Question 1

If the demand for a product increases as the result of a decline in income, it can be concluded that the

Accepted Answer

A)  product is an inferior good. 
B)  demand for the product is inelastic. 
C)  price elasticity of demand for the product equals unity. 
D)  demand for the product is elastic. 
A)  product is an inferior good. 
B)  demand for the product is inelastic. 
C)  price elasticity of demand for the product equals unity. 
D)  demand for the product is elastic.

Question 2

Figure 7-15
  
-Refer to Figure 7-15. Along which of these segments of the supply curve is supply least elastic?

Accepted Answer

A)  between E and F 
B)  between C and D 
C)  between A and C 
D)  between A and B 
A)  between E and F 
B)  between C and D 
C)  between A and C 
D)  between A and B

Question 3

Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will

Accepted Answer

A)  cause the consumer to buy more of good Y and less of good X. 
B)  cause the consumer to buy more of good X and less of good Y. 
C)  not affect the amount of goods X and Y that the consumer buys. 
D)  result in an upward-sloping demand for good Y because of the substitution effect. 
A)  cause the consumer to buy more of good Y and less of good X. 
B)  cause the consumer to buy more of good X and less of good Y. 
C)  not affect the amount of goods X and Y that the consumer buys. 
D)  result in an upward-sloping demand for good Y because of the substitution effect.

Question 4

If you compared the short-run demand and long-run demand for education at your college, you would almost certainly find that

Accepted Answer

A)  the long-run demand curve was steeper than the short-run demand curve. 
B)  a tuition increase would reduce enrollment more in the long run than in the short run. 
C)  a reduction in tuition would increase enrollment in the short run but not in the long run. 
D)  the short-run and long-run demand curves were identical. 
A)  the long-run demand curve was steeper than the short-run demand curve. 
B)  a tuition increase would reduce enrollment more in the long run than in the short run. 
C)  a reduction in tuition would increase enrollment in the short run but not in the long run. 
D)  the short-run and long-run demand curves were identical.

Question 5

"I like ice cream, but after eating homemade ice cream last night, I want to have something else for dessert today." This statement most clearly reflects

Accepted Answer

A)  the budget constraint. 
B)  consumer irrationality. 
C)  the second law of demand: Price elasticity increases with time. 
D)  the law of diminishing marginal utility. 
A)  the budget constraint. 
B)  consumer irrationality. 
C)  the second law of demand: Price elasticity increases with time. 
D)  the law of diminishing marginal utility.

Question 6

If an increase in the excise tax imposed on cigarettes pushes the price per pack up by 20 percent, and the quantity sold declines by 8 percent as a result, the price elasticity of demand for cigarettes is equal to

Accepted Answer

A)  -0.2. 
B)  -0.4. 
C)  -0.8. 
D)  -5. 
A)  -0.2. 
B)  -0.4. 
C)  -0.8. 
D)  -5.

Question 7

Figure 7-16
  
-Which of the demand curves in Figure 7-16 is unit elastic?

Accepted Answer

A)  the curve in graph a 
B)  the curve in graph b 
C)  the curve in graph c 
D)  the curve in graph d 
E)  the curve in graph e 
A)  the curve in graph a 
B)  the curve in graph b 
C)  the curve in graph c 
D)  the curve in graph d 
E)  the curve in graph e

Question 8

Figure 7-17
  
-Consider Figure 7-17. Between the prices of $5 and $6, which supply curve is most elastic and which is least elastic?

Accepted Answer

A)  S₁ is most elastic; S₂ is least elastic. 
B)  S₁ is most elastic; S3 is least elastic. 
C)  S3 is most elastic; S₁ is least elastic. 
D)  S3 is most elastic; S₂ is least elastic. 
E)  S₂ is most elastic; S3 is least elastic. 
A)  S₁ is most elastic; S₂ is least elastic. 
B)  S₁ is most elastic; S3 is least elastic. 
C)  S3 is most elastic; S₁ is least elastic. 
D)  S3 is most elastic; S₂ is least elastic. 
E)  S₂ is most elastic; S3 is least elastic.

Question 9

The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that

Accepted Answer

A)  gasoline is an economic good but water is not. 
B)  the marginal utility of gasoline is greater than the marginal utility of a gallon of water. 
C)  the average utility of a gallon of gasoline is greater than the average utility of a gallon of water. 
D)  the total utility of gasoline exceeds the total utility of water. 
A)  gasoline is an economic good but water is not. 
B)  the marginal utility of gasoline is greater than the marginal utility of a gallon of water. 
C)  the average utility of a gallon of gasoline is greater than the average utility of a gallon of water. 
D)  the total utility of gasoline exceeds the total utility of water.

Question 10

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 11

If the price of steak rises from $6 to $10 per pound, and the quantity purchased falls from 90 to 70 pounds, the price elasticity of demand (in absolute value) is

Accepted Answer

A)  0.2. 
B)  0.5. 
C)  1.0. 
D)  2.0. 
A)  0.2. 
B)  0.5. 
C)  1.0. 
D)  2.0.

Question 12

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 13

If a Pizza Hut restaurant near campus reduces its pizza prices by 15 percent, and as a result, its total revenue from pizza sales increases, this indicates that the price elasticity of demand was

Accepted Answer

A)  elastic. 
B)  of unitary elasticity. 
C)  inelastic. 
D)  equal to 0.15. 
A)  elastic. 
B)  of unitary elasticity. 
C)  inelastic. 
D)  equal to 0.15.

Question 14

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

Accepted Answer

A)  The price of pens rises by 10 cents, and quantity of pens demanded falls by 50. 
B)  The price of pens rises by 10 cents, and total revenue rises. 
C)  A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded. 
D)  Total revenue does not change when the price of pens rises. 
E)  Total revenue decreases when the price of pens rises. 
A)  The price of pens rises by 10 cents, and quantity of pens demanded falls by 50. 
B)  The price of pens rises by 10 cents, and total revenue rises. 
C)  A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded. 
D)  Total revenue does not change when the price of pens rises. 
E)  Total revenue decreases when the price of pens rises.

Question 15

When a good is more broadly defined,

Accepted Answer

A)  the more substitutes it has so the more elastic is its demand. 
B)  the fewer substitutes it has so the more elastic is its demand. 
C)  the more substitutes it has so the less elastic is its demand. 
D)  the fewer substitutes it has so the less elastic is its demand. 
A)  the more substitutes it has so the more elastic is its demand. 
B)  the fewer substitutes it has so the more elastic is its demand. 
C)  the more substitutes it has so the less elastic is its demand. 
D)  the fewer substitutes it has so the less elastic is its demand.

Question 16

Figure 7-13
  
-Refer to Figure 7-13. If price increases from $10 to $15, total revenue will

Accepted Answer

A)  increase by $20, so demand must be inelastic in this price range. 
B)  increase by $5, so demand must be inelastic in this price range. 
C)  decrease by $20, so demand must be elastic in this price range. 
D)  decrease by $10, so demand must be elastic in this price range. 
A)  increase by $20, so demand must be inelastic in this price range. 
B)  increase by $5, so demand must be inelastic in this price range. 
C)  decrease by $20, so demand must be elastic in this price range. 
D)  decrease by $10, so demand must be elastic in this price range.

Question 17

Which of the following statements is true?

Accepted Answer

A)  The demand curve for a group of consumers in a market is simply the horizontal summation of each individual's demand. 
B)  The single demand curve shows the quantity of a good that people will buy, allowing all factors (price, income, expected future prices, etc.) to vary. 
C)  An increase in income will cause a person to move down and to the right along her demand curve. 
D)  All of the above are true. 
A)  The demand curve for a group of consumers in a market is simply the horizontal summation of each individual's demand. 
B)  The single demand curve shows the quantity of a good that people will buy, allowing all factors (price, income, expected future prices, etc.) to vary. 
C)  An increase in income will cause a person to move down and to the right along her demand curve. 
D)  All of the above are true.

Question 18

An inferior good is distinguished by a

Accepted Answer

A)  negative price elasticity of demand. 
B)  positive price elasticity of demand. 
C)  positive income elasticity of demand. 
D)  negative income elasticity of demand. 
A)  negative price elasticity of demand. 
B)  positive price elasticity of demand. 
C)  positive income elasticity of demand. 
D)  negative income elasticity of demand.

Question 19

Fred, a poor college student, states: "I eat tuna sandwiches five times a week. When I graduate and get a real job, I will never purchase tuna again." Is Fred planning on breaking the law of demand?

Accepted Answer

For normal goods, we expect consumers to

Question 20

Other things constant, the price elasticity of demand for a product will tend to be smaller (more inelastic) if

Accepted Answer

A)  people spend a large share of their income on the product. 
B)  people spend an insignificant share of their income on the product. 
C)  the population in the market area is large. 
D)  there are many good substitutes for the product. 
A)  people spend a large share of their income on the product. 
B)  people spend an insignificant share of their income on the product. 
C)  the population in the market area is large. 
D)  there are many good substitutes for the product.

Exam 20: Consumer Choice and Elasticity

If the demand for a product increases as the result of a decline in income, it can be concluded that the

Figure 7-15 -Refer to Figure 7-15. Along which of these segments of the supply curve is supply least elastic?

Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will

If you compared the short-run demand and long-run demand for education at your college, you would almost certainly find that

"I like ice cream, but after eating homemade ice cream last night, I want to have something else for dessert today." This statement most clearly reflects

If an increase in the excise tax imposed on cigarettes pushes the price per pack up by 20 percent, and the quantity sold declines by 8 percent as a result, the price elasticity of demand for cigarettes is equal to

Figure 7-16 -Which of the demand curves in Figure 7-16 is unit elastic?

Figure 7-17 -Consider Figure 7-17. Between the prices of $5 and $6, which supply curve is most elastic and which is least elastic?

The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that

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

If the price of steak rises from $6 to $10 per pound, and the quantity purchased falls from 90 to 70 pounds, the price elasticity of demand (in absolute value) is

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

If a Pizza Hut restaurant near campus reduces its pizza prices by 15 percent, and as a result, its total revenue from pizza sales increases, this indicates that the price elasticity of demand was

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

When a good is more broadly defined,

Figure 7-13 -Refer to Figure 7-13. If price increases from $10 to $15, total revenue will

Which of the following statements is true?

An inferior good is distinguished by a

Fred, a poor college student, states: "I eat tuna sandwiches five times a week. When I graduate and get a real job, I will never purchase tuna again." Is Fred planning on breaking the law of demand?

Other things constant, the price elasticity of demand for a product will tend to be smaller (more inelastic) if

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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