Question 1

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 2

If the price elasticity of demand is computed for two products,and product A measures .79,and product B measures 1.6,then:

Accepted Answer

A) product A is more price elastic than product B. 
B) product B is more price elastic than product A. 
C) consumers are more sensitive to price changes in product A than in product B. 
D) product B is more price inelastic than product A. 
E) products A and B must be substitutes. 
A) product A is more price elastic than product B. 
B) product B is more price elastic than product A. 
C) consumers are more sensitive to price changes in product A than in product B. 
D) product B is more price inelastic than product A. 
E) products A and B must be substitutes.

Question 3

If the price elasticity of demand for football tickets is estimated to be 4.5,then a 10 percent increase in football ticket prices would be expected to cause a

Accepted Answer

A) 4.5 percent decrease in quantity demanded. 
B) 4.5 percent increase in quantity demanded. 
C) 45 percent decrease in quantity demanded. 
D) 45 percent increase in quantity demanded. 
E) 450 percent increase in quantity demanded 
A) 4.5 percent decrease in quantity demanded. 
B) 4.5 percent increase in quantity demanded. 
C) 45 percent decrease in quantity demanded. 
D) 45 percent increase in quantity demanded. 
E) 450 percent increase in quantity demanded

Question 4

Jack,a music major,is perusing Jill's notes for her economics class,where she has written that "total revenues will rise with price rises only if demand is elastic." Jack tells Jill this is nonsense because firms can always increase their revenues by raising price.How should Jill respond?

Accepted Answer

Jill should point out that her statement

Question 5

Suppose Microsoft announces it is cutting the prices of some of its software titles (mainly games)by 25 percent.Assuming that Microsoft is seeking to increase revenues,it must believe that the elasticity of demand for these products 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 6

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 mig

Question 7

Suppose a city that operates local electric and natural gas companies wants to raise revenues by increasing its rates for electricity and natural gas.The price rise will increase city revenues if the elasticity of demand for electricity and natural gas is

Accepted Answer

A) inelastic. 
B) elastic. 
C) negative. 
D) equal to -1. 
A) inelastic. 
B) elastic. 
C) negative. 
D) equal to -1.

Question 8

Table 7-1
  
-Refer to Table 7-1.When the price of the good is $1.00,the quantity demanded in this market would be

Accepted Answer

A) 42 units. 
B) 31 units. 
C) 24 units. 
D) 14 units. 
A) 42 units. 
B) 31 units. 
C) 24 units. 
D) 14 units.

Question 9

The price of product X increases from $35 to $40,and as a result,the quantity demanded decreases from 250 to 200.Over this price range,

Accepted Answer

A) demand is elastic. 
B) demand is inelastic. 
C) demand is of unitary elasticity. 
D) there is insufficient information to determine the price elasticity of demand. 
A) demand is elastic. 
B) demand is inelastic. 
C) demand is of unitary elasticity. 
D) there is insufficient information to determine the price elasticity of demand.

Question 10

The price elasticity of demand for gasoline measures the

Accepted Answer

A) responsiveness of gasoline producers to changes in the quality of gasoline. 
B) responsiveness of customers to changes in the price of gasoline. 
C) responsiveness of consumer preferences to changes in the quality of gasoline. 
D) both a and c above. 
A) responsiveness of gasoline producers to changes in the quality of gasoline. 
B) responsiveness of customers to changes in the price of gasoline. 
C) responsiveness of consumer preferences to changes in the quality of gasoline. 
D) both a and c above.

Question 11

If Sarah's income rises by 20 percent,and,as a result,she purchases 40 percent more designer clothing,her income elasticity for designer clothing is

Accepted Answer

A) 0.5. 
B) 1.0. 
C) 2.0. 
D) Not enough information is given to answer this question. 
A) 0.5. 
B) 1.0. 
C) 2.0. 
D) Not enough information is given to answer this question.

Question 12

Demand will be more elastic when

Accepted Answer

A) the time the consumer has to adjust to price changes is short. 
B) the price of the good is low. 
C) the number of good substitutes is large. 
D) the consumption of the good is essential. 
A) the time the consumer has to adjust to price changes is short. 
B) the price of the good is low. 
C) the number of good substitutes is large. 
D) the consumption of the good is essential.

Question 13

Other things equal,the demand for a good tends to be more inelastic when

Accepted Answer

A) there are fewer available substitutes. 
B) a longer time period is considered. 
C) the good is considered a luxury good. 
D) the market for the good is more narrowly defined. 
A) there are fewer available substitutes. 
B) a longer time period is considered. 
C) the good is considered a luxury good. 
D) the market for the good is more narrowly defined.

Question 14

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 15

You and your college roommate eat three packages of Ramen noodles each week.After graduation last month,both of you were hired at several times your college income.You still enjoy Ramen noodles very much and buy even more,but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more.When looking at income elasticity of demand for Ramen noodles,

Accepted Answer

A) yours would be negative and your roommate's would be positive. 
B) yours would be positive and your roommate's would be negative. 
C) yours would be zero and your roommate's would approach infinity. 
D) yours would approach infinity and your roommate's would be zero. 
A) yours would be negative and your roommate's would be positive. 
B) yours would be positive and your roommate's would be negative. 
C) yours would be zero and your roommate's would approach infinity. 
D) yours would approach infinity and your roommate's would be zero.

Question 16

The market demand for an item is

Accepted Answer

A) the sum of individual demands. 
B) steeper for any given price change than the individual demand curves. 
C) independent of the number of individuals in the market. 
D) determined by dividing the quantity demanded by each individual by the number of individuals in the market. 
A) the sum of individual demands. 
B) steeper for any given price change than the individual demand curves. 
C) independent of the number of individuals in the market. 
D) determined by dividing the quantity demanded by each individual by the number of individuals in the market.

Question 17

When a good is more broadly defined,

Accepted Answer

A) the more substitutes it has so the more elastic is its demand. 
B) the fewer substitutes it has so the more elastic is its demand. 
C) the more substitutes it has so the less elastic is its demand. 
D) the fewer substitutes it has so the less elastic is its demand. 
A) the more substitutes it has so the more elastic is its demand. 
B) the fewer substitutes it has so the more elastic is its demand. 
C) the more substitutes it has so the less elastic is its demand. 
D) the fewer substitutes it has so the less elastic is its demand.

Question 18

All things equal,the price elasticity of supply

Accepted Answer

A) will be greater in the short run than in the long run. 
B) will be greater 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 greater in the short run than in the long run. 
B) will be greater 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 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

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.

Exam 20: Consumer Choice and Elasticity

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

If the price elasticity of demand is computed for two products,and product A measures .79,and product B measures 1.6,then:

If the price elasticity of demand for football tickets is estimated to be 4.5,then a 10 percent increase in football ticket prices would be expected to cause a

Jack,a music major,is perusing Jill's notes for her economics class,where she has written that "total revenues will rise with price rises only if demand is elastic." Jack tells Jill this is nonsense because firms can always increase their revenues by raising price.How should Jill respond?

Suppose Microsoft announces it is cutting the prices of some of its software titles (mainly games)by 25 percent.Assuming that Microsoft is seeking to increase revenues,it must believe that the elasticity of demand for these products is

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?

Suppose a city that operates local electric and natural gas companies wants to raise revenues by increasing its rates for electricity and natural gas.The price rise will increase city revenues if the elasticity of demand for electricity and natural gas is

Table 7-1 -Refer to Table 7-1.When the price of the good is $1.00,the quantity demanded in this market would be

The price of product X increases from $35 to $40,and as a result,the quantity demanded decreases from 250 to 200.Over this price range,

The price elasticity of demand for gasoline measures the

If Sarah's income rises by 20 percent,and,as a result,she purchases 40 percent more designer clothing,her income elasticity for designer clothing is

Demand will be more elastic when

Other things equal,the demand for a good tends to be more inelastic when

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

The market demand for an item is

When a good is more broadly defined,

All things equal,the price elasticity of supply

All things equal,the price elasticity of supply

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

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

Aprice-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

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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