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Exam 7: Consumer Choice and Elasticity

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Question 21

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Figure 7-10 -Refer to Figure 7-10.Using the total revenue test to verify the price elasticity between points a and b on the demand curve,demand is

A) perfectly inelastic.
B) unit-elastic.
C) perfectly elastic.
D) elastic.

E) C) and D)
F) B) and D)

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Question 22

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If Paul decides to buy a $60 ticket to a Cirque du Soleil show rather than a $45 ticket for a Blue Man Group performance,we can conclude that

A) the marginal utility per dollar spent on Cirque du Soleil is lower than the marginal utility per dollar spent on Blue Man Group.
B) Paul's demand for a ticket to see Cirque du Soleil is more elastic than his demand for a ticket to see Blue Man Group.
C) Paul is not making a rational choice.
D) the marginal utility per dollar spent on Cirque du Soleil is higher than the marginal utility per dollar spent on Blue Man Group.

E) All of the above
F) B) and D)

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Question 23

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Economists use the concept of ________ to measure how one economic variable,such as quantity,responds to a change in another economic variable,such as price.

Figure 7-1 -Refer to Figure 7-1.Which of the following statements is true?

When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?

A study discussed in the Making the Connection feature in the text found that there is ________ that some consumers are not well aware of prices,even for goods they buy regularly.

The demand for gasoline in the short run is

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

The demand curve for an inferior good can never be downward sloping.

What did economists Robert Jensen and Nolan Miller determine must be true for a good to be a Giffen good,where the income effect is larger than its substitution effect?

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded,then the demand for golf balls is

With the increased usage of cell phone services,what has happened to the price elasticity of demand for land-line telephone services?

The current price of canvas messenger bags is $36 each and sales of the bags equal 400 per week.If the price elasticity of demand is -2.5 and the price changes to $44,how many messenger bags will be sold per week? Use the midpoint formula.

Behavioral economists examine choices that consumers make that are not economically rational.Economists generally assume that people are rational; that is,they weigh the benefits and costs of an action and choose an action only if the benefits outweigh the costs.Why do consumers not act rationally when the result is that they make themselves worse off?

A network externality occurs when

The estimated price elasticities of demand for the products listed in the table as "Product A" are from Table 7-7 in the text.Indicate whether the products listed as "Product B" will have a more elastic or less elastic demand than the corresponding Product A. $\begin{array}{|l|l|l|l|}\hline \begin{array}{ll}\text { Product A }\end{array} & \begin{array}{l}\text { Estimated } \\\text { Elasticity for } \\\text { Product A }\end{array} & \text { Product B } & \begin{array}{l}\text { Is Estimated Elasticity for } \\\text { Product B More Elastic or Less }\\\text { Elastic than for Product A? }\end{array} \\\hline \text { Beer } & -0.29 & \text { Samuel Adams } & \\&& \text { Boston Lager } & \\\hline \text { Chicken } & -0.37 & \begin{array}{l}\text { Prganically raised } \\\text { chicken }\end{array} & \\\hline \text { Cocaine } & -0.28 & \text { Fllegal narcotics } & \\\hline \text { Cigarettes } & -0.25 & \text { Marlboro Lights } & \\\hline \text { Restaurant } & & \text { Penny's Grand } & \\\text { meals } & -0.67 & \text { Slam breakfast } &\\\hline \end{array}$

Which of the following statements is true?

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value) .This means that a 20 percent increase in the price of beef,holding every thing else constant,will cause the quantity of beef demanded to

If the marginal utility Ida Mae receives from eating chicken wings is negative then

An economist observes two consumers in a supermarket.One of the consumers buys a case of Coca-Cola and the other buys a case of Pepsi-Cola.Both colas sell for the same price and the ages and incomes of the consumers are also the same.Based on this information,how would the economist explain the consumers' choices?