Question 1

If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good, demand is said to be

Accepted Answer

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

Question 2

Which of the following would help control the future growth of healthcare prices and expenditures?

Accepted Answer

A)  Greater reliance on government financed healthcare reimbursement plans. 
B)  An increase in the share of healthcare expenditures financed with low co-payment insurance. 
C)  An increase in the share of healthcare cost paid for either directly or from personal medical savings accounts. 
D)  The finance of prescription drugs for the elderly with a low co-payment insurance plan under Medicare. 
A)  Greater reliance on government financed healthcare reimbursement plans. 
B)  An increase in the share of healthcare expenditures financed with low co-payment insurance. 
C)  An increase in the share of healthcare cost paid for either directly or from personal medical savings accounts. 
D)  The finance of prescription drugs for the elderly with a low co-payment insurance plan under Medicare.

Question 3

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because

Accepted Answer

A)  buyers tend to be much less sensitive to a change in price when given more time to react. 
B)  buyers tend to be much more sensitive to a change in price when given more time to react. 
C)  buyers will have substantially more income over a ten-year period. 
D)  the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline. 
A)  buyers tend to be much less sensitive to a change in price when given more time to react. 
B)  buyers tend to be much more sensitive to a change in price when given more time to react. 
C)  buyers will have substantially more income over a ten-year period. 
D)  the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline.

Question 4

If a demand curve for a good were completely vertical, it would be considered

Accepted Answer

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

Question 5

The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller. The airlines base the policy on the assumption that

Accepted Answer

A)  consumers are not aware of airline prices. 
B)  consumer demand is unrelated to prices. 
C)  consumer demand becomes more elastic as departure time approaches. 
D)  consumer demand becomes more inelastic as departure time approaches. 
A)  consumers are not aware of airline prices. 
B)  consumer demand is unrelated to prices. 
C)  consumer demand becomes more elastic as departure time approaches. 
D)  consumer demand becomes more inelastic as departure time approaches.

Question 6

Figure 7-15  
-Refer to Figure 7-15. Along which of these segments of the supply curve is supply most elastic?

Accepted Answer

A)  between A and B 
B)  between C and D 
C)  between D and F 
D)  between E and F 
A)  between A and B 
B)  between C and D 
C)  between D and F 
D)  between E and F

Question 7

Suppose Microsoft announces it is cutting the prices of some of its software titles (mainly games) by 25 percent. Assuming that Microsoft is seeking to increase revenues, it must believe that the elasticity of demand for these products 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 8

The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that

Accepted Answer

A)  gasoline is an economic good but water is not. 
B)  the marginal utility of gasoline is greater than the marginal utility of a gallon of water. 
C)  the average utility of a gallon of gasoline is greater than the average utility of a gallon of water. 
D)  the total utility of gasoline exceeds the total utility of water. 
A)  gasoline is an economic good but water is not. 
B)  the marginal utility of gasoline is greater than the marginal utility of a gallon of water. 
C)  the average utility of a gallon of gasoline is greater than the average utility of a gallon of water. 
D)  the total utility of gasoline exceeds the total utility of water.

Question 9

Federal tax legislation makes it cheaper for individuals and families to pay for health care

Accepted Answer

A)  by purchasing an insurance policy through their employer rather than paying for it directly with their own money. 
B)  by purchasing an insurance policy through their employer rather than directly purchasing health insurance from the company of their choice. 
C)  directly rather than through an insurance policy offered through their employer. 
D)  by both a and b above. 
A)  by purchasing an insurance policy through their employer rather than paying for it directly with their own money. 
B)  by purchasing an insurance policy through their employer rather than directly purchasing health insurance from the company of their choice. 
C)  directly rather than through an insurance policy offered through their employer. 
D)  by both a and b above.

Question 10

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

Accepted Answer

A)  reduce the overall demand for medical services because the elderly will not have to pay for hospitalization in the future. 
B)  place downward pressure on healthcare prices. 
C)  cause Medicare expenditures to increase and necessitate the need for higher taxes to finance the program. 
D)  do all of the above. 
A)  reduce the overall demand for medical services because the elderly will not have to pay for hospitalization in the future. 
B)  place downward pressure on healthcare prices. 
C)  cause Medicare expenditures to increase and necessitate the need for higher taxes to finance the program. 
D)  do all of the above.

Question 11

When the 2010 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 all Americans to purchase health care insurance from either a private or government source. 
C)  increase the competitiveness of the health insurance business by allowing people to purchase the insurance across state boundaries. 
D)  reduce the demand for health care and thereby lead to lower prices for health care services. 
A)  substantially reduce the share of health care expenses paid by a third party. 
B)  require all Americans to purchase health care insurance from either a private or government source. 
C)  increase the competitiveness of the health insurance business by allowing people to purchase the insurance across state boundaries. 
D)  reduce the demand for health care and thereby lead to lower prices for health care services.

Question 12

Samantha values the utility of her first cup of coffee at $1.00; a second cup, $0.75; and a third cup, $0.50. If Samantha drinks three cups of coffee for breakfast, her marginal utility is equal to

Accepted Answer

A)  $0.50, the value of her last cup of coffee. 
B)  $1.00, the value of her first cup of coffee. 
C)  $2.25. 
D)  $1.50. 
A)  $0.50, the value of her last cup of coffee. 
B)  $1.00, the value of her first cup of coffee. 
C)  $2.25. 
D)  $1.50.

Question 13

Real expenditures on Medicare and Medicaid

Accepted Answer

A)  rose during the 1970s and 1980s, but they have been declining since 1990. 
B)  fell during the 1970s and 1980s, but they have been increasing since 1990. 
C)  increased at about the same rate as real GDP during the last three decades. 
D)  have approximately doubled during each of the last three decades. 
A)  rose during the 1970s and 1980s, but they have been declining since 1990. 
B)  fell during the 1970s and 1980s, but they have been increasing since 1990. 
C)  increased at about the same rate as real GDP during the last three decades. 
D)  have approximately doubled during each of the last three decades.

Question 14

"I like ice cream, but after eating homemade ice cream last night, I want to have something else for dessert today." This statement most clearly reflects

Accepted Answer

A)  the budget constraint. 
B)  consumer irrationality. 
C)  the second law of demand: price elasticity increases with time. 
D)  the law of diminishing marginal utility. 
A)  the budget constraint. 
B)  consumer irrationality. 
C)  the second law of demand: price elasticity increases with time. 
D)  the law of diminishing marginal utility.

Question 15

If demand price elasticity measures 2, this implies that consumers would

Accepted Answer

A)  buy twice as much of the product if the price drops 10 percent. 
B)  require a 2 percent drop in price to increase their purchases by 1 percent. 
C)  buy 2 percent more of the product in response to a 1 percent drop in price. 
D)  require at least a $2 increase in price before showing any response to the price increase. 
E)  buy twice as much of the product if the price drops 1 percent. 
A)  buy twice as much of the product if the price drops 10 percent. 
B)  require a 2 percent drop in price to increase their purchases by 1 percent. 
C)  buy 2 percent more of the product in response to a 1 percent drop in price. 
D)  require at least a $2 increase in price before showing any response to the price increase. 
E)  buy twice as much of the product if the price drops 1 percent.

Question 16

Demand will be more inelastic when

Accepted Answer

A)  the time the consumer has to adjust to price changes is short. 
B)  the price of the good is high. 
C)  the number of good substitutes is large. 
D)  the consumption of the good is not very essential. 
A)  the time the consumer has to adjust to price changes is short. 
B)  the price of the good is high. 
C)  the number of good substitutes is large. 
D)  the consumption of the good is not very essential.

Question 17

If Mason's marginal benefit derived from the consumption of another candy bar is greater than the price of the candy bar,

Accepted Answer

A)  Mason will not purchase any more candy bars. 
B)  Mason will increase his total satisfaction by purchasing the candy bar. 
C)  the opportunity cost of the candy bar is lower than the price. 
D)  Mason will decrease his total utility if he purchases the candy bar. 
A)  Mason will not purchase any more candy bars. 
B)  Mason will increase his total satisfaction by purchasing the candy bar. 
C)  the opportunity cost of the candy bar is lower than the price. 
D)  Mason will decrease his total utility if he purchases the candy bar.

Question 18

If you compared the short-run demand and long-run demand for education at your college, you would almost certainly find that

Accepted Answer

A)  the long-run demand curve was steeper than the short-run demand curve. 
B)  a tuition increase would reduce enrollment more in the long run than in the short run. 
C)  a reduction in tuition would increase enrollment in the short run but not in the long run. 
D)  the short-run and long-run demand curves were identical. 
A)  the long-run demand curve was steeper than the short-run demand curve. 
B)  a tuition increase would reduce enrollment more in the long run than in the short run. 
C)  a reduction in tuition would increase enrollment in the short run but not in the long run. 
D)  the short-run and long-run demand curves were identical.

Question 19

Figure 7-12  
-Refer to Figure 7-12. When price falls from $50 to $40, it can be inferred that demand between those two prices is

Accepted Answer

A)  inelastic, since total revenue decreases from $8,000 to $5,000. 
B)  inelastic, since total revenue increases from $5,000 to $8,000. 
C)  elastic, since total revenue increases from $5,000 to $8,000. 
D)  unit elastic, since total revenue increases from $5,000 to $8,000. 
A)  inelastic, since total revenue decreases from $8,000 to $5,000. 
B)  inelastic, since total revenue increases from $5,000 to $8,000. 
C)  elastic, since total revenue increases from $5,000 to $8,000. 
D)  unit elastic, since total revenue increases from $5,000 to $8,000.

Question 20

A good with a high income elasticity is generally considered to be

Accepted Answer

A)  an inferior good. 
B)  a luxury good. 
C)  a necessity. 
D)  inexpensive, relative to other goods. 
A)  an inferior good. 
B)  a luxury good. 
C)  a necessity. 
D)  inexpensive, relative to other goods.

If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good, demand is said to be

Which of the following would help control the future growth of healthcare prices and expenditures?

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because

If a demand curve for a good were completely vertical, it would be considered

The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller. The airlines base the policy on the assumption that

Figure 7-15 -Refer to Figure 7-15. Along which of these segments of the supply curve is supply most elastic?

Suppose Microsoft announces it is cutting the prices of some of its software titles (mainly games) by 25 percent. Assuming that Microsoft is seeking to increase revenues, it must believe that the elasticity of demand for these products is

The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that

Federal tax legislation makes it cheaper for individuals and families to pay for health care

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

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

Samantha values the utility of her first cup of coffee at $1.00; a second cup, $0.75; and a third cup, $0.50. If Samantha drinks three cups of coffee for breakfast, her marginal utility is equal to

Real expenditures on Medicare and Medicaid

"I like ice cream, but after eating homemade ice cream last night, I want to have something else for dessert today." This statement most clearly reflects

If demand price elasticity measures 2, this implies that consumers would

Demand will be more inelastic when

If Mason's marginal benefit derived from the consumption of another candy bar is greater than the price of the candy bar,

If you compared the short-run demand and long-run demand for education at your college, you would almost certainly find that

Figure 7-12 -Refer to Figure 7-12. When price falls from $50 to $40, it can be inferred that demand between those two prices is

A good with a high income elasticity is generally considered to be

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

If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good, demand is said to be

Which of the following would help control the future growth of healthcare prices and expenditures?

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because

If a demand curve for a good were completely vertical, it would be considered

The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller. The airlines base the policy on the assumption that

Figure 7-15 -Refer to Figure 7-15. Along which of these segments of the supply curve is supply most elastic?

Suppose Microsoft announces it is cutting the prices of some of its software titles (mainly games) by 25 percent. Assuming that Microsoft is seeking to increase revenues, it must believe that the elasticity of demand for these products is

The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that

Federal tax legislation makes it cheaper for individuals and families to pay for health care

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

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

Samantha values the utility of her first cup of coffee at $1.00; a second cup, $0.75; and a third cup, $0.50. If Samantha drinks three cups of coffee for breakfast, her marginal utility is equal to

Real expenditures on Medicare and Medicaid

"I like ice cream, but after eating homemade ice cream last night, I want to have something else for dessert today." This statement most clearly reflects

If demand price elasticity measures 2, this implies that consumers would

Demand will be more inelastic when

If Mason's marginal benefit derived from the consumption of another candy bar is greater than the price of the candy bar,

If you compared the short-run demand and long-run demand for education at your college, you would almost certainly find that

Figure 7-12 -Refer to Figure 7-12. When price falls from $50 to $40, it can be inferred that demand between those two prices is

A good with a high income elasticity is generally considered to be

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