Question 1

The endowment effect suggests that that people

Accepted Answer

A)  have a strong attachment to their property, regardless of whether they paid to acquire it. 
B)  have a strong sense of fairness. 
C)  are concerned about the welfare of others. 
D)  act in ways to distort market prices. 
A)  have a strong attachment to their property, regardless of whether they paid to acquire it. 
B)  have a strong sense of fairness. 
C)  are concerned about the welfare of others. 
D)  act in ways to distort market prices.

Question 2

If the demand for a product is elastic,the quantity demanded changes by a smaller percentage than the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 3

What must be true in terms of the income effect,the substitution effect,and the type of good for the good's demand curve to be upward sloping?

Accepted Answer

The income effect would have t

Question 4

Marginal utility can be

Accepted Answer

A)  negative. 
B)  zero. 
C)  positive. 
D)  positive, negative, or zero. 
A)  negative. 
B)  zero. 
C)  positive. 
D)  positive, negative, or zero.

Question 5

Table 7-2
 $\begin{array}{|c|c|c|c|}
\hline\begin{array}{c}
\text { Quantity of } \
\text { Soup (cups) }
\end{array} & \text { Total Utility } & \begin{array}{c}
\text { Quantity of } \
\text { Sandwiches }
\end{array} & \text { Total Utility } \
\hline 1 & 40 & 1 & 45 \
\hline 2 & 60 & 2 & 75 \
\hline 3 & 72 & 3 & 102 \
\hline 4 & 82 & 4 & 120 \
\hline 5 & 88 & 5 & 135 \
\hline 6 & 90 & 6 & 145 \
\hline
\end{array}$ Table 7-2 above shows Keira's utility from soup and sandwiches. The price of soup is $2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two goods.
-Refer to Table 7-2.Suppose Keira's income increases from $18 to $23 but prices have not changed.What is her utility maximizing bundle now?

Accepted Answer

A)  6 cups of soup and 5 sandwiches 
B)  4 cups of soup and 5 sandwiches 
C)  5 cups of soup and 4 sandwiches 
D)  5 cups of soup and 5 sandwiches 
A)  6 cups of soup and 5 sandwiches 
B)  4 cups of soup and 5 sandwiches 
C)  5 cups of soup and 4 sandwiches 
D)  5 cups of soup and 5 sandwiches

Question 6

The highest-valued alternative that must be given up to engage in an activity is the definition of

Accepted Answer

A)  utility. 
B)  implicit cost. 
C)  opportunity cost. 
D)  economic sacrifice. 
A)  utility. 
B)  implicit cost. 
C)  opportunity cost. 
D)  economic sacrifice.

Question 7

A linear downward-sloping demand curve has price elasticities (in absolute values)that

Accepted Answer

A)  increase as price decreases. 
B)  remain constant along the demand curve. 
C)  decrease as price decreases. 
D)  are greater than or equal to 1. 
A)  increase as price decreases. 
B)  remain constant along the demand curve. 
C)  decrease as price decreases. 
D)  are greater than or equal to 1.

Question 8

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15,what is the absolute value of the price elasticity of demand? Use the midpoint formula.

Accepted Answer

A)  0.17 
B)  0.62 
C)  1.62 
D)  5 
A)  0.17 
B)  0.62 
C)  1.62 
D)  5

Question 9

One possible reason as to why consumers respond to sales is that by displaying a "high" regular price and a "low" sale price,sales provide consumers with a reference point to interpret the prices being offered.

Accepted Answer

A) True 
 B)False

Question 10

Define the economic concept of elasticity.

Accepted Answer

Elasticity is a measure of how

Question 11

Which of the following correctly comments on the following statement? "The only way to increase the revenue from selling a product is to increase the product's price."

Accepted Answer

A)  It is not true. Revenue will increase as the price of the product increases only if demand is elastic. 
B)  This statement is not true. Revenue will increase as the price of the product increases only if demand is inelastic. 
C)  The statement is true. 
D)  This statement is not true. Revenue will decrease as the price of the product increases because quantity demanded will fall. 
A)  It is not true. Revenue will increase as the price of the product increases only if demand is elastic. 
B)  This statement is not true. Revenue will increase as the price of the product increases only if demand is inelastic. 
C)  The statement is true. 
D)  This statement is not true. Revenue will decrease as the price of the product increases because quantity demanded will fall.

Question 12

Total revenue is equal to

Accepted Answer

A)  the amount of funds earned by a firm minus its costs of production. 
B)  the total quantity sold of a product over a given period of time. 
C)  the price of a product multiplied by the number of units of the product sold. 
D)  the monetary value of the capital (for example, plant and equipment) a firm owns. 
A)  the amount of funds earned by a firm minus its costs of production. 
B)  the total quantity sold of a product over a given period of time. 
C)  the price of a product multiplied by the number of units of the product sold. 
D)  the monetary value of the capital (for example, plant and equipment) a firm owns.

Question 13

An article in the Wall Street Journal noted the following: Instead of relying on a full-coach,round-trip unrestricted fare of about $2,000 between Cleveland and Los Angeles ...Continental [Airlines] since June has offered a $716 unrestricted fare in that market ....Through October,the test resulted in about the same revenue that Continental thinks it would have collected with its higher fare.
Source: Scott McCartney,"Airlines Try Cutting Business Fares,Find They Don't Lose Revenue," Wall Street Journal,November 22,2002.
What is the absolute value of the price elasticity of demand on this airline route?

Accepted Answer

A)  0 
B)  less than 1 
C)  greater than 1 
D)  approximately 1 
A)  0 
B)  less than 1 
C)  greater than 1 
D)  approximately 1

Question 14

Figure 7-3
   Bettye Babylon does not charge admission to her arboreal estate, the Hanging Gardens. Due to space limitations, Bettye only allows 200 visitors per day at her estate. The figure represents the supply and demand for admission to the Hanging Gardens.
-Refer to Figure 7-3.If Bettye chose to auction off tickets to her estate,bidding should cause the price of tickets to

Accepted Answer

A)  remain at $0. 
B)  rise to $10. 
C)  rise to $25. 
D)  rise, but to an undetermined amount. 
A)  remain at $0. 
B)  rise to $10. 
C)  rise to $25. 
D)  rise, but to an undetermined amount.

Question 15

A demand curve that is horizontal indicates that the commodity

Accepted Answer

A)  has few substitutes. 
B)  must be very cheap. 
C)  is a necessity. 
D)  has a large number of substitutes. 
A)  has few substitutes. 
B)  must be very cheap. 
C)  is a necessity. 
D)  has a large number of substitutes.

Question 16

If a firm wanted to know whether the demand for its product was elastic,unit elastic,or inelastic,then the firm could

Accepted Answer

A)  survey competitors and ask them what they think demand elasticity is for the product. 
B)  talk to its customers. 
C)  change price a little bit and observe what happens to total revenue. 
D)  not do anything as there is no way to find an elasticity value. 
A)  survey competitors and ask them what they think demand elasticity is for the product. 
B)  talk to its customers. 
C)  change price a little bit and observe what happens to total revenue. 
D)  not do anything as there is no way to find an elasticity value.

Question 17

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

Accepted Answer

A)  Petra's utility from her second apple was less than her satisfaction from her first orange. 
B)  Hudson enjoyed his second slice of pizza more than his first. 
C)  Sabine's utility from her first granola bar is greater than Rachel's utility from her second granola bar. 
D)  Wesley enjoyed his second bottle of iced tea less than his first bottle, other things constant. 
A)  Petra's utility from her second apple was less than her satisfaction from her first orange. 
B)  Hudson enjoyed his second slice of pizza more than his first. 
C)  Sabine's utility from her first granola bar is greater than Rachel's utility from her second granola bar. 
D)  Wesley enjoyed his second bottle of iced tea less than his first bottle, other things constant.

Question 18

Lilly Davis has $5 per week to spend on any combination of ice cream and candy.The price of an ice cream cone is $2 and the price of a candy bar is $1.The table below shows Lilly's utility values.Use the table to answer the questions that follow the table.
 $\begin{array}{|c|c|c|c|c|c|c|}
\hline  \begin{array}{c}
\text { Quantity } \
\text { of Ice } \
\text { Cream } \
\text { Cones }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Utility per } \
\text { Dollar }
\end{array} & \begin{array}{c}
\text { Quantity } \
\text { of Candy }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Utility }
\end{array} \
\hline 1 & 20 & & & 1 & 20 & \
\hline 2 & 38 & & & 2 & 38 & \
\hline 3 & 52 & & & 3 & 48 & \
\hline 4 & 62 & & & 4 & 54 & \
\hline
\end{array}$ 
a.Complete the table by filling in the blank spaces.
b.Suppose Lilly purchases 2 ice cream cones and 1 candy bar.Is she consuming the optimal consumption bundle? If so,explain why.If not,what combination should she buy and why?

Accepted Answer

a.
   b∙If Lilly purchases 2 ice cream c

Question 19

Which of the following products comes closest to having a perfectly inelastic demand?

Accepted Answer

A)  gasoline 
B)  cholesterol medication in general 
C)  iPhones 
D)  bus rides 
A)  gasoline 
B)  cholesterol medication in general 
C)  iPhones 
D)  bus rides

Question 20

The demand curve for a luxury good is upward sloping.

Accepted Answer

A) True 
 B)False

The endowment effect suggests that that people

If the demand for a product is elastic,the quantity demanded changes by a smaller percentage than the percentage change in price.

What must be true in terms of the income effect,the substitution effect,and the type of good for the good's demand curve to be upward sloping?

Marginal utility can be

The highest-valued alternative that must be given up to engage in an activity is the definition of

A linear downward-sloping demand curve has price elasticities (in absolute values)that

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15,what is the absolute value of the price elasticity of demand? Use the midpoint formula.

One possible reason as to why consumers respond to sales is that by displaying a "high" regular price and a "low" sale price,sales provide consumers with a reference point to interpret the prices being offered.

Define the economic concept of elasticity.

Which of the following correctly comments on the following statement? "The only way to increase the revenue from selling a product is to increase the product's price."

Total revenue is equal to

A demand curve that is horizontal indicates that the commodity

If a firm wanted to know whether the demand for its product was elastic,unit elastic,or inelastic,then the firm could

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

Which of the following products comes closest to having a perfectly inelastic demand?

The demand curve for a luxury good is upward sloping.

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 endowment effect suggests that that people

If the demand for a product is elastic,the quantity demanded changes by a smaller percentage than the percentage change in price.

What must be true in terms of the income effect,the substitution effect,and the type of good for the good's demand curve to be upward sloping?

Marginal utility can be

The highest-valued alternative that must be given up to engage in an activity is the definition of

A linear downward-sloping demand curve has price elasticities (in absolute values)that

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15,what is the absolute value of the price elasticity of demand? Use the midpoint formula.

One possible reason as to why consumers respond to sales is that by displaying a "high" regular price and a "low" sale price,sales provide consumers with a reference point to interpret the prices being offered.

Define the economic concept of elasticity.

Which of the following correctly comments on the following statement? "The only way to increase the revenue from selling a product is to increase the product's price."

Total revenue is equal to

A demand curve that is horizontal indicates that the commodity

If a firm wanted to know whether the demand for its product was elastic,unit elastic,or inelastic,then the firm could

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

Which of the following products comes closest to having a perfectly inelastic demand?

The demand curve for a luxury good is upward sloping.

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