99) Could an increase in urban bus fares eventually lead to an increase in the demand for bus
service?
A) It could not do so, though it could lead to a reduction in the demand for bus service.
B) It could not do so, though it would probably lead to a reduction in the quantity of bus service
demanded.
C) It might do so if increasing the demand for and price of downtown parking increased even
more.
D) It might do so by making the demand for bus service unit elastic.
E) Only in cities where the demand for bus service slopes upward to the right.
100) What effect would a reduction in the U.S. selling price of Japanese-made cars have on the
U.S. demand for American-made cars?
A) No effect, because price changes affect quantity demanded, not demand.
B) The demand would decrease.
C) The demand would increase.
D) We cannot tell unless we know the elasticities of demand for Japanese-made and American-
made cars.
E) We cannot tell unless we know what happened to the price of American-made cars.
101) What would be the direct effect of a reduction in the U.S. selling price of Japanese-made
cars on the U.S. demand for Japanese-made cars?
A) No effect, because price changes affect quantity demanded, not demand.
B) The demand would decrease.
C) The demand would increase.
D) We cannot tell unless we know the elasticities of demand for Japanese-made and American-
made cars.
E) We cannot tell unless we know whether more cars can be imported from Japan.
102) If the college athletic department raises the price of football tickets from $6 to $8 and sells
more tickets at $8 than it had sold the year before at $6, we could reasonably conclude the
demand for football tickets
A) was completely inelastic.
B) had increased.
C) was elastic.
D) was inelastic.
E) was unit elastic.
103) Suppose the United Automobile Workers union agrees to accept lower wages for members
if the automobile manufacturers lower their prices to buyers. Will the UAW’s measures usually
result in a larger number of cars being sold and hence more jobs for UAW members?
A) No, because people only buy new cars when they need them.
B) Not if the price elasticity of demand for new cars turns out to be less than one.
C) Only in the unlikely event the demand for new cars is unit elastic.
D) Probably not, because new car sales depend on advertising.
E) Yes.
104) What is the error in the following argument? “An increased sales tax on gasoline won’t
reduce consumption, because while the higher price will at first reduce demand, the reduced
demand will eventually bring the price back down again, and consumption will return to its
former level.”
A) A higher price doesn’t reduce demand.
B) A reduced demand does not cause lower prices.
C) The tax-induced price increase may be greater than the price reduction due to the lower
demand.
D) the tax-induced price increase will necessarily be greater than the price reduction due to the
lower demand, because demand is never perfectly inelastic.
E) The ultimate effect on consumption may be to increase it beyond its original level.
105) If automobile commuters are asked in a survey whether their city needs additional
freeways, the answers will reveal
A) almost nothing about the demand for freeways.
B) only one portion of the demand for freeways.
C) the demand for freeways but from a biased group.
D) the demand for freeways but not its elasticity.
E) the demand for freeways without regard to the need for them.
106) Which of the following will likely increase the demand for downtown parking in a large
city?
A) Improved bus service to the downtown area
B) Lower downtown parking fees
C) More downtown parking lots
D) More freeways leading to the downtown area
E) Much higher gasoline prices
107) Suppose a whiskey maker advertises its whiskey as follows: “Whiskey that tastes expensive
and is expensive.” The manufacturer is assuming some customers who buy whiskey
A) have a perfectly inelastic demand for whiskey.
B) have a relatively inelastic demand for whiskey.
C) want to impress their friends or associates.
D) will ignore the law of demand.
E) will purchase more at higher than at lower prices.
108) Someone who knows nothing about the relative quality of a $2 toothbrush and a $7
toothbrush, both available for sale, but chooses to buy the more expensive one, is probably
A) displaying an inelastic demand for toothbrushes.
B) judging quality by price.
C) violating the law of demand.
D) wealthy enough not to care about prices.
109) Why do the sellers of some whiskeys pay for advertisements to tell people their whiskey is
extremely expensive?
A) Because the sellers either do not know or do not accept the law of demand
B) To allocate the product to people who will most appreciate it
C) To increase the demand
D) To lower the demand and keep production costs low
E) To prevent “price shock” among potential customers
110) The amount by which people will increase or decrease their purchases when prices change
A) is typically greater in the case of luxuries than in the case of necessities.
B) is typically less for business firms than for households because business firms can more easily
borrow to maintain purchasing patterns.
C) is typically less for business firms than for households because business firms must have
certain goods to remain in operation.
D) tends to be greater over longer periods of time because it takes time to invent and to discover
substitutes.
E) will be approximately zero unless the demand also changes.
111) The price elasticity of demand for a good tends
A) not to vary over time because people adjust to changed circumstances.
B) to be greater over the long run than over a short period of time.
C) to be less over the long run than over a short period of time.
D) to rise when the demand increases.
E) toward unity in the long run.
112) Economists speak of price elasticity of demand. Which word below is synonymous with
“elasticity”?
A) Futility
B) Sensitivity
C) Relativity
D) Serendipity
113) Price elasticity of demand is defined as
A) the change in price divided by the change in quantity demanded.
B) the change in quantity demanded divided by the change in price.
C) the percentage change in price divided by the percentage change in quantity demanded.
D) the percentage change in quantity demanded divided by the percentage change in price.
E) the quantity demanded divided by the price.
114) “The percentage change in quantity demanded divided by the percentage change in price”
represents
A) the law of demand.
B) the law of one price.
C) the price elasticity of demand.
D) the responsiveness of consumers to a change in quantity demanded.
E) none of the above.
115) The price elasticity of demand is measured as
A) the ratio of the typical consumer’s quantity demanded to the entire quantity demanded in the
market.
B) the percentage change in quantity demanded divided by the percentage change in price.
C) the number of purchases divided by the price of the product.
D) price divided by quantity.
E) quantity divided by price.
116) If a 50 cent increase in price causes the amount purchased to fall by 50 units per week, we
know
A) almost nothing about the price elasticity of demand.
B) demand is relatively elastic.
C) demand is relatively inelastic.
D) demand is unit elastic.
E) the demand does not obey the law of demand.
117) When the price of pizzle trees increased by 20 percent last year, consumers ended up
spending 10 percent more on the purchase of pizzle trees. This shows that the demand for pizzle
trees
A) was elastic.
B) was inelastic.
C) was unit elastic.
D) did not obey the law of demand.
118) If a drought reduced by 20 percent the quantity of wheat available for consumption, by how
much would the price of wheat have to rise to clear the market if the price elasticity of demand
was .25?
A) 4 percent
B) 4.5 percent
C) 5 percent
D) 25 percent
E) 80 percent
119) If each 10 percent increase in the price of gasoline reduces by 2 percent the quantity
purchased, the price elasticity of demand for gasoline is
A) .2.
B) 5.
C) 8.
D) 12.
E) 20.
120) If the coefficient of elasticity is 25,
A) demand is 25%.
B) demand is about to change for the better.
C) demand is very elastic.
D) demand is very inelastic.
E) the law of demand hardly applies.
121) If the price of cappuccino on campus falls from $5 to $3 and the quantity demanded
increases from 15 to 20, then the price elasticity of demand is approximately
A) 0.47, which mean cappuccino is inelastic.
B) 0.57, which means cappuccino is inelastic.
C) 1.75, which means cappuccino is elastic.
D) 2.25, which means cappuccino is elastic.
122) When the price of Gatorade is $2 per bottle, the quantity demanded is 500 bottles per at the
local grocer. When the price falls to $1 per bottle, the quantity demanded increases to 1000.
Given this information, the demand for Gatorade is
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly elastic.
123) If the quantity demanded changes proportionately the same as price, demand is said to be
A) vertical.
B) elastic.
C) unit elastic
D) inelastic.
124) If the elasticity measure equals 3.5, then the demand is
A) elastic.
B) unit elastic.
C) inelastic.
D) infinitely elastic.
125) If the elasticity measure equals 0.6, then the demand is
A) elastic.
B) unit elastic.
C) inelastic.
D) infinitely elastic.
126) If the elasticity measure equals 1.0, then the demand is
A) elastic.
B) unit elastic.
C) inelastic.
D) infinitely elastic.
127) If the demand for a good is determined to be “inelastic,” then the elasticity measure
A) is greater than 1.0.
B) is equal to 1.0.
C) is less than 1.0.
D) is infinite.
128) If the demand for a good is determined to be “unit elastic,” then the elasticity measure
A) is greater than 1.0.
B) is equal to 1.0.
C) is less than 1.0.
D) is infinite.
129) If the demand for a good is determined to be “elastic,” then the elasticity measure
A) is greater than 1.0.
B) is equal to 1.0.
C) is less than 1.0.
D) is infinite.
130) If gasoline prices rise by 20% and quantity demanded falls by 5%, then the price elasticity
of demand for gasoline is:
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly inelastic.
131) If gasoline prices rise by 20% and quantity demanded falls by 5%., then the price elasticity
of demand is:
A) .05.
B) .15.
C) .20.
D) .25.
E) .40.
132) If textbook prices rise by 5% this year, and textbook purchases fall by 5% this year, then the
price elasticity of demand is:
A) .05.
B) .10.
C) .55.
D) .95.
E) 1.0.
133) Suppose a 25% off sale on post-holiday merchandise creates a 50% increase in post-holiday
sales. The price elasticity of demand is:
A) 2.0.
B) .75.
C) .50.
D) .25.
E) none of the above.
134) Little Dicky Lemons operates a lemonade stand. Yesterday he sold 10 cups when he
charged $1.00 per cup. Today he lowered his price to 80 cents, and sold 14 cups. What’s the
price elasticity of demand?
A) .50
B) 1.0
C) 2.0
D) 4.0
E) 8.0
135) Suppose the quantity demanded of cigarette cartons falls by 5% when prices are increased
by 100%. The price elasticity of demand for cigarettes is
A) elastic and equal to 0.05.
B) inelastic and equal to 0.05.
C) elastic and equal to 20.
D) inelastic and equal to 20.
136) Suppose the quantity demanded of milk increases by 15% when milk prices are decreased
by 3%. The price elasticity of demand for milk is
A) elastic and equal to 0.2.
B) inelastic and equal to 0.2.
C) elastic and equal to 5.
D) inelastic and equal to 5.
137) “I’m telling you, instead of charging $50 each, they could give the opera tickets away for
free, and I myself still wouldn’t go—ever!” What can we say about this person’s demand for
opera tickets?
A) His price elasticity is infinite, which means his demand curve is upward sloping.
B) His price elasticity is exactly equal to 1, which means his demand curve is unit elastic.
C) His price elasticity is exactly equal to 50, which means his demand curve is very elastic.
D) He doesn’t have a demand for opera tickets.
138) Rank the following goods from least to most elastic: gasoline, Unocal gasoline, gasoline at
Murph’s Unocal Station.
A) Gasoline, Unocal gasoline, gasoline at Murph’s Unocal Station
B) Gasoline, gasoline at Murph’s Unocal Station, Unocal gasoline
C) Gasoline at Murph’s Unocal Station, Unocal gasoline, gasoline
D) Unocal gasoline, gasoline at Murph’s Unocal Station, gasoline
E) Unocal gasoline, gasoline, gasoline at Murph’s Unocal Station
139) Rank the following goods from least to most elastic: Christian books, religious books, the
Bible.
A) Christian books, religious books, the Bible
B) Religious books, Christian books, the Bible
C) The Bible, Christian books, religious books
D) The Bible, religious books, Christian books
E) None of the above.
140) Rank the following goods from least to most elastic: high octane unleaded gasoline,
unleaded gasoline, gasoline.
A) High octane unleaded gasoline, unleaded gasoline, gasoline
B) High octane unleaded gasoline, gasoline, unleaded gasoline
C) Unleaded gasoline, high octane unleaded gasoline, gasoline
D) Gasoline, unleaded gasoline, high octane unleaded gasoline
E) None of the above.
141) Rank the following goods from most elastic to least elastic: The Economic Way of Thinking
(11th ed.), economics textbooks, textbooks.
A) The Economic Way of Thinking (11th ed.), economics textbooks, textbooks
B) The Economic Way of Thinking (11th ed.), textbooks, economics textbooks
C) Economics textbooks, The Economic Way of Thinking (11th ed.), textbooks
D) Textbooks, economics textbooks, The Economic Way of Thinking (11th ed.)
E) None of the above.
142) Rank the following goods from most elastic to least elastic: fruit, apples, Granny Smith
apples.
A) Fruit, apples, Granny Smith apples
B) Apples, Granny Smith apples, fruit
C) Granny Smith apples, apples, fruit
D) The goods cannot be ranked by elasticity because it ultimately involves the problem of
comparing apples to oranges.
143) Rank the following goods from least to most elastic: compact cars, convertible compact
cars, cars.
A) Cars, convertible compact cars, compact cars
B) Compact cars, convertible compact cars, cars
C) Convertible compact cars, compact cars, cars
D) Cars, compact cars, convertible compact cars
144) Rank the following goods from least to most elastic: school, prep school, Purebred Prep
School.
A) School, prep school, Purebred Prep School
B) Prep School, school, Purebred Prep School
C) Prep School, Purebred Prep School, School
D) Purebred Prep School, Prep School, School
E) None of the above.
145) For which of the following goods would the price elasticity of demand ordinarily be
greatest?
A) Gasoline
B) Mobil regular gasoline
C) Petroleum products
D) Transportation services
E) Unleaded gasoline
146) If people in Pottsville purchase 20 percent more pickles today than they did in 1980,even
though the price of pickles has increased 40 percent since 1980, the demand for pickles in
Pottsville
A) does not obey the law of demand.
B) has changed since 1980.
C) is relatively elastic.
D) is relatively inelastic.
E) is unit elastic.
147) What effect would an increase in the price of pork have on the demand for beef?
A) It would decrease the demand for beef.
B) It would decrease the demand for beef only if the demand for beef is elastic.
C) It would increase the demand for beef.
D) It would increase the demand for beef only if the demand for beef is inelastic.
E) It would have no effect, because a change in price affects only the quantity demanded, not the
demand.
148) Fill in the blank: Since millions of people now use email as opposed to traditional “snail
mail,” the price elasticity of demand for the Post Office’s first class letter service tends to
________.
A) decrease
B) increase
C) increase in the short run but then decrease in the long run
D) leave unchanged
149) Fill in the blank: Other things constant, the introduction of generic (non-brand name) drugs
on the market tends to ________ the price elasticity of demand for brand name drugs.
A) increase
B) decrease
C) leave unchanged
D) alter for the better
150) Fill in the blank: Other things constant, the growing availability of college degrees being
offered through online programs will tend to ________ the price elasticity of demand for more
traditional college degree programs.
A) leave unchanged
B) decrease
C) increase
D) alter for the better
151) Fill in the blank: The Players Union went on strike against the NBA during the 1998-1999
season, canceling games for weeks. Other things constant, the strike and subsequent cancellation
of games would tend to ________ the price elasticity of demand for hockey tickets during the
same period the NBA games were canceled.
A) worsen
B) preserve
C) increase
D) decrease
152) Suppose water rates in Podunk rise by 100%. The water consumption in Podunk will tend
to
A) remain unchanged, because water is a necessity of life.
B) decrease substantially overnight.
C) decrease more substantially over time, as residents discover substitutes for water.
D) decrease, and therefore lead to a lower price of water.
153) The more time gasoline consumers have to adjust to a price change,
A) the lower their price elasticity of demand.
B) the greater their price elasticity of demand.
C) the less sensitive they will be to the price change.
D) the less time they will have to seek out substitutes for gasoline.
154) Were the price of gasoline to permanently increase by 10% overnight and stay there for the
foreseeable future. Other things constant,
A) the demand for gasoline would fall immediately.
B) the quantity demanded for gasoline would fall immediately.
C) the quantity demanded for gasoline would fall more dramatically over time
D) the quantity demanded for gasoline would remain unchanged, because cars can only be run on
gasoline.
155) According to your text, there are substitutes for any scarce good,
A) but some demand curves are vertical.
B) but the elasticity of demand for most goods is zero.
C) but the law of demand only holds for inexpensive goods.
D) but it often takes time for consumers to seek out useful substitutes.
156) Which good most likely has the lowest elasticity of demand?
A) Macintosh computers
B) Toothpicks
C) Chemotherapy treatment
D) Sirloin steaks
E) VCR players
157) Fill in the blanks: The ________ the proportion of one’s budget spent on a good, the
________ the elasticity of demand.
A) greater; lower
B) greater; greater
C) lower; greater
D) lower; more responsive
158) Consumers are often somewhat insensitive to changes in the price of table salt because
A) the proportion of their budget spent on salt is very low.
B) there are a considerable number of good substitutes for salt, in their opinion.
C) they are not used to changes in the price of salt.
D) salt is a necessity for a complete dining experience.
E) all of the above reasons.
159) Other things constant, which case would tend to reflect the highest elasticity of demand for
eggs?
A) A restaurant that spends 1% of their budget on eggs
B) A restaurant that spends 2% of their budget on eggs
C) A restaurant that spends 5% of their budget on eggs
D) The question can’t be answered without information on the price of eggs.
160) Medical service by physicians
A) could be made a free good through universal health insurance.
B) is a good for which the demand is completely inelastic.
C) is a good for which there is no satisfactory substitute.
D) would become a free good if physicians did not charge monetary fees.
E) would cost some patients more in non-monetary terms than they now pay if physicians did not
charge monetary fees.
161) Fill in the blanks: A system of universal medical insurance would tend to ________ the
________ for medical services.
A) increase; elasticity of demand
B) decrease; elasticity of demand
C) decrease; quantity demanded
D) decrease; non-monetary payments
162) Which event is most likely to increase the elasticity of demand for a good?
A) A decrease in the demand for the good
B) A decrease in the price of the good
C) An increase in the demand for the good
D) Higher incomes for consumers of the good
E) The appearance on the market of excellent substitutes for the good
163) If the demand for a good were completely inelastic,
A) the good is a basic necessity.
B) the good is a luxury.
C) there are no substitutes for the good.
D) there had been a long period of time for people to adjust their behavior.
E) people who own the good currently do not want to give it up except at much higher prices.
164) The demand for salt is probably more inelastic at generally prevailing prices than the
demand for potatoes because
A) potatoes require salt but salt does not require potatoes.
B) salt has long been a favorite target for taxation.
C) salt is cheap relative to most users’ incomes and has few good substitutes.
D) salt will keep longer than potatoes before spoiling.
E) there is so much potential salt in the ocean.
165) If the market demand for oranges is relatively inelastic with respect to price, orange
consumers
A) pay no attention to price in their purchasing decisions.
B) will buy fewer oranges at any higher price and will spend less money on oranges.
C) will buy fewer oranges at any higher price but will spend more money on oranges.
D) will buy more oranges at any higher price.
E) will buy more oranges only if their incomes increase.
166) “A doubling of the price of gasoline in the 1970s did not reduce consumption one iota.” The
person making the above claim evidently thinks the demand for gasoline is
A) completely elastic.
B) completely inelastic.
C) greater than the supply.
D) less than the supply.
E) unit elastic.
167) Suppose drug companies come out with new wonder-drugs capable of curing the common
cold. What is the most likely effect on the demand for physicians’ services?
A) The demand will become more elastic.
B) The demand will become more inelastic.
C) The demand will decrease if government or private insurance pays all or most of the
physicians’ fees.
D) The demand will increase if the drugs can only be obtained with a physician’s prescription.
E) The demand will not change, though the quantity demanded almost certainly will.
168) If Dr. Giltscalpel’s gross revenue doubled when he doubled his surgical fees, the demand
for his services within the relevant price range would be
A) indeterminate.
B) perfectly elastic.
C) perfectly inelastic.
D) unit elastic.
E) none of the above.
169) A seller who continues to earn the same gross revenue from sales whether she raises or
lowers her prices faces a demand curve that
A) contradicts the law of demand.
B) is completely elastic.
C) is completely inelastic.
D) is unit elastic.
E) is vertical.
170) The demand for a good is inelastic if, when its price rises,
A) the demand falls.
B) the quantity demanded falls.
C) the quantity demanded increases.
D) total dollar expenditure on the good decreases.
E) total dollar expenditure on the good increases.
171) Other things constant, if tuition at a private university rises from $40,000 to $45,000 and
revenue for the university decreases, the demand for the good must be
A) increasing.
B) inelastic.
C) unit elastic.
D) elastic.
172) Other things constant, if tuition at a private university rises from $40,000 to $45,000 and
revenue for the university decreases, the demand for the good must be
A) decreasing.
B) inelastic.
C) unit elastic.
D) elastic.
173) If total consumer expenditures (in dollars) for bus transportation were to increase when the
price of bus transportation was raised, the demand for bus transportation probably
A) had decreased.
B) had increased.
C) violated the law of demand.
D) was elastic.
E) was inelastic.
174) If wheat farmers would receive a larger gross income from wheat sales when half the total
wheat crop was destroyed, the demand for their wheat is
A) elastic.
B) inelastic.
C) larger at higher prices.
D) smaller at higher prices.
E) unit elastic.
175) Business executives who think the demand for their product is very elastic at the current
price are assuming
A) the demand will become less elastic at a higher price.
B) they will be able to sell more units at a higher price.
C) they will sell fewer units but receive more dollars in sales revenue at a higher price.
D) they will sell more units and receive more dollars in sales revenue at a lower price.
E) they will sell more units but receive fewer dollars in sales revenue at a lower price.
176) If the university administration plans to cut tuition charges in the hope of attracting more
students and thereby increasing tuition revenues, we know
A) they are assuming an elastic demand.
B) they are assuming an inelastic demand.
C) they cannot succeed because of the law of demand.
D) they must be running in the red.
E) they will only succeed if more students can be enrolled at no cost.
177) If the university administration plans to hike tuition charges in the hope of increasing
tuition revenues, we know
A) they are assuming an elastic demand.
B) they are assuming an inelastic demand.
C) they cannot succeed because of the law of demand.
D) they must be running in the red.
E) they will only succeed if more students can be enrolled at no cost.
178) If the U.S. Postal Service raised its first-class postage rate by 10 percent and found (to its
surprise) total receipts from first-class mail service subsequently increased by 10 percent, the
demand for first-class mail service would be
A) completely elastic.
B) completely inelastic.
C) greater than anticipated.
D) unit elastic.
E) upward sloping.
179) If movie theaters began collecting more gross income from ticket sales after lowering ticket
prices, we would know
A) movie patrons were not behaving consistently with the law of demand.
B) movie quality must have increased.
C) the demand for movie tickets was elastic.
D) the demand for movie tickets was inelastic.
E) the supply of movies had increased.
180) When inflation occurs,
A) everyone (or almost everyone) is made worse off.
B) only wealthy people can maintain their previous consumption levels.
C) the cost of living rises.
D) the prices of all goods rise in equal proportions.
E) the purchasing power of money declines.
181) Will scarce goods necessarily be rationed in some manner?
A) Not if people agree to share them equitably
B) Not if there is enough for everyone to have what they need
C) Not if their prices are free to rise
D) Not if they are privately owned
E) Yes
182) According to the textbook, which of the following methods for coordinating the supplies
and demands for scarce goods tends to work best to enhance the freedom and power of people
who want the goods?
A) A lottery
B) Equal shares for all
C) First come, first served
D) Highest money bid
E) Might makes right
183) Every society must follow some kinds of criteria to determine who gets what. Examples of
such criteria include
A) age.
B) gender.
C) height.
D) willingness to pay.
E) all of the above.
184) Determining who receives scarce goods by the criterion of willingness to pay tends to
enhance the freedom and power of people who want the goods because
A) it enables everyone to obtain at least a little of everything.
B) it facilitates choice by everyone on the basis of their own specific situation.
C) it gives everyone an equal chance.
D) it makes sure the people who obtain scarce goods are the people who most deserve them.
E) it puts genuine need ahead of politics.