Question 1

According to the income effect, when the price of automobiles rises, people buy fewer automobiles because

Accepted Answer

A)  they substitute other forms of transportation for driving. 
B)  the nominal amount of their paychecks is smaller. 
C)  the purchasing power of their income is reduced. 
D)  their demand for automobiles is very elastic. 
A)  they substitute other forms of transportation for driving. 
B)  the nominal amount of their paychecks is smaller. 
C)  the purchasing power of their income is reduced. 
D)  their demand for automobiles is very elastic.

Question 2

When the price elasticity of demand is greater than one, it means that demand is

Accepted Answer

A)  inelastic and the percent change in quantity is greater than the percent change in price. 
B)  inelastic and the percent change in quantity is less than the percent change in price. 
C)  elastic and the percent change in quantity is greater than the percent change in price. 
D)  elastic and the percent change in quantity is less than the percent change in price. 
A)  inelastic and the percent change in quantity is greater than the percent change in price. 
B)  inelastic and the percent change in quantity is less than the percent change in price. 
C)  elastic and the percent change in quantity is greater than the percent change in price. 
D)  elastic and the percent change in quantity is less than the percent change in price.

Question 3

A good that takes up a very large percentage of the consumer's budget will tend to have

Accepted Answer

A)  an elastic demand. 
B)  a perfectly elastic demand. 
C)  an inelastic demand. 
D)  an upward-sloping demand curve. 
E)  very many substitutes. 
A)  an elastic demand. 
B)  a perfectly elastic demand. 
C)  an inelastic demand. 
D)  an upward-sloping demand curve. 
E)  very many substitutes.

Question 4

If an increase in the excise tax imposed on cigarettes pushes the price per pack up by 20 percent, and the quantity sold declines by 8 percent as a result, the price elasticity of demand for cigarettes is equal to

Accepted Answer

A)  − 0.2. 
B)  − 0.4. 
C)  − 0.8. 
D)  − 5. 
A)  − 0.2. 
B)  − 0.4. 
C)  − 0.8. 
D)  − 5.

Question 5

The market demand for a good is

Accepted Answer

A)  the horizontal sum of all individual demand curves for the good. 
B)  generally upward sloping, unlike individual demand curves. 
C)  usually a vertical line at a quantity of one hundred. 
D)  the average amount purchased by each individual in the market. 
A)  the horizontal sum of all individual demand curves for the good. 
B)  generally upward sloping, unlike individual demand curves. 
C)  usually a vertical line at a quantity of one hundred. 
D)  the average amount purchased by each individual in the market.

Question 6

If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, demand is classified as

Accepted Answer

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

Question 7

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 8

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 9

After eating six chocolate candy bars in ten minutes, Jody says, "You would have to pay me to eat another chocolate candy bar!" This statement best illustrates

Accepted Answer

A)  the law of demand. 
B)  the substitutability among goods. 
C)  the law of diminishing marginal utility. 
D)  that chocolate candy bars are an inferior good. 
A)  the law of demand. 
B)  the substitutability among goods. 
C)  the law of diminishing marginal utility. 
D)  that chocolate candy bars are an inferior good.

Question 10

Figure 7-12  
Refer to Figure 7-12. An increase in price from $20 to $30 would

Accepted Answer

A)  increase total revenue by $2,000. 
B)  decrease total revenue by $2,000. 
C)  increase total revenue by $1,000. 
D)  decrease total revenue by $1,000. 
A)  increase total revenue by $2,000. 
B)  decrease total revenue by $2,000. 
C)  increase total revenue by $1,000. 
D)  decrease total revenue by $1,000.

Question 11

An inferior good is distinguished by a

Accepted Answer

A)  negative price elasticity of demand. 
B)  positive price elasticity of demand. 
C)  positive income elasticity of demand. 
D)  negative income elasticity of demand. 
A)  negative price elasticity of demand. 
B)  positive price elasticity of demand. 
C)  positive income elasticity of demand. 
D)  negative income elasticity of demand.

Question 12

If the price elasticity of demand for football tickets is estimated to be 4.5, then a 10 percent increase in football ticket prices would be expected to cause a

Accepted Answer

A)  4.5 percent decrease in quantity demanded. 
B)  4.5 percent increase in quantity demanded. 
C)  45 percent decrease in quantity demanded. 
D)  45 percent increase in quantity demanded. 
E)  450 percent increase in quantity demanded 
A)  4.5 percent decrease in quantity demanded. 
B)  4.5 percent increase in quantity demanded. 
C)  45 percent decrease in quantity demanded. 
D)  45 percent increase in quantity demanded. 
E)  450 percent increase in quantity demanded

Question 13

John's demand schedule for pizza is indicated below. If the current price of pizza is $1.10 per slice, what is John's consumer surplus if he buys five slices of pizza?

Accepted Answer

A)  $0 
B)  $1.00 
C)  $1.10 
D)  $6.50 
A)  $0 
B)  $1.00 
C)  $1.10 
D)  $6.50

Question 14

A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  of unitary elasticity. 
D)  indeterminate; more information is needed to determine the price elasticity of demand. 
A)  elastic. 
B)  inelastic. 
C)  of unitary elasticity. 
D)  indeterminate; more information is needed to determine the price elasticity of demand.

Question 15

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 16

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 17

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 18

Table 7-1
 
Refer to Table 7-1. Whose demand does not conform to the law of demand?

Accepted Answer

A)  Aaron's 
B)  Angela's 
C)  Austin's 
D)  Alyssa's 
A)  Aaron's 
B)  Angela's 
C)  Austin's 
D)  Alyssa's

Question 19

If the price elasticity of demand is computed for two products, and product A measures .79, and product B measures 1.6, then:

Accepted Answer

A)  product A is more price elastic than product B. 
B)  product B is more price elastic than product A. 
C)  consumers are more sensitive to price changes in product A than in product B. 
D)  product B is more price inelastic than product A. 
E)  products A and B must be substitutes. 
A)  product A is more price elastic than product B. 
B)  product B is more price elastic than product A. 
C)  consumers are more sensitive to price changes in product A than in product B. 
D)  product B is more price inelastic than product A. 
E)  products A and B must be substitutes.

Question 20

Use the diagram below to answer this question.
 
For this demand curve, the price elasticity of demand is

Accepted Answer

A)  more elastic at $3 than at $2. 
B)  more elastic at $2 than at $3. 
C)  identical at $2 to that at $3. 
D)  equal to 1.0 over the range from $3 to $2. 
A)  more elastic at $3 than at $2. 
B)  more elastic at $2 than at $3. 
C)  identical at $2 to that at $3. 
D)  equal to 1.0 over the range from $3 to $2.

According to the income effect, when the price of automobiles rises, people buy fewer automobiles because

When the price elasticity of demand is greater than one, it means that demand is

A good that takes up a very large percentage of the consumer's budget will tend to have

If an increase in the excise tax imposed on cigarettes pushes the price per pack up by 20 percent, and the quantity sold declines by 8 percent as a result, the price elasticity of demand for cigarettes is equal to

The market demand for a good is

If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, demand is classified as

If rice is an inferior good,

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?

After eating six chocolate candy bars in ten minutes, Jody says, "You would have to pay me to eat another chocolate candy bar!" This statement best illustrates

Figure 7-12 Refer to Figure 7-12. An increase in price from $20 to $30 would

An inferior good is distinguished by a

If the price elasticity of demand for football tickets is estimated to be 4.5, then a 10 percent increase in football ticket prices would be expected to cause a

John's demand schedule for pizza is indicated below. If the current price of pizza is $1.10 per slice, what is John's consumer surplus if he buys five slices of pizza?

A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was

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

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 demand price elasticity measures 2, this implies that consumers would

Table 7-1 Refer to Table 7-1. Whose demand does not conform to the law of demand?

If the price elasticity of demand is computed for two products, and product A measures .79, and product B measures 1.6, then:

Use the diagram below to answer this question. For this demand curve, the price elasticity of demand 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

Applying the Basics: Special Topics in Economics

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Exam 7: Consumer Choice and Elasticity

According to the income effect, when the price of automobiles rises, people buy fewer automobiles because

When the price elasticity of demand is greater than one, it means that demand is

A good that takes up a very large percentage of the consumer's budget will tend to have

If an increase in the excise tax imposed on cigarettes pushes the price per pack up by 20 percent, and the quantity sold declines by 8 percent as a result, the price elasticity of demand for cigarettes is equal to

The market demand for a good is

If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, demand is classified as

If rice is an inferior good,

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?

After eating six chocolate candy bars in ten minutes, Jody says, "You would have to pay me to eat another chocolate candy bar!" This statement best illustrates

Figure 7-12 Refer to Figure 7-12. An increase in price from $20 to $30 would

An inferior good is distinguished by a

If the price elasticity of demand for football tickets is estimated to be 4.5, then a 10 percent increase in football ticket prices would be expected to cause a

John's demand schedule for pizza is indicated below. If the current price of pizza is $1.10 per slice, what is John's consumer surplus if he buys five slices of pizza?

A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was

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

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 demand price elasticity measures 2, this implies that consumers would

Table 7-1 Refer to Table 7-1. Whose demand does not conform to the law of demand?

If the price elasticity of demand is computed for two products, and product A measures .79, and product B measures 1.6, then:

Use the diagram below to answer this question. For this demand curve, the price elasticity of demand 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

Applying the Basics: Special Topics in Economics

Filters