Question 1

After getting an A on your economics exam,you decide to go to your favorite Mexican restaurant to celebrate.You are having trouble deciding whether to order the chipotle chicken chimichanga or the cilantro seafood enchiladas.Use the rule of equal marginal utility per dollar to determine which one to purchase: (a)the chimichanga for $8 which gives you 120 units of utility,or (b)the enchiladas for $15 which gives you 195 units of utility?

Accepted Answer

You should buy the chimichanga...

Question 2

Explain the concept of network externalities.

Accepted Answer

A network externality is a sit...

Question 3

Jenna runs a small boutique in Capitola.She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more.On the basis of this information,what can you conclude about her price elasticity of demand for wool hand warmers?

Accepted Answer

A)  It is elastic.
B)  It is perfectly elastic.
C)  It is perfectly inelastic.
D)  The price elasticity coefficient is 0.E) C) and D)
F) B) and C)

Question 4

Marv Pilson has $50 worth of groceries in a shopping cart at his local Shop 'n Save.Assume that the marginal utility per dollar of the liter bottles of soft drink in Marv's cart equals 50.The marginal utility per dollar of the boxes of cereal in Marv's cart equals 20.Marv has only $50 to spend,but has not yet paid for his groceries.How can Marv increase his total utility without spending more than $50?

Accepted Answer

A)  Marv should substitute his favorite soft drink or the cereal in his cart for generic brands that have lower prices.
B)  Marv should buy more boxes of cereal and fewer bottles of soft drink.
C)  Marv should buy fewer boxes of cereal and more bottles of soft drink.
D)  Marv should buy fewer boxes of cereal and fewer bottles of soft drink.He can then spend more on other items.E) A) and D)
F) None of the above

Question 5

Jaycee Jeans sold 40 pairs of jeans at a price of $40.When it lowered its price to $20,the quantity sold increased to 60 pairs.Calculate the absolute value of the price elasticity of demand.Use the midpoint formula.

Accepted Answer

A)  1.67
B)  1.0
C)  0.6
D)  0.53E) All of the above
F) C) and D)

Question 6

Costs that have already been incurred,and which cannot be recovered,are known as

Accepted Answer

A)  short-run fixed costs.
B)  implicit costs.
C)  unavoidable costs.
D)  sunk costs.E) B) and D)
F) A) and B)

Question 7

Figure 7-3
 
-Refer to Figure 7-3.A perfectly elastic demand curve is shown in

Accepted Answer

A)  Panel A.
B)  Panel B.
C)  Panel C.
D)  Panel D.E) All of the above
F) C) and D)

Question 8

A new area of economics studies situations in which people appear to be making choices that do not appear to be economically rational.This area is called

Accepted Answer

A)  behavioral economics.
B)  irrational economics.
C)  social economics.
D)  new wave economics.E) B) and D)
F) A) and B)

Question 9

The income effect of a price increase for a Giffen good outweighs the substitution effect.

Accepted Answer

A) True 
 B)False

Question 10

Suppose when Nablom's Bakery raised the price of its breads by 10 percent,the quantity demanded fell by 15 percent.What was the effect on sales revenue?

Accepted Answer

A)  Sales revenue increased.
B)  Sales revenue remained unchanged.
C)  Sales revenue decreased.
D)  It cannot be determined without information on prices.E) A) and D)
F) None of the above

Question 11

Jonah lives in a small town where there is only one Mexican restaurant.Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant?

Accepted Answer

A)  Demand is likely to be perfectly inelastic.
B)  Demand is likely to be perfectly elastic.
C)  Demand is likely to be relatively elastic.
D)  Demand is likely to be relatively inelastic.E) B) and D)
F) All of the above

Question 12

Some economists have argued that path dependence and switching costs can lead to market failure.Which of the following is an example of this argument?

Accepted Answer

A)  Costly celebrity endorsements lead many consumers to buy a product even though it is more expensive or less effective than a product that is not endorsed by a celebrity.
B)  A consumer who won a lottery for a Super Bowl ticket refuses to sell it for $3,000 even though he would not have paid $3,000 for a ticket if he had not won the lottery.
C)  While playing the ultimate game, an allocator decides to share $20 equally with a recipient rather than keep the $20 for herself.
D)  VHS video recorders became more popular with consumers than Sony Betamax recorders even though the Betamax recorders embodied a superior technology.E) None of the above
F) B) and C)

Question 13

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

Accepted Answer

A)  Petra's utility from her second apple was less than her satisfaction from her first orange.
B)  Hudson enjoyed his second slice of pizza more than his first.
C)  Sabine's utility from her first granola bar is greater than Rachel's utility from her second granola bar.
D)  Wesley enjoyed his second bottle of iced tea less than his first bottle, other things constant.E) A) and C)
F) A) and D)

Question 14

The quantity demanded of tickets to the Super Bowl is always greater than the than the quantity supplied.Which of the following in the best explanation why the National Football League does not raise the price of tickets to the level where the quantity demanded equals the quantity supplied?

Accepted Answer

A)  Raising the price would reduce the demand for tickets; there would then be a surplus and the game would not sell out.
B)  The cost of raising the price and printing new tickets would exceed the revenue the NFL would receive from higher ticket prices.
C)  The demand for Super Bowl tickets is elastic; raising the price would reduce total revenue.
D)  The NFL is concerned that raising ticket prices would be considered unfair.E) C) and D)
F) All of the above

Question 15

Suppose the value of the price elasticity of demand is -3.What does this mean?

Accepted Answer

A)  A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent.
B)  A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.
C)  A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent.
D)  A $1 increase in price causes quantity demanded to fall by 3 units.E) None of the above
F) B) and C)

Question 16

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore

Accepted Answer

A)  the demand for salt will be perfectly inelastic.
B)  salt is a normal good.
C)  the demand for salt is relatively inelastic.
D)  the price elasticity of demand for salt is greater than 1 (in absolute value) .E) A) and D)
F) A) and C)

Question 17

Table 7-9
   Price per Pound  (dollars)   Quantity of Cheese  Demanded (pounds)  $163144125106876849210\begin{array} { | c | c | } \hline \begin{array} { c } 	ext { Price per Pound } \	ext { (dollars)  }\end{array} & \begin{array} { c } 	ext { Quantity of Cheese } \	ext { Demanded (pounds)  }\end{array} \\hline \$ 16 & 3 \\hline 14 & 4 \\hline 12 & 5 \\hline 10 & 6 \\hline 8 & 7 \\hline 6 & 8 \\hline 4 & 9 \\hline 2 & 10 \\hline\end{array} Price per Pound  (dollars)  ​$161412108642​ Quantity of Cheese  Demanded (pounds)  ​345678910​​ 
-Refer to Table 7-9.Over what range of prices is the demand inelastic?

Accepted Answer

A)  over the entire range of prices
B)  between $12 and $16
C)  between $8 and $16
D)  between $2 and $8 E) A) and B)
F) All of the above

Question 18

For each pair of items below determine which product would have the higher price elasticity of demand (in absolute value).
a.Blood pressure medicine for someone who has high blood pressure and the purchase of Clairol hair coloring product.
b.A new Ford Fusion or a tank of gas for your current car.
c.A Seiko watch or watches in general.

Accepted Answer

a. The demand for the hair product is mo...

Question 19

If demand is perfectly inelastic,the absolute value of the price elasticity of demand is

Accepted Answer

A)  zero.
B)  less than one.
C)  more than one.
D)  equal to the absolute value of the slope of the demand curve.E) A) and C)
F) B) and C)

Question 20

A sunk cost is a cost that has already been paid and cannot be recovered.

Accepted Answer

A) True 
 B)False

Exam 7: Consumer Choice and Elasticity

Explain the concept of network externalities.

Correct Answer
verified
A network externality is a sit...
View Answer

Costs that have already been incurred,and which cannot be recovered,are known as

Correct Answer
verified

If demand is perfectly inelastic,the absolute value of the price elasticity of demand is

Correct Answer
verified

Suppose when Nablom's Bakery raised the price of its breads by 10 percent,the quantity demanded fell by 15 percent.What was the effect on sales revenue?

Correct Answer
verified

Jenna runs a small boutique in Capitola.She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more.On the basis of this information,what can you conclude about her price elasticity of demand for wool hand warmers?

Correct Answer
verified

Correct Answer
verified

The quantity demanded of tickets to the Super Bowl is always greater than the than the quantity supplied.Which of the following in the best explanation why the National Football League does not raise the price of tickets to the level where the quantity demanded equals the quantity supplied?

Correct Answer
verified

A sunk cost is a cost that has already been paid and cannot be recovered.

Correct Answer
verified

Some economists have argued that path dependence and switching costs can lead to market failure.Which of the following is an example of this argument?

Correct Answer
verified

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

Correct Answer
verified

Correct Answer
verified
You should buy the chimichanga...
View Answer

Figure 7-3 -Refer to Figure 7-3.A perfectly elastic demand curve is shown in

Correct Answer
verified

Jonah lives in a small town where there is only one Mexican restaurant.Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant?

Correct Answer
verified

The income effect of a price increase for a Giffen good outweighs the substitution effect.

Correct Answer
verified

Suppose the value of the price elasticity of demand is -3.What does this mean?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. The demand for the hair product is mo...
View Answer

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore

Correct Answer
verified

Jaycee Jeans sold 40 pairs of jeans at a price of $40.When it lowered its price to $20,the quantity sold increased to 60 pairs.Calculate the absolute value of the price elasticity of demand.Use the midpoint formula.

Correct Answer
verified

A new area of economics studies situations in which people appear to be making choices that do not appear to be economically rational.This area is called

Correct Answer
verified

Exam 7: Consumer Choice and Elasticity

Explain the concept of network externalities.

Correct AnswerverifiedA network externality is a sit...View AnswerShow Answer

Costs that have already been incurred,and which cannot be recovered,are known as

Correct AnswerverifiedShow Answer

If demand is perfectly inelastic,the absolute value of the price elasticity of demand is

Correct AnswerverifiedShow Answer

Suppose when Nablom's Bakery raised the price of its breads by 10 percent,the quantity demanded fell by 15 percent.What was the effect on sales revenue?

Correct AnswerverifiedShow Answer

Jenna runs a small boutique in Capitola.She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more.On the basis of this information,what can you conclude about her price elasticity of demand for wool hand warmers?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The quantity demanded of tickets to the Super Bowl is always greater than the than the quantity supplied.Which of the following in the best explanation why the National Football League does not raise the price of tickets to the level where the quantity demanded equals the quantity supplied?

Correct AnswerverifiedShow Answer

A sunk cost is a cost that has already been paid and cannot be recovered.

Correct AnswerverifiedShow Answer

Some economists have argued that path dependence and switching costs can lead to market failure.Which of the following is an example of this argument?

Correct AnswerverifiedShow Answer

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedYou should buy the chimichanga...View AnswerShow Answer

Figure 7-3 -Refer to Figure 7-3.A perfectly elastic demand curve is shown in

Correct AnswerverifiedShow Answer

Jonah lives in a small town where there is only one Mexican restaurant.Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant?

Correct AnswerverifiedShow Answer

The income effect of a price increase for a Giffen good outweighs the substitution effect.

Correct AnswerverifiedShow Answer

Suppose the value of the price elasticity of demand is -3.What does this mean?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answerverifieda. The demand for the hair product is mo...View AnswerShow Answer

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore

Correct AnswerverifiedShow Answer

Jaycee Jeans sold 40 pairs of jeans at a price of $40.When it lowered its price to $20,the quantity sold increased to 60 pairs.Calculate the absolute value of the price elasticity of demand.Use the midpoint formula.

Correct AnswerverifiedShow Answer

A new area of economics studies situations in which people appear to be making choices that do not appear to be economically rational.This area is called

Correct AnswerverifiedShow Answer

Correct Answer
verified
A network externality is a sit...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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You should buy the chimichanga...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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a. The demand for the hair product is mo...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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