Question 1

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

Accepted Answer

A) spend more on sugar. 
B) spend less on sugar. 
C) spend the same amount on sugar. 
D) consume more goods like coffee and tea that are complements of sugar. 
A) spend more on sugar. 
B) spend less on sugar. 
C) spend the same amount on sugar. 
D) consume more goods like coffee and tea that are complements of sugar.

Question 2

Rebel Records announces it is cutting the prices of its bluegrass album titles by 25 percent. If Rebel is seeking to increase revenues, it must believe that the elasticity of demand for bluegrass albums 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 3

Which of the following is not a fundamental that underlies consumer behavior?

Accepted Answer

A) Goods can be substituted for one another. 
B) Consumers make decisions purposefully based upon past experience and knowledge. 
C) The law of diminishing marginal utility applies to all goods. 
D) Consumers always make choices with perfect information. 
A) Goods can be substituted for one another. 
B) Consumers make decisions purposefully based upon past experience and knowledge. 
C) The law of diminishing marginal utility applies to all goods. 
D) Consumers always make choices with perfect information.

Question 4

The exhibit illustrates two possible demand curves for a product, D₁ and D₂. Which of the following is true regarding these demand curves?

Accepted Answer

A) Demand curve D₁ represents a demand curve that is relatively more elastic than demand curve D₂. 
B) Demand curve D₁ represents a demand curve that is relatively more inelastic than demand curve D₂. 
C) Demand curve D₁ represents a demand curve that shows consumer purchases being more responsive to a change in the price of the good than demand curve D₂. 
D) Both are examples of unitary elastic demand curves. 
A) Demand curve D₁ represents a demand curve that is relatively more elastic than demand curve D₂. 
B) Demand curve D₁ represents a demand curve that is relatively more inelastic than demand curve D₂. 
C) Demand curve D₁ represents a demand curve that shows consumer purchases being more responsive to a change in the price of the good than demand curve D₂. 
D) Both are examples of unitary elastic demand curves.

Question 5

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A) The relevant time horizon is short. 
B) The good is a necessity. 
C) The market for the good is broadly defined. 
D) There are many close substitutes for this good. 
A) The relevant time horizon is short. 
B) The good is a necessity. 
C) The market for the good is broadly defined. 
D) There are many close substitutes for this good.

Question 6

Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent, and as a result, the quantity of the dolls sold increases by 25 percent. This indicates that the price elasticity of demand for the dolls over this range is

Accepted Answer

A) 2.5. 
B) 0.4. 
C) 0.5. 
D) 5. 
E) inelastic. 
A) 2.5. 
B) 0.4. 
C) 0.5. 
D) 5. 
E) inelastic.

Question 7

The price elasticity of supply

Accepted Answer

A) will be positive when supply is elastic and negative when it is inelastic. 
B) will be negative when supply is elastic and positive when it is inelastic. 
C) will always be positive. 
D) will be positive when demand for the good is inelastic. 
E) will be positive when demand for the good is elastic. 
A) will be positive when supply is elastic and negative when it is inelastic. 
B) will be negative when supply is elastic and positive when it is inelastic. 
C) will always be positive. 
D) will be positive when demand for the good is inelastic. 
E) will be positive when demand for the good is elastic.

Question 8

The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called

Accepted Answer

A) price elasticity of demand. 
B) consumer surplus. 
C) the substitution effect. 
D) income elasticity of demand. 
A) price elasticity of demand. 
B) consumer surplus. 
C) the substitution effect. 
D) income elasticity of demand.

Question 9

Muriel's income elasticity of demand for football tickets is 1.5. All else equal, this means that if her income increases by 20 percent, she will buy

Accepted Answer

A) 150 percent more football tickets. 
B) 50 percent more football tickets. 
C) 30 percent more football tickets. 
D) 20 percent more football tickets. 
A) 150 percent more football tickets. 
B) 50 percent more football tickets. 
C) 30 percent more football tickets. 
D) 20 percent more football tickets.

Question 10

A normal good is defined by economists to be a good

Accepted Answer

A) with a negatively-sloped demand curve. 
B) that is purchased by at least 75 percent of the population. 
C) that is bought by consumers with normal tastes. 
D) whose demand increases when incomes increase. 
E) whose demand decreases when incomes increase. 
A) with a negatively-sloped demand curve. 
B) that is purchased by at least 75 percent of the population. 
C) that is bought by consumers with normal tastes. 
D) whose demand increases when incomes increase. 
E) whose demand decreases when incomes increase.

Question 11

A question on an economics exam asks: What happens in the market for margarine when income rises? Allison, an excellent student, shows the demand for margarine decreasing. Is she necessarily wrong? Why or why not?

Accepted Answer

If we consider Allison's answer wrong, w

Question 12

Scenario 7-1
Use the information below to answer the following question(s).
JoAnn considers cola and plain sparkling water to be good substitutes. Suppose the price of sugar, a key ingredient used to produce cola, falls.
-Refer to Scenario 7-1. According to the substitution effect, which of the following is most likely to occur?

Accepted Answer

A) JoAnn will purchase less cola and more sparkling water. 
B) JoAnn will purchase more cola and less sparkling water. 
C) JoAnn will purchase more of all goods due to her higher real income. 
D) JoAnn's demand curve will decrease (shift in), causing her to purchase less cola. 
A) JoAnn will purchase less cola and more sparkling water. 
B) JoAnn will purchase more cola and less sparkling water. 
C) JoAnn will purchase more of all goods due to her higher real income. 
D) JoAnn's demand curve will decrease (shift in), causing her to purchase less cola.

Question 13

All things equal, the price elasticity of supply

Accepted Answer

A) will be smaller in the short run than in the long run. 
B) will be smaller in the long run than in the short run. 
C) is the same for the short run and the long run. 
D) approaches zero in the long run. 
A) will be smaller in the short run than in the long run. 
B) will be smaller in the long run than in the short run. 
C) is the same for the short run and the long run. 
D) approaches zero in the long run.

Question 14

If people buy less chewing gum at every price when their incomes fall, then

Accepted Answer

A) chewing gum is a normal good. 
B) the demand for chewing gum is positively sloped. 
C) demand for chewing gum has increased. 
D) the price of chewing gum has increased. 
E) there has been a decrease in population that changed demand. 
A) chewing gum is a normal good. 
B) the demand for chewing gum is positively sloped. 
C) demand for chewing gum has increased. 
D) the price of chewing gum has increased. 
E) there has been a decrease in population that changed demand.

Question 15

"Because of the unseasonably cold weather, Florida orange growers expect (1) fewer bushels of oranges to be harvested, (2) a higher market price for oranges, and (3) larger total revenues from this year's crop." This statement would most likely be correct if the

Accepted Answer

A) demand for Florida oranges was elastic. 
B) demand for Florida oranges was unitary elastic. 
C) demand for Florida oranges was inelastic. 
D) income elasticity of Florida oranges was negative. 
A) demand for Florida oranges was elastic. 
B) demand for Florida oranges was unitary elastic. 
C) demand for Florida oranges was inelastic. 
D) income elasticity of Florida oranges was negative.

Question 16

If Jane's marginal benefit as a consumer in the jeans market is larger than the price of a pair of jeans,

Accepted Answer

A) Jane will not purchase any more jeans. 
B) Jane can benefit by purchasing more jeans. 
C) the opportunity cost of a pair of jeans is lower than the price. 
D) Jane will decrease her total utility by purchasing more jeans. 
A) Jane will not purchase any more jeans. 
B) Jane can benefit by purchasing more jeans. 
C) the opportunity cost of a pair of jeans is lower than the price. 
D) Jane will decrease her total utility by purchasing more jeans.

Question 17

When a good is more broadly defined,

Accepted Answer

A) the more substitutes it has, so demand will be more price-elastic. 
B) the less substitutes it has, so demand will be more price-elastic. 
C) the more substitutes it has, so demand will be less price-elastic. 
D) the less substitutes it has, so demand will be less price-elastic 
A) the more substitutes it has, so demand will be more price-elastic. 
B) the less substitutes it has, so demand will be more price-elastic. 
C) the more substitutes it has, so demand will be less price-elastic. 
D) the less substitutes it has, so demand will be less price-elastic

Question 18

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 19

If the demand for a product increases as the result of a decline in income, it can be concluded that the

Accepted Answer

A) product is an inferior good. 
B) demand for the product is inelastic. 
C) price elasticity of demand for the product equals unity. 
D) demand for the product is elastic. 
A) product is an inferior good. 
B) demand for the product is inelastic. 
C) price elasticity of demand for the product equals unity. 
D) demand for the product is elastic.

Question 20

Table 7-1
  
-Refer to Table 7-1. When the price of the good is $1.00, the quantity demanded in this market would be

Accepted Answer

A) 42 units. 
B) 31 units. 
C) 24 units. 
D) 14 units. 
A) 42 units. 
B) 31 units. 
C) 24 units. 
D) 14 units.

Exam 7: Consumer Choice and Elasticity

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

Rebel Records announces it is cutting the prices of its bluegrass album titles by 25 percent. If Rebel is seeking to increase revenues, it must believe that the elasticity of demand for bluegrass albums is

Which of the following is not a fundamental that underlies consumer behavior?

The exhibit illustrates two possible demand curves for a product, D₁ and D₂. Which of the following is true regarding these demand curves?

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent, and as a result, the quantity of the dolls sold increases by 25 percent. This indicates that the price elasticity of demand for the dolls over this range is

The price elasticity of supply

The difference between the amount consumers would be willing to pay and the amount they actually pay for a good is called

Muriel's income elasticity of demand for football tickets is 1.5. All else equal, this means that if her income increases by 20 percent, she will buy

A normal good is defined by economists to be a good

A question on an economics exam asks: What happens in the market for margarine when income rises? Allison, an excellent student, shows the demand for margarine decreasing. Is she necessarily wrong? Why or why not?

All things equal, the price elasticity of supply

If people buy less chewing gum at every price when their incomes fall, then

"Because of the unseasonably cold weather, Florida orange growers expect (1) fewer bushels of oranges to be harvested, (2) a higher market price for oranges, and (3) larger total revenues from this year's crop." This statement would most likely be correct if the

If Jane's marginal benefit as a consumer in the jeans market is larger than the price of a pair of jeans,

When a good is more broadly defined,

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

If the demand for a product increases as the result of a decline in income, it can be concluded that the

Table 7-1 -Refer to Table 7-1. When the price of the good is $1.00, the quantity demanded in this market would be

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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