Question 1

The market demand for an item is

Accepted Answer

A) the sum of individual demands. 
B) steeper for any given price change than the individual demand curves. 
C) independent of the number of individuals in the market. 
D) determined by dividing the quantity demanded by each individual by the number of individuals in the market. 
A) the sum of individual demands. 
B) steeper for any given price change than the individual demand curves. 
C) independent of the number of individuals in the market. 
D) determined by dividing the quantity demanded by each individual by the number of individuals in the market. A

Question 2

Use the figure below to answer the following question(s).
Figure 7-6
  
-In the price range between $3 and $4, the price elasticity of the demand curve depicted in Figure 7-6 is

Accepted Answer

A) highly elastic. 
B) approximately equal to -0.33. 
C) approximately equal to -3. 
D) of unitary elasticity. 
A) highly elastic. 
B) approximately equal to -0.33. 
C) approximately equal to -3. 
D) of unitary elasticity. B

Question 3

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. D

Question 4

The principle of diminishing marginal utility says that

Accepted Answer

A) as more of a good or service is consumed, demand will decrease. 
B) as more of a good or service is consumed, the price will rise. 
C) the marginal utility of additional units consumed will increase. 
D) the marginal utility of additional units consumed will decline. 
A) as more of a good or service is consumed, demand will decrease. 
B) as more of a good or service is consumed, the price will rise. 
C) the marginal utility of additional units consumed will increase. 
D) the marginal utility of additional units consumed will decline.

Question 5

The demand curve for a good is very unlikely to be perfectly vertical because

Accepted Answer

A) scarcity and limited income restrict the ability of consumers to afford goods as they become very expensive. 
B) as the price of a good rises to high enough levels, the incentive for other suppliers to invent new substitutes for the good increases. 
C) consumers generally do not care about the price of the goods they consume. 
D) both a and b are true. 
A) scarcity and limited income restrict the ability of consumers to afford goods as they become very expensive. 
B) as the price of a good rises to high enough levels, the incentive for other suppliers to invent new substitutes for the good increases. 
C) consumers generally do not care about the price of the goods they consume. 
D) both a and b are true.

Question 6

If the income elasticity of demand for a good is negative, this implies that

Accepted Answer

A) only the poor will buy the good. 
B) as incomes fall, less will be spent on the good. 
C) as incomes rise, the demand for the good will fall. 
D) the good does not obey the law of demand. 
A) only the poor will buy the good. 
B) as incomes fall, less will be spent on the good. 
C) as incomes rise, the demand for the good will fall. 
D) the good does not obey the law of demand.

Question 7

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 8

If taking an airplane from Pittsburgh to Miami cost $600 and takes 5 hours, while taking a bus would cost $150 and takes 50 hours, the minimum value of your time that would make it worthwhile to fly would be

Accepted Answer

A) $1 per hour. 
B) $3 per hour. 
C) $10 per hour. 
D) $12 per hour. 
A) $1 per hour. 
B) $3 per hour. 
C) $10 per hour. 
D) $12 per hour.

Question 9

Figure 7-17
  
-Consider Figure 7-17. Between the prices of $5 and $6, which supply curve is most elastic and which is least elastic?

Accepted Answer

A) S₁ is most elastic; S₂ is least elastic. 
B) S₁ is most elastic; S₃ is least elastic. 
C) S₃ is most elastic; S₁ is least elastic. 
D) S₃ is most elastic; S₂ is least elastic. 
E) S₂ is most elastic; S₃ is least elastic. 
A) S₁ is most elastic; S₂ is least elastic. 
B) S₁ is most elastic; S₃ is least elastic. 
C) S₃ is most elastic; S₁ is least elastic. 
D) S₃ is most elastic; S₂ is least elastic. 
E) S₂ is most elastic; S₃ is least elastic.

Question 10

Sally recently got a 15 percent raise. She now purchases 7.5 percent more steak dinners. Sally's income elasticity for steak dinners is

Accepted Answer

A) 0.5. 
B) 0.75. 
C) 1.5 
D) 2. 
A) 0.5. 
B) 0.75. 
C) 1.5 
D) 2.

Question 11

Which of the following is the best example of the substitution effect?

Accepted Answer

A) Joe buys fewer apples and more oranges as the result of an increase in the price of apples. 
B) Joe buys more apples when his income increases. 
C) Joe buys an apple slicer when the price of apples decreases. 
D) Joe buys less sugar as the result of an increase in price of apples. 
A) Joe buys fewer apples and more oranges as the result of an increase in the price of apples. 
B) Joe buys more apples when his income increases. 
C) Joe buys an apple slicer when the price of apples decreases. 
D) Joe buys less sugar as the result of an increase in price of apples.

Question 12

If the quantity demanded of a product rose from 900 to 1,200 when the price of the product fell from $11 to $9, the price elasticity of demand coefficient is equal to

Accepted Answer

A) -0.20. 
B) -0.70. 
C) -1.00. 
D) -1.42. 
A) -0.20. 
B) -0.70. 
C) -1.00. 
D) -1.42.

Question 13

Figure 7-16
  
-Which of the demand curves in Figure 7-16 is unit 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 14

If the quantity demanded of a product fell from 11,000 to 10,000 when price rose from $9 to $10, the price elasticity of demand over this range is equal to approximately

Accepted Answer

A) -0.1. 
B) -0.05. 
C) -0.9. 
D) -1.1. 
A) -0.1. 
B) -0.05. 
C) -0.9. 
D) -1.1.

Question 15

If a 10 percent rise in airfares leads to a 5 percent increase in total expenditures on air travel, the price elasticity of demand for air travel in this range must be

Accepted Answer

A) 2. 
B) elastic. 
C) 0.5. 
D) inelastic. 
A) 2. 
B) elastic. 
C) 0.5. 
D) inelastic.

Question 16

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

Accepted Answer

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

Question 17

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 18

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 19

If the demand for cigarettes is highly inelastic, this indicates that

Accepted Answer

A) higher cigarette prices will increase the demand for cigarettes. 
B) the price elasticity coefficient of cigarettes exceeds 1. 
C) the price elasticity coefficient of cigarettes equals 1. 
D) the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes. 
A) higher cigarette prices will increase the demand for cigarettes. 
B) the price elasticity coefficient of cigarettes exceeds 1. 
C) the price elasticity coefficient of cigarettes equals 1. 
D) the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes.

Question 20

If the price of steak rises from $6 to $10 per pound, and the quantity purchased falls from 90 to 70 pounds, the price elasticity of demand (in absolute value) is

Accepted Answer

A) 0.2. 
B) 0.5. 
C) 1.0. 
D) 2.0. 
A) 0.2. 
B) 0.5. 
C) 1.0. 
D) 2.0.

Exam 7: Consumer Choice and Elasticity

The market demand for an item is

Use the figure below to answer the following question(s). Figure 7-6 -In the price range between $3 and $4, the price elasticity of the demand curve depicted in Figure 7-6 is

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

The principle of diminishing marginal utility says that

The demand curve for a good is very unlikely to be perfectly vertical because

If the income elasticity of demand for a good is negative, this implies that

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

If taking an airplane from Pittsburgh to Miami cost $600 and takes 5 hours, while taking a bus would cost $150 and takes 50 hours, the minimum value of your time that would make it worthwhile to fly would be

Figure 7-17 -Consider Figure 7-17. Between the prices of $5 and $6, which supply curve is most elastic and which is least elastic?

Sally recently got a 15 percent raise. She now purchases 7.5 percent more steak dinners. Sally's income elasticity for steak dinners is

Which of the following is the best example of the substitution effect?

If the quantity demanded of a product rose from 900 to 1,200 when the price of the product fell from $11 to $9, the price elasticity of demand coefficient is equal to

Figure 7-16 -Which of the demand curves in Figure 7-16 is unit elastic?

If the quantity demanded of a product fell from 11,000 to 10,000 when price rose from $9 to $10, the price elasticity of demand over this range is equal to approximately

If a 10 percent rise in airfares leads to a 5 percent increase in total expenditures on air travel, the price elasticity of demand for air travel in this range must be

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

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

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

If the demand for cigarettes is highly inelastic, this indicates that

If the price of steak rises from $6 to $10 per pound, and the quantity purchased falls from 90 to 70 pounds, the price elasticity of demand (in absolute value) is

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: 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

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

Appendix: the Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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