Question 1

Ceteris paribus,an increase in the price of a good will cause the

Accepted Answer

A) quantity demanded of the good to increase. 
B) quantity supplied of the good to decrease. 
C) consumer surplus derived from the good to decrease. 
D) demand of the good to increase. 
A) quantity demanded of the good to increase. 
B) quantity supplied of the good to decrease. 
C) consumer surplus derived from the good to decrease. 
D) demand of the good to increase.

Question 2

When the price elasticity of demand is greater than one,it means that demand is

Accepted Answer

A) inelastic and the percent change in quantity is greater than the percent change in price. 
B) inelastic and the percent change in quantity is less than the percent change in price. 
C) elastic and the percent change in quantity is greater than the percent change in price. 
D) elastic and the percent change in quantity is less than the percent change in price. 
A) inelastic and the percent change in quantity is greater than the percent change in price. 
B) inelastic and the percent change in quantity is less than the percent change in price. 
C) elastic and the percent change in quantity is greater than the percent change in price. 
D) elastic and the percent change in quantity is less than the percent change in price.

Question 3

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 4

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.

Question 5

If the demand for cigarettes is highly inelastic,this indicates that

Accepted Answer

A) higher cigarette prices will increase the demand for cigarettes. 
B) the price elasticity coefficient of cigarettes exceeds 1. 
C) the price elasticity coefficient of cigarettes equals 1. 
D) the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes. 
A) higher cigarette prices will increase the demand for cigarettes. 
B) the price elasticity coefficient of cigarettes exceeds 1. 
C) the price elasticity coefficient of cigarettes equals 1. 
D) the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes.

Question 6

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 7

Which of the following describes a situation in which demand must be inelastic?

Accepted Answer

A) The price of pens rises by 10 cents,and quantity of pens demanded falls by 50. 
B) The price of pens rises by 10 cents,and total revenue rises. 
C) A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded. 
D) Total revenue does not change when the price of pens rises. 
E) Total revenue decreases when the price of pens rises. 
A) The price of pens rises by 10 cents,and quantity of pens demanded falls by 50. 
B) The price of pens rises by 10 cents,and total revenue rises. 
C) A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded. 
D) Total revenue does not change when the price of pens rises. 
E) Total revenue decreases when the price of pens rises.

Question 8

Elaine,a small grocer,is planning to cut certain prices to increase her sales revenues.What will be the likely result of a price decrease for matches,a good for which the demand is inelastic,and a price decrease for fresh green tomatoes,an item for which consumer demand is elastic?

Accepted Answer

A) The total revenue derived from both will go up. 
B) The total revenue derived from matches will increase,but total revenue derived from tomatoes will decline. 
C) The total revenue derived from matches will decline,but total revenues derived from tomatoes will increase. 
D) The total revenues derived from both will decline. 
A) The total revenue derived from both will go up. 
B) The total revenue derived from matches will increase,but total revenue derived from tomatoes will decline. 
C) The total revenue derived from matches will decline,but total revenues derived from tomatoes will increase. 
D) The total revenues derived from both will decline.

Question 9

If Mr.McLean thinks the last dollar spent on bowling yields more satisfaction than the last dollar spent on hamburgers,and McLean is a utility-maximizing consumer,he should

Accepted Answer

A) bowl less,so the marginal satisfaction from expenditures in this area will increase. 
B) spend more on hamburgers,so total satisfaction from that activity will increase. 
C) eliminate spending on hamburgers. 
D) bowl more and spend less on hamburgers. 
A) bowl less,so the marginal satisfaction from expenditures in this area will increase. 
B) spend more on hamburgers,so total satisfaction from that activity will increase. 
C) eliminate spending on hamburgers. 
D) bowl more and spend less on hamburgers.

Question 10

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 11

The exhibit illustrates two possible demand curves for a product,D₁ and D₂.Which of the following is true regarding these demand curves?

Accepted Answer

A) Demand curve D₁ represents a demand curve that is relatively more elastic than demand curve D₂. 
B) Demand curve D₁ represents a demand curve that is relatively more inelastic than demand curve D₂. 
C) Demand curve D₁ represents a demand curve that shows consumer purchases being more responsive to a change in the price of the good than demand curve D₂. 
D) Both are examples of unitary elastic demand curves. 
A) Demand curve D₁ represents a demand curve that is relatively more elastic than demand curve D₂. 
B) Demand curve D₁ represents a demand curve that is relatively more inelastic than demand curve D₂. 
C) Demand curve D₁ represents a demand curve that shows consumer purchases being more responsive to a change in the price of the good than demand curve D₂. 
D) Both are examples of unitary elastic demand curves.

Question 12

Scenario 7-1
Use the information below to answer the following question(s).
JoAnn considers cola and plain sparkling water to be good substitutes.Suppose the price of sugar,a key ingredient used to produce cola,falls.
-Refer to Scenario 7-1.According to the substitution effect,which of the following is most likely to occur?

Accepted Answer

A) JoAnn will purchase less cola and more sparkling water. 
B) JoAnn will purchase more cola and less sparkling water. 
C) JoAnn will purchase more of all goods due to her higher real income. 
D) JoAnn's demand curve will decrease (shift in),causing her to purchase less cola. 
A) JoAnn will purchase less cola and more sparkling water. 
B) JoAnn will purchase more cola and less sparkling water. 
C) JoAnn will purchase more of all goods due to her higher real income. 
D) JoAnn's demand curve will decrease (shift in),causing her to purchase less cola.

Question 13

Consider a consumer who purchases two goods,X and Y.If the price of good Y falls,then the substitution effect by itself will

Accepted Answer

A) cause the consumer to buy more of good Y and less of good X. 
B) cause the consumer to buy more of good X and less of good Y. 
C) not affect the amount of goods X and Y that the consumer buys. 
D) result in an upward-sloping demand for good Y because of the substitution effect. 
A) cause the consumer to buy more of good Y and less of good X. 
B) cause the consumer to buy more of good X and less of good Y. 
C) not affect the amount of goods X and Y that the consumer buys. 
D) result in an upward-sloping demand for good Y because of the substitution effect.

Question 14

The price elasticity of demand for a commodity is determined primarily by the

Accepted Answer

A) size of the consumer surplus. 
B) attractiveness of the substitutes for the good. 
C) incomes of consumers. 
D) availability of complementary goods. 
A) size of the consumer surplus. 
B) attractiveness of the substitutes for the good. 
C) incomes of consumers. 
D) availability of complementary goods.

Question 15

If the income elasticity of a good is positive,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 16

As the period for firms to expand output is lengthened,the elasticity of the market supply curve will

Accepted Answer

A) approach zero. 
B) increase. 
C) decrease. 
D) remain the same since time does not affect the elasticity of market supply. 
A) approach zero. 
B) increase. 
C) decrease. 
D) remain the same since time does not affect the elasticity of market supply.

Question 17

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 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

Figure 7-8
  
-For a price increase from $10 to $11,the price elasticity of the demand curve depicted in Figure 7-8 is

Accepted Answer

A) highly inelastic. 
B) relatively inelastic. 
C) approximately equal to -1. 
D) approximately equal to -2. 
A) highly inelastic. 
B) relatively inelastic. 
C) approximately equal to -1. 
D) approximately equal to -2.

Question 20

If an increase in the excise tax imposed on cigarettes pushes the price per pack up by 20 percent,and the quantity sold declines by 8 percent as a result,the price elasticity of demand for cigarettes is equal to

Accepted Answer

A) -0.2. 
B) -0.4. 
C) -0.8. 
D) -5. 
A) -0.2. 
B) -0.4. 
C) -0.8. 
D) -5.

Exam 20: Consumer Choice and Elasticity

Ceteris paribus,an increase in the price of a good will cause the

When the price elasticity of demand is greater than one,it means that demand is

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

The principle of diminishing marginal utility says that

If the demand for cigarettes is highly inelastic,this indicates that

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

Which of the following describes a situation in which demand must be inelastic?

Elaine,a small grocer,is planning to cut certain prices to increase her sales revenues.What will be the likely result of a price decrease for matches,a good for which the demand is inelastic,and a price decrease for fresh green tomatoes,an item for which consumer demand is elastic?

If Mr.McLean thinks the last dollar spent on bowling yields more satisfaction than the last dollar spent on hamburgers,and McLean is a utility-maximizing consumer,he should

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

The exhibit illustrates two possible demand curves for a product,D₁ and D₂.Which of the following is true regarding these demand curves?

Consider a consumer who purchases two goods,X and Y.If the price of good Y falls,then the substitution effect by itself will

The price elasticity of demand for a commodity is determined primarily by the

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

As the period for firms to expand output is lengthened,the elasticity of the market supply curve will

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

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

Figure 7-8 -For a price increase from $10 to $11,the price elasticity of the demand curve depicted in Figure 7-8 is

If an increase in the excise tax imposed on cigarettes pushes the price per pack up by 20 percent,and the quantity sold declines by 8 percent as a result,the price elasticity of demand for cigarettes is equal to

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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