Question 1

Which of the following would encourage consumers to economize on health-care expenditures and producers to supply health-care services more efficiently?

Accepted Answer

A)  An increase in out-of-pocket expenditures by health-care consumers. 
B)  Decreased reliance on personal Medical Savings Accounts and health-care expenditures from the accounts. 
C)  Decreased reliance on the purchase of catastrophic health insurance coverage and less reliance on insurance with first-dollar coverage and small co-payments. 
D)  The establishment of a national health-care system that would provide coverage to all people. 
A)  An increase in out-of-pocket expenditures by health-care consumers. 
B)  Decreased reliance on personal Medical Savings Accounts and health-care expenditures from the accounts. 
C)  Decreased reliance on the purchase of catastrophic health insurance coverage and less reliance on insurance with first-dollar coverage and small co-payments. 
D)  The establishment of a national health-care system that would provide coverage to all people.

Question 2

If the price of gasoline goes up, and Jacob now buys fewer candy bars because he has to spend more on gas, this would best be explained by

Accepted Answer

A)  the substitution effect. 
B)  the income effect. 
C)  the highly elastic demand for gasoline. 
D)  all of the above. 
A)  the substitution effect. 
B)  the income effect. 
C)  the highly elastic demand for gasoline. 
D)  all of the above.

Question 3

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 4

When the price of a good falls, consumers buy more of the good because it is cheaper relative to competing goods. This statement describes the

Accepted Answer

A)  consumer equilibrium effect. 
B)  price effect. 
C)  income effect. 
D)  substitution effect. 
A)  consumer equilibrium effect. 
B)  price effect. 
C)  income effect. 
D)  substitution effect.

Question 5

If consumers would be willing to purchase the same quantity of a good no matter what its price was, the demand curve would

Accepted Answer

A)  be a vertical line, and demand would be perfectly inelastic. 
B)  be a horizontal line, and the demand would be perfectly elastic. 
C)  not exist. 
D)  be identical to the supply curve for the good. 
A)  be a vertical line, and demand would be perfectly inelastic. 
B)  be a horizontal line, and the demand would be perfectly elastic. 
C)  not exist. 
D)  be identical to the supply curve for the good.

Question 6

If Mr. Smith thinks the last dollar spent on shirts yields more satisfaction than the last dollar spent on cola, and Smith is a utility-maximizing consumer, he should

Accepted Answer

A)  decrease his spending on cola. 
B)  decrease his spending on cola and decrease his spending on shirts. 
C)  decrease his spending on shirts. 
D)  increase his spending on cola and decrease his spending on shirts. 
A)  decrease his spending on cola. 
B)  decrease his spending on cola and decrease his spending on shirts. 
C)  decrease his spending on shirts. 
D)  increase his spending on cola and decrease his spending on shirts.

Question 7

Under the current structure of Medicare, the movement of the baby boom generation into the retirement phase of life will

Accepted Answer

A)  increase the demand for medical services and the share of those services financed by third parties. 
B)  push both healthcare prices and expenditures upward. 
C)  cause Medicare expenditures to increase and necessitate the need for higher taxes to finance the program. 
D)  do all of the above. 
A)  increase the demand for medical services and the share of those services financed by third parties. 
B)  push both healthcare prices and expenditures upward. 
C)  cause Medicare expenditures to increase and necessitate the need for higher taxes to finance the program. 
D)  do all of the above.

Question 8

In which of the following cases will the total spending on a good decrease?

Accepted Answer

A)  Demand is inelastic, and price increases. 
B)  Demand is elastic, and price increases. 
C)  Demand is elastic, and price decreases. 
D)  Demand is of unit elasticity, and price decreases. 
A)  Demand is inelastic, and price increases. 
B)  Demand is elastic, and price increases. 
C)  Demand is elastic, and price decreases. 
D)  Demand is of unit elasticity, and price decreases.

Question 9

Over the last forty years, the price index of healthcare services

Accepted Answer

A)  declined slightly relative to the overall consumer price index. 
B)  fell by approximately 50 percent compared to the overall consumer price index. 
C)  increased at twice the rate of the overall consumer price index. 
D)  rose during a brief period following the passage of Medicare and Medicaid but has been relatively stable since that time. 
A)  declined slightly relative to the overall consumer price index. 
B)  fell by approximately 50 percent compared to the overall consumer price index. 
C)  increased at twice the rate of the overall consumer price index. 
D)  rose during a brief period following the passage of Medicare and Medicaid but has been relatively stable since that time.

Question 10

In the mythical nation of Oz, gasoline used to sell for $1 a gallon, and the natives purchased 100,000 gallons a week. Four years ago, the price rose to $3 a gallon, and the natives reduced their quantity demanded to 90,000 gallons a week. Calculate the price elasticity for this change. Today, gas again sells for $1 a gallon in Oz, but the natives are only buying 70,000 gallons a week. What gives?

Accepted Answer

Four years ago, the initial price increa

Question 11

The marginal value of a commodity to a consumer

Accepted Answer

A)  increases as more of the good is consumed. 
B)  is exactly equal to price for all units purchased by the consumer. 
C)  is measured by the height of the individual consumer's demand curve. 
D)  is equal to the area above the price and below the individual consumer's demand curve. 
A)  increases as more of the good is consumed. 
B)  is exactly equal to price for all units purchased by the consumer. 
C)  is measured by the height of the individual consumer's demand curve. 
D)  is equal to the area above the price and below the individual consumer's demand curve.

Question 12

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 13

The growth of third-party payments (payments by insurers and the government) of healthcare services during the last four decades has been accompanied by

Accepted Answer

A)  a reduction in expenditures on healthcare as a share of the economy. 
B)  an increase in the sensitivity of consumers to the prices of healthcare services. 
C)  persistent increases in the prices of healthcare services and rapid growth in the total expenditures on healthcare. 
D)  an increase in the incentive of suppliers to provide healthcare services at a low cost. 
A)  a reduction in expenditures on healthcare as a share of the economy. 
B)  an increase in the sensitivity of consumers to the prices of healthcare services. 
C)  persistent increases in the prices of healthcare services and rapid growth in the total expenditures on healthcare. 
D)  an increase in the incentive of suppliers to provide healthcare services at a low cost.

Question 14

New York City increased regulated taxi fares by 17.5 percent and expected taxi revenue to increase by the same amount. The taxi commission believed taxi demand was

Accepted Answer

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

Question 15

When a third party pays a larger and larger share of the purchasing price of a good, economic theory indicates that the

Accepted Answer

A)  demand for the good will decline. 
B)  consumers of the good will have less and less incentive to economize on its use. 
C)  suppliers of the good will have a stronger incentive to provide the good at low prices. 
D)  prices of the good will tend to decline with the passage of time. 
A)  demand for the good will decline. 
B)  consumers of the good will have less and less incentive to economize on its use. 
C)  suppliers of the good will have a stronger incentive to provide the good at low prices. 
D)  prices of the good will tend to decline with the passage of time.

Question 16

If a third party pays for an individual to consume a good, how is the decision making of consumers affected? How does this affect the actions of suppliers?

Accepted Answer

When spending their own money, consumers

Question 17

When the 2010 Patient Protection and Affordable Care Act is fully implemented, it will

Accepted Answer

A)  require employers with 50 or more employees to provide approved health insurance for their employees or pay a $2000 fine annually for each full-time employee. 
B)  expand the supply of doctors and other medical services. 
C)  require all members of Congress and congressional staff employees to purchase their health insurance through the government operated exchanges. 
D)  make it legal for individuals to purchase health insurance from an insurer in another state. 
A)  require employers with 50 or more employees to provide approved health insurance for their employees or pay a $2000 fine annually for each full-time employee. 
B)  expand the supply of doctors and other medical services. 
C)  require all members of Congress and congressional staff employees to purchase their health insurance through the government operated exchanges. 
D)  make it legal for individuals to purchase health insurance from an insurer in another state.

Question 18

During the last three decades, the real (adjusted for inflation) expenditures

Accepted Answer

A)  on Medicare have grown rapidly, but the real expenditures on Medicaid have been virtually constant. 
B)  on the Medicare program have been virtually constant but the real expenditures on Medicaid have increased substantially. 
C)  on both Medicare and Medicaid have increased substantially. 
D)  on both Medicare and Medicaid have been virtually constant. 
A)  on Medicare have grown rapidly, but the real expenditures on Medicaid have been virtually constant. 
B)  on the Medicare program have been virtually constant but the real expenditures on Medicaid have increased substantially. 
C)  on both Medicare and Medicaid have increased substantially. 
D)  on both Medicare and Medicaid have been virtually constant.

Question 19

How has public policy influenced the incentives of consumers to economize and suppliers to provide their services economically in the health-care industry?

Accepted Answer

Public policy has generally promoted pay

Question 20

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

Accepted Answer

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

Which of the following would encourage consumers to economize on health-care expenditures and producers to supply health-care services more efficiently?

If the price of gasoline goes up, and Jacob now buys fewer candy bars because he has to spend more on gas, this would best be explained by

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

When the price of a good falls, consumers buy more of the good because it is cheaper relative to competing goods. This statement describes the

If consumers would be willing to purchase the same quantity of a good no matter what its price was, the demand curve would

If Mr. Smith thinks the last dollar spent on shirts yields more satisfaction than the last dollar spent on cola, and Smith is a utility-maximizing consumer, he should

Under the current structure of Medicare, the movement of the baby boom generation into the retirement phase of life will

In which of the following cases will the total spending on a good decrease?

Over the last forty years, the price index of healthcare services

The marginal value of a commodity to a consumer

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?

The growth of third-party payments (payments by insurers and the government) of healthcare services during the last four decades has been accompanied by

New York City increased regulated taxi fares by 17.5 percent and expected taxi revenue to increase by the same amount. The taxi commission believed taxi demand was

When a third party pays a larger and larger share of the purchasing price of a good, economic theory indicates that the

If a third party pays for an individual to consume a good, how is the decision making of consumers affected? How does this affect the actions of suppliers?

When the 2010 Patient Protection and Affordable Care Act is fully implemented, it will

During the last three decades, the real (adjusted for inflation) expenditures

How has public policy influenced the incentives of consumers to economize and suppliers to provide their services economically in the health-care industry?

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

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

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

Gaining From International Trade

Filters

Exam 7: Consumer Choice and Elasticity

Which of the following would encourage consumers to economize on health-care expenditures and producers to supply health-care services more efficiently?

If the price of gasoline goes up, and Jacob now buys fewer candy bars because he has to spend more on gas, this would best be explained by

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

When the price of a good falls, consumers buy more of the good because it is cheaper relative to competing goods. This statement describes the

If consumers would be willing to purchase the same quantity of a good no matter what its price was, the demand curve would

If Mr. Smith thinks the last dollar spent on shirts yields more satisfaction than the last dollar spent on cola, and Smith is a utility-maximizing consumer, he should

Under the current structure of Medicare, the movement of the baby boom generation into the retirement phase of life will

In which of the following cases will the total spending on a good decrease?

Over the last forty years, the price index of healthcare services

The marginal value of a commodity to a consumer

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?

The growth of third-party payments (payments by insurers and the government) of healthcare services during the last four decades has been accompanied by

New York City increased regulated taxi fares by 17.5 percent and expected taxi revenue to increase by the same amount. The taxi commission believed taxi demand was

When a third party pays a larger and larger share of the purchasing price of a good, economic theory indicates that the

If a third party pays for an individual to consume a good, how is the decision making of consumers affected? How does this affect the actions of suppliers?

When the 2010 Patient Protection and Affordable Care Act is fully implemented, it will

During the last three decades, the real (adjusted for inflation) expenditures

How has public policy influenced the incentives of consumers to economize and suppliers to provide their services economically in the health-care industry?

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

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

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

Gaining From International Trade

Filters