Question 1

Figure 7-4  
-Which of the following is true for the demand curve depicted in Figure 7-4?

Accepted Answer

A)  An increase in price from $2 to $3 will reduce total expenditures on the product. 
B)  In the $2 to $3 range, the price elasticity of the demand curve is approximately unitary. 
C)  At a price of $2, the price elasticity of the demand curve equals approximately −2.5. 
D)  In the $2 to $3 range, the demand curve is inelastic. 
A)  An increase in price from $2 to $3 will reduce total expenditures on the product. 
B)  In the $2 to $3 range, the price elasticity of the demand curve is approximately unitary. 
C)  At a price of $2, the price elasticity of the demand curve equals approximately −2.5. 
D)  In the $2 to $3 range, the demand curve is inelastic.

Question 2

Concerning health care, which of the following is true?

Accepted Answer

A)  More than half of medical bills are paid for directly by consumers. 
B)  Healthcare insurance provided by one's employer is counted as personal income. 
C)  State mandated coverage of medical procedures like in-vitro fertilization, drug rehabilitation, and acupuncture, make health insurance more affordable. 
D)  Regulations prevent consumers from purchasing a health insurance plan offered in another state. 
A)  More than half of medical bills are paid for directly by consumers. 
B)  Healthcare insurance provided by one's employer is counted as personal income. 
C)  State mandated coverage of medical procedures like in-vitro fertilization, drug rehabilitation, and acupuncture, make health insurance more affordable. 
D)  Regulations prevent consumers from purchasing a health insurance plan offered in another state.

Question 3

Other things constant, the price elasticity of demand for a product will tend to be smaller (more inelastic) if

Accepted Answer

A)  people spend a large share of their income on the product. 
B)  people spend an insignificant share of their income on the product. 
C)  the population in the market area is large. 
D)  there are many good substitutes for the product. 
A)  people spend a large share of their income on the product. 
B)  people spend an insignificant share of their income on the product. 
C)  the population in the market area is large. 
D)  there are many good substitutes for the product.

Question 4

When demand is price inelastic,

Accepted Answer

A)  price and total revenue move in the same direction. 
B)  price and total revenue move in the opposite direction. 
C)  total revenue increases whether price goes up or down. 
D)  total revenue decreases whether price goes up or down. 
A)  price and total revenue move in the same direction. 
B)  price and total revenue move in the opposite direction. 
C)  total revenue increases whether price goes up or down. 
D)  total revenue decreases whether price goes up or down.

Question 5

Which of the following would encourage consumers to economize on their use of healthcare and producers to provide it more efficiently?

Accepted Answer

A)  A reduction in out-of-pocket healthcare expenditures. 
B)  Government subsidies that encourage people to purchase health insurance policies with first-dollar coverage and small co-payments. 
C)  Medicare reform that at least partially substituted defined benefits (funds that could be used to pay for healthcare or the purchase of insurance) for the present cost reimbursement system. 
D)  All of the above. 
A)  A reduction in out-of-pocket healthcare expenditures. 
B)  Government subsidies that encourage people to purchase health insurance policies with first-dollar coverage and small co-payments. 
C)  Medicare reform that at least partially substituted defined benefits (funds that could be used to pay for healthcare or the purchase of insurance) for the present cost reimbursement system. 
D)  All of the above.

Question 6

A successful advertising campaign would likely

Accepted Answer

A)  increase price elasticity of demand by stressing the uniqueness of the product. 
B)  reduce price elasticity of demand by stressing the uniqueness of the product. 
C)  reduce price elasticity of demand by informing consumers of the availability of substitutes. 
D)  not alter the demand curve. 
E)  generally make the demand curve shift inward. 
A)  increase price elasticity of demand by stressing the uniqueness of the product. 
B)  reduce price elasticity of demand by stressing the uniqueness of the product. 
C)  reduce price elasticity of demand by informing consumers of the availability of substitutes. 
D)  not alter the demand curve. 
E)  generally make the demand curve shift inward.

Question 7

Gabriela recently got a 10 percent raise. She now purchases 30 percent more in groceries on a weekly basis. Gabriela's income elasticity for groceries is

Accepted Answer

A)  0.33. 
B)  0.5. 
C)  1. 
D)  3. 
A)  0.33. 
B)  0.5. 
C)  1. 
D)  3.

Question 8

When the price elasticity of demand is large, then

Accepted Answer

A)  the product is more likely to be a necessity. 
B)  the responsiveness of quantity demanded to a change in price is small. 
C)  the percentage change in price divided by the percentage change in quantity demanded is large. 
D)  the responsiveness of quantity demanded to a change in price is large. 
A)  the product is more likely to be a necessity. 
B)  the responsiveness of quantity demanded to a change in price is small. 
C)  the percentage change in price divided by the percentage change in quantity demanded is large. 
D)  the responsiveness of quantity demanded to a change in price is large.

Question 9

If demand is inelastic, an increase in the price of a good will cause total expenditures on the good to

Accepted Answer

A)  fall. 
B)  remain constant since the decrease in quantity sold is exactly offset by the price increase. 
C)  rise. 
D)  rise if it is a normal good and fall if it is an inferior good. 
A)  fall. 
B)  remain constant since the decrease in quantity sold is exactly offset by the price increase. 
C)  rise. 
D)  rise if it is a normal good and fall if it is an inferior good.

Question 10

If a Pizza Hut restaurant near campus reduces its pizza prices by 15 percent, and as a result, its total revenue from pizza sales increases, this indicates that the price elasticity of demand was

Accepted Answer

A)  elastic. 
B)  of unitary elasticity. 
C)  inelastic. 
D)  equal to 0.15. 
A)  elastic. 
B)  of unitary elasticity. 
C)  inelastic. 
D)  equal to 0.15.

Question 11

If the income elasticity of a good is positive, we can conclude that the good is

Accepted Answer

A)  an inferior good. 
B)  a normal good. 
C)  a luxury good. 
D)  a necessity. 
A)  an inferior good. 
B)  a normal good. 
C)  a luxury good. 
D)  a necessity.

Question 12

Suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is −.25, by how much would you have to raise the price of water?

Accepted Answer

A)  10 percent 
B)  25 percent 
C)  40 percent 
D)  100 percent 
A)  10 percent 
B)  25 percent 
C)  40 percent 
D)  100 percent

Question 13

Rebel Records announces it is cutting the prices of its bluegrass album titles by 25 percent. If Rebel is seeking to increase revenues, it must believe that the elasticity of demand for bluegrass albums is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  of unitary elasticity. 
D)  perfectly inelastic. 
A)  elastic. 
B)  inelastic. 
C)  of unitary elasticity. 
D)  perfectly inelastic.

Question 14

Which of the following groups is most likely to derive substantial benefits from the Patient Protection and Affordable Care Act?

Accepted Answer

A)  Healthy young people. 
B)  Individuals and families with incomes of more than 400 percent of the poverty level. 
C)  Individuals with pre-existing health problems. 
D)  The elderly. 
A)  Healthy young people. 
B)  Individuals and families with incomes of more than 400 percent of the poverty level. 
C)  Individuals with pre-existing health problems. 
D)  The elderly.

Question 15

A normal good is defined by economists to be a good

Accepted Answer

A)  with a negatively-sloped demand curve. 
B)  that is purchased by at least 75 percent of the population. 
C)  that is bought by consumers with normal tastes. 
D)  whose demand increases when incomes increase. 
E)  whose demand decreases when incomes increase. 
A)  with a negatively-sloped demand curve. 
B)  that is purchased by at least 75 percent of the population. 
C)  that is bought by consumers with normal tastes. 
D)  whose demand increases when incomes increase. 
E)  whose demand decreases when incomes increase.

Question 16

If Ethan thinks the last dollar spent on bowling yields more satisfaction than the last dollar spent on hamburgers, and Ethan is a utility-maximizing consumer, he should

Accepted Answer

A)  bowl less, so the marginal satisfaction from expenditures in this area will increase. 
B)  spend more on hamburgers, so total satisfaction from that activity will increase. 
C)  eliminate spending on hamburgers. 
D)  bowl more and spend less on hamburgers. 
A)  bowl less, so the marginal satisfaction from expenditures in this area will increase. 
B)  spend more on hamburgers, so total satisfaction from that activity will increase. 
C)  eliminate spending on hamburgers. 
D)  bowl more and spend less on hamburgers.

Question 17

Suppose a city that operates local electric and natural gas companies wants to raise revenues by increasing its rates for electricity and natural gas. The price rise will increase city revenues if the elasticity of demand for electricity and natural gas is

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  negative. 
D)  equal to −1. 
A)  inelastic. 
B)  elastic. 
C)  negative. 
D)  equal to −1.

Question 18

Special savings accounts that individuals would pay into and then use to pay for medical expenses (or use to purchase a catastrophic health insurance policy) are called

Accepted Answer

A)  Medicare accounts. 
B)  comprehensive insurance plans. 
C)  medical savings accounts. 
D)  Health Maintenance Organizations (HMOs). 
A)  Medicare accounts. 
B)  comprehensive insurance plans. 
C)  medical savings accounts. 
D)  Health Maintenance Organizations (HMOs).

Question 19

The demand for a product is likely to be more elastic when

Accepted Answer

A)  the share of the total budget spent on the product is small. 
B)  more complementary products are available. 
C)  the consumer has a short time to adjust to price changes. 
D)  more good substitutes for the product are available. 
A)  the share of the total budget spent on the product is small. 
B)  more complementary products are available. 
C)  the consumer has a short time to adjust to price changes. 
D)  more good substitutes for the product are available.

Question 20

If the price of hamburger increases, the substitution effect works to

Accepted Answer

A)  decrease the quantity of hamburger supplied. 
B)  increase the number of hamburger buns demanded. 
C)  decrease the quantity of hamburger demanded. 
D)  increase the number of hamburger buns supplied. 
A)  decrease the quantity of hamburger supplied. 
B)  increase the number of hamburger buns demanded. 
C)  decrease the quantity of hamburger demanded. 
D)  increase the number of hamburger buns supplied.

Figure 7-4 -Which of the following is true for the demand curve depicted in Figure 7-4?

Concerning health care, which of the following is true?

Other things constant, the price elasticity of demand for a product will tend to be smaller (more inelastic) if

When demand is price inelastic,

Which of the following would encourage consumers to economize on their use of healthcare and producers to provide it more efficiently?

A successful advertising campaign would likely

Gabriela recently got a 10 percent raise. She now purchases 30 percent more in groceries on a weekly basis. Gabriela's income elasticity for groceries is

When the price elasticity of demand is large, then

If demand is inelastic, an increase in the price of a good will cause total expenditures on the good to

If a Pizza Hut restaurant near campus reduces its pizza prices by 15 percent, and as a result, its total revenue from pizza sales increases, this indicates that the price elasticity of demand was

If the income elasticity of a good is positive, we can conclude that the good is

Suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is −.25, by how much would you have to raise the price of water?

Rebel Records announces it is cutting the prices of its bluegrass album titles by 25 percent. If Rebel is seeking to increase revenues, it must believe that the elasticity of demand for bluegrass albums is

Which of the following groups is most likely to derive substantial benefits from the Patient Protection and Affordable Care Act?

A normal good is defined by economists to be a good

If Ethan thinks the last dollar spent on bowling yields more satisfaction than the last dollar spent on hamburgers, and Ethan is a utility-maximizing consumer, he should

Suppose a city that operates local electric and natural gas companies wants to raise revenues by increasing its rates for electricity and natural gas. The price rise will increase city revenues if the elasticity of demand for electricity and natural gas is

Special savings accounts that individuals would pay into and then use to pay for medical expenses (or use to purchase a catastrophic health insurance policy) are called

The demand for a product is likely to be more elastic when

If the price of hamburger increases, the substitution effect works to

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

Figure 7-4 -Which of the following is true for the demand curve depicted in Figure 7-4?

Concerning health care, which of the following is true?

Other things constant, the price elasticity of demand for a product will tend to be smaller (more inelastic) if

When demand is price inelastic,

Which of the following would encourage consumers to economize on their use of healthcare and producers to provide it more efficiently?

A successful advertising campaign would likely

Gabriela recently got a 10 percent raise. She now purchases 30 percent more in groceries on a weekly basis. Gabriela's income elasticity for groceries is

When the price elasticity of demand is large, then

If demand is inelastic, an increase in the price of a good will cause total expenditures on the good to

If a Pizza Hut restaurant near campus reduces its pizza prices by 15 percent, and as a result, its total revenue from pizza sales increases, this indicates that the price elasticity of demand was

If the income elasticity of a good is positive, we can conclude that the good is

Suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is −.25, by how much would you have to raise the price of water?

Rebel Records announces it is cutting the prices of its bluegrass album titles by 25 percent. If Rebel is seeking to increase revenues, it must believe that the elasticity of demand for bluegrass albums is

Which of the following groups is most likely to derive substantial benefits from the Patient Protection and Affordable Care Act?

A normal good is defined by economists to be a good

If Ethan thinks the last dollar spent on bowling yields more satisfaction than the last dollar spent on hamburgers, and Ethan is a utility-maximizing consumer, he should

Suppose a city that operates local electric and natural gas companies wants to raise revenues by increasing its rates for electricity and natural gas. The price rise will increase city revenues if the elasticity of demand for electricity and natural gas is

Special savings accounts that individuals would pay into and then use to pay for medical expenses (or use to purchase a catastrophic health insurance policy) are called

The demand for a product is likely to be more elastic when

If the price of hamburger increases, the substitution effect works to

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