Question 1

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 2

An inferior good is a good whose quantity demanded

Accepted Answer

A)  rises when its price falls. 
B)  falls when the price of a related good falls. 
C)  falls when the consumer's total utility rises. 
D)  rises when the consumer's income falls. 
A)  rises when its price falls. 
B)  falls when the price of a related good falls. 
C)  falls when the consumer's total utility rises. 
D)  rises when the consumer's income falls.

Question 3

A good is classified as inferior if

Accepted Answer

A)  consumers buy less when the price rises. 
B)  consumers buy less when income rises. 
C)  consumers buy less when the price falls. 
D)  consumers buy more when income rises. 
A)  consumers buy less when the price rises. 
B)  consumers buy less when income rises. 
C)  consumers buy less when the price falls. 
D)  consumers buy more when income rises.

Question 4

If people buy less chewing gum at every price when their incomes fall, then

Accepted Answer

A)  chewing gum is a normal good. 
B)  the demand for chewing gum is positively sloped. 
C)  demand for chewing gum has increased. 
D)  the price of chewing gum has increased. 
E)  there has been a decrease in population that changed demand. 
A)  chewing gum is a normal good. 
B)  the demand for chewing gum is positively sloped. 
C)  demand for chewing gum has increased. 
D)  the price of chewing gum has increased. 
E)  there has been a decrease in population that changed demand.

Question 5

A normal good is defined by economists to be a good

Accepted Answer

A)  with a negatively-sloped demand curve. 
B)  that is purchased by at least 75 percent of the population. 
C)  that is bought by consumers with normal tastes. 
D)  whose demand increases when incomes increase. 
E)  whose demand decreases when incomes increase. 
A)  with a negatively-sloped demand curve. 
B)  that is purchased by at least 75 percent of the population. 
C)  that is bought by consumers with normal tastes. 
D)  whose demand increases when incomes increase. 
E)  whose demand decreases when incomes increase.

Question 6

Jeff likes Pepsi and pizza. When the price of pizza rises, the substitution effect causes Pepsi to be relatively

Accepted Answer

A)  more expensive, so Jeff buys more Pepsi. 
B)  more expensive, so Jeff buys less Pepsi. 
C)  less expensive, so Jeff buys more Pepsi. 
D)  less expensive, so Jeff buys less Pepsi. 
A)  more expensive, so Jeff buys more Pepsi. 
B)  more expensive, so Jeff buys less Pepsi. 
C)  less expensive, so Jeff buys more Pepsi. 
D)  less expensive, so Jeff buys less Pepsi.

Question 7

Which of the following statements is true regarding the price elasticity of supply?

Accepted Answer

A)  The price elasticity of supply is always negative. 
B)  The price elasticity of supply is always positive. 
C)  The price elasticity of supply will be greater when suppliers have a shorter time to respond to a price change. 
D)  None of the above statements are true. 
A)  The price elasticity of supply is always negative. 
B)  The price elasticity of supply is always positive. 
C)  The price elasticity of supply will be greater when suppliers have a shorter time to respond to a price change. 
D)  None of the above statements are true.

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

Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup, and as a result, the quantity sold per day increased from 350 to 450. Over this price range, the absolute value of the price elasticity of demand for Starbucks coffee is

Accepted Answer

A)  0.40. 
B)  0.80. 
C)  1.25. 
D)  2.50. 
E)  4. 
A)  0.40. 
B)  0.80. 
C)  1.25. 
D)  2.50. 
E)  4.

Question 10

When economists say the price elasticity of supply is elastic, they mean that

Accepted Answer

A)  suppliers are willing to produce much larger amounts of their good. 
B)  suppliers are willing to produce only a small amount more of their good. 
C)  consumers are willing to purchase much larger quantities of the good. 
D)  the change in quantity supplied is relatively small compared to the change in price. 
A)  suppliers are willing to produce much larger amounts of their good. 
B)  suppliers are willing to produce only a small amount more of their good. 
C)  consumers are willing to purchase much larger quantities of the good. 
D)  the change in quantity supplied is relatively small compared to the change in price.

Question 11

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles,

Accepted Answer

A)  yours would be negative and your roommate's would be positive. 
B)  yours would be positive and your roommate's would be negative. 
C)  yours would be zero and your roommate's would approach infinity. 
D)  yours would approach infinity and your roommate's would be zero. 
A)  yours would be negative and your roommate's would be positive. 
B)  yours would be positive and your roommate's would be negative. 
C)  yours would be zero and your roommate's would approach infinity. 
D)  yours would approach infinity and your roommate's would be zero.

Question 12

If the price of apples increases, total expenditures on apples will decline if

Accepted Answer

A)  there are few substitutes for apples. 
B)  the supply of apples is inelastic. 
C)  the demand for apples is elastic. 
D)  apples are a normal good. 
A)  there are few substitutes for apples. 
B)  the supply of apples is inelastic. 
C)  the demand for apples is elastic. 
D)  apples are a normal good.

Question 13

Figure 7-11
  
-Refer to Figure 7-11. As price falls from PA to PB, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

Accepted Answer

A)  D₁ 
B)  D₂ 
C)  D₃ 
D)  All of the above are equally elastic. 
A)  D₁ 
B)  D₂ 
C)  D₃ 
D)  All of the above are equally elastic.

Question 14

If the price elasticity of demand for grapes was 2.5,

Accepted Answer

A)  the demand for grapes would be considered inelastic. 
B)  an increase in the price of grapes would decrease total consumer spending on grapes. 
C)  consumer purchases are less sensitive to a change in the price of grapes than to a change in the price of bananas, which have a price elasticity of 1.6. 
D)  the income elasticity for grapes must also be 2.5. 
A)  the demand for grapes would be considered inelastic. 
B)  an increase in the price of grapes would decrease total consumer spending on grapes. 
C)  consumer purchases are less sensitive to a change in the price of grapes than to a change in the price of bananas, which have a price elasticity of 1.6. 
D)  the income elasticity for grapes must also be 2.5.

Question 15

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

Accepted Answer

A)  Total revenue decreases by 10 percent when the price of jeans rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of jeans rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of jeans rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of jeans rises by $10. 
E)  Total revenue decreases by more than $10 when the price of jeans rises by $10. 
A)  Total revenue decreases by 10 percent when the price of jeans rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of jeans rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of jeans rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of jeans rises by $10. 
E)  Total revenue decreases by more than $10 when the price of jeans rises by $10.

Question 16

The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called

Accepted Answer

A)  price elasticity of demand. 
B)  consumer surplus. 
C)  the substitution effect. 
D)  income elasticity of demand. 
A)  price elasticity of demand. 
B)  consumer surplus. 
C)  the substitution effect. 
D)  income elasticity of demand.

Question 17

If Russell values a ticket to a rock concert at $100 and is able to purchase it for only $40, he has received ____ in consumer surplus on his purchase. (Fill in the blank.)

Accepted Answer

A)  $40 
B)  $60 
C)  $100 
D)  $140 
A)  $40 
B)  $60 
C)  $100 
D)  $140

Question 18

Sarah recently got a 10 percent raise. She now purchases 30 percent more in groceries on a weekly basis. Sarah's income elasticity for groceries is

Accepted Answer

A)  0.33. 
B)  0.5. 
C)  1. 
D)  3. 
A)  0.33. 
B)  0.5. 
C)  1. 
D)  3.

Question 19

The difference between normal and inferior goods is that

Accepted Answer

A)  an increase in price will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward. 
B)  if the price of a normal good increases, individuals who buy it are poorer; for inferior goods, the opposite is true. 
C)  an inferior good is something that will not be demanded until quantities of the normal good have been exhausted. 
D)  an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward. 
A)  an increase in price will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward. 
B)  if the price of a normal good increases, individuals who buy it are poorer; for inferior goods, the opposite is true. 
C)  an inferior good is something that will not be demanded until quantities of the normal good have been exhausted. 
D)  an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward.

Question 20

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A)  The relevant time horizon is short. 
B)  The good is a necessity. 
C)  The market for the good is broadly defined. 
D)  There are many close substitutes for this good. 
A)  The relevant time horizon is short. 
B)  The good is a necessity. 
C)  The market for the good is broadly defined. 
D)  There are many close substitutes for this good.

Exam 20: Consumer Choice and Elasticity

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

An inferior good is a good whose quantity demanded

A good is classified as inferior if

If people buy less chewing gum at every price when their incomes fall, then

A normal good is defined by economists to be a good

Jeff likes Pepsi and pizza. When the price of pizza rises, the substitution effect causes Pepsi to be relatively

Which of the following statements is true regarding the price elasticity of supply?

The demand for salt is

Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup, and as a result, the quantity sold per day increased from 350 to 450. Over this price range, the absolute value of the price elasticity of demand for Starbucks coffee is

When economists say the price elasticity of supply is elastic, they mean that

If the price of apples increases, total expenditures on apples will decline if

Figure 7-11 -Refer to Figure 7-11. As price falls from PA to PB, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

If the price elasticity of demand for grapes was 2.5,

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

The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called

If Russell values a ticket to a rock concert at $100 and is able to purchase it for only $40, he has received ____ in consumer surplus on his purchase. (Fill in the blank.)

Sarah recently got a 10 percent raise. She now purchases 30 percent more in groceries on a weekly basis. Sarah's income elasticity for groceries is

The difference between normal and inferior goods is that

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

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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