Question 1

If demand price elasticity measures 2, this implies that consumers would

Accepted Answer

A)  buy twice as much of the product if the price drops 10 percent. 
B)  require a 2 percent drop in price to increase their purchases by 1 percent. 
C)  buy 2 percent more of the product in response to a 1 percent drop in price. 
D)  require at least a $2 increase in price before showing any response to the price increase. 
E)  buy twice as much of the product if the price drops 1 percent. 
A)  buy twice as much of the product if the price drops 10 percent. 
B)  require a 2 percent drop in price to increase their purchases by 1 percent. 
C)  buy 2 percent more of the product in response to a 1 percent drop in price. 
D)  require at least a $2 increase in price before showing any response to the price increase. 
E)  buy twice as much of the product if the price drops 1 percent.

Question 2

An increase in the price of computer diskettes leads to an increase in total expenditures on the diskettes. Which of the following is true for this price change?

Accepted Answer

A)  Computer diskettes are an inferior good. 
B)  The demand for computer diskettes is perfectly elastic. 
C)  The demand for computer diskettes is inelastic. 
D)  The demand for computer diskettes is elastic. 
A)  Computer diskettes are an inferior good. 
B)  The demand for computer diskettes is perfectly elastic. 
C)  The demand for computer diskettes is inelastic. 
D)  The demand for computer diskettes is elastic.

Question 3

Terri currently consumes 10 hamburgers and 2 shirts per month. At her current rates of consumption, her marginal utility of hamburgers is 10 and her marginal utility of shirts is 50. If the price of hamburgers is $2 each, while the price of a shirt is $25, Terri

Accepted Answer

A)  is maximizing her utility. 
B)  could improve her total utility by buying fewer hamburgers and more shirts. 
C)  could improve her total utility by buying fewer shirts and more hamburgers. 
D)  could improve her total utility by spending less on both goods. 
A)  is maximizing her utility. 
B)  could improve her total utility by buying fewer hamburgers and more shirts. 
C)  could improve her total utility by buying fewer shirts and more hamburgers. 
D)  could improve her total utility by spending less on both goods.

Question 4

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 5

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 6

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 7

When the price of Nike tennis shoes goes from $100 to $80, the quantity demanded increases from 20 to 30 million. Over this price range, the absolute value of the price elasticity of demand is

Accepted Answer

A)  0.55. 
B)  1. 
C)  1.25. 
D)  1.80. 
E)  2.50. 
A)  0.55. 
B)  1. 
C)  1.25. 
D)  1.80. 
E)  2.50.

Question 8

When economists say the demand for a good is highly inelastic, they mean that

Accepted Answer

A)  even if the price rose substantially, suppliers would be unwilling to offer much more of the good. 
B)  the facilities utilized by producers of the good are inflexible; producers cannot easily expand their facilities, even in the long run. 
C)  consumers will respond to a change in the price of the good by purchasing substantially more of it. 
D)  a large (percentage) change in the price of a good will result in only a small (percentage) change in the quantity demanded. 
A)  even if the price rose substantially, suppliers would be unwilling to offer much more of the good. 
B)  the facilities utilized by producers of the good are inflexible; producers cannot easily expand their facilities, even in the long run. 
C)  consumers will respond to a change in the price of the good by purchasing substantially more of it. 
D)  a large (percentage) change in the price of a good will result in only a small (percentage) change in the quantity demanded.

Question 9

If the income elasticity of demand for a good is negative, this implies that

Accepted Answer

A)  only the poor will buy the good. 
B)  as incomes fall, less will be spent on the good. 
C)  as incomes rise, the demand for the good will fall. 
D)  the good does not obey the law of demand. 
A)  only the poor will buy the good. 
B)  as incomes fall, less will be spent on the good. 
C)  as incomes rise, the demand for the good will fall. 
D)  the good does not obey the law of demand.

Question 10

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.

Question 11

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 12

When the price elasticity of demand is large, then

Accepted Answer

A)  the product is more likely to be a necessity. 
B)  the responsiveness of quantity demanded to a change in price is small. 
C)  the percentage change in price divided by the percentage change in quantity demanded is large. 
D)  the responsiveness of quantity demanded to a change in price is large. 
A)  the product is more likely to be a necessity. 
B)  the responsiveness of quantity demanded to a change in price is small. 
C)  the percentage change in price divided by the percentage change in quantity demanded is large. 
D)  the responsiveness of quantity demanded to a change in price is large.

Question 13

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 14

Cary increases the price of her cakes from $8 to $10 per cake, but her cash receipts decrease by 2 percent. The price elasticity of demand (in the $8 to $10 range) is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  0.02. 
D)  0.25. 
A)  elastic. 
B)  inelastic. 
C)  0.02. 
D)  0.25.

Question 15

A car wash currently sells 30 car washes a day at a price of $5. Total daily revenue is now $150. If they lower their price to $3,

Accepted Answer

A)  total revenue will fall if the number of washes sold only rises to 40. 
B)  total revenue will remain unchanged if the number of washes sold rises to 50. 
C)  total revenue will increase if the number of washes sold rises to 60. 
D)  all of the above are true. 
A)  total revenue will fall if the number of washes sold only rises to 40. 
B)  total revenue will remain unchanged if the number of washes sold rises to 50. 
C)  total revenue will increase if the number of washes sold rises to 60. 
D)  all of the above are true.

Question 16

Goods that consumers regard as luxuries generally have

Accepted Answer

A)  an income elasticity equal to 1. 
B)  an income elasticity less than 1. 
C)  an income elasticity greater than 1. 
D)  a negative income elasticity. 
A)  an income elasticity equal to 1. 
B)  an income elasticity less than 1. 
C)  an income elasticity greater than 1. 
D)  a negative income elasticity.

Question 17

New York City increased regulated taxi fares by 17.5 percent and expected taxi revenue to increase by the same amount. The taxi commission believed taxi demand was

Accepted Answer

A)  unit elastic. 
B)  somewhat elastic. 
C)  perfectly elastic. 
D)  perfectly inelastic. 
E)  somewhat inelastic 
A)  unit elastic. 
B)  somewhat elastic. 
C)  perfectly elastic. 
D)  perfectly inelastic. 
E)  somewhat inelastic

Question 18

If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, demand is classified as

Accepted Answer

A)  unstable. 
B)  relatively inelastic. 
C)  relatively elastic. 
D)  of unitary elasticity. 
A)  unstable. 
B)  relatively inelastic. 
C)  relatively elastic. 
D)  of unitary elasticity.

Question 19

An increase in the consumption of a good resulting from a reduction in price that makes the good cheaper in relation to other goods is called the

Accepted Answer

A)  substitution effect. 
B)  income effect. 
C)  real balance effect. 
D)  inelasticity effect. 
A)  substitution effect. 
B)  income effect. 
C)  real balance effect. 
D)  inelasticity effect.

Question 20

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.

Exam 20: Consumer Choice and Elasticity

If demand price elasticity measures 2, this implies that consumers would

An increase in the price of computer diskettes leads to an increase in total expenditures on the diskettes. Which of the following is true for this price change?

Terri currently consumes 10 hamburgers and 2 shirts per month. At her current rates of consumption, her marginal utility of hamburgers is 10 and her marginal utility of shirts is 50. If the price of hamburgers is $2 each, while the price of a shirt is $25, Terri

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 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

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

When the price of Nike tennis shoes goes from $100 to $80, the quantity demanded increases from 20 to 30 million. Over this price range, the absolute value of the price elasticity of demand is

When economists say the demand for a good is highly inelastic, they mean that

If the income elasticity of demand for a good is negative, this implies that

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

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

When the price elasticity of demand is large, then

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

Cary increases the price of her cakes from $8 to $10 per cake, but her cash receipts decrease by 2 percent. The price elasticity of demand (in the $8 to $10 range) is

A car wash currently sells 30 car washes a day at a price of $5. Total daily revenue is now $150. If they lower their price to $3,

Goods that consumers regard as luxuries generally have

New York City increased regulated taxi fares by 17.5 percent and expected taxi revenue to increase by the same amount. The taxi commission believed taxi demand was

If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, demand is classified as

An increase in the consumption of a good resulting from a reduction in price that makes the good cheaper in relation to other goods is called the

Figure 7-9 -At a price of $10, the price elasticity of the demand curve depicted in Figure 7-9 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 : Taking the Nations Economic Pulse

B : Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

A : an Introduction to Basic Macroeconomic Markets

B : an 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

A : Money and the Banking System

B : Money 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

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

Special Topic 1 : Government Spending and Taxation

Special Topic 2 : The Economics of Social Security

Special Topic 3 : The Stock Market: Its Function, Performance, and Potential as an Investment Opportunity

Special Topic 4 : Great Debates in Economics: Keynes Versus Hayek

Special Topic 5 : The Crisis of 2008: Causes and Lessons for the Future

Special Topic 6 : Lessons from the Great Depression

Special Topic 7 : Lessons from Japan and Canada

Special Topic 8 : The Federal Budget and the National Debt

Special Topic 9 : The Economics of Healthcare

Special Topic 10 : Education: Problems and Performance

Special Topic 11 : Earnings Differences Between Men and Women

Special Topic 12 : Do Labor Unions Increase the Wages of Workers?

Special Topic 13 : The Question of Resource Exhaustion

Special Topic 14 : Difficult Environmental Cases and the Role of Government

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