Question 1

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

Accepted Answer

A)  Total revenue increases by 15 percent when the price of corndogs rises by 15 percent. 
B)  Total revenue increases by less than 15 percent when the price of corndogs rises by 15 percent. 
C)  Total revenue decreases by more than 15 percent when the price of corndogs rises by 15 percent. 
D)  Total revenue increases by $15 when the price of corndogs rises by $15. 
E)  Total revenue increases by more than $15 when the price of corndogs rises by $15. 
A)  Total revenue increases by 15 percent when the price of corndogs rises by 15 percent. 
B)  Total revenue increases by less than 15 percent when the price of corndogs rises by 15 percent. 
C)  Total revenue decreases by more than 15 percent when the price of corndogs rises by 15 percent. 
D)  Total revenue increases by $15 when the price of corndogs rises by $15. 
E)  Total revenue increases by more than $15 when the price of corndogs rises by $15.

Question 2

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

Which one of the following goods would likely have the most inelastic demand?

Accepted Answer

A)  Kellogg's corn flakes 
B)  salt 
C)  a new Toyota automobile 
D)  fresh green beans 
A)  Kellogg's corn flakes 
B)  salt 
C)  a new Toyota automobile 
D)  fresh green beans

Question 4

Figure 7-13
  
-Refer to Figure 7-13. A decrease in price from $15 to $10 leads to

Accepted Answer

A)  a decrease in total revenue of $10, so the price elasticity of demand is greater than 1 in this price range. 
B)  a decrease in total revenue of $10, so the price elasticity of demand is less than 1 in this price range. 
C)  a decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this price range. 
D)  a decrease in total revenue of $20, so demand is elastic in this price range. 
A)  a decrease in total revenue of $10, so the price elasticity of demand is greater than 1 in this price range. 
B)  a decrease in total revenue of $10, so the price elasticity of demand is less than 1 in this price range. 
C)  a decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this price range. 
D)  a decrease in total revenue of $20, so demand is elastic in this price range.

Question 5

Diminishing marginal utility means that

Accepted Answer

A)  as you consume more of a good, other things constant, the total satisfaction you obtain from consuming this good tends to fall. 
B)  as you hire more labor, other things constant, the total amount produced begins to fall. 
C)  as you consume more of a good, other things constant, the additional satisfaction you obtain from each additional unit of the good tends to fall. 
D)  as you consume more of a good, other things constant, the extra satisfaction you obtain from each additional unit becomes negative. 
A)  as you consume more of a good, other things constant, the total satisfaction you obtain from consuming this good tends to fall. 
B)  as you hire more labor, other things constant, the total amount produced begins to fall. 
C)  as you consume more of a good, other things constant, the additional satisfaction you obtain from each additional unit of the good tends to fall. 
D)  as you consume more of a good, other things constant, the extra satisfaction you obtain from each additional unit becomes negative.

Question 6

Jack, a music major, is perusing Jill's notes for her economics class, where she has written that "total revenues will rise with price rises only if demand is elastic." Jack tells Jill this is nonsense because firms can always increase their revenues by raising price. How should Jill respond?

Accepted Answer

Jill should point out that her statement

Question 7

"After eating nothing but fast-food hamburgers on spring break, I was anxious to return home and eat something different." This statement most clearly reflects the law of

Accepted Answer

A)  the budget constraint. 
B)  consumer irrationality. 
C)  greater demand elasticity with time. 
D)  diminishing marginal utility. 
A)  the budget constraint. 
B)  consumer irrationality. 
C)  greater demand elasticity with time. 
D)  diminishing marginal utility.

Question 8

Members of Alpha fraternity have developed a strong liking for Coca-Cola. Beta fraternity members buy the same amount of Coke but believe Pepsi is just about as good. From this, we can infer that

Accepted Answer

A)  Alpha members will not care what the price of Coke is. 
B)  compared to Alpha members, Betas will have a smaller price elasticity of demand for Coke. 
C)  compared to Alpha members, Betas will have a larger price elasticity of demand for Coke. 
D)  Alpha members will increase their purchases by a larger amount of Pepsi than Beta members in response to a "50 cents off" sale on a case of Pepsi. 
A)  Alpha members will not care what the price of Coke is. 
B)  compared to Alpha members, Betas will have a smaller price elasticity of demand for Coke. 
C)  compared to Alpha members, Betas will have a larger price elasticity of demand for Coke. 
D)  Alpha members will increase their purchases by a larger amount of Pepsi than Beta members in response to a "50 cents off" sale on a case of Pepsi.

Question 9

Which of the following is true regarding the price elasticity of demand?

Accepted Answer

A)  Demand is generally more elastic in the long run than in the short run. 
B)  Along a single demand curve, demand elasticity decreases as you move down the curve (to lower prices). 
C)  A demand curve that is flatter (has a less steep slope) is relatively more elastic than a demand curve that has a steeper slope. 
D)  All of the above are true. 
A)  Demand is generally more elastic in the long run than in the short run. 
B)  Along a single demand curve, demand elasticity decreases as you move down the curve (to lower prices). 
C)  A demand curve that is flatter (has a less steep slope) is relatively more elastic than a demand curve that has a steeper slope. 
D)  All of the above are true.

Question 10

Scenario 7-1
Use the information below to answer the following question(s).
JoAnn considers cola and plain sparkling water to be good substitutes. Suppose the price of sugar, a key ingredient used to produce cola, falls.
-Refer to Scenario 7-1. According to the income effect, which of the following is most likely to occur?

Accepted Answer

A)  JoAnn will purchase less cola and more sparkling water. 
B)  JoAnn will purchase more cola and less sparkling water. 
C)  JoAnn will purchase more of most goods due to her higher real income. 
D)  JoAnn's demand curve will decrease (shift in), causing her to purchase less cola. 
A)  JoAnn will purchase less cola and more sparkling water. 
B)  JoAnn will purchase more cola and less sparkling water. 
C)  JoAnn will purchase more of most goods due to her higher real income. 
D)  JoAnn's demand curve will decrease (shift in), causing her to purchase less cola.

Question 11

If the income elasticity of a good is positive, 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 12

If Joe's income increased and as a result he purchased more wine and less fast food,

Accepted Answer

A)  wine is a normal good and fast food an inferior good for Joe. 
B)  wine is an inferior good and fast food a normal good for Joe. 
C)  both wine and fast food are inferior goods for Joe. 
D)  both wine and fast food are normal goods for Joe. 
A)  wine is a normal good and fast food an inferior good for Joe. 
B)  wine is an inferior good and fast food a normal good for Joe. 
C)  both wine and fast food are inferior goods for Joe. 
D)  both wine and fast food are normal goods for Joe.

Question 13

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 14

Use the diagram below to answer this question.  
For this demand curve, the price elasticity of demand is

Accepted Answer

A)  more elastic at $3 than at $2. 
B)  more elastic at $2 than at $3. 
C)  identical at $2 to that at $3. 
D)  equal to 1.0 over the range from $3 to $2. 
A)  more elastic at $3 than at $2. 
B)  more elastic at $2 than at $3. 
C)  identical at $2 to that at $3. 
D)  equal to 1.0 over the range from $3 to $2.

Question 15

Figure 7-4
  
-Which of the following is true for the demand curve depicted in Figure 7-4?

Accepted Answer

A)  An increase in price from $2 to $3 will reduce total expenditures on the product. 
B)  In the $2 to $3 range, the price elasticity of the demand curve is approximately unitary. 
C)  At a price of $2, the price elasticity of the demand curve equals approximately -2.5. 
D)  In the $2 to $3 range, the demand curve is inelastic. 
A)  An increase in price from $2 to $3 will reduce total expenditures on the product. 
B)  In the $2 to $3 range, the price elasticity of the demand curve is approximately unitary. 
C)  At a price of $2, the price elasticity of the demand curve equals approximately -2.5. 
D)  In the $2 to $3 range, the demand curve is inelastic.

Question 16

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 17

Along the inelastic portion of a demand curve,

Accepted Answer

A)  the change in price will always be less than the change in quantity demanded. 
B)  the percentage change in price will be less than the percentage change in quantity demanded. 
C)  the change in price will always be more than the change in quantity demanded. 
D)  the percentage change in price will be more than the percentage change in quantity demanded. 
A)  the change in price will always be less than the change in quantity demanded. 
B)  the percentage change in price will be less than the percentage change in quantity demanded. 
C)  the change in price will always be more than the change in quantity demanded. 
D)  the percentage change in price will be more than the percentage change in quantity demanded.

Question 18

If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good, demand is said to be

Accepted Answer

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

Question 19

Rebel Records announces it is cutting the prices of its bluegrass album titles by 25 percent. If Rebel is seeking to increase revenues, it must believe that the elasticity of demand for bluegrass albums is

Accepted Answer

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

Question 20

The price of product X increases from $35 to $40, and as a result, the quantity demanded decreases from 250 to 200. Over this price range,

Accepted Answer

A)  demand is elastic. 
B)  demand is inelastic. 
C)  demand is of unitary elasticity. 
D)  there is insufficient information to determine the price elasticity of demand. 
A)  demand is elastic. 
B)  demand is inelastic. 
C)  demand is of unitary elasticity. 
D)  there is insufficient information to determine the price elasticity of demand.

Exam 20: Consumer Choice and Elasticity

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

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

Which one of the following goods would likely have the most inelastic demand?

Figure 7-13 -Refer to Figure 7-13. A decrease in price from $15 to $10 leads to

Diminishing marginal utility means that

Jack, a music major, is perusing Jill's notes for her economics class, where she has written that "total revenues will rise with price rises only if demand is elastic." Jack tells Jill this is nonsense because firms can always increase their revenues by raising price. How should Jill respond?

"After eating nothing but fast-food hamburgers on spring break, I was anxious to return home and eat something different." This statement most clearly reflects the law of

Members of Alpha fraternity have developed a strong liking for Coca-Cola. Beta fraternity members buy the same amount of Coke but believe Pepsi is just about as good. From this, we can infer that

Which of the following is true regarding the price elasticity of demand?

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

If Joe's income increased and as a result he purchased more wine and less fast food,

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

Use the diagram below to answer this question. For this demand curve, the price elasticity of demand is

Figure 7-4 -Which of the following is true for the demand curve depicted in Figure 7-4?

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

Along the inelastic portion of a demand curve,

If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good, demand is said to be

Rebel Records announces it is cutting the prices of its bluegrass album titles by 25 percent. If Rebel is seeking to increase revenues, it must believe that the elasticity of demand for bluegrass albums is

The price of product X increases from $35 to $40, and as a result, the quantity demanded decreases from 250 to 200. Over this price range,

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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