Question 1

All of the following products are most likely to have significant network externalities except

Accepted Answer

A) cat food. 
B) cell phones. 
C) popular board games. 
D) fax machines. 
A) cat food. 
B) cell phones. 
C) popular board games. 
D) fax machines.

Question 2

Which of the following products comes closest to having a perfectly inelastic demand?

Accepted Answer

A) gasoline 
B) cholesterol medication in general 
C)  iPhones 
D) bus rides 
A) gasoline 
B) cholesterol medication in general 
C)  iPhones 
D) bus rides

Question 3

Figure 7-6
  
-Refer to Figure 7-6.Which of the following statements is true about the price elasticity of demand?

Accepted Answer

A) The elasticity coefficient is constant along the demand curve. 
B) The elastic portion of a straight-line downward sloping demand curve corresponds to the segment above the midpoint. 
C) The inelastic portion of the demand curve corresponds to the segment above the midpoint. 
D) At the midpoint of the demand curve, the elasticity coefficient is zero. 
A) The elasticity coefficient is constant along the demand curve. 
B) The elastic portion of a straight-line downward sloping demand curve corresponds to the segment above the midpoint. 
C) The inelastic portion of the demand curve corresponds to the segment above the midpoint. 
D) At the midpoint of the demand curve, the elasticity coefficient is zero.

Question 4

Why might network externalities result in products that contain inferior technologies?

Accepted Answer

Network externalities can create signifi

Question 5

As a consumer consumes more and more of a product in a particular time period,eventually marginal utility

Accepted Answer

A) rises. 
B) is constant. 
C) declines. 
D) fluctuates. 
A) rises. 
B) is constant. 
C) declines. 
D) fluctuates.

Question 6

For each pair of items below determine which product would have the higher price elasticity of demand (in absolute value).
a.Insulin for a diabetic or aspirin for someone suffering a headache.
b.A new Whirlpool 27 cu.ft.side-by-side refrigerator or electricity to power your all-electric home.
c.A can of Red Bull or soft drinks in general.

Accepted Answer

a. The demand for aspirin is more price

Question 7

The endowment effect is the tendency of people to be unwilling to sell a good they already own even if they are offered a price greater than they would be willing to pay to buy the good if they did not already own it.

Accepted Answer

A) True 
 B)False

Question 8

For a demand curve to be upward sloping,the good would have to be an inferior good,and

Accepted Answer

A) the income effect would have to be larger than the substitution effect. 
B) the income effect would have to be smaller than the substitution effect. 
C) the income effect would have to be equal to the substitution effect. 
D) the income effect and the substitution effect would have to be nonexistent. 
A) the income effect would have to be larger than the substitution effect. 
B) the income effect would have to be smaller than the substitution effect. 
C) the income effect would have to be equal to the substitution effect. 
D) the income effect and the substitution effect would have to be nonexistent.

Question 9

Table 7-6
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { Beer (glasses) }
\end{array} & \text { Total Utility } & \begin{array} { c } 
\text { Quantity of } \
\text { Pizza (slices) }
\end{array} & \text { Total Utility } \
\hline 1 & 25 & 1 & 20 \
\hline 2 & 45 & 2 & 35 \
\hline 3 & 60 & 3 & 45 \
\hline 4 & 65 & 4 & 50 \
\hline 5 & 69 & 5 & 52 \
\hline 6 & 70 & 6 & 52 \
\hline
\end{array}$$ 
Table 7-6 shows Antonio's utility from beer and pizza.
-Refer to Table 7-6.What is Antonio's marginal utility from consuming the fifth beer?

Accepted Answer

A) 4 utils 
B) 13.6 utils 
C) 69 utils 
D) 134 utils 
A) 4 utils 
B) 13.6 utils 
C) 69 utils 
D) 134 utils

Question 10

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges,then Marlowe

Accepted Answer

A) is maximizing total utility. 
B) should buy more apples and fewer oranges. 
C) should buy more oranges and fewer apples. 
D) should buy fewer oranges and fewer apples. 
A) is maximizing total utility. 
B) should buy more apples and fewer oranges. 
C) should buy more oranges and fewer apples. 
D) should buy fewer oranges and fewer apples.

Question 11

The demand curve for a Giffen good is

Accepted Answer

A) non-linear but downward-sloping. 
B) vertical. 
C) upward-sloping. 
D) non-existent. 
A) non-linear but downward-sloping. 
B) vertical. 
C) upward-sloping. 
D) non-existent.

Question 12

Suppose a decrease in the supply of paper results in an increase in revenue.This indicates that

Accepted Answer

A) the demand for paper is inelastic. 
B) the demand for paper is elastic. 
C) the supply of paper is inelastic. 
D) the supply of paper is elastic. 
A) the demand for paper is inelastic. 
B) the demand for paper is elastic. 
C) the supply of paper is inelastic. 
D) the supply of paper is elastic.

Question 13

Molly received an autographed poster of David Hasselhoff for her 21st birthday.Her friend Helga offered her $50 for the poster,but Molly refused to sell the poster even though she knows she would never pay that much to replace it if it was ever damaged or destroyed.Explain this inconsistency in Molly's behavior.

Accepted Answer

The inconsistency comes from Molly's fai

Question 14

When there are few substitutes available for a good,demand tends to be relatively inelastic.

Accepted Answer

A) True 
 B)False

Question 15

The average price of gasoline in your neighborhood is $3.53 per gallon.Your neighbor,Diana tells you that you can "save a lot" by frequenting a gas station 20 miles outside your neighborhood where the price of gasoline is $3.46 per gallon However,she cautions you that there usually long lines at that station.Is her suggestion beneficial to you?

Accepted Answer

A) Yes, since gasoline is a necessity for car owners, the total cost savings would be relatively substantial. 
B) No, if one factors in the non-monetary opportunity costs (driving time and waiting in line), it could prove more costly to go to the lower-priced gasoline station. 
C) Yes, the lower price of gasoline at the rival station increases my purchasing power and enables me to consume more of other goods. 
D) No, my friend is misled; clearly, the lower priced gasoline must be of inferior quality and could damage vehicles. 
A) Yes, since gasoline is a necessity for car owners, the total cost savings would be relatively substantial. 
B) No, if one factors in the non-monetary opportunity costs (driving time and waiting in line), it could prove more costly to go to the lower-priced gasoline station. 
C) Yes, the lower price of gasoline at the rival station increases my purchasing power and enables me to consume more of other goods. 
D) No, my friend is misled; clearly, the lower priced gasoline must be of inferior quality and could damage vehicles.

Question 16

Consumers maximize total utility within their budget constraint by

Accepted Answer

A) buying the cheapest goods they can find. 
B) buying whatever they like the best. 
C) buying the goods with the largest marginal utility per dollar spent. 
D) spending the same dollar amount for each good. 
A) buying the cheapest goods they can find. 
B) buying whatever they like the best. 
C) buying the goods with the largest marginal utility per dollar spent. 
D) spending the same dollar amount for each good.

Question 17

What is marginal utility and what is the law of diminishing marginal utility?

Accepted Answer

Marginal utility is the change in total

Question 18

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Accepted Answer

A) A wide variety of substitutes are available for the good. 
B) The time period under consideration is short. 
C) The good is a necessity. 
D) The expenditure on the good is small relative to one's budget. 
A) A wide variety of substitutes are available for the good. 
B) The time period under consideration is short. 
C) The good is a necessity. 
D) The expenditure on the good is small relative to one's budget.

Question 19

The estimated price elasticities of demand for the products listed in the table as "Product A" are from Table 7-5 in the text.Indicate whether the products listed as "Product B" will have a more elastic or less elastic demand than the corresponding Product A.
 $\begin{array}{|l|l|l|l|}
\hline &\text { Estimated } && \text { Is Estimated Elasticity for } \
\hline &\text { Elasticity for } & &\text { ProductB More Elastic or Less } \
 \text { Product A } & \text { Product A } & \text { Product B }&\text { Elastic than for Product A? }\
\hline \text { Beer } & -0.29 & \begin{array}{l}
\text { Samuel Adams } \
\text { Boston Lager }
\end{array} \
\hline \text { Chicken } & -0.37 & \begin{array}{l}
\text { Organically } \
\text { raised chicken }
\end{array} \
\hline \text { Cocaine } & -0.28 & \text { Illegal narcotics } \
\hline \text { Cigarettes } & -0.25 & \text { Marlboro Lights } \
\text { Restaurant } & & \begin{array}{l}
\text { Denny's Grand } \
\text { Slam breakfast }
\end{array} \
\hline
\end{array}$

Accepted Answer

None

Question 20

Figure 7-7
  
-Refer to Figure 7-7.The section of the demand curve labeled "A" represents

Accepted Answer

A) the inelastic section of the demand curve. 
B) the unit-elastic section of the demand curve. 
C) the elastic section of the demand curve. 
D) the perfectly elastic section of the demand curve. 
A) the inelastic section of the demand curve. 
B) the unit-elastic section of the demand curve. 
C) the elastic section of the demand curve. 
D) the perfectly elastic section of the demand curve.

All of the following products are most likely to have significant network externalities except

Which of the following products comes closest to having a perfectly inelastic demand?

Figure 7-6 -Refer to Figure 7-6.Which of the following statements is true about the price elasticity of demand?

Why might network externalities result in products that contain inferior technologies?

As a consumer consumes more and more of a product in a particular time period,eventually marginal utility

The endowment effect is the tendency of people to be unwilling to sell a good they already own even if they are offered a price greater than they would be willing to pay to buy the good if they did not already own it.

For a demand curve to be upward sloping,the good would have to be an inferior good,and

Table 7-6 Quantity of Beer (glasses) Total Utility Quantity of Pizza (slices) Total Utility 1 25 1 20 2 45 2 35 3 60 3 45 4 65 4 50 5 69 5 52 6 70 6 52 Table 7-6 shows Antonio's utility from beer and pizza. -Refer to Table 7-6.What is Antonio's marginal utility from consuming the fifth beer?

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges,then Marlowe

The demand curve for a Giffen good is

Suppose a decrease in the supply of paper results in an increase in revenue.This indicates that

When there are few substitutes available for a good,demand tends to be relatively inelastic.

Consumers maximize total utility within their budget constraint by

What is marginal utility and what is the law of diminishing marginal utility?

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Figure 7-7 -Refer to Figure 7-7.The section of the demand curve labeled "A" represents

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

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Exam 7: Consumer Choice and Elasticity

All of the following products are most likely to have significant network externalities except

Which of the following products comes closest to having a perfectly inelastic demand?

Figure 7-6 -Refer to Figure 7-6.Which of the following statements is true about the price elasticity of demand?

Why might network externalities result in products that contain inferior technologies?

As a consumer consumes more and more of a product in a particular time period,eventually marginal utility

The endowment effect is the tendency of people to be unwilling to sell a good they already own even if they are offered a price greater than they would be willing to pay to buy the good if they did not already own it.

For a demand curve to be upward sloping,the good would have to be an inferior good,and

Table 7-6 Quantity of Beer (glasses) Total Utility Quantity of Pizza (slices) Total Utility 1 25 1 20 2 45 2 35 3 60 3 45 4 65 4 50 5 69 5 52 6 70 6 52 Table 7-6 shows Antonio's utility from beer and pizza. -Refer to Table 7-6.What is Antonio's marginal utility from consuming the fifth beer?

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges,then Marlowe

The demand curve for a Giffen good is

Suppose a decrease in the supply of paper results in an increase in revenue.This indicates that

When there are few substitutes available for a good,demand tends to be relatively inelastic.

Consumers maximize total utility within their budget constraint by

What is marginal utility and what is the law of diminishing marginal utility?

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Figure 7-7 -Refer to Figure 7-7.The section of the demand curve labeled "A" represents

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters