Question 1

Figure 7-1  
-Refer to Figure 7-1.Which of the following statements is true?

Accepted Answer

A) Quantities Q0 and Q1 are the utility-maximizing quantities of hoagies at two different prices of hoagies. 
B) Quantities Q0 and Q1 may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumer's budget or the price of other goods. 
C) Quantity Q0 could be a utility-maximizing choice if the price is $5.75,but quantity Q1 may not be because we have no information on the marginal utility per dollar when price changes. 
D) Quantities Q0 and Q1 are derived independently of the utility-maximizing model. 
A) Quantities Q0 and Q1 are the utility-maximizing quantities of hoagies at two different prices of hoagies. 
B) Quantities Q0 and Q1 may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumer's budget or the price of other goods. 
C) Quantity Q0 could be a utility-maximizing choice if the price is $5.75,but quantity Q1 may not be because we have no information on the marginal utility per dollar when price changes. 
D) Quantities Q0 and Q1 are derived independently of the utility-maximizing model.

Question 2

Necessities tend to have more inelastic demands than luxuries.

Accepted Answer

A) True 
 B)False

Question 3

Many airlines have not reduced or eliminated fuel surcharges despite the price of oil dropping.A logical reason for this is that the decline in fuel prices

Accepted Answer

A) shifted the supply curve for airline tickets to the left,and at the same time an increase in demand for airline tickets shifted the demand curve to the right,so prices did not decline. 
B) shifted the supply curve for airline tickets to the right,and at the same time a decrease in demand for airline tickets shifted the demand curve to the left,so prices still increased. 
C) shifted the supply curve for airline tickets to the right,and at the same time an increase in demand for airline tickets shifted the demand curve to the right,so prices still increased. 
D) shifted the supply curve for airline tickets to the left,and at the same time a decrease in demand for airline tickets shifted the demand curve to the left,so prices did not decline. 
A) shifted the supply curve for airline tickets to the left,and at the same time an increase in demand for airline tickets shifted the demand curve to the right,so prices did not decline. 
B) shifted the supply curve for airline tickets to the right,and at the same time a decrease in demand for airline tickets shifted the demand curve to the left,so prices still increased. 
C) shifted the supply curve for airline tickets to the right,and at the same time an increase in demand for airline tickets shifted the demand curve to the right,so prices still increased. 
D) shifted the supply curve for airline tickets to the left,and at the same time a decrease in demand for airline tickets shifted the demand curve to the left,so prices did not decline.

Question 4

What is a Giffen good?

Accepted Answer

A Giffen good is something con

Question 5

A demand curve which is ________ represents perfectly inelastic demand,and a demand curve which is ________ represents inelastic demand.

Accepted Answer

A) downward sloping;vertical 
B) horizontal;downward sloping 
C) vertical;downward sloping 
D) upward sloping;horizontal 
A) downward sloping;vertical 
B) horizontal;downward sloping 
C) vertical;downward sloping 
D) upward sloping;horizontal

Question 6

If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit,and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased,she

Accepted Answer

A) is maximizing total utility and does not want to change their consumption of ankle socks or bandanas. 
B) wants to consume more ankle socks and fewer bandanas. 
C) wants to consume more of bandanas and fewer ankle socks. 
D) wants to consume less of both ankle sock and bandanas. 
A) is maximizing total utility and does not want to change their consumption of ankle socks or bandanas. 
B) wants to consume more ankle socks and fewer bandanas. 
C) wants to consume more of bandanas and fewer ankle socks. 
D) wants to consume less of both ankle sock and bandanas.

Question 7

Explain the relationship between price elasticity of demand and total revenue.

Accepted Answer

If demand is elastic,the an increase in

Question 8

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞.What happens to sales revenue if the restaurant increases its price by 5 percent?

Accepted Answer

A) Sales revenue falls by less than 5 percent. 
B) Sales revenue remains unchanged. 
C) Sales revenue falls by 100 percent. 
D) It cannot be determined without information on prices. 
A) Sales revenue falls by less than 5 percent. 
B) Sales revenue remains unchanged. 
C) Sales revenue falls by 100 percent. 
D) It cannot be determined without information on prices.

Question 9

An item has utility for a consumer if it

Accepted Answer

A) is scarce. 
B) has a high price. 
C) is something everyone else wants. 
D) generates enjoyment or satisfaction. 
A) is scarce. 
B) has a high price. 
C) is something everyone else wants. 
D) generates enjoyment or satisfaction.

Question 10

Most people would prefer to drive a luxury car that has all the options,but more people buy less expensive cars even though they could afford the luxury car because

Accepted Answer

A) car buyers are irrational. 
B) the total utility of less expensive cars is greater than that of luxury cars. 
C) the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars. 
D) luxury cars cost a lot more than non-luxury cars. 
A) car buyers are irrational. 
B) the total utility of less expensive cars is greater than that of luxury cars. 
C) the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars. 
D) luxury cars cost a lot more than non-luxury cars.

Question 11

If demand is perfectly inelastic,the absolute value of the price elasticity of demand is

Accepted Answer

A) zero. 
B) less than one. 
C) more than one. 
D) equal to the absolute value of the slope of the demand curve. 
A) zero. 
B) less than one. 
C) more than one. 
D) equal to the absolute value of the slope of the demand curve.

Question 12

If,for a given percentage increase in price,quantity demanded falls by a proportionately smaller percentage,then demand is

Accepted Answer

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

Question 13

Suppose at a price of $50,Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and
at a price of $40,it sells 25 tickets.Based on this information,the demand for Yoshi's jazz performance is elastic.

Accepted Answer

A) True 
 B)False

Question 14

Suppose the value of the price elasticity of demand is -3.What does this mean?

Accepted Answer

A) A $1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. 
B) A $1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. 
C) A $3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. 
D) A $1 increase in price causes quantity demanded to fall by 3 units. 
A) A $1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. 
B) A $1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. 
C) A $3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. 
D) A $1 increase in price causes quantity demanded to fall by 3 units.

Question 15

For which of the following products is social influence likely to have the greatest impact?

Accepted Answer

A) toothpaste 
B) restaurants 
C) high-blood pressure medication 
D) school textbook 
A) toothpaste 
B) restaurants 
C) high-blood pressure medication 
D) school textbook

Question 16

If Callum is consuming his utility maximizing bundle and the price of one good rises,what happens to the marginal utility per dollar spent on this good (MU/P),and what should Callum do?

Accepted Answer

A) MU/P has increased and Callum should buy more of this good. 
B) MU/P has increased and Callum should buy less of this good. 
C) MU/P has decreased and Callum should buy more of this good. 
D) MU/P has decreased and Callum should buy less of this good. 
A) MU/P has increased and Callum should buy more of this good. 
B) MU/P has increased and Callum should buy less of this good. 
C) MU/P has decreased and Callum should buy more of this good. 
D) MU/P has decreased and Callum should buy less of this good.

Question 17

A construction project in Congressman Foghorn's district is unfinished.Foghorn has asked that a new appropriations bill include funds to complete the project,despite a report by an independent agency that the project is a waste of taxpayer money.Foghorn's project is a bridge that crosses a river between two cities in his district.The press has criticized Foghorn and dubbed the project "a bridge too far" since another bridge,located closer to the same two cities Foghorn's bridge will connect,already exists and can accommodate all traffic between the two cities.Foghorn argues that if the bridge project is not completed,the $50 million already spent will have been wasted.Is Foghorn's argument economically rational? Explain your answer.

Accepted Answer

Foghorn's argument is not rational.The $

Question 18

Table 7-2
   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.Holding prices constant,when Keira's income changed from $18 to $23,her utility maximizing bundle changed.Based on your answers to her optimal choices at the two income levels,what type of goods are soup and sandwiches?

Accepted Answer

A) Soup is an inferior good and sandwiches are a normal good. 
B) Soup is a normal good and sandwiches are an inferior good. 
C) Both soup and sandwiches are normal goods. 
D) Both soup and sandwiches are inferior goods. 
A) Soup is an inferior good and sandwiches are a normal good. 
B) Soup is a normal good and sandwiches are an inferior good. 
C) Both soup and sandwiches are normal goods. 
D) Both soup and sandwiches are inferior goods.

Question 19

Which of the following is not a common mistake made by consumers?

Accepted Answer

A) the failure to take into account the implicit costs of an activity 
B) the failure to ignore sunk costs 
C) being overly optimistic about their future behavior 
D) being overly pessimistic about their future behavior 
A) the failure to take into account the implicit costs of an activity 
B) the failure to ignore sunk costs 
C) being overly optimistic about their future behavior 
D) being overly pessimistic about their future behavior

Question 20

Rank these three items in terms of the elasticity of the demand for them at any given price,from most elastic to least elastic: hot beverages,coffee and Peets' Coffee.

Accepted Answer

A) hot beverages,coffee,Peets' Coffee 
B) Peets' Coffee,coffee,hot beverages 
C) coffee,Peets' Coffee,hot beverages 
D) coffee,hot beverages,Peets' Coffee 
A) hot beverages,coffee,Peets' Coffee 
B) Peets' Coffee,coffee,hot beverages 
C) coffee,Peets' Coffee,hot beverages 
D) coffee,hot beverages,Peets' Coffee

Figure 7-1 -Refer to Figure 7-1.Which of the following statements is true?

Necessities tend to have more inelastic demands than luxuries.

Many airlines have not reduced or eliminated fuel surcharges despite the price of oil dropping.A logical reason for this is that the decline in fuel prices

What is a Giffen good?

A demand curve which is represents perfectly inelastic demand,and a demand curve which is represents inelastic demand.

If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit,and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased,she

Explain the relationship between price elasticity of demand and total revenue.

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞.What happens to sales revenue if the restaurant increases its price by 5 percent?

An item has utility for a consumer if it

Most people would prefer to drive a luxury car that has all the options,but more people buy less expensive cars even though they could afford the luxury car because

If demand is perfectly inelastic,the absolute value of the price elasticity of demand is

If,for a given percentage increase in price,quantity demanded falls by a proportionately smaller percentage,then demand is

Suppose at a price of $50,Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40,it sells 25 tickets.Based on this information,the demand for Yoshi's jazz performance is elastic.

Suppose the value of the price elasticity of demand is -3.What does this mean?

For which of the following products is social influence likely to have the greatest impact?

If Callum is consuming his utility maximizing bundle and the price of one good rises,what happens to the marginal utility per dollar spent on this good (MU/P),and what should Callum do?

Which of the following is not a common mistake made by consumers?

Rank these three items in terms of the elasticity of the demand for them at any given price,from most elastic to least elastic: hot beverages,coffee and Peets' Coffee.

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

Figure 7-1 -Refer to Figure 7-1.Which of the following statements is true?

Necessities tend to have more inelastic demands than luxuries.

Many airlines have not reduced or eliminated fuel surcharges despite the price of oil dropping.A logical reason for this is that the decline in fuel prices

What is a Giffen good?

A demand curve which is ________ represents perfectly inelastic demand,and a demand curve which is ________ represents inelastic demand.

If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit,and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased,she

Explain the relationship between price elasticity of demand and total revenue.

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞.What happens to sales revenue if the restaurant increases its price by 5 percent?

An item has utility for a consumer if it

Most people would prefer to drive a luxury car that has all the options,but more people buy less expensive cars even though they could afford the luxury car because

If demand is perfectly inelastic,the absolute value of the price elasticity of demand is

If,for a given percentage increase in price,quantity demanded falls by a proportionately smaller percentage,then demand is

Suppose at a price of $50,Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40,it sells 25 tickets.Based on this information,the demand for Yoshi's jazz performance is elastic.

Suppose the value of the price elasticity of demand is -3.What does this mean?

For which of the following products is social influence likely to have the greatest impact?

If Callum is consuming his utility maximizing bundle and the price of one good rises,what happens to the marginal utility per dollar spent on this good (MU/P),and what should Callum do?

Which of the following is not a common mistake made by consumers?

Rank these three items in terms of the elasticity of the demand for them at any given price,from most elastic to least elastic: hot beverages,coffee and Peets' Coffee.

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

A demand curve which is represents perfectly inelastic demand,and a demand curve which is represents inelastic demand.