Question 1

The demand for gasoline is perfectly inelastic because most people need gasoline to drive their cars.

Accepted Answer

A) True 
 B)False

Question 2

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative,demand for using the toll road must be

Accepted Answer

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

Question 3

Figure 7-7
  
-Refer to Figure 7-7.Which of the following statements about price elasticity of demand is true?

Accepted Answer

A)  The elasticity coefficient is constant along the demand curve. 
B)  The elastic portion of a straight-line, downward-sloping demand curve corresponds to the segment above the midpoint. 
C)  The inelastic portion of the demand curve corresponds to the segment above the midpoint. 
D)  At the midpoint of the demand curve, the elasticity coefficient is zero. 
A)  The elasticity coefficient is constant along the demand curve. 
B)  The elastic portion of a straight-line, downward-sloping demand curve corresponds to the segment above the midpoint. 
C)  The inelastic portion of the demand curve corresponds to the segment above the midpoint. 
D)  At the midpoint of the demand curve, the elasticity coefficient is zero.

Question 4

Consider a demand curve that has a constant elasticity value of 0.What happens to quantity demanded and total revenue when price increases?

Accepted Answer

A)  The quantity demanded and total revenue remain the same. 
B)  The quantity demanded does not change but total revenue increases. 
C)  The quantity demanded and total revenue fall to zero. 
D)  The quantity demanded does not change but total revenue decreases. 
A)  The quantity demanded and total revenue remain the same. 
B)  The quantity demanded does not change but total revenue increases. 
C)  The quantity demanded and total revenue fall to zero. 
D)  The quantity demanded does not change but total revenue decreases.

Question 5

Figure 7-7
  
-Refer to Figure 7-7.The absolute value of the price elasticity of demand at the midpoint of the demand curve is

Accepted Answer

A)  at a maximum. 
B)  at a minimum. 
C)  zero. 
D)  one. 
A)  at a maximum. 
B)  at a minimum. 
C)  zero. 
D)  one.

Question 6

In 2016,the most profit from the musical Hamilton went to

Accepted Answer

A)  the musical's star and creator, Lin-Manuel Miranda. 
B)  the musical's producers. 
C)  the owners of the Richard Rodgers Theater where the musical is performed. 
D)  scalpers. 
A)  the musical's star and creator, Lin-Manuel Miranda. 
B)  the musical's producers. 
C)  the owners of the Richard Rodgers Theater where the musical is performed. 
D)  scalpers.

Question 7

A common mistake made by consumers is the failure to take into account the sunk costs of their actions.

Accepted Answer

A) True 
 B)False

Question 8

Table 7-6
 $\begin{array}{|c|c|c|c|}
\hline \begin{array}{c}
\text { Quantity of } \
\text { Beer (glasses) }
\end{array} & \text { Total Utility } & \begin{array}{c}
\text { Quantity of } \
\text { Pizza (slices) }
\end{array} & \text { Total Utility } \
\hline 1 & 25 & 1 & 20 \
\hline 2 & 45 & 2 & 35 \
\hline 3 & 60 & 3 & 45 \
\hline 4 & 65 & 4 & 50 \
\hline 5 & 69 & 5 & 52 \
\hline 6 & 70 & 6 & 52 \
\hline
\end{array}$ Table 7-6 shows Antonio's utility from beer and pizza.
-Refer to Table 7-6.What is Antonio's marginal utility from consuming the fifth beer?

Accepted Answer

A)  4 utils 
B)  13.6 utils 
C)  69 utils 
D)  134 utils 
A)  4 utils 
B)  13.6 utils 
C)  69 utils 
D)  134 utils

Question 9

Table 7-5
 $\begin{array}{|c|c|c|c|}
\hline \begin{array}{c}
\text { Quantity of } \
\text { Burgers }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Quantity of } \
\text { Pepsi }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Utility }
\end{array} \
\hline 1 & 20 & 1 & 30 \
\hline 2 & 14 & 2 & 10 \
\hline 3 & 10 & 3 & 7 \
\hline 4 & 3 & 4 & 5 \
\hline 5 & 1 & 5 & 1 \
\hline 6 & -5 & 6 & 0 \
\hline 7 & -10 & 7 & -4 \
\hline
\end{array}$ Table 7-5 lists Jay's marginal utilities for burgers and Pepsi. Jay has $7 to spend on these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1.
-Refer to Table 7-5.What is Jay's optimal consumption bundle?

Accepted Answer

A)  1 burger and 2 cans of Pepsi 
B)  2 burgers and 3 cans of Pepsi 
C)  3 burgers and 1 can of Pepsi 
D)  3 burgers and 2 cans of Pepsi 
A)  1 burger and 2 cans of Pepsi 
B)  2 burgers and 3 cans of Pepsi 
C)  3 burgers and 1 can of Pepsi 
D)  3 burgers and 2 cans of Pepsi

Question 10

In their surveys of consumers,Daniel Kahneman,Jack Knetsch and Richard Thaler found that

Accepted Answer

A)  most people considered it unfair for firms to raise their prices because of an increase in their costs, but fair to raise their prices after an increase in demand. 
B)  most people considered any increase in price to be unfair as it led to an increase in profits. 
C)  most people believed that low-income people were hurt most by increases in prices. 
D)  most people considered an increase in price by firms following an increase in their costs to be fair but believed it was unfair for firms to raise their prices because of an increase in demand. 
A)  most people considered it unfair for firms to raise their prices because of an increase in their costs, but fair to raise their prices after an increase in demand. 
B)  most people considered any increase in price to be unfair as it led to an increase in profits. 
C)  most people believed that low-income people were hurt most by increases in prices. 
D)  most people considered an increase in price by firms following an increase in their costs to be fair but believed it was unfair for firms to raise their prices because of an increase in demand.

Question 11

The most important determinant of the price elasticity of demand for a good is

Accepted Answer

A)  the definition of the market for a good. 
B)  the availability of substitutes for the good. 
C)  the share of the good in the consumer's budget. 
D)  whether the good is a necessity or a luxury. 
A)  the definition of the market for a good. 
B)  the availability of substitutes for the good. 
C)  the share of the good in the consumer's budget. 
D)  whether the good is a necessity or a luxury.

Question 12

If,as a person consumes more and more of a good,each additional unit adds less satisfaction than the previous unit consumed,we are seeing the workings of

Accepted Answer

A)  the law of demand. 
B)  the law of supply. 
C)  the law of increasing marginal opportunity cost. 
D)  the law of diminishing marginal utility. 
A)  the law of demand. 
B)  the law of supply. 
C)  the law of increasing marginal opportunity cost. 
D)  the law of diminishing marginal utility.

Question 13

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand of the DVD for the movie The Hangover should be

Accepted Answer

A)  less then 0.8 in absolute value. 
B)  greater than 0.8 in absolute value. 
C)  equal to 1 in absolute value. 
D)  equal to zero because the DVD of this movie has been out for several years. 
A)  less then 0.8 in absolute value. 
B)  greater than 0.8 in absolute value. 
C)  equal to 1 in absolute value. 
D)  equal to zero because the DVD of this movie has been out for several years.

Question 14

Costs that have already been incurred,and which cannot be recovered,are known as

Accepted Answer

A)  short-run fixed costs. 
B)  implicit costs. 
C)  unavoidable costs. 
D)  sunk costs. 
A)  short-run fixed costs. 
B)  implicit costs. 
C)  unavoidable costs. 
D)  sunk costs.

Question 15

Behavioral economics helps explain why customers ________ at J.C.Penney.

Accepted Answer

A)  favored the policy of everyday low prices and not sales and coupons 
B)  favored sales and coupons and not the policy of everyday low prices 
C)  were equally happy with sales and coupons and the policy of everyday low prices 
D)  responded negatively to both sales and coupons and the policy of everyday low prices 
A)  favored the policy of everyday low prices and not sales and coupons 
B)  favored sales and coupons and not the policy of everyday low prices 
C)  were equally happy with sales and coupons and the policy of everyday low prices 
D)  responded negatively to both sales and coupons and the policy of everyday low prices

Question 16

The demand for heating oil in the short run is more elastic than the long run demand for heating oil.

Accepted Answer

A) True 
 B)False

Question 17

A newspaper story on the effect of higher milk prices on the market for ice cream contained the following:
"As a result [of the increase in milk prices],retail prices for ice cream are up 4 percent from last year....And ice cream consumption is down 3 percent."
Source: John Curran,"Ice Cream,They Scream: Milk Fat Costs Drive Up Ice Cream Prices," Associated Press,July 23,2001.
Based on the information given,what is the price elasticity of demand for ice cream?

Accepted Answer

A)  0.75 (in absolute value) 
B)  1.33 (in absolute value) 
C)  12% 
D)  We do not have enough information to calculate the elasticity. 
A)  0.75 (in absolute value) 
B)  1.33 (in absolute value) 
C)  12% 
D)  We do not have enough information to calculate the elasticity.

Question 18

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons.What is the absolute value of the price elasticity of demand?

Accepted Answer

A)  0.11 
B)  0.37 
C)  2.69 
D)  9.33 
A)  0.11 
B)  0.37 
C)  2.69 
D)  9.33

Question 19

Figure 7-8
  
-Refer to Figure 7-8.The section of the demand curve labeled "A" represents

Accepted Answer

A)  the inelastic section of the demand curve. 
B)  the unit-elastic section of the demand curve. 
C)  the elastic section of the demand curve. 
D)  the perfectly elastic section of the demand curve. 
A)  the inelastic section of the demand curve. 
B)  the unit-elastic section of the demand curve. 
C)  the elastic section of the demand curve. 
D)  the perfectly elastic section of the demand curve.

Question 20

If the market for a product is narrowly defined,then there are likely to be many substitutes for the product and the demand for the product is relatively elastic.

Accepted Answer

A) True 
 B)False

The demand for gasoline is perfectly inelastic because most people need gasoline to drive their cars.

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative,demand for using the toll road must be

Figure 7-7 -Refer to Figure 7-7.Which of the following statements about price elasticity of demand is true?

Consider a demand curve that has a constant elasticity value of 0.What happens to quantity demanded and total revenue when price increases?

Figure 7-7 -Refer to Figure 7-7.The absolute value of the price elasticity of demand at the midpoint of the demand curve is

In 2016,the most profit from the musical Hamilton went to

A common mistake made by consumers is the failure to take into account the sunk costs of their actions.

Table 7-6 Quantity of Beer (glasses) Total Utility Quantity of Pizza (slices) Total Utility 1 25 1 20 2 45 2 35 3 60 3 45 4 65 4 50 5 69 5 52 6 70 6 52 Table 7-6 shows Antonio's utility from beer and pizza. -Refer to Table 7-6.What is Antonio's marginal utility from consuming the fifth beer?

In their surveys of consumers,Daniel Kahneman,Jack Knetsch and Richard Thaler found that

The most important determinant of the price elasticity of demand for a good is

If,as a person consumes more and more of a good,each additional unit adds less satisfaction than the previous unit consumed,we are seeing the workings of

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand of the DVD for the movie The Hangover should be

Costs that have already been incurred,and which cannot be recovered,are known as

Behavioral economics helps explain why customers ________ at J.C.Penney.

The demand for heating oil in the short run is more elastic than the long run demand for heating oil.

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons.What is the absolute value of the price elasticity of demand?

Figure 7-8 -Refer to Figure 7-8.The section of the demand curve labeled "A" represents

If the market for a product is narrowly defined,then there are likely to be many substitutes for the product and the demand for the product is relatively elastic.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters

Exam 7: Consumer Choice and Elasticity

The demand for gasoline is perfectly inelastic because most people need gasoline to drive their cars.

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative,demand for using the toll road must be

Figure 7-7 -Refer to Figure 7-7.Which of the following statements about price elasticity of demand is true?

Consider a demand curve that has a constant elasticity value of 0.What happens to quantity demanded and total revenue when price increases?

Figure 7-7 -Refer to Figure 7-7.The absolute value of the price elasticity of demand at the midpoint of the demand curve is

In 2016,the most profit from the musical Hamilton went to

A common mistake made by consumers is the failure to take into account the sunk costs of their actions.

Table 7-6 Quantity of Beer (glasses) Total Utility Quantity of Pizza (slices) Total Utility 1 25 1 20 2 45 2 35 3 60 3 45 4 65 4 50 5 69 5 52 6 70 6 52 Table 7-6 shows Antonio's utility from beer and pizza. -Refer to Table 7-6.What is Antonio's marginal utility from consuming the fifth beer?

In their surveys of consumers,Daniel Kahneman,Jack Knetsch and Richard Thaler found that

The most important determinant of the price elasticity of demand for a good is

If,as a person consumes more and more of a good,each additional unit adds less satisfaction than the previous unit consumed,we are seeing the workings of

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand of the DVD for the movie The Hangover should be

Costs that have already been incurred,and which cannot be recovered,are known as

Behavioral economics helps explain why customers ________ at J.C.Penney.

The demand for heating oil in the short run is more elastic than the long run demand for heating oil.

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons.What is the absolute value of the price elasticity of demand?

Figure 7-8 -Refer to Figure 7-8.The section of the demand curve labeled "A" represents

If the market for a product is narrowly defined,then there are likely to be many substitutes for the product and the demand for the product is relatively elastic.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters