141. Figure 7-10 depicts a demand curve with a price elasticity that is
a.
unitary, implying that a percent change in price leads to an equal percent change in
quantity demanded.
b.
perfectly inelastic, implying that the same amount will be purchased regardless of the
price of the good.
c.
equal to zero.
d.
both b and c.
Figure 7-11
142. Refer to Figure 7-11. As price falls from PA to PB, which demand curve represents the most elastic
demand?
a.
D1
b.
D2
c.
D3
d.
All of the above are equally elastic.
143. Refer to Figure 7-11. As price falls from PA to PB, we could use the three demand curves to calculate
three different values of the price elasticity of demand. Which of the three demand curves would
produce the smallest elasticity?
a.
D1
b.
D2
c.
D3
d.
All of the above are equally elastic.
Figure 7-12
144. Refer to Figure 7-12. When price falls from $50 to $40, it can be inferred that demand between those
two prices is
a.
inelastic, since total revenue decreases from $8,000 to $5,000.
b.
inelastic, since total revenue increases from $5,000 to $8,000.
c.
elastic, since total revenue increases from $5,000 to $8,000.
d.
unit elastic, since total revenue increases from $5,000 to $8,000.
145. Refer to Figure 7-12. An increase in price from $20 to $30 would
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.
146. Refer to Figure 7-12. An increase in price from $30 to $35 would
a.
increase total revenue by $250
b.
decrease total revenue by $250.
c.
increase total revenue by $500.
d.
decrease total revenue by $500.
Figure 7-13
147. Refer to Figure 7-13. If price increases from $10 to $15, total revenue will
a.
increase by $20, so demand must be inelastic in this price range.
b.
increase by $5, so demand must be inelastic in this price range.
c.
decrease by $20, so demand must be elastic in this price range.
d.
decrease by $10, so demand must be elastic in this price range.
148. Refer to Figure 7-13. A decrease in price from $15 to $10 leads to
a.
a decrease in total revenue of $10, so the price elasticity of demand is greater than 1 in this
price range.
b.
a decrease in total revenue of $10, so the price elasticity of demand is less than 1 in this
price range.
c.
a decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this
price range.
d.
a decrease in total revenue of $20, so demand is elastic in this price range.
Figure 7-14
149. Refer to Figure 7-14. Which supply curve represents perfectly inelastic supply?
a.
S1
b.
S2
c.
S3
d.
It is impossible to tell without more information.
Figure 7-15
150. Refer to Figure 7-15. Along which of these segments of the supply curve is supply least elastic?
a.
between E and F
b.
between C and D
c.
between A and C
d.
between A and B
151. Refer to Figure 7-15. Along which of these segments of the supply curve is supply most elastic?
a.
between A and B
b.
between C and D
c.
between D and F
d.
between E and F
Figure 7-16
152. Which of the demand curves in Figure 7-16 is unit elastic?
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
153. Which demand curve in Figure 7-16 is perfectly elastic?
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
Figure 7-17
154. Consider Figure 7-17. Between the prices of $5 and $6, which supply curve is most elastic and which
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.
155. If the price of apples rises from $.50 to $1.50 and quantity demanded falls from 1,000 to 900, we can
conclude that the price elasticity for apples is
a.
−20.
b.
inelastic.
c.
elastic.
d.
unitary.
156. 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
a.
−0.20.
b.
−0.70.
c.
−1.00.
d.
−1.42.
157. Cary increases the price of her cakes from $8 to $10 per cake, but her cash receipts decrease by 2
percent. The price elasticity of demand (in the $8 to $10 range) is
a.
elastic.
b.
inelastic.
c.
0.02.
d.
0.25.
158. 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
a.
elastic.
b.
inelastic.
c.
of unitary elasticity.
d.
perfectly inelastic.
159. Since the income elasticity for food is estimated to be 0.51, it appears that the proportion of income
spent by poor people on food is ____ the proportion spent by those with higher incomes.
a.
greater than
b.
less than
c.
about the same as
d.
about half as great as
160. “I’m tired of eating cold pizza for breakfast. Today I’m going to the make some oatmeal instead.” This
statement most clearly reflects the
a.
law of increasing returns to scale.
b.
second law of demand.
c.
law of diminishing marginal utility.
d.
law of comparative advantage.
161. After downing three glasses of lemonade on a hot summer afternoon, Todd says, “You would have to
pay me to drink another glass!” This statement best illustrates
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.
162. A 10 percent increase in the price of sugar reduces sugar consumption by about 5 percent. The increase
causes households to
a.
spend more on sugar.
b.
spend less on sugar.
c.
spend the same on sugar.
d.
consume more goods like coffee and tea that are complements of sugar.
163. If Mr. Smith thinks the last dollar spent on shirts yields more satisfaction than the last dollar spent on
cola, and Smith is a utility-maximizing consumer, he should
a.
decrease his spending on cola.
b.
decrease his spending on cola and decrease his spending on shirts.
c.
decrease his spending on shirts.
d.
increase his spending on cola and decrease his spending on shirts.
164. If the income elasticity of a good is negative, we can conclude that the good is
a.
an inferior good.
b.
a normal good.
c.
a luxury good.
d.
a necessity.
165. If the demand for a product increases as the result of an increase in income, it can be concluded that
the
a.
product is an inferior good.
b.
demand for the product is inelastic.
c.
price elasticity of demand for the product equals unity.
d.
product is a normal good.
166. A perfectly inelastic demand curve indicates that
a.
a producer can sell as many units as desired at the market price but no units above the
market price.
b.
for a given percent change in price, the quantity demanded rises by the same percentage.
c.
price has no effect on the quantity demanded.
d.
the percent change in price is less than the percent change in quantity demanded.
167. If people spend 30 percent less on movie tickets when movie prices decline 15 percent, the price
elasticity of demand for movie tickets at these prices must be
a.
−3.0.
b.
elastic
c.
−0.5.
d.
inelastic.
168. When the price of a product increases, the passage of time usually causes the price elasticity of
demand for the product to become
a.
less elastic.
b.
more elastic.
c.
smaller and smaller in an absolute value.
d.
approximately equal to zero in the long run because of scarcity.
ESSAY
169. Mark complains: “I can’t believe they raised the price of comic books, and because of this, I’m going to
reduce my demand for comic books.” Is Mark stating the concept of demand correctly?
170. Sally is on her college golf team and only uses Titleist golf balls. She states: “I don’t care what the
price is, I will only buy Titleists.” Is this a believable assertion?
171. John is a well-known consultant who makes $150 an hour and has all the work he can handle. He has a
big job in Washington D.C., ten hours away. He can drive at a cost of $80 round trip or take a
one-hour flight for $300. Which is he likely to do? Are there circumstances that may lead him to
choose otherwise?
172. Fred, a poor college student, states: “I eat tuna sandwiches five times a week. When I graduate and get
a real job, I will never purchase tuna again.” Is Fred planning on breaking the law of demand?
173. In the mythical nation of Oz, gasoline used to sell for $1 a gallon, and the natives purchased 100,000
gallons a week. Four years ago, the price rose to $3 a gallon, and the natives reduced their quantity
demanded to 90,000 gallons a week. Calculate the price elasticity for this change. Today, gas again
sells for $1 a gallon in Oz, but the natives are only buying 70,000 gallons a week. What gives?
174. 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?
175. 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?
176. A local restaurant offers an “all you can eat” ribs special. If a person pays $11.95, she can eat as many
servings as she desires at no additional cost. Can you infer anything about her marginal utility from
observing her eating behavior?
ANS:
