Question 1

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value).This means that a 20 percent increase in the price of beef,holding every thing else constant,will cause the quantity of beef demanded to

Accepted Answer

A)  decrease by 12 percent. 
B)  decrease by 26 percent. 
C)  decrease by 32 percent. 
D)  decrease by 60 percent.

Question 2

Figure 7-1
 
-Refer to Figure 7-1.Which of the following statements is true?

Accepted Answer

A)  Quantities Q₀ and Q₁ are the utility-maximizing quantities of hoagies at two different prices of hoagies. 
B)  Quantities Q₀ and Q₁ may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumer's budget or the price of other goods. 
C)  Quantity Q₀ could be a utility-maximizing choice if the price is $5.75, but quantity Q₁ may not be because we have no information on the marginal utility per dollar when price changes. 
D)  Quantities Q₀ and Q₁ are derived independently of the utility-maximizing model.

Question 3

When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?

Accepted Answer

The answer of When is demand perfectly elastic? When is...

Question 4

Figure 7-10
 
-Refer to Figure 7-10.Using the total revenue test to verify the price elasticity between points a and b on the demand curve,demand is

Accepted Answer

A)  perfectly inelastic. 
B)  unit-elastic. 
C)  perfectly elastic. 
D)  elastic.

Question 5

The demand curve for an inferior good can never be downward sloping.

Accepted Answer

A) True 
 B)False

Question 6

A network externality occurs when

Accepted Answer

A)  there is production cost savings from being networked with suppliers. 
B)  there is production cost savings from being networked with buyers. 
C)  the usefulness of a good is affected by how many other people use the good. 
D)  the usefulness of a good is affected by celebrities who use the good.

Question 7

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

Accepted Answer

The answer of List the five key determinants of price...

Question 8

The current price of canvas messenger bags is $36 each and sales of the bags equal 400 per week.If the price elasticity of demand is -2.5 and the price changes to $44,how many messenger bags will be sold per week? Use the midpoint formula.

Accepted Answer

The answer of The current price of canvas messenger bags...

Question 9

An economist observes two consumers in a supermarket.One of the consumers buys a case of Coca-Cola and the other buys a case of Pepsi-Cola.Both colas sell for the same price and the ages and incomes of the consumers are also the same.Based on this information,how would the economist explain the consumers' choices?

Accepted Answer

A)  One of the consumers made the wrong choice, but it is impossible to say which one. 
B)  Both consumers should have considered buying other colas that had lower prices. 
C)  Both consumers should have purchased less than a case because they would be able to buy more later. 
D)  Apparently, the consumers had different tastes.

Question 10

A study discussed in the Making the Connection feature in the text found that there is ________ that some consumers are not well aware of prices,even for goods they buy regularly.

Accepted Answer

A)  no evidence 
B)  substantial evidence 
C)  little evidence 
D)  no reason to believe

Question 11

Which of the following statements is true?

Accepted Answer

A)  If the price of a good is lowered and total revenue decreases, demand is elastic. 
B)  If the price of a good is raised and total revenue does not change, demand is perfectly elastic. 
C)  If the price of a good is raised and total revenue increases, demand is inelastic. 
D)  If the price of a good is lowered and total revenue increases, demand is inelastic.

Question 12

The demand for gasoline in the short run is

Accepted Answer

A)  elastic because people can easily switch to public transportation. 
B)  perfectly inelastic because people have no choice but to buy gasoline. 
C)  unit elastic because people tend to consume a stable amount of gasoline per period. 
D)  inelastic because there are very few good substitutes for gasoline.

Question 13

With the increased usage of cell phone services,what has happened to the price elasticity of demand for land-line telephone services?

Accepted Answer

A)  It has become more price inelastic. 
B)  It has become more price elastic. 
C)  It has become more income elastic. 
D)  The absolute value of the price elasticity coefficient has probably gone down.

Question 14

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded,then the demand for golf balls is

Accepted Answer

A)  unit elastic. 
B)  perfectly elastic. 
C)  relatively inelastic. 
D)  relatively elastic.

Question 15

If the marginal utility Ida Mae receives from eating chicken wings is negative then

Accepted Answer

A)  her total utility from eating chicken wings has fallen. 
B)  her total utility from eating chicken wings is negative as well. 
C)  Ida Mae definitely does not like chicken wings. 
D)  her total utility has risen, but by less from the last chicken wing than from the next to last chicken wing.

Question 16

Behavioral economists examine choices that consumers make that are not economically rational.Economists generally assume that people are rational; that is,they weigh the benefits and costs of an action and choose an action only if the benefits outweigh the costs.Why do consumers not act rationally when the result is that they make themselves worse off?

Accepted Answer

The answer of Behavioral economists examine choices that consumers make...

Question 17

If Paul decides to buy a $60 ticket to a Cirque du Soleil show rather than a $45 ticket for a Blue Man Group performance,we can conclude that

Accepted Answer

A)  the marginal utility per dollar spent on Cirque du Soleil is lower than the marginal utility per dollar spent on Blue Man Group. 
B)  Paul's demand for a ticket to see Cirque du Soleil is more elastic than his demand for a ticket to see Blue Man Group. 
C)  Paul is not making a rational choice. 
D)  the marginal utility per dollar spent on Cirque du Soleil is higher than the marginal utility per dollar spent on Blue Man Group.

Question 18

Economists use the concept of ________ to measure how one economic variable,such as quantity,responds to a change in another economic variable,such as price.

Accepted Answer

A)  slope 
B)  efficiency 
C)  relativity 
D)  elasticity

Question 19

The estimated price elasticities of demand for the products listed in the table as "Product A" are from Table 7-7 in the text.Indicate whether the products listed as "Product B" will have a more elastic or less elastic demand than the corresponding Product A.
 $\begin{array}{|l|l|l|l|}
\hline  \begin{array}{ll}
\text { Product A }
\end{array} & \begin{array}{l}
\text { Estimated } \
\text { Elasticity for } \
\text { Product A }
\end{array} & \text { Product B } & \begin{array}{l}
\text { Is Estimated Elasticity for } \
\text { Product B More Elastic or Less }\
\text { Elastic than for Product A? }
\end{array} \
\hline \text { Beer } & -0.29 & \text { Samuel Adams } & \
&& \text { Boston Lager } & \
\hline \text { Chicken } & -0.37 & \begin{array}{l}
\text { Prganically raised } \
\text { chicken }
\end{array} & \
\hline \text { Cocaine } & -0.28 & \text { Fllegal narcotics } & \
\hline \text { Cigarettes } & -0.25 & \text { Marlboro Lights } & \
\hline \text { Restaurant } & & \text { Penny's Grand } & \
\text { meals } & -0.67 & \text { Slam breakfast } &\
\hline 
\end{array}$

Accepted Answer

The answer of The estimated price elasticities of demand for...

Question 20

What did economists Robert Jensen and Nolan Miller determine must be true for a good to be a Giffen good,where the income effect is larger than its substitution effect?

Accepted Answer

The answer of What did economists Robert Jensen and Nolan...

Exam 7: Consumer Choice and Elasticity

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value) .This means that a 20 percent increase in the price of beef,holding every thing else constant,will cause the quantity of beef demanded to

Figure 7-1 -Refer to Figure 7-1.Which of the following statements is true?