Question 1

Figure 7-15 
-Refer to Figure 7-15. Along which of these segments of the supply curve is supply least elastic?

Accepted Answer

A)   between E and F
B)   between C and D
C)   between A and C
D)   between A and BE) A) and B)
F) B) and C)

Question 2

If the board of regents of a major state university system plans to raise tuition in order to increase revenues, the regents must believe student demand is

Accepted Answer

A)   elastic.
B)   inelastic.
C)   of unitary elasticity.
D)   perfectly elastic.E) A) and C)
F) C) and D)

Question 3

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 eF) A) and B)
G) A) and C)

Question 4

Which of the following would be the best example of consumer surplus?

Accepted Answer

A)   Shaniqua does not get cell-phone service because she feels that it is worth less than the $30 a month fee.
B)   Nicolas pays $8 for a haircut that is worth $10 to him.
C)   Diego buys a house for $104,000, the maximum amount that he would be willing to pay for it.
D)   Isabella purchases a book for $20 and uses a credit card to pay for it.E) All of the above
F) A) and D)

Question 5

Which of the following is fully tax deductible (it is either subtracted or excluded from taxable income)  under the current tax system of the United States?

Accepted Answer

A)   Out-of-pocket medical expenses.
B)   Healthcare insurance purchased through one's employer.
C)   Healthcare insurance purchased directly by an individual or family.
D)   All of the above.E) B) and C)
F) None of the above

Question 6

Which of the following would increase the incentive of consumers to economize and of producers to provide medical services at economical prices?

Accepted Answer

A)   Substitution of catastrophic health insurance plans for low deductible, low co-payment plans.
B)   More reliance on medical savings accounts rather than insurance.
C)   Equalization of tax treatment between out-of-pocket medical expenses and employer-provided health insurance.
D)   All of the above.E) A) and D)
F) A) and C)

Question 7

As the Medicare program is expanded to cover the cost of prescription drugs for the elderly, other things constant, this will lead to

Accepted Answer

A)   an increase in demand and higher prices for prescription drugs.
B)   an increase in demand and lower prices for prescription drugs.
C)   reduction in demand and lower prices for prescription drugs.
D)   reduction in demand and higher prices for prescription drugs.E) C) and D)
F) A) and B)

Question 8

Marginal utility is the change in

Accepted Answer

A)   total utility when an extra unit of output is produced.
B)   total utility when an extra unit of output is consumed.
C)   marginal utility when an extra unit of output is produced.
D)   average utility when an extra unit of output is consumed.E) None of the above
F) A) and B)

Question 9

Other things equal, the demand for a good tends to be more inelastic when

Accepted Answer

A)   there are fewer available substitutes.
B)   a longer time period is considered.
C)   the good is considered a luxury good.
D)   the market for the good is more narrowly defined.E) B) and C)
F) B) and D)

Question 10

If the price of gloves increases, total expenditures on gloves will decline if

Accepted Answer

A)   the demand for gloves is inelastic.
B)   the demand for gloves is elastic.
C)   the quantity of gloves purchased is unresponsive to changes in price.
D)   there are few good substitutes for gloves.E) A) and B)
F) All of the above

Question 11

William likes Dr. Pepper and pork sandwiches. When the price of pork sandwiches rises, the substitution effect causes Dr. Pepper to be relatively

Accepted Answer

A)   more expensive, so William buys more Dr. Pepper.
B)   more expensive, so William buys less Dr. Pepper.
C)   less expensive, so William buys more Dr. Pepper.
D)   less expensive, so William buys less Dr. Pepper.E) A) and D)
F) B) and D)

Question 12

The price elasticity of demand for a commodity is determined primarily by the

Accepted Answer

A)   size of the consumer surplus.
B)   attractiveness of the substitutes for the good.
C)   incomes of consumers.
D)   availability of complementary goods.E) C) and D)
F) B) and C)

Question 13

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.E) None of the above
F) B) and D)

Question 14

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.F) C) and E)
G) A) and E)

Question 15

Economic theory indicates that as a larger share of medical services are paid for by a third party (for example, insurance companies or the government)  rather than directly by the consumer,

Accepted Answer

A)   consumers will have a stronger incentive to economize.
B)   consumers will have a weaker incentive to economize and the prices of medical services will rise more rapidly than would otherwise be the case.
C)   consumers will have a weaker incentive to economize, but medical service suppliers will have a stronger incentive to keep prices low.
D)   the suppliers of medical services will have more incentive to economize.E) B) and D)
F) B) and C)

Question 16

From the standpoint of economic efficiency, which of the following is a major advantage of medical savings accounts?

Accepted Answer

A)   They encourage healthcare consumers to purchase low-deductible, low co-payment medical insurance plans.
B)   They guarantee that no American will ever have to pay another medical bill.
C)   They encourage healthcare consumers to economize.
D)   They will force employers to pay a larger share of the medical expenses of their employees.E) A) and B)
F) A) and C)

Question 17

The price elasticity of demand for gasoline measures the

Accepted Answer

A)   responsiveness of gasoline producers to changes in the quality of gasoline.
B)   responsiveness of customers to changes in the price of gasoline.
C)   responsiveness of consumer preferences to changes in the quality of gasoline.
D)   both a and c above.E) A) and D)
F) A) and B)

Question 18

Suppose an increase in the price of hair dryers leads to an increase in total expenditures on the hair dryers. Which of the following is true for this price change?

Accepted Answer

A)   Hair dryers are an inferior good.
B)   The demand for hair dryers is perfectly elastic.
C)   The demand for hair dryers is inelastic.
D)   The demand for hair dryers is elastic.E) B) and D)
F) C) and D)

Question 19

Have market forces failed in keeping healthcare costs under control?

Accepted Answer

A)   Yes; in most high-income countries healthcare is a socialized industry and costs have been kept low.
B)   Yes; the government has allowed market forces to determine costs, yet healthcare spending continues to rise rapidly.
C)   No; government regulations have undermined the operation of markets and created perverse incentives that have led to rising prices and soaring healthcare expenditures.
D)   No; market forces have been allowed to determine costs and those costs have remained low relative to the consumer price index.E) All of the above
F) B) and D)

Question 20

If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, demand is classified as

Accepted Answer

A)   unstable.
B)   relatively inelastic.
C)   relatively elastic.
D)   of unitary elasticity.E) A) and B)
F) C) and D)

Exam 7: Consumer Choice and Elasticity

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

Correct AnswerverifiedShow Answer

William likes Dr. Pepper and pork sandwiches. When the price of pork sandwiches rises, the substitution effect causes Dr. Pepper to be relatively

Correct AnswerverifiedShow Answer

Which of the following is fully tax deductible (it is either subtracted or excluded from taxable income) under the current tax system of the United States?

Correct AnswerverifiedShow Answer

As the Medicare program is expanded to cover the cost of prescription drugs for the elderly, other things constant, this will lead to

Correct AnswerverifiedShow Answer

Which of the following would increase the incentive of consumers to economize and of producers to provide medical services at economical prices?

Correct AnswerverifiedShow Answer

Economic theory indicates that as a larger share of medical services are paid for by a third party (for example, insurance companies or the government) rather than directly by the consumer,

Correct AnswerverifiedShow Answer

Figure 7-15 -Refer to Figure 7-15. Along which of these segments of the supply curve is supply least elastic?

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Which of the following would be the best example of consumer surplus?

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From the standpoint of economic efficiency, which of the following is a major advantage of medical savings accounts?

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

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If the price of gloves increases, total expenditures on gloves will decline if

Correct AnswerverifiedShow Answer

Suppose an increase in the price of hair dryers leads to an increase in total expenditures on the hair dryers. Which of the following is true for this price change?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, demand is classified as

Correct AnswerverifiedShow Answer

The price elasticity of demand for gasoline measures the

Correct AnswerverifiedShow Answer

Have market forces failed in keeping healthcare costs under control?

Correct AnswerverifiedShow Answer

If the board of regents of a major state university system plans to raise tuition in order to increase revenues, the regents must believe student demand is

Correct AnswerverifiedShow Answer

The price elasticity of demand for a commodity is determined primarily by the

Correct AnswerverifiedShow Answer

Other things equal, the demand for a good tends to be more inelastic when

Correct AnswerverifiedShow Answer

Marginal utility is the change in

Correct AnswerverifiedShow Answer

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