Question 1

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 2

If a 30 percent decline in the price of gasoline leads to a 15 percent rise in expenditures on gasoline, the price elasticity of demand for gasoline in this range must be

Accepted Answer

A)  2. 
B)  elastic. 
C)  0.5. 
D)  inelastic. 
A)  2. 
B)  elastic. 
C)  0.5. 
D)  inelastic.

Question 3

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 4

When the price of a product increases, the passage of time usually causes the price elasticity of demand for the product to become

Accepted Answer

A)  less elastic. 
B)  more elastic. 
C)  smaller and smaller in an absolute value. 
D)  approximately equal to zero in the long run because of scarcity. 
A)  less elastic. 
B)  more elastic. 
C)  smaller and smaller in an absolute value. 
D)  approximately equal to zero in the long run because of scarcity.

Question 5

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 6

Mark complains: "I can't believe they raised the price of comic books, and because of this, I'm going to reduce my demand for comic books." Is Mark stating the concept of demand correctly?

Accepted Answer

Mark has confused the concept of demand

Question 7

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 8

Figure 7-12
  
-Refer to Figure 7-12. When price falls from $50 to $40, it can be inferred that demand between those two prices is

Accepted Answer

A)  inelastic, since total revenue decreases from $8,000 to $5,000. 
B)  inelastic, since total revenue increases from $5,000 to $8,000. 
C)  elastic, since total revenue increases from $5,000 to $8,000. 
D)  unit elastic, since total revenue increases from $5,000 to $8,000. 
A)  inelastic, since total revenue decreases from $8,000 to $5,000. 
B)  inelastic, since total revenue increases from $5,000 to $8,000. 
C)  elastic, since total revenue increases from $5,000 to $8,000. 
D)  unit elastic, since total revenue increases from $5,000 to $8,000.

Question 9

An individual's demand curve for a good is derived by

Accepted Answer

A)  varying the income level and observing the resulting total utility derived from both goods. 
B)  varying the price of one good and observing the resulting quantities of the other good. 
C)  shifting the budget line to the left and calculating the loss in total utility. 
D)  varying the price of one good and observing the resulting quantities demanded of that good. 
A)  varying the income level and observing the resulting total utility derived from both goods. 
B)  varying the price of one good and observing the resulting quantities of the other good. 
C)  shifting the budget line to the left and calculating the loss in total utility. 
D)  varying the price of one good and observing the resulting quantities demanded of that good.

Question 10

Assuming that bus travel is an inferior good, an increase in consumer income, other things being equal, will cause

Accepted Answer

A)  an upward movement along the demand curve for bus travel. 
B)  a downward movement along the demand curve for bus travel. 
C)  a rightward shift in the demand curve for bus travel. 
D)  a leftward shift in the demand curve for bus travel. 
A)  an upward movement along the demand curve for bus travel. 
B)  a downward movement along the demand curve for bus travel. 
C)  a rightward shift in the demand curve for bus travel. 
D)  a leftward shift in the demand curve for bus travel.

Question 11

According to the income effect, when the price of automobiles rises, people buy fewer automobiles because

Accepted Answer

A)  they substitute other forms of transportation for driving. 
B)  the nominal amount of their paychecks is smaller. 
C)  the purchasing power of their income is reduced. 
D)  their demand for automobiles is very elastic. 
A)  they substitute other forms of transportation for driving. 
B)  the nominal amount of their paychecks is smaller. 
C)  the purchasing power of their income is reduced. 
D)  their demand for automobiles is very elastic.

Question 12

If a demand curve for a good were completely vertical, it would be considered

Accepted Answer

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

Question 13

If the price of tickets to Disney World increases 10 percent, and as a result, attendance falls by 15 percent, the demand for the tickets is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  of unitary elasticity. 
D)  indeterminate. 
A)  elastic. 
B)  inelastic. 
C)  of unitary elasticity. 
D)  indeterminate.

Question 14

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 15

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 16

Suppose there are only two goods, apples and oranges. What happens if the price of each good increases by 15 percent?

Accepted Answer

A)  The consumer will substitute apples for oranges. 
B)  The consumer will substitute oranges for apples. 
C)  There is no substitution effect because relative prices have remained constant. 
D)  Demand for both goods increases. 
E)  Demand for both goods decreases. 
A)  The consumer will substitute apples for oranges. 
B)  The consumer will substitute oranges for apples. 
C)  There is no substitution effect because relative prices have remained constant. 
D)  Demand for both goods increases. 
E)  Demand for both goods decreases.

Question 17

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 18

Suppose that the quantity of DVD players sold increased from 200 to 400 when the price fell from $225 to $175. Over this price range, the absolute value of the price elasticity of demand for DVD players is

Accepted Answer

A)  0.25. 
B)  0.375. 
C)  1.0. 
D)  2.67. 
E)  4.0. 
A)  0.25. 
B)  0.375. 
C)  1.0. 
D)  2.67. 
E)  4.0.

Question 19

The price elasticity of supply

Accepted Answer

A)  will be positive when supply is elastic and negative when it is inelastic. 
B)  will be negative when supply is elastic and positive when it is inelastic. 
C)  will always be positive. 
D)  will be positive when demand for the good is inelastic. 
E)  will be positive when demand for the good is elastic. 
A)  will be positive when supply is elastic and negative when it is inelastic. 
B)  will be negative when supply is elastic and positive when it is inelastic. 
C)  will always be positive. 
D)  will be positive when demand for the good is inelastic. 
E)  will be positive when demand for the good is elastic.

Question 20

A question on an economics exam asks: What happens in the market for margarine when income rises? Allison, an excellent student, shows the demand for margarine decreasing. Is she necessarily wrong? Why or why not?

Accepted Answer

If we consider Allison's Answer wrong, w

Exam 20: Consumer Choice and Elasticity

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

If a 30 percent decline in the price of gasoline leads to a 15 percent rise in expenditures on gasoline, the price elasticity of demand for gasoline in this range must be

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

When the price of a product increases, the passage of time usually causes the price elasticity of demand for the product to become

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

Mark complains: "I can't believe they raised the price of comic books, and because of this, I'm going to reduce my demand for comic books." Is Mark stating the concept of demand correctly?

The principle of diminishing marginal utility says that

Figure 7-12 -Refer to Figure 7-12. When price falls from $50 to $40, it can be inferred that demand between those two prices is

An individual's demand curve for a good is derived by

Assuming that bus travel is an inferior good, an increase in consumer income, other things being equal, will cause

According to the income effect, when the price of automobiles rises, people buy fewer automobiles because

If a demand curve for a good were completely vertical, it would be considered

If the price of tickets to Disney World increases 10 percent, and as a result, attendance falls by 15 percent, the demand for the tickets is

A successful advertising campaign would likely

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

Suppose there are only two goods, apples and oranges. What happens if the price of each good increases by 15 percent?

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

Suppose that the quantity of DVD players sold increased from 200 to 400 when the price fell from $225 to $175. Over this price range, the absolute value of the price elasticity of demand for DVD players is

The price elasticity of supply

A question on an economics exam asks: What happens in the market for margarine when income rises? Allison, an excellent student, shows the demand for margarine decreasing. Is she necessarily wrong? Why or why not?

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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