Question 1

The demand for Chocolate Chip Cookie Dough ice cream is likely quite elastic because

Accepted Answer

A)  ice cream must be eaten quickly. 
B)  this particular flavor of ice cream is viewed as a necessity by many ice-cream lovers. 
C)  the market is broadly defined. 
D)  other flavors of ice cream are good substitutes for this particular flavor. 
A)  ice cream must be eaten quickly. 
B)  this particular flavor of ice cream is viewed as a necessity by many ice-cream lovers. 
C)  the market is broadly defined. 
D)  other flavors of ice cream are good substitutes for this particular flavor.

Question 2

Why do economists use the concept of elasticity in addition to measurement of the slope of the demand curve?

Accepted Answer

A)  Mathematical equations are favored over graphical analysis. 
B)  Elasticities are independent of the units of measure. 
C)  The concept of elasticity can be used in other areas of economics, whereas the slope of the demand curve is only useful in demand analysis. 
D)  These terms are interchangeable, but elasticity has the more professional sound. 
A)  Mathematical equations are favored over graphical analysis. 
B)  Elasticities are independent of the units of measure. 
C)  The concept of elasticity can be used in other areas of economics, whereas the slope of the demand curve is only useful in demand analysis. 
D)  These terms are interchangeable, but elasticity has the more professional sound.

Question 3

Which of the following would help control the future costs of healthcare?

Accepted Answer

A)  A new government program that would cover the cost of prescription drugs purchased by all healthcare consumers. 
B)  An increase in the share of healthcare expenditures financed with low co-payment insurance. 
C)  Allowing consumers to purchase healthcare insurance from out-of-state providers. 
D)  An increase in the tax benefits of purchasing healthcare through one's employer. 
A)  A new government program that would cover the cost of prescription drugs purchased by all healthcare consumers. 
B)  An increase in the share of healthcare expenditures financed with low co-payment insurance. 
C)  Allowing consumers to purchase healthcare insurance from out-of-state providers. 
D)  An increase in the tax benefits of purchasing healthcare through one's employer.

Question 4

Figure 7-16  
-Which demand curve in Figure 7-16 is perfectly elastic?

Accepted Answer

A)  the curve in graph a 
B)  the curve in graph b 
C)  the curve in graph c 
D)  the curve in graph d 
E)  the curve in graph e 
A)  the curve in graph a 
B)  the curve in graph b 
C)  the curve in graph c 
D)  the curve in graph d 
E)  the curve in graph e

Question 5

If a sandwich shop near campus increases its prices by 5 percent, but revenues from its sales are unchanged, the price elasticity of demand for the services offered by the sandwich shop must be

Accepted Answer

A)  elastic. 
B)  of unitary elasticity. 
C)  inelastic. 
D)  equal to 0.5. 
A)  elastic. 
B)  of unitary elasticity. 
C)  inelastic. 
D)  equal to 0.5.

Question 6

Third-party payments by either the government or an insurance company accounted for ____ of the 2011 healthcare expenditures, compared to ____ paid by third parties in 1960. (Fill in the blanks)

Accepted Answer

A)  40 percent; 20 percent 
B)  20 percent; 40 percent 
C)  86 percent; 45 percent 
D)  96 percent; 73 percent 
A)  40 percent; 20 percent 
B)  20 percent; 40 percent 
C)  86 percent; 45 percent 
D)  96 percent; 73 percent

Question 7

The only two options to control the growth of healthcare spending are

Accepted Answer

A)  price controls and political rationing or competition and market prices. 
B)  taxation or political mandates. 
C)  subsidizing of healthcare insurance or government provision of healthcare. 
D)  free healthcare or subsidized healthcare. 
A)  price controls and political rationing or competition and market prices. 
B)  taxation or political mandates. 
C)  subsidizing of healthcare insurance or government provision of healthcare. 
D)  free healthcare or subsidized healthcare.

Question 8

Suppose the value of income elasticity of demand for a private college education is equal to 1.5. This means that

Accepted Answer

A)  every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education. 
B)  every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education. 
C)  a 10 percent increase in income causes a 15 percent increase in the quantity of private college education purchased. 
D)  a 15 percent increase in income causes a 10 percent increase in the quantity of private college education purchased. 
E)  a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent. 
A)  every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education. 
B)  every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education. 
C)  a 10 percent increase in income causes a 15 percent increase in the quantity of private college education purchased. 
D)  a 15 percent increase in income causes a 10 percent increase in the quantity of private college education purchased. 
E)  a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent.

Question 9

Which of the following grew rapidly during the years following the passage of the Medicare and Medicaid programs?

Accepted Answer

A)  The share of healthcare expenditures financed by third parties. 
B)  The prices of healthcare relative to the prices of other goods and services. 
C)  Expenditures on healthcare as a share of the economy. 
D)  All of the above. 
A)  The share of healthcare expenditures financed by third parties. 
B)  The prices of healthcare relative to the prices of other goods and services. 
C)  Expenditures on healthcare as a share of the economy. 
D)  All of the above.

Question 10

A 20 percent increase in the price of flour reduces flour consumption by about 10 percent. Such a price increase causes households to

Accepted Answer

A)  spend less on flour. 
B)  spend more on flour. 
C)  spend the same amount on flour as before. 
D)  consume more goods like salt and baking powder, which are flour complements. 
A)  spend less on flour. 
B)  spend more on flour. 
C)  spend the same amount on flour as before. 
D)  consume more goods like salt and baking powder, which are flour complements.

Question 11

The difference between normal and inferior goods is that

Accepted Answer

A)  an increase in price will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward. 
B)  if the price of a normal good increases, individuals who buy it are poorer; for inferior goods, the opposite is true. 
C)  an inferior good is something that will not be demanded until quantities of the normal good have been exhausted. 
D)  an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward. 
A)  an increase in price will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward. 
B)  if the price of a normal good increases, individuals who buy it are poorer; for inferior goods, the opposite is true. 
C)  an inferior good is something that will not be demanded until quantities of the normal good have been exhausted. 
D)  an increase in income will shift the demand curve for a normal good rightward and the demand curve for an inferior good leftward.

Question 12

Assume that a college student purchases only diet soda and potato chips. The substitution effect associated with a decrease in the price of a potato chips will result in

Accepted Answer

A)  an increase in the consumption of diet soda only. 
B)  a decrease in the consumption of diet soda only. 
C)  an increase in the consumption of potato chips and a decrease in the consumption of diet soda. 
D)  a decrease in the consumption of potato chips and an increase in the consumption of diet soda. 
A)  an increase in the consumption of diet soda only. 
B)  a decrease in the consumption of diet soda only. 
C)  an increase in the consumption of potato chips and a decrease in the consumption of diet soda. 
D)  a decrease in the consumption of potato chips and an increase in the consumption of diet soda.

Question 13

When health insurance is purchased primarily through one's employer,

Accepted Answer

A)  direct purchase of health insurance becomes cheaper. 
B)  the benefits of the healthcare insurance are fully taxable. 
C)  it is more costly for employees to switch jobs and move to areas where jobs are available. 
D)  the overall number of people without health insurance decreases. 
A)  direct purchase of health insurance becomes cheaper. 
B)  the benefits of the healthcare insurance are fully taxable. 
C)  it is more costly for employees to switch jobs and move to areas where jobs are available. 
D)  the overall number of people without health insurance decreases.

Question 14

Figure 7-9  
-At a price of $10, the price elasticity of the demand curve depicted in Figure 7-9 is

Accepted Answer

A)  positive. 
B)  approximately equal to −0.1. 
C)  approximately equal to −1. 
D)  approximately equal to −2. 
A)  positive. 
B)  approximately equal to −0.1. 
C)  approximately equal to −1. 
D)  approximately equal to −2.

Question 15

If Noah thinks the last dollar spent on belts yields more satisfaction than the last dollar spent on socks, and Smith is a utility-maximizing consumer, he should

Accepted Answer

A)  decrease his spending on socks. 
B)  decrease his spending on socks and increase his spending on belts. 
C)  increase his spending on belts. 
D)  increase his spending on socks and decrease his spending on belts. 
A)  decrease his spending on socks. 
B)  decrease his spending on socks and increase his spending on belts. 
C)  increase his spending on belts. 
D)  increase his spending on socks and decrease his spending on belts.

Question 16

Figure 7-13  
-Refer to Figure 7-13. If price increases from $10 to $15, total revenue will

Accepted Answer

A)  increase by $20, so demand must be inelastic in this price range. 
B)  increase by $5, so demand must be inelastic in this price range. 
C)  decrease by $20, so demand must be elastic in this price range. 
D)  decrease by $10, so demand must be elastic in this price range. 
A)  increase by $20, so demand must be inelastic in this price range. 
B)  increase by $5, so demand must be inelastic in this price range. 
C)  decrease by $20, so demand must be elastic in this price range. 
D)  decrease by $10, so demand must be elastic in this price range.

Question 17

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

Accepted Answer

A)  Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept. 
B)  Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus. 
C)  Without elasticity, we would not be able to address the direction in which price is likely to move in response to a shortage. 
D)  Without elasticity, it is very difficult to assess the degree of competition within a market. 
A)  Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept. 
B)  Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus. 
C)  Without elasticity, we would not be able to address the direction in which price is likely to move in response to a shortage. 
D)  Without elasticity, it is very difficult to assess the degree of competition within a market.

Question 18

A 10 percent increase in the price of butter reduces butter consumption by about 5 percent. The increase causes households to

Accepted Answer

A)  spend more on butter. 
B)  spend less on butter. 
C)  spend the same amount on butter. 
D)  consume more goods like bread that are complements of butter. 
A)  spend more on butter. 
B)  spend less on butter. 
C)  spend the same amount on butter. 
D)  consume more goods like bread that are complements of butter.

Question 19

When economists say the demand for a good is highly inelastic, they mean that

Accepted Answer

A)  even if the price rose substantially, suppliers would be unwilling to offer much more of the good. 
B)  the facilities utilized by producers of the good are inflexible; producers cannot easily expand their facilities, even in the long run. 
C)  consumers will respond to a change in the price of the good by purchasing substantially more of it. 
D)  a large (percentage) change in the price of a good will result in only a small (percentage) change in the quantity demanded. 
A)  even if the price rose substantially, suppliers would be unwilling to offer much more of the good. 
B)  the facilities utilized by producers of the good are inflexible; producers cannot easily expand their facilities, even in the long run. 
C)  consumers will respond to a change in the price of the good by purchasing substantially more of it. 
D)  a large (percentage) change in the price of a good will result in only a small (percentage) change in the quantity demanded.

Question 20

Figure 7-1  
-Figure 7-1 depicts a demand curve with a price elasticity that is

Accepted Answer

A)  perfectly elastic, implying that consumers will purchase as much as can be supplied at the market price. 
B)  relatively inelastic, implying that a percent increase in price results in a smaller percent reduction in sales. 
C)  unitary, implying that a percent change in price leads to an equal percent change in quantity demanded. 
D)  perfectly inelastic, implying that the same amount will be purchased regardless of the price of the good. 
A)  perfectly elastic, implying that consumers will purchase as much as can be supplied at the market price. 
B)  relatively inelastic, implying that a percent increase in price results in a smaller percent reduction in sales. 
C)  unitary, implying that a percent change in price leads to an equal percent change in quantity demanded. 
D)  perfectly inelastic, implying that the same amount will be purchased regardless of the price of the good.

The demand for Chocolate Chip Cookie Dough ice cream is likely quite elastic because

Why do economists use the concept of elasticity in addition to measurement of the slope of the demand curve?

Which of the following would help control the future costs of healthcare?

Figure 7-16 -Which demand curve in Figure 7-16 is perfectly elastic?

If a sandwich shop near campus increases its prices by 5 percent, but revenues from its sales are unchanged, the price elasticity of demand for the services offered by the sandwich shop must be

Third-party payments by either the government or an insurance company accounted for of the 2011 healthcare expenditures, compared to paid by third parties in 1960. (Fill in the blanks)

The only two options to control the growth of healthcare spending are

Suppose the value of income elasticity of demand for a private college education is equal to 1.5. This means that

Which of the following grew rapidly during the years following the passage of the Medicare and Medicaid programs?

A 20 percent increase in the price of flour reduces flour consumption by about 10 percent. Such a price increase causes households to

The difference between normal and inferior goods is that

Assume that a college student purchases only diet soda and potato chips. The substitution effect associated with a decrease in the price of a potato chips will result in

When health insurance is purchased primarily through one's employer,

Figure 7-9 -At a price of $10, the price elasticity of the demand curve depicted in Figure 7-9 is

If Noah thinks the last dollar spent on belts yields more satisfaction than the last dollar spent on socks, and Smith is a utility-maximizing consumer, he should

Figure 7-13 -Refer to Figure 7-13. If price increases from $10 to $15, total revenue will

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

A 10 percent increase in the price of butter reduces butter consumption by about 5 percent. The increase causes households to

When economists say the demand for a good is highly inelastic, they mean that

Figure 7-1 -Figure 7-1 depicts a demand curve with a price elasticity that is

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

The demand for Chocolate Chip Cookie Dough ice cream is likely quite elastic because

Why do economists use the concept of elasticity in addition to measurement of the slope of the demand curve?

Which of the following would help control the future costs of healthcare?

Figure 7-16 -Which demand curve in Figure 7-16 is perfectly elastic?

If a sandwich shop near campus increases its prices by 5 percent, but revenues from its sales are unchanged, the price elasticity of demand for the services offered by the sandwich shop must be

Third-party payments by either the government or an insurance company accounted for ____ of the 2011 healthcare expenditures, compared to ____ paid by third parties in 1960. (Fill in the blanks)

The only two options to control the growth of healthcare spending are

Suppose the value of income elasticity of demand for a private college education is equal to 1.5. This means that

Which of the following grew rapidly during the years following the passage of the Medicare and Medicaid programs?

A 20 percent increase in the price of flour reduces flour consumption by about 10 percent. Such a price increase causes households to

The difference between normal and inferior goods is that

Assume that a college student purchases only diet soda and potato chips. The substitution effect associated with a decrease in the price of a potato chips will result in

When health insurance is purchased primarily through one's employer,

Figure 7-9 -At a price of $10, the price elasticity of the demand curve depicted in Figure 7-9 is

If Noah thinks the last dollar spent on belts yields more satisfaction than the last dollar spent on socks, and Smith is a utility-maximizing consumer, he should

Figure 7-13 -Refer to Figure 7-13. If price increases from $10 to $15, total revenue will

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

A 10 percent increase in the price of butter reduces butter consumption by about 5 percent. The increase causes households to

When economists say the demand for a good is highly inelastic, they mean that

Figure 7-1 -Figure 7-1 depicts a demand curve with a price elasticity that is

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

Third-party payments by either the government or an insurance company accounted for of the 2011 healthcare expenditures, compared to paid by third parties in 1960. (Fill in the blanks)