is a normal good. 
B)  the demand for chewing gum is positively sloped. 
C)  demand for chewing gum has increased. 
D)  the price of chewing gum has increased. 
E)  there has been a decrease in population that changed demand. 
A)  chewing gum is a normal good. 
B)  the demand for chewing gum is positively sloped. 
C)  demand for chewing gum has increased. 
D)  the price of chewing gum has increased. 
E)  there has been a decrease in population that changed demand.

Question 6

Diminishing marginal utility means that

Accepted Answer

A)  as you consume more of a good, other things constant, the total satisfaction you obtain from consuming this good tends to fall. 
B)  as you hire more labor, other things constant, the total amount produced begins to fall. 
C)  as you consume more of a good, other things constant, the additional satisfaction you obtain from each additional unit of the good tends to fall. 
D)  as you consume more of a good, other things constant, the extra satisfaction you obtain from each additional unit becomes negative. 
A)  as you consume more of a good, other things constant, the total satisfaction you obtain from consuming this good tends to fall. 
B)  as you hire more labor, other things constant, the total amount produced begins to fall. 
C)  as you consume more of a good, other things constant, the additional satisfaction you obtain from each additional unit of the good tends to fall. 
D)  as you consume more of a good, other things constant, the extra satisfaction you obtain from each additional unit becomes negative.

Question 7

If the income elasticity of demand for a good is negative, this implies that

Accepted Answer

A)  only the poor will buy the good. 
B)  as incomes fall, less will be spent on the good. 
C)  as incomes rise, the demand for the good will fall. 
D)  the good does not obey the law of demand. 
A)  only the poor will buy the good. 
B)  as incomes fall, less will be spent on the good. 
C)  as incomes rise, the demand for the good will fall. 
D)  the good does not obey the law of demand.

Question 8

Cary increases the price of her cakes from $8 to $10 per cake, but her cash receipts decrease by 2 percent. The price elasticity of demand (in the $8 to $10 range) is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  0.02. 
D)  0.25. 
A)  elastic. 
B)  inelastic. 
C)  0.02. 
D)  0.25.

Question 9

The demand curve for a good is very unlikely to be perfectly vertical because

Accepted Answer

A)  scarcity and limited income restrict the ability of consumers to afford goods as they become very expensive. 
B)  as the price of a good rises to high enough levels, the incentive for other suppliers to invent new substitutes for the good increases. 
C)  consumers generally do not care about the price of the goods they consume. 
D)  both a and b are true. 
A)  scarcity and limited income restrict the ability of consumers to afford goods as they become very expensive. 
B)  as the price of a good rises to high enough levels, the incentive for other suppliers to invent new substitutes for the good increases. 
C)  consumers generally do not care about the price of the goods they consume. 
D)  both a and b are true.

Question 10

A successful advertising campaign would likely

Accepted Answer

A)  increase price elasticity of demand by stressing the uniqueness of the product. 
B)  reduce price elasticity of demand by stressing the uniqueness of the product. 
C)  reduce price elasticity of demand by informing consumers of the availability of substitutes. 
D)  not alter the demand curve. 
E)  generally make the demand curve shift inward. 
A)  increase price elasticity of demand by stressing the uniqueness of the product. 
B)  reduce price elasticity of demand by stressing the uniqueness of the product. 
C)  reduce price elasticity of demand by informing consumers of the availability of substitutes. 
D)  not alter the demand curve. 
E)  generally make the demand curve shift inward.

Question 11

If Russell values a ticket to a rock concert at $100 and is able to purchase it for only $40, he has received ____ in consumer surplus on his purchase. (Fill in the blank.)

Accepted Answer

A)  $40 
B)  $60 
C)  $100 
D)  $140 
A)  $40 
B)  $60 
C)  $100 
D)  $140

Question 12

Figure 7-13  
Refer to Figure 7-13. A decrease in price from $15 to $10 leads to

Accepted Answer

A)  a decrease in total revenue of $10, so the price elasticity of demand is greater than 1 in this price range. 
B)  a decrease in total revenue of $10, so the price elasticity of demand is less than 1 in this price range. 
C)  a decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this price range. 
D)  a decrease in total revenue of $20, so demand is elastic in this price range. 
A)  a decrease in total revenue of $10, so the price elasticity of demand is greater than 1 in this price range. 
B)  a decrease in total revenue of $10, so the price elasticity of demand is less than 1 in this price range. 
C)  a decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this price range. 
D)  a decrease in total revenue of $20, so demand is elastic in this price range.

Question 13

Tele-Com, Inc., a large cable TV company, tested the effect of a price reduction for the Disney Channel. It lowered prices from $10.75 to $7.95 and found that the number of customers more than doubled. This means the

Accepted Answer

A)  demand curve for the Disney Channel shifted to the right. 
B)  supply curve of the Disney Channel shifted to the left. 
C)  demand for the Disney Channel is elastic in this price range. 
D)  demand for the Disney Channel is inelastic in this price range. 
A)  demand curve for the Disney Channel shifted to the right. 
B)  supply curve of the Disney Channel shifted to the left. 
C)  demand for the Disney Channel is elastic in this price range. 
D)  demand for the Disney Channel is inelastic in this price range.

Question 14

Jeff likes Pepsi and pizza. When the price of pizza rises, the substitution effect causes Pepsi to be relatively

Accepted Answer

A)  more expensive, so Jeff buys more Pepsi. 
B)  more expensive, so Jeff buys less Pepsi. 
C)  less expensive, so Jeff buys more Pepsi. 
D)  less expensive, so Jeff buys less Pepsi. 
A)  more expensive, so Jeff buys more Pepsi. 
B)  more expensive, so Jeff buys less Pepsi. 
C)  less expensive, so Jeff buys more Pepsi. 
D)  less expensive, so Jeff buys less Pepsi.

Question 15

A local restaurant offers an "all you can eat" ribs special. You pay $11.95, and then you can eat as many servings as you desire at no additional cost. It would follow that you will stop eating when

Accepted Answer

A)  your marginal utility (or value) derived from eating another serving is zero. 
B)  your total utility (or value) derived from all of the servings consumed just equals $11.95. 
C)  your marginal utility (or value) derived from another serving equals $11.95. 
D)  it is physically impossible for you to eat any more. 
A)  your marginal utility (or value) derived from eating another serving is zero. 
B)  your total utility (or value) derived from all of the servings consumed just equals $11.95. 
C)  your marginal utility (or value) derived from another serving equals $11.95. 
D)  it is physically impossible for you to eat any more.

Question 16

If Francis experiences a decrease in his income, we would expect that Francis's demand for

Accepted Answer

A)  each good he purchases will remain unchanged. 
B)  normal goods will decrease. 
C)  most goods will increase. 
D)  inferior goods will decrease. 
A)  each good he purchases will remain unchanged. 
B)  normal goods will decrease. 
C)  most goods will increase. 
D)  inferior goods will decrease.

Question 17

When the price of a product increases, the passage of time usually causes the price elasticity of demand for the product to become

Accepted Answer

A)  less elastic. 
B)  more elastic. 
C)  smaller and smaller in an absolute value. 
D)  approximately equal to zero in the long run because of scarcity. 
A)  less elastic. 
B)  more elastic. 
C)  smaller and smaller in an absolute value. 
D)  approximately equal to zero in the long run because of scarcity.

Question 18

If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is ____, indicating the demand is ____.

Accepted Answer

A)  2; elastic 
B)  2; inelastic 
C)  0.5; elastic 
D)  0.5; inelastic 
A)  2; elastic 
B)  2; inelastic 
C)  0.5; elastic 
D)  0.5; inelastic

Question 19

All things equal, the price elasticity of supply

Accepted Answer

A)  will be smaller in the short run than in the long run. 
B)  will be smaller in the long run than in the short run. 
C)  is the same for the short run and the long run. 
D)  approaches zero in the long run. 
A)  will be smaller in the short run than in the long run. 
B)  will be smaller in the long run than in the short run. 
C)  is the same for the short run and the long run. 
D)  approaches zero in the long run.

Question 20

The principle of diminishing marginal utility says that

Accepted Answer

A)  as more of a good or service is consumed, demand will decrease. 
B)  as more of a good or service is consumed, the price will rise. 
C)  the marginal utility of additional units consumed will increase. 
D)  the marginal utility of additional units consumed will decline. 
A)  as more of a good or service is consumed, demand will decrease. 
B)  as more of a good or service is consumed, the price will rise. 
C)  the marginal utility of additional units consumed will increase. 
D)  the marginal utility of additional units consumed will decline.

Figure 7-4 Which of the following is true for the demand curve depicted in Figure 7-4?

Assuming that bus travel is an inferior good, an increase in consumer income, other things being equal, will cause

If the income elasticity of a good is negative, we can conclude that the good is

Elaine values the utility of her first cup of coffee at $1; a second cup, $.75; and a third cup, $.50. If Elaine drinks three cups of coffee for breakfast, her marginal utility is equal to

If people buy less chewing gum at every price when their incomes fall, then

Diminishing marginal utility means that

If the income elasticity of demand for a good is negative, this implies that

Cary increases the price of her cakes from $8 to $10 per cake, but her cash receipts decrease by 2 percent. The price elasticity of demand (in the $8 to $10 range) is

The demand curve for a good is very unlikely to be perfectly vertical because

A successful advertising campaign would likely

If Russell values a ticket to a rock concert at $100 and is able to purchase it for only $40, he has received ____ in consumer surplus on his purchase. (Fill in the blank.)

Figure 7-13 Refer to Figure 7-13. A decrease in price from $15 to $10 leads to

Tele-Com, Inc., a large cable TV company, tested the effect of a price reduction for the Disney Channel. It lowered prices from $10.75 to $7.95 and found that the number of customers more than doubled. This means the

Jeff likes Pepsi and pizza. When the price of pizza rises, the substitution effect causes Pepsi to be relatively

A local restaurant offers an "all you can eat" ribs special. You pay $11.95, and then you can eat as many servings as you desire at no additional cost. It would follow that you will stop eating when

If Francis experiences a decrease in his income, we would expect that Francis's demand for

When the price of a product increases, the passage of time usually causes the price elasticity of demand for the product to become

If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is , indicating the demand is .

All things equal, the price elasticity of supply

The principle of diminishing marginal utility says that

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

Figure 7-4 Which of the following is true for the demand curve depicted in Figure 7-4?

Assuming that bus travel is an inferior good, an increase in consumer income, other things being equal, will cause

If the income elasticity of a good is negative, we can conclude that the good is

Elaine values the utility of her first cup of coffee at $1; a second cup, $.75; and a third cup, $.50. If Elaine drinks three cups of coffee for breakfast, her marginal utility is equal to

If people buy less chewing gum at every price when their incomes fall, then

Diminishing marginal utility means that

If the income elasticity of demand for a good is negative, this implies that

Cary increases the price of her cakes from $8 to $10 per cake, but her cash receipts decrease by 2 percent. The price elasticity of demand (in the $8 to $10 range) is

The demand curve for a good is very unlikely to be perfectly vertical because

A successful advertising campaign would likely

If Russell values a ticket to a rock concert at $100 and is able to purchase it for only $40, he has received ____ in consumer surplus on his purchase. (Fill in the blank.)

Figure 7-13 Refer to Figure 7-13. A decrease in price from $15 to $10 leads to

Tele-Com, Inc., a large cable TV company, tested the effect of a price reduction for the Disney Channel. It lowered prices from $10.75 to $7.95 and found that the number of customers more than doubled. This means the

Jeff likes Pepsi and pizza. When the price of pizza rises, the substitution effect causes Pepsi to be relatively

A local restaurant offers an "all you can eat" ribs special. You pay $11.95, and then you can eat as many servings as you desire at no additional cost. It would follow that you will stop eating when

If Francis experiences a decrease in his income, we would expect that Francis's demand for

When the price of a product increases, the passage of time usually causes the price elasticity of demand for the product to become

If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is ____, indicating the demand is ____.

All things equal, the price elasticity of supply

The principle of diminishing marginal utility says that

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

If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is , indicating the demand is .