Question 1

Figure 7-9
  
-At a price of $10,the price elasticity of the demand curve depicted in Figure 7-9 is

Accepted Answer

A) positive. 
B) approximately equal to -0.1. 
C) approximately equal to -1. 
D) approximately equal to -2. 
A) positive. 
B) approximately equal to -0.1. 
C) approximately equal to -1. 
D) approximately equal to -2. C

Question 2

The demand for salt is

Accepted Answer

A) inelastic because there are few substitutes for salt and it represents a large percentage of a consumer's budget. 
B) inelastic because there are many substitutes for salt and it represents a large percentage of a consumer's budget. 
C) inelastic because there are few substitutes for salt and it represents a small percentage of a consumer's budget. 
D) elastic because there are no substitutes for salt and it represents a large percentage of a consumer's budget. 
E) elastic because there are many substitutes for salt and it represents a large percentage of a consumer's budget. 
A) inelastic because there are few substitutes for salt and it represents a large percentage of a consumer's budget. 
B) inelastic because there are many substitutes for salt and it represents a large percentage of a consumer's budget. 
C) inelastic because there are few substitutes for salt and it represents a small percentage of a consumer's budget. 
D) elastic because there are no substitutes for salt and it represents a large percentage of a consumer's budget. 
E) elastic because there are many substitutes for salt and it represents a large percentage of a consumer's budget. C

Question 3

If the price of apples rises from $.50 to $1.50 and quantity demanded falls from 1,000 to 900,we can conclude that the price elasticity for apples is

Accepted Answer

A) -20. 
B) inelastic. 
C) elastic. 
D) unitary. 
A) -20. 
B) inelastic. 
C) elastic. 
D) unitary. B

Question 4

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 5

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 6

If the quantity demanded of a product rose from 900 to 1,200 when the price of the product fell from $11 to $9,the price elasticity of demand coefficient is equal to

Accepted Answer

A) -0.20. 
B) -0.70. 
C) -1.00. 
D) -1.42. 
A) -0.20. 
B) -0.70. 
C) -1.00. 
D) -1.42.

Question 7

All else equal,if a firm raises its price by 20 percent and the firm's total revenue falls by 20 percent,

Accepted Answer

A) demand must be elastic. 
B) demand must be inelastic. 
C) demand must be unit elastic. 
D) the price elasticity of demand must be equal to 1. 
A) demand must be elastic. 
B) demand must be inelastic. 
C) demand must be unit elastic. 
D) the price elasticity of demand must be equal to 1.

Question 8

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 9

Which of the following would be the best example of consumer surplus?

Accepted Answer

A) Jane does not get cell-phone service because she feels that it is worth less than the $30 a month fee. 
B) Sam pays $8 for a haircut that is worth $10 to him. 
C) Ralph buys a house for $104,000,the maximum amount that he would be willing to pay for it. 
D) Sue purchases a book for $20 and uses a credit card to pay for it. 
A) Jane does not get cell-phone service because she feels that it is worth less than the $30 a month fee. 
B) Sam pays $8 for a haircut that is worth $10 to him. 
C) Ralph buys a house for $104,000,the maximum amount that he would be willing to pay for it. 
D) Sue purchases a book for $20 and uses a credit card to pay for it.

Question 10

According to the income effect,when the price of automobiles rises,people buy fewer automobiles because

Accepted Answer

A) they substitute other forms of transportation for driving. 
B) the nominal amount of their paychecks is smaller. 
C) the purchasing power of their income is reduced. 
D) their demand for automobiles is very elastic. 
A) they substitute other forms of transportation for driving. 
B) the nominal amount of their paychecks is smaller. 
C) the purchasing power of their income is reduced. 
D) their demand for automobiles is very elastic.

Question 11

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

Accepted Answer

A) highly elastic. 
B) approximately equal to -0.33. 
C) approximately equal to -3. 
D) of unitary elasticity. 
A) highly elastic. 
B) approximately equal to -0.33. 
C) approximately equal to -3. 
D) of unitary elasticity.

Question 12

If Mr.Smith thinks the last dollar spent on shirts yields more satisfaction than the last dollar spent on cola,and Smith is a utility-maximizing consumer,he should

Accepted Answer

A) decrease his spending on cola. 
B) decrease his spending on cola and increase his spending on shirts. 
C) increase his spending on shirts. 
D) increase his spending on cola and decrease his spending on shirts. 
A) decrease his spending on cola. 
B) decrease his spending on cola and increase his spending on shirts. 
C) increase his spending on shirts. 
D) increase his spending on cola and decrease his spending on shirts.

Question 13

A perfectly inelastic demand curve indicates that

Accepted Answer

A) a producer can sell as many units as desired at the market price but no units above the market price. 
B) for a given percent change in price,the quantity demanded rises by the same percentage. 
C) price has no effect on the quantity demanded. 
D) the percent change in price is less than the percent change in quantity demanded. 
A) a producer can sell as many units as desired at the market price but no units above the market price. 
B) for a given percent change in price,the quantity demanded rises by the same percentage. 
C) price has no effect on the quantity demanded. 
D) the percent change in price is less than the percent change in quantity demanded.

Question 14

If the price of tickets to Disney World increases 10 percent,and as a result,attendance falls by 15 percent,the demand for the tickets is

Accepted Answer

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

Question 15

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 16

The price elasticity of demand for a product tends to be large (more elastic)when

Accepted Answer

A) people spend a large share of their income on the product. 
B) the population in the market area is small. 
C) few good substitutes for the product are available. 
D) many complementary products are available. 
A) people spend a large share of their income on the product. 
B) the population in the market area is small. 
C) few good substitutes for the product are available. 
D) many complementary products are available.

Question 17

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 18

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 amount 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 amount on sugar. 
D) consume more goods like coffee and tea that are complements of sugar.

Question 19

If the price elasticity of demand for grapes was 2.5,

Accepted Answer

A) the demand for grapes would be considered inelastic. 
B) an increase in the price of grapes would decrease total consumer spending on grapes. 
C) consumer purchases are less sensitive to a change in the price of grapes than to a change in the price of bananas,which have a price elasticity of 1.6. 
D) the income elasticity for grapes must also be 2.5. 
A) the demand for grapes would be considered inelastic. 
B) an increase in the price of grapes would decrease total consumer spending on grapes. 
C) consumer purchases are less sensitive to a change in the price of grapes than to a change in the price of bananas,which have a price elasticity of 1.6. 
D) the income elasticity for grapes must also be 2.5.

Question 20

The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called

Accepted Answer

A) price elasticity of demand. 
B) consumer surplus. 
C) the substitution effect. 
D) income elasticity of demand. 
A) price elasticity of demand. 
B) consumer surplus. 
C) the substitution effect. 
D) income elasticity of demand.

Exam 20: Consumer Choice and Elasticity

Figure 7-9 -At a price of $10,the price elasticity of the demand curve depicted in Figure 7-9 is

The demand for salt is

If the price of apples rises from $.50 to $1.50 and quantity demanded falls from 1,000 to 900,we can conclude that the price elasticity for apples is

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

A successful advertising campaign would likely

If the quantity demanded of a product rose from 900 to 1,200 when the price of the product fell from $11 to $9,the price elasticity of demand coefficient is equal to

All else equal,if a firm raises its price by 20 percent and the firm's total revenue falls by 20 percent,

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

Which of the following would be the best example of consumer surplus?

According to the income effect,when the price of automobiles rises,people buy fewer automobiles because

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

If Mr.Smith thinks the last dollar spent on shirts yields more satisfaction than the last dollar spent on cola,and Smith is a utility-maximizing consumer,he should

A perfectly inelastic demand curve indicates that

If the price of tickets to Disney World increases 10 percent,and as a result,attendance falls by 15 percent,the demand for the tickets is

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

The price elasticity of demand for a product tends to be large (more elastic)when

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

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

If the price elasticity of demand for grapes was 2.5,

The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

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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

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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