Question 1

The inelasticity of demand for gasoline in the short run

Accepted Answer

A)   makes no theoretical sense.
B)   makes sense because there are very few substitutes.
C)   makes little sense because there are very few substitutes.
D)   is more pronounced in the long run.

Question 2

If income doubles and the quantity demanded of good X more than doubles,then good X can be described as a

Accepted Answer

A)   substitute good.
B)   complement good.
C)   necessity.
D)   luxury.

Question 3

If good X is a normal good and its price rises,then quantity demanded

Accepted Answer

A)   may or may not fall.
B)   will always fall.
C)   will always rise.
D)   will remain unchanged.

Question 4

Suppose demand can be written as Q = 5.The elasticity of demand is)

Accepted Answer

A)   increasing as price rises.
B)   decreasing as price rises.
C)   constant regardless of prices and perfectly inelastic.
D)   constant regardless of prices and unit elastic.

Question 5

Two goods,X and Y,are called substitutes if

Accepted Answer

A)   an increase in PX causes more Y to be bought.
B)   an increase in PX causes less Y to be bought.
C)   an increase in PY causes less Y to be bought.
D)   an increase in income causes more of both X and Y to be bought.

Question 6

Which of the following functional forms for utility suggests the greatest substitution effect when starting at the point where PX = PY

Accepted Answer

A)   U = min (X, Y) 
B)   U = X + Y
C)   U = X1/2Y1/2
D)   U = X1/4Y3/4

Question 7

If a good is normal and its price increases,

Accepted Answer

A)   the income effect will be positive and the substitution effect will be positive.
B)   the income effect will be negative and the substitution effect will be negative.
C)   the income effect will be positive and the substitution effect will be negative.
D)   the income effect will be negative and the substitution effect will be positive.

Question 8

The price elasticity of demand for any good must be less than or equal to zero unless

Accepted Answer

A)   the good is a necessity.
B)   the good is a luxury.
C)   the good is a Giffen good.
D)   the good is a substitute.

Question 9

Two goods,X and Y,are called complements if

Accepted Answer

A)   an increase in PX causes more Y to be bought.
B)   an increase in PX causes less Y to be bought.
C)   an increase in PY causes less Y to be bought.
D)   an increase in income causes more of both X and Y to be bought.

Question 10

If demand is elastic,a decrease in quantity will cause the total spending (P * Q) to

Accepted Answer

A)   rise.
B)   fall.
C)   remain unchanged.
D)   change in a way that cannot be determined.

Question 11

Figure 3  In Figure 3,the point A2 is half way between the origin and the quantity intercept of the demand curve.The price elasticity at point "3" is

Accepted Answer

A)   0
B)   between - ∞\infty∞  and -1
C)   -1
D)   between -1 and 0

Question 12

Assume X and Y are the only two goods a person consumes.If after a rise in  the quantity demanded of Y increases,one could say

Accepted Answer

A)   the income effect dominates the substitution effect for Y.
B)   the substitution effect dominates the income effect for Y.
C)   it is impossible to determine whether the substitution or income effect dominates for Y.
D)   None of the above.

Question 13

If an individual's housing purchases are always a constant fraction of income,then the income elasticity of demand for housing is

Accepted Answer

A)   greater than one.
B)   equal to one.
C)   less than one.
D)   Cannot be determined from the available information.

Question 14

Suppose there are two goods (X and Y) .On a traditional graph of a budget line a tripling of all prices and incomes will

Accepted Answer

A)   alter the slope of the budget line only.
B)   alter the slope of the budget line as well as the Y-intercept.
C)   alter the slope of the budget line as well as the X-intercept.
D)   leave the budget line unaltered.

Question 15

If the cross price elasticity of demand equals -1,then the two goods are

Accepted Answer

A)   both normal.
B)   both inferior.
C)   complements to one another.
D)   substitutes to one another.

Question 16

Suppose demand can be written as PQ = 1000.The price elasticity of demand is)

Accepted Answer

A)   increasing as price rises.
B)   decreasing as price rises.
C)   constant regardless of prices and perfectly elastic.
D)   constant regardless of prices and unit elastic.

Question 17

The market demand curve for any good is

Accepted Answer

A)   independent of individuals' demand curves for the good.
B)   the vertical summation of individuals' demand curves.
C)   the horizontal summation of individuals' demand curves.
D)   derived from the firm's marginal cost of production.

Question 18

With only two goods,if the income effect is in the opposite direction as the substitution effect but the income effect dominates then the good is

Accepted Answer

A)   normal
B)   inferior but not Giffen
C)   Giffen
D)   There is not enough information to answer.

Question 19

Suppose there are two people who demand apples.Suppose one considers apples and oranges complements and another considers them substitutes.An increase in the price of oranges will

Accepted Answer

A)   increase the market demand for oranges.
B)   decrease the market demand for apples
C)   increase the market demand for apples.
D)   have an uncertain impact on the market demand for apples.

Question 20

At any price,the market demand curve

Accepted Answer

A)   is flatter than the flattest individual demand curve.
B)   has a slope that is the average of the individual demand curve slopes.
C)   is steeper than the steepest individual demand curve.
D)   has a horizontal intercept equal to the average of the individual demand curve horizontal intercepts.

Exam 3: Individual Demand Curves

The price elasticity of demand for any good must be less than or equal to zero unless

Correct Answer
verified

Suppose demand can be written as Q = 5.The elasticity of demand is)

Correct Answer
verified

Two goods,X and Y,are called substitutes if

Correct Answer
verified

Suppose demand can be written as PQ = 1000.The price elasticity of demand is)

Correct Answer
verified

Assume X and Y are the only two goods a person consumes.If after a rise in the quantity demanded of Y increases,one could say

Correct Answer
verified

If income doubles and the quantity demanded of good X more than doubles,then good X can be described as a

Correct Answer
verified

If the cross price elasticity of demand equals -1,then the two goods are

Correct Answer
verified

Suppose there are two goods (X and Y) .On a traditional graph of a budget line a tripling of all prices and incomes will

Correct Answer
verified

If good X is a normal good and its price rises,then quantity demanded

Correct Answer
verified

Which of the following functional forms for utility suggests the greatest substitution effect when starting at the point where P_X = P_Y

Correct Answer
verified

With only two goods,if the income effect is in the opposite direction as the substitution effect but the income effect dominates then the good is

Correct Answer
verified

Correct Answer
verified

The inelasticity of demand for gasoline in the short run

Correct Answer
verified

Two goods,X and Y,are called complements if

Correct Answer
verified

Suppose there are two people who demand apples.Suppose one considers apples and oranges complements and another considers them substitutes.An increase in the price of oranges will

Correct Answer
verified

If a good is normal and its price increases,

Correct Answer
verified

If an individual's housing purchases are always a constant fraction of income,then the income elasticity of demand for housing is

Correct Answer
verified

At any price,the market demand curve

Correct Answer
verified

The market demand curve for any good is

Correct Answer
verified

If demand is elastic,a decrease in quantity will cause the total spending (P * Q) to

Correct Answer
verified

Exam 3: Individual Demand Curves

The price elasticity of demand for any good must be less than or equal to zero unless

Correct AnswerverifiedShow Answer

Suppose demand can be written as Q = 5.The elasticity of demand is)

Correct AnswerverifiedShow Answer

Two goods,X and Y,are called substitutes if

Correct AnswerverifiedShow Answer

Suppose demand can be written as PQ = 1000.The price elasticity of demand is)

Correct AnswerverifiedShow Answer

Assume X and Y are the only two goods a person consumes.If after a rise in the quantity demanded of Y increases,one could say

Correct AnswerverifiedShow Answer

If income doubles and the quantity demanded of good X more than doubles,then good X can be described as a

Correct AnswerverifiedShow Answer

If the cross price elasticity of demand equals -1,then the two goods are

Correct AnswerverifiedShow Answer

Suppose there are two goods (X and Y) .On a traditional graph of a budget line a tripling of all prices and incomes will

Correct AnswerverifiedShow Answer

If good X is a normal good and its price rises,then quantity demanded

Correct AnswerverifiedShow Answer

Which of the following functional forms for utility suggests the greatest substitution effect when starting at the point where PX = PY

Correct AnswerverifiedShow Answer

With only two goods,if the income effect is in the opposite direction as the substitution effect but the income effect dominates then the good is

Correct AnswerverifiedShow Answer

Figure 3 In Figure 3,the point A2 is half way between the origin and the quantity intercept of the demand curve.The price elasticity at point "3" is

Correct AnswerverifiedShow Answer

The inelasticity of demand for gasoline in the short run

Correct AnswerverifiedShow Answer

Two goods,X and Y,are called complements if

Correct AnswerverifiedShow Answer

Suppose there are two people who demand apples.Suppose one considers apples and oranges complements and another considers them substitutes.An increase in the price of oranges will

Correct AnswerverifiedShow Answer

If a good is normal and its price increases,

Correct AnswerverifiedShow Answer

If an individual's housing purchases are always a constant fraction of income,then the income elasticity of demand for housing is

Correct AnswerverifiedShow Answer

At any price,the market demand curve

Correct AnswerverifiedShow Answer

The market demand curve for any good is

Correct AnswerverifiedShow Answer

If demand is elastic,a decrease in quantity will cause the total spending (P * Q) to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following functional forms for utility suggests the greatest substitution effect when starting at the point where P_X = P_Y

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified