Question 1

Differentiate between the following.
a)Normal goods and inferior goods
b)Substitutes and complements

Accepted Answer

a)A normal good is a good whose consumpt

Question 2

Which of the following is true of a good that has a price elasticity of demand of −3?

Accepted Answer

A)  If the income of a consumer increases by 3 percent, the quantity demanded of the good will increase by 1 percent. 
B)  If the income of a consumer increases by 1 percent, the quantity demanded of the good will increase by 3 percent. 
C)  If the price of the good increases by 1 percent, the quantity demanded of the good will decrease by 3 percent. 
D)  If the price of the good increases by 3 percent, the quantity demanded of the good will increase by 1 percent. 
A)  If the income of a consumer increases by 3 percent, the quantity demanded of the good will increase by 1 percent. 
B)  If the income of a consumer increases by 1 percent, the quantity demanded of the good will increase by 3 percent. 
C)  If the price of the good increases by 1 percent, the quantity demanded of the good will decrease by 3 percent. 
D)  If the price of the good increases by 3 percent, the quantity demanded of the good will increase by 1 percent.

Question 3

Kate's income is increased by 25%.Her quantity demanded of restaurant meals increases from 10 to 12.Restaurant meals are considered ________ for Kate.

Accepted Answer

A)  luxury good 
B)  normal good 
C)  inferior good 
D)  inelastic good 
A)  luxury good 
B)  normal good 
C)  inferior good 
D)  inelastic good

Question 4

Elasticity is ________.

Accepted Answer

A)  the sum of the percentage changes in two variables 
B)  the difference between the percentage changes in two variables 
C)  the product of the percentage changes in two variables 
D)  the ratio of the percentage changes in two variables 
A)  the sum of the percentage changes in two variables 
B)  the difference between the percentage changes in two variables 
C)  the product of the percentage changes in two variables 
D)  the ratio of the percentage changes in two variables

Question 5

When the price of a cookie is $4,Gary purchases 50 cookies.When the price of a cookie increases to $6,he purchases 20 cookies.Given the information,what is the absolute value of Gary's arc elasticity of demand for cookies?

Accepted Answer

A)  1.2 
B)  2.14 
C)  3.26 
D)  5 
A)  1.2 
B)  2.14 
C)  3.26 
D)  5

Question 6

When the price of one pen is $1,the number of notebooks demanded is 50.When the price per pen increases to $5,the number of notebooks demanded decreases to 30.What is the cross-price elasticity of demand between the two goods using the arc elasticity method?

Accepted Answer

A)  0.1 
B)  −0.375 
C)  3 
D)  −3 
A)  0.1 
B)  −0.375 
C)  3 
D)  −3

Question 7

Lily wants to maximize her benefit of consuming apples and bananas,given her fixed budget of $10 for these two fruits.The price of an apple is $1,and the price of a banana is $0.50.In order to derive Lily's demand curve for bananas,we need to ________.

Accepted Answer

A)  solve the buyer's problem for her once, and find the optimal number of bananas, when price of a bananas is $0.50 
B)  solve the buyer's problem for her multiple times and find the optimal number of bananas, when price of a bananas is at a different level each time 
C)  draw a downward sloping line with slope of -1 
D)  draw a downward sloping line with slope of -2 
A)  solve the buyer's problem for her once, and find the optimal number of bananas, when price of a bananas is $0.50 
B)  solve the buyer's problem for her multiple times and find the optimal number of bananas, when price of a bananas is at a different level each time 
C)  draw a downward sloping line with slope of -1 
D)  draw a downward sloping line with slope of -2

Question 8

In case of a downward-sloping,linear demand curve,the price elasticity of demand for a good ________.

Accepted Answer

A)  is zero between any two points on the curve 
B)  is one between any two points on the curve 
C)  is different at different points on the curve 
D)  is equal to the slope between different points on the demand curve 
A)  is zero between any two points on the curve 
B)  is one between any two points on the curve 
C)  is different at different points on the curve 
D)  is equal to the slope between different points on the demand curve

Question 9

Suppose the prices of a pair of jeans,a shirt,and a tie are $30,$20,and $10,respectively.Which of the following statements is true in this context?

Accepted Answer

A)  The opportunity cost of buying a pair of jeans is 2 ties. 
B)  The opportunity cost of buying a tie is 3 pairs of jeans. 
C)  The opportunity cost of buying a tie is 2 shirts. 
D)  The opportunity cost of buying a shirt is 2 ties. 
A)  The opportunity cost of buying a pair of jeans is 2 ties. 
B)  The opportunity cost of buying a tie is 3 pairs of jeans. 
C)  The opportunity cost of buying a tie is 2 shirts. 
D)  The opportunity cost of buying a shirt is 2 ties.

Question 10

If the price of a good increases,________.

Accepted Answer

A)  the budget constraint shifts to the right 
B)  the budget constraint shifts to the left 
C)  consumer surplus increases 
D)  consumer surplus decreases 
A)  the budget constraint shifts to the right 
B)  the budget constraint shifts to the left 
C)  consumer surplus increases 
D)  consumer surplus decreases

Question 11

In the following figure,BC is the budget constraint and IC₁ and IC₂ are two indifference curves of a consumer.Despite IC₂ representing a higher level of satisfaction,why does the optimal bundle for the consumer lie on indifference curve IC₁?

Accepted Answer

The budget constraint represents the dif

Question 12

The following table shows the marginal benefit that Marcus derives by consuming different quantities of hotdog and soda. The price of a hotdog is $3, and the price of a soda is $1.
  
-Refer to the table above.What is the optimal combination of Soda and Hotdog for Marcus,if his weekly budget for hotdog and soda is $14?

Accepted Answer

A)  2 sodas, and 4 hotdogs 
B)  3 sodas, and 3 hotdogs 
C)  6 sodas, and 5 hotdogs 
D)  5 sodas, and 3 hotdogs 
A)  2 sodas, and 4 hotdogs 
B)  3 sodas, and 3 hotdogs 
C)  6 sodas, and 5 hotdogs 
D)  5 sodas, and 3 hotdogs

Question 13

Holly spends exactly $50 on coffee each month.The price of tea decrease,while the price of coffee remains the same.Holly's cross price elasticity of demand of coffee with respect to tea is ________.

Accepted Answer

A)  0 
B)  positive 
C)  negative 
D)  between 1 and 2 
A)  0 
B)  positive 
C)  negative 
D)  between 1 and 2

Question 14

Sofia is selling homemade cakes.The demand for homemade cakes is elastic.If Sofia reduces the price of her cakes,________.

Accepted Answer

A)  her revenue will increase 
B)  her revenue will decrease 
C)  her revenue will not change 
D)  she will not make any revenue 
A)  her revenue will increase 
B)  her revenue will decrease 
C)  her revenue will not change 
D)  she will not make any revenue

Question 15

What are the determinants of the price elasticity of demand?

Accepted Answer

There are three important determinants o

Question 16

Luxury goods have an income elasticity ________.

Accepted Answer

A)  less than zero 
B)  between zero and one 
C)  equal to one 
D)  greater than one 
A)  less than zero 
B)  between zero and one 
C)  equal to one 
D)  greater than one

Question 17

In the graph above,which bundles of jeans and sweaters are in your budget set?

Accepted Answer

A)  Only Bundle D (2 pairs of jeans and 8 sweaters) 
B)  Bundle D (2 pairs of jeans and 8 sweaters) and Bundle A (5 pairs of jeans and no sweaters) 
C)  Bundles D (2 pairs of jeans and 8 sweaters), A (5 pairs of jeans and no sweaters), and B (4 pairs of jeans and 4 sweaters) 
D)  Bundles D (2 pairs of jeans and 8 sweaters), A (5 pairs of jeans and no sweaters), and C (3 pairs of jeans and 6 sweaters) 
A)  Only Bundle D (2 pairs of jeans and 8 sweaters) 
B)  Bundle D (2 pairs of jeans and 8 sweaters) and Bundle A (5 pairs of jeans and no sweaters) 
C)  Bundles D (2 pairs of jeans and 8 sweaters), A (5 pairs of jeans and no sweaters), and B (4 pairs of jeans and 4 sweaters) 
D)  Bundles D (2 pairs of jeans and 8 sweaters), A (5 pairs of jeans and no sweaters), and C (3 pairs of jeans and 6 sweaters)

Question 18

Suppose the government imposes a tax on Good X.In order to estimate the effect of the tax on the quantity demanded Good Y,a related good,we can use the concept of ________.

Accepted Answer

A)  the price elasticity of demand 
B)  deadweight loss 
C)  the cross-price elasticity of demand 
D)  the budget constraint 
A)  the price elasticity of demand 
B)  deadweight loss 
C)  the cross-price elasticity of demand 
D)  the budget constraint

Question 19

The following figure illustrates the market demand curve for solar-powered lights.
  
-Refer to the figure above.What is the absolute value of the arc elasticity of demand for solar-powered lights when their price decreases from $5 to $2?

Accepted Answer

A)  0.64 
B)  1.25 
C)  1.75 
D)  2.00 
A)  0.64 
B)  1.25 
C)  1.75 
D)  2.00

Question 20

The following figure shows the budget constraint of Lesley when she is faced with two goods: burgers and icecream.
  
-Refer to the figure above.If Lesley's budget for burgers and ice creams is cut by half,Lesley's new budget constraint ________.

Accepted Answer

A)  will cross the vertical axis at 5, and will cross the horizontal axis at 3 
B)  will start from the same point on the vertical axis, but will cross the horizontal axis at 3 
C)  will start from the same point on the horizontal axis, but will cross the vertical axis at 5 
D)  will cross the vertical axis at 20, and will cross the horizontal axis at 12 
A)  will cross the vertical axis at 5, and will cross the horizontal axis at 3 
B)  will start from the same point on the vertical axis, but will cross the horizontal axis at 3 
C)  will start from the same point on the horizontal axis, but will cross the vertical axis at 5 
D)  will cross the vertical axis at 20, and will cross the horizontal axis at 12

Differentiate between the following. a)Normal goods and inferior goods b)Substitutes and complements

Which of the following is true of a good that has a price elasticity of demand of −3?

Kate's income is increased by 25%.Her quantity demanded of restaurant meals increases from 10 to 12.Restaurant meals are considered ________ for Kate.

Elasticity is ________.

When the price of a cookie is $4,Gary purchases 50 cookies.When the price of a cookie increases to $6,he purchases 20 cookies.Given the information,what is the absolute value of Gary's arc elasticity of demand for cookies?

When the price of one pen is $1,the number of notebooks demanded is 50.When the price per pen increases to $5,the number of notebooks demanded decreases to 30.What is the cross-price elasticity of demand between the two goods using the arc elasticity method?

Lily wants to maximize her benefit of consuming apples and bananas,given her fixed budget of $10 for these two fruits.The price of an apple is $1,and the price of a banana is $0.50.In order to derive Lily's demand curve for bananas,we need to ________.

In case of a downward-sloping,linear demand curve,the price elasticity of demand for a good ________.

Suppose the prices of a pair of jeans,a shirt,and a tie are $30,$20,and $10,respectively.Which of the following statements is true in this context?

If the price of a good increases,________.

In the following figure,BC is the budget constraint and IC₁ and IC₂ are two indifference curves of a consumer.Despite IC₂ representing a higher level of satisfaction,why does the optimal bundle for the consumer lie on indifference curve IC₁?

Holly spends exactly $50 on coffee each month.The price of tea decrease,while the price of coffee remains the same.Holly's cross price elasticity of demand of coffee with respect to tea is ________.

Sofia is selling homemade cakes.The demand for homemade cakes is elastic.If Sofia reduces the price of her cakes,________.

What are the determinants of the price elasticity of demand?

Luxury goods have an income elasticity ________.

In the graph above,which bundles of jeans and sweaters are in your budget set?

Suppose the government imposes a tax on Good X.In order to estimate the effect of the tax on the quantity demanded Good Y,a related good,we can use the concept of ________.

The following figure illustrates the market demand curve for solar-powered lights. -Refer to the figure above.What is the absolute value of the arc elasticity of demand for solar-powered lights when their price decreases from $5 to $2?

The following figure shows the budget constraint of Lesley when she is faced with two goods: burgers and icecream. -Refer to the figure above.If Lesley's budget for burgers and ice creams is cut by half,Lesley's new budget constraint ________.

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Sellers and Incentives

Perfect Competition and the Invisible Hand

Trade

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Monopoly

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

Filters

Exam 5: Consumers and Incentives

Differentiate between the following. a)Normal goods and inferior goods b)Substitutes and complements

Which of the following is true of a good that has a price elasticity of demand of −3?

Kate's income is increased by 25%.Her quantity demanded of restaurant meals increases from 10 to 12.Restaurant meals are considered ________ for Kate.

Elasticity is ________.

When the price of a cookie is $4,Gary purchases 50 cookies.When the price of a cookie increases to $6,he purchases 20 cookies.Given the information,what is the absolute value of Gary's arc elasticity of demand for cookies?

When the price of one pen is $1,the number of notebooks demanded is 50.When the price per pen increases to $5,the number of notebooks demanded decreases to 30.What is the cross-price elasticity of demand between the two goods using the arc elasticity method?

Lily wants to maximize her benefit of consuming apples and bananas,given her fixed budget of $10 for these two fruits.The price of an apple is $1,and the price of a banana is $0.50.In order to derive Lily's demand curve for bananas,we need to ________.

In case of a downward-sloping,linear demand curve,the price elasticity of demand for a good ________.

Suppose the prices of a pair of jeans,a shirt,and a tie are $30,$20,and $10,respectively.Which of the following statements is true in this context?

If the price of a good increases,________.

In the following figure,BC is the budget constraint and IC₁ and IC₂ are two indifference curves of a consumer.Despite IC₂ representing a higher level of satisfaction,why does the optimal bundle for the consumer lie on indifference curve IC₁?

Holly spends exactly $50 on coffee each month.The price of tea decrease,while the price of coffee remains the same.Holly's cross price elasticity of demand of coffee with respect to tea is ________.

Sofia is selling homemade cakes.The demand for homemade cakes is elastic.If Sofia reduces the price of her cakes,________.

What are the determinants of the price elasticity of demand?

Luxury goods have an income elasticity ________.

In the graph above,which bundles of jeans and sweaters are in your budget set?

Suppose the government imposes a tax on Good X.In order to estimate the effect of the tax on the quantity demanded Good Y,a related good,we can use the concept of ________.

The following figure illustrates the market demand curve for solar-powered lights. -Refer to the figure above.What is the absolute value of the arc elasticity of demand for solar-powered lights when their price decreases from $5 to $2?

The following figure shows the budget constraint of Lesley when she is faced with two goods: burgers and icecream. -Refer to the figure above.If Lesley's budget for burgers and ice creams is cut by half,Lesley's new budget constraint ________.

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Sellers and Incentives

Perfect Competition and the Invisible Hand

Trade

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Monopoly

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

Filters