Question 1

The demand for a product is likely to be more elastic when

Accepted Answer

A) the share of the total budget spent on the product is small. 
B) more complementary products are available. 
C) the consumer has a short time to adjust to price changes. 
D) more good substitutes for the product are available. 
A) the share of the total budget spent on the product is small. 
B) more complementary products are available. 
C) the consumer has a short time to adjust to price changes. 
D) more good substitutes for the product are available.

Question 2

A good with a high income elasticity is generally considered to be

Accepted Answer

A) an inferior good. 
B) a luxury good. 
C) a necessity. 
D) inexpensive, relative to other goods. 
A) an inferior good. 
B) a luxury good. 
C) a necessity. 
D) inexpensive, relative to other goods.

Question 3

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

Accepted Answer

A) relatively inelastic. 
B) approximately equal to -0.33. 
C) approximately equal to -3. 
D) both a andb. 
A) relatively inelastic. 
B) approximately equal to -0.33. 
C) approximately equal to -3. 
D) both a andb.

Question 4

Figure 7-7
  
-In the price range between $3 and $4, the price elasticity of the demand curve depicted in Figure 7-7 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 5

Marginal utility is the change in

Accepted Answer

A) total utility when an extra unit of output is produced. 
B) total utility when an extra unit of output is consumed. 
C) marginal utility when an extra unit of output is produced. 
D) average utility when an extra unit of output is consumed. 
A) total utility when an extra unit of output is produced. 
B) total utility when an extra unit of output is consumed. 
C) marginal utility when an extra unit of output is produced. 
D) average utility when an extra unit of output is consumed.

Question 6

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 7

A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.91. The administration is considering a tuition increase to help balance the budget. The revenue-maximizing decision is to

Accepted Answer

A) decrease tuition, which should boost enrollment enough to balance the budget. 
B) decrease tuition, which would bring in more revenue. 
C) leave tuition as is-an increase would not help balance the budget. 
D) increase tuition, which would generate more revenue. 
A) decrease tuition, which should boost enrollment enough to balance the budget. 
B) decrease tuition, which would bring in more revenue. 
C) leave tuition as is-an increase would not help balance the budget. 
D) increase tuition, which would generate more revenue.

Question 8

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.

Question 9

Table 7-1
  
-Refer to Table 7-1. If the price increases from $1.00 to $1.50,

Accepted Answer

A) the market demand decreases by 20 units. 
B) individual demand curves, when drawn, will shift to the left. 
C) the quantity demanded in the market decreases by 2 units. 
D) the quantity demanded in the market decreases by 7 units. 
A) the market demand decreases by 20 units. 
B) individual demand curves, when drawn, will shift to the left. 
C) the quantity demanded in the market decreases by 2 units. 
D) the quantity demanded in the market decreases by 7 units.

Question 10

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.

Question 11

The number of CDs purchased increased by 5 percent when consumer income increased by 10 percent. Assuming other factors are held constant, CDs would be classified as

Accepted Answer

A) inferior goods. 
B) normal goods. 
C) elastic goods. 
D) inelastic goods. 
A) inferior goods. 
B) normal goods. 
C) elastic goods. 
D) inelastic goods.

Question 12

A local Krispy Kreme doughnut shop reduced its prices by 10 percent, and as a result, the quantity of doughnuts sold increased by 25 percent. Over this range, the absolute value of the price elasticity of demand was

Accepted Answer

A) 0.4. 
B) 1. 
C) 2. 
D) 2.5 
A) 0.4. 
B) 1. 
C) 2. 
D) 2.5

Question 13

The marginal value of a commodity to a consumer

Accepted Answer

A) increases as more of the good is consumed. 
B) is exactly equal to price for all units purchased by the consumer. 
C) is measured by the height of the individual consumer's demand curve. 
D) is equal to the area above the price and below the individual consumer's demand curve. 
A) increases as more of the good is consumed. 
B) is exactly equal to price for all units purchased by the consumer. 
C) is measured by the height of the individual consumer's demand curve. 
D) is equal to the area above the price and below the individual consumer's demand curve.

Question 14

A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was

Accepted Answer

A) elastic. 
B) inelastic. 
C) of unitary elasticity. 
D) indeterminate; more information is needed to determine the price elasticity of demand. 
A) elastic. 
B) inelastic. 
C) of unitary elasticity. 
D) indeterminate; more information is needed to determine the price elasticity of demand.

Question 15

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because

Accepted Answer

A) buyers tend to be much less sensitive to a change in price when given more time to react. 
B) buyers tend to be much more sensitive to a change in price when given more time to react. 
C) buyers will have substantially more income over a ten-year period. 
D) the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline. 
A) buyers tend to be much less sensitive to a change in price when given more time to react. 
B) buyers tend to be much more sensitive to a change in price when given more time to react. 
C) buyers will have substantially more income over a ten-year period. 
D) the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline.

Question 16

If rice is an inferior good,

Accepted Answer

A) the income elasticity of demand for rice will be positive. 
B) an increase in income will cause the demand curve for rice to shift to the left. 
C) an increase in income will cause consumers to buy more rice at the current market price. 
D) a reduction in income would not affect the demand for rice, but it would increase the quantity demanded. 
A) the income elasticity of demand for rice will be positive. 
B) an increase in income will cause the demand curve for rice to shift to the left. 
C) an increase in income will cause consumers to buy more rice at the current market price. 
D) a reduction in income would not affect the demand for rice, but it would increase the quantity demanded.

Question 17

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 18

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 19

If the price of a good is $0, a consumer will

Accepted Answer

A) consume an infinite quantity. 
B) consume all units with positive marginal utility. 
C) consume the entire amount supplied. 
D) consume until total utility becomes 0. 
A) consume an infinite quantity. 
B) consume all units with positive marginal utility. 
C) consume the entire amount supplied. 
D) consume until total utility becomes 0.

Question 20

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

Exam 7: Consumer Choice and Elasticity

The demand for a product is likely to be more elastic when

A good with a high income elasticity is generally considered to be

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

Figure 7-7 -In the price range between $3 and $4, the price elasticity of the demand curve depicted in Figure 7-7 is

Marginal utility is the change in

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

A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.91. The administration is considering a tuition increase to help balance the budget. The revenue-maximizing decision is to

The demand for salt is

Table 7-1 -Refer to Table 7-1. If the price increases from $1.00 to $1.50,

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

The number of CDs purchased increased by 5 percent when consumer income increased by 10 percent. Assuming other factors are held constant, CDs would be classified as

A local Krispy Kreme doughnut shop reduced its prices by 10 percent, and as a result, the quantity of doughnuts sold increased by 25 percent. Over this range, the absolute value of the price elasticity of demand was

The marginal value of a commodity to a consumer

A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because

If rice is an inferior good,

A successful advertising campaign would likely

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

If the price of a good is $0, a consumer will

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 ____.

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: 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

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

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

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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 .