Question 1

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

Accepted Answer

A)  relatively inelastic. 
B)  approximately equal to −0.33. 
C)  approximately equal to −3. 
D)  both a and b. 
A)  relatively inelastic. 
B)  approximately equal to −0.33. 
C)  approximately equal to −3. 
D)  both a and b.

Question 2

If rice is an inferior good,

Accepted Answer

A)  the income elasticity of demand for rice will be positive. 
B)  an increase in income will cause the demand curve for rice to shift to the left. 
C)  an increase in income will cause consumers to buy more rice at the current market price. 
D)  a reduction in income would not affect the demand for rice, but it would increase the quantity demanded. 
A)  the income elasticity of demand for rice will be positive. 
B)  an increase in income will cause the demand curve for rice to shift to the left. 
C)  an increase in income will cause consumers to buy more rice at the current market price. 
D)  a reduction in income would not affect the demand for rice, but it would increase the quantity demanded.

Question 3

Why is the current U.S. tax-treatment of health insurance purchased through one's employer discriminatory?

Accepted Answer

A)  Health insurance should not be a tax-deductible expense for anyone. 
B)  The system gives preferential tax treatment to self-employed individuals. 
C)  The system imposes higher taxes on the direct purchase of health insurance because it is not tax deductible. 
D)  The system gives preferential tax treatment to people who purchase health insurance directly from a provider. 
A)  Health insurance should not be a tax-deductible expense for anyone. 
B)  The system gives preferential tax treatment to self-employed individuals. 
C)  The system imposes higher taxes on the direct purchase of health insurance because it is not tax deductible. 
D)  The system gives preferential tax treatment to people who purchase health insurance directly from a provider.

Question 4

Figure 7-7  
-In the price range between $3 and $4, the price elasticity of the demand curve depicted in Figure 7-7 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 5

Which of the following is the best example of a health care service with a large public good component?

Accepted Answer

A)  A hair-growing treatment provided to a twenty-five year-old single man. 
B)  Heart bypass surgery provided to an employee and paid for by employer-funded insurance. 
C)  A vaccine that reduces the incidence of a communicable disease. 
D)  A hip replacement provided to a senior citizen. 
A)  A hair-growing treatment provided to a twenty-five year-old single man. 
B)  Heart bypass surgery provided to an employee and paid for by employer-funded insurance. 
C)  A vaccine that reduces the incidence of a communicable disease. 
D)  A hip replacement provided to a senior citizen.

Question 6

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

Accepted Answer

A)  Total revenue decreases by 10 percent when the price of jeans rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of jeans rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of jeans rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of jeans rises by $10. 
E)  Total revenue decreases by more than $10 when the price of jeans rises by $10. 
A)  Total revenue decreases by 10 percent when the price of jeans rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of jeans rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of jeans rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of jeans rises by $10. 
E)  Total revenue decreases by more than $10 when the price of jeans rises by $10.

Question 7

If the quantity demanded of a product rose from 900 to 1,200 when the price of the product fell from $11 to $9, the price elasticity of demand coefficient is equal to

Accepted Answer

A)  −0.20. 
B)  −0.70. 
C)  −1.00. 
D)  −1.42. 
A)  −0.20. 
B)  −0.70. 
C)  −1.00. 
D)  −1.42.

Question 8

Healthcare price controls will lead to

Accepted Answer

A)  more innovative healthcare treatments. 
B)  waiting lines and lengthy delays for treatment. 
C)  higher quality healthcare services. 
D)  an increase in the supply of healthcare services. 
A)  more innovative healthcare treatments. 
B)  waiting lines and lengthy delays for treatment. 
C)  higher quality healthcare services. 
D)  an increase in the supply of healthcare services.

Question 9

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

Accepted Answer

A)  substantially reduce the share of health care expenses paid by a third party. 
B)  require individuals to pay an annual tax-penalty of up to $695 if they do not have an approved health insurance plan. 
C)  require firms with fewer than 50 employees to provide health insurance for their workers. 
D)  make it legal for individuals to purchase health insurance from an insurer in another state. 
A)  substantially reduce the share of health care expenses paid by a third party. 
B)  require individuals to pay an annual tax-penalty of up to $695 if they do not have an approved health insurance plan. 
C)  require firms with fewer than 50 employees to provide health insurance for their workers. 
D)  make it legal for individuals to purchase health insurance from an insurer in another state.

Question 10

The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called

Accepted Answer

A)  price elasticity of demand. 
B)  consumer surplus. 
C)  the substitution effect. 
D)  income elasticity of demand. 
A)  price elasticity of demand. 
B)  consumer surplus. 
C)  the substitution effect. 
D)  income elasticity of demand.

Question 11

The principle of diminishing marginal utility says that

Accepted Answer

A)  as more of a good or service is consumed, demand will decrease. 
B)  as more of a good or service is consumed, the price will rise. 
C)  the marginal utility of additional units consumed will increase. 
D)  the marginal utility of additional units consumed will decline. 
A)  as more of a good or service is consumed, demand will decrease. 
B)  as more of a good or service is consumed, the price will rise. 
C)  the marginal utility of additional units consumed will increase. 
D)  the marginal utility of additional units consumed will decline.

Question 12

Residents of Leon County have developed a strong liking for barbeque pork sandwiches. Residents of Bay County buy the same amount of barbeque pork sandwiches but believe beef sandwiches are just about as good. From this, we can infer that

Accepted Answer

A)  residents of Leon County will not care what the price of barbeque pork sandwiches is. 
B)  compared to residents of Leon County, residents of Bay County will have a smaller price elasticity of demand for barbeque pork sandwiches. 
C)  compared to residents of Leon County, residents of Bay County will have a larger price elasticity of demand for barbeque pork sandwiches. 
D)  residents of Leon County will increase their purchases by a larger amount for beef sandwiches than residents of Bay County in response to a "50 cents off" sale on beef sandwiches. 
A)  residents of Leon County will not care what the price of barbeque pork sandwiches is. 
B)  compared to residents of Leon County, residents of Bay County will have a smaller price elasticity of demand for barbeque pork sandwiches. 
C)  compared to residents of Leon County, residents of Bay County will have a larger price elasticity of demand for barbeque pork sandwiches. 
D)  residents of Leon County will increase their purchases by a larger amount for beef sandwiches than residents of Bay County in response to a "50 cents off" sale on beef sandwiches.

Question 13

What percentage of U.S. healthcare expenditures is currently paid for by a third party, either the government or an insurance company?

Accepted Answer

A)  Less than 10 percent. 
B)  Approximately 30 percent. 
C)  Approximately 50 percent. 
D)  More than 85 percent. 
A)  Less than 10 percent. 
B)  Approximately 30 percent. 
C)  Approximately 50 percent. 
D)  More than 85 percent.

Question 14

If a 10 percent rise in airfares leads to a 5 percent increase in total expenditures on air travel, the price elasticity of demand for air travel in this range must be

Accepted Answer

A)  2. 
B)  elastic. 
C)  0.5. 
D)  inelastic. 
A)  2. 
B)  elastic. 
C)  0.5. 
D)  inelastic.

Question 15

Goods that consumers regard as luxuries generally have

Accepted Answer

A)  an income elasticity equal to 1. 
B)  an income elasticity less than 1. 
C)  an income elasticity greater than 1. 
D)  a negative income elasticity. 
A)  an income elasticity equal to 1. 
B)  an income elasticity less than 1. 
C)  an income elasticity greater than 1. 
D)  a negative income elasticity.

Question 16

All things equal, the price elasticity of supply

Accepted Answer

A)  will be smaller in the short run than in the long run. 
B)  will be smaller in the long run than in the short run. 
C)  is the same for the short run and the long run. 
D)  approaches zero in the long run. 
A)  will be smaller in the short run than in the long run. 
B)  will be smaller in the long run than in the short run. 
C)  is the same for the short run and the long run. 
D)  approaches zero in the long run.

Question 17

If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is ____, indicating the demand is ____.

Accepted Answer

A)  2; elastic 
B)  2; inelastic 
C)  0.5; elastic 
D)  0.5; inelastic 
A)  2; elastic 
B)  2; inelastic 
C)  0.5; elastic 
D)  0.5; inelastic

Question 18

During the last four decades,

Accepted Answer

A)  the total expenditures of Americans on health care have been relatively constant. 
B)  the share of health-care expenditures covered by a third party (either the government or an insurance company) has increased substantially. 
C)  the prices of health-care services have risen but not as rapidly as the general level of prices. 
D)  health-care providers have lowered prices in response to the rapid increase in medical technology. 
A)  the total expenditures of Americans on health care have been relatively constant. 
B)  the share of health-care expenditures covered by a third party (either the government or an insurance company) has increased substantially. 
C)  the prices of health-care services have risen but not as rapidly as the general level of prices. 
D)  health-care providers have lowered prices in response to the rapid increase in medical technology.

Question 19

Given the current structure of health-care finance, which of the following is most likely to occur when the baby boom generation begins to retire and the elderly population increases rapidly during the years following 2010?

Accepted Answer

A)  The demand for health-care services will decrease. 
B)  The prices of health-care services will grow less rapidly than has been the case during the last three decades. 
C)  The real (adjusted for inflation) expenditures on Medicare and the taxes to finance the program will tend to decline. 
D)  The health-care inflation and spending growth of recent decades will continue or even accelerate. 
A)  The demand for health-care services will decrease. 
B)  The prices of health-care services will grow less rapidly than has been the case during the last three decades. 
C)  The real (adjusted for inflation) expenditures on Medicare and the taxes to finance the program will tend to decline. 
D)  The health-care inflation and spending growth of recent decades will continue or even accelerate.

Question 20

Does it make any difference whether health-care expenditures are paid for by the consumer or by a third party (the government or an insurance company, for example)?

Accepted Answer

A)  No; the quantity of health-care service demanded is not influenced by either the price of health care or who is paying for it. 
B)  Yes; consumers of health care will have a stronger incentive to economize when they are buying the service with their own money. 
C)  Yes; consumers of health-care services will have a stronger incentive to economize when the services are paid for by a third party. 
D)  No; health care is an essential service, and therefore, the incentive to economize on it is unaffected by who is paying for the service. 
A)  No; the quantity of health-care service demanded is not influenced by either the price of health care or who is paying for it. 
B)  Yes; consumers of health care will have a stronger incentive to economize when they are buying the service with their own money. 
C)  Yes; consumers of health-care services will have a stronger incentive to economize when the services are paid for by a third party. 
D)  No; health care is an essential service, and therefore, the incentive to economize on it is unaffected by who is paying for the service.

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

If rice is an inferior good,

Why is the current U.S. tax-treatment of health insurance purchased through one's employer discriminatory?

Figure 7-7 -In the price range between $3 and $4, the price elasticity of the demand curve depicted in Figure 7-7 is

Which of the following is the best example of a health care service with a large public good component?

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

If the quantity demanded of a product rose from 900 to 1,200 when the price of the product fell from $11 to $9, the price elasticity of demand coefficient is equal to

Healthcare price controls will lead to

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

The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called

The principle of diminishing marginal utility says that

Residents of Leon County have developed a strong liking for barbeque pork sandwiches. Residents of Bay County buy the same amount of barbeque pork sandwiches but believe beef sandwiches are just about as good. From this, we can infer that

What percentage of U.S. healthcare expenditures is currently paid for by a third party, either the government or an insurance company?

If a 10 percent rise in airfares leads to a 5 percent increase in total expenditures on air travel, the price elasticity of demand for air travel in this range must be

Goods that consumers regard as luxuries generally have

All things equal, the price elasticity of supply

If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is , indicating the demand is .

During the last four decades,

Given the current structure of health-care finance, which of the following is most likely to occur when the baby boom generation begins to retire and the elderly population increases rapidly during the years following 2010?

Does it make any difference whether health-care expenditures are paid for by the consumer or by a third party (the government or an insurance company, for example)?

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

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

If rice is an inferior good,

Why is the current U.S. tax-treatment of health insurance purchased through one's employer discriminatory?

Figure 7-7 -In the price range between $3 and $4, the price elasticity of the demand curve depicted in Figure 7-7 is

Which of the following is the best example of a health care service with a large public good component?

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

If the quantity demanded of a product rose from 900 to 1,200 when the price of the product fell from $11 to $9, the price elasticity of demand coefficient is equal to

Healthcare price controls will lead to

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

The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called

The principle of diminishing marginal utility says that

Residents of Leon County have developed a strong liking for barbeque pork sandwiches. Residents of Bay County buy the same amount of barbeque pork sandwiches but believe beef sandwiches are just about as good. From this, we can infer that

What percentage of U.S. healthcare expenditures is currently paid for by a third party, either the government or an insurance company?

If a 10 percent rise in airfares leads to a 5 percent increase in total expenditures on air travel, the price elasticity of demand for air travel in this range must be

Goods that consumers regard as luxuries generally have

All things equal, the price elasticity of supply

If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is ____, indicating the demand is ____.

During the last four decades,

Given the current structure of health-care finance, which of the following is most likely to occur when the baby boom generation begins to retire and the elderly population increases rapidly during the years following 2010?

Does it make any difference whether health-care expenditures are paid for by the consumer or by a third party (the government or an insurance company, for example)?

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

If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is , indicating the demand is .