Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. The price elasticity of demand can be found by: a. examining only the slope of the demand curve. b. measuring absolute changes in price and quantity demanded. c. multiplying the percentage change in quantity demanded by the percentage change in price. d. knowing that when price changes, the quantity demanded goes in the opposite direction. e. dividing the percentage change in quantity demanded by the percentage change in price.
____ 2. Egg producers know that the elasticity of demand for eggs is 0.1. If they want to increase sales by 5%, they will have to lower price by ________%. a. 0.1 b. 1 c. 5 d. 50 e. 0.5%
____ 3. When a consumer consumes more of a good that has become cheaper in place of a good that has become relatively more expensive, this is known as the: a. substitution effect. b. income effect. c. budget constraint. d. inferior effect. e. normal effect.
____ 4. A local restaurant has estimated that the price elasticity of demand for meals is equal to 2. If the restaurant increases menu prices by 5%, they can expect the number of customers to decrease by ________and total revenue to ________. a. 10%; increase b. 5%; stay constant c. 10%; decrease d. 2.5%; decrease e. 2.5%; increase
____ 5. Sometimes airlines raise ticket prices as the flight departure date approaches in the hope of increasing revenue.
The airlines raise their prices on the assumption that: a. consumer demand becomes more price-elastic as departure time approaches. b. consumer demand is perfectly inelastic. c. consumers are not aware of airline prices. d. consumer demand is unrelated to prices. e. consumer demand becomes less price-elastic as departure time approaches.
____ 6. The price elasticity of demand for a good such as water is likely to be very low because: a. the price is very low. b. water has some good substitutes. c. water is considered a luxury. d. the share of income spent on water is large. e. water is a necessity.

____ 7. The price elasticity of a good will tend to be greater: a. the longer the relevant time period. b. the fewer the number of substitute goods available. c. if it is a staple or necessity with few substitutes. d. if the share of income spent on the good is small. e. if it is a luxury good with no substitutes.
Figure 47-3: Demand Curves
____ 8. (Figure 47-3: Demand Curves) Gala apples are a type of apple that has many substitutes and is not very expensive. Which graph(s) best represents the demand schedule for Gala apples? a. A b. B c. C d. D e. both A and C
____ 9. The price elasticity of demand along a demand curve with a constant slope: a. is equal to the slope. b. is greater than the slope. c. is less than the slope. d. increases in absolute value as the price rises. e. is equal to zero at the price where the demand curve intersects the vertical axis.
____ 10. The price elasticity of demand along a demand curve with a constant slope: a. is equal to the slope. b. is greater than the slope. c. is less than the slope. d. decreases in absolute value as quantity demanded rises. e. is equal to zero at the price where the demand curve intersects the vertical axis.
____ 11. The absolute value of the price elasticity of demand for cabbage has been estimated to be 0.25. If an insect infestation destroys 20% of the nation's cabbage crop (and thus reduces supply), how will that affect cabbage consumption and total expenditures on cabbage, all other things equal? a. Quantity demanded falls and total expenditures rise. b. Quantity demanded falls and total expenditures fall. c. Quantity demanded falls and total expenditures remain unchanged. d. Quantity demanded rises and total expenditures remain unchanged. e. Quantity demanded remains unchanged and total expenditures rise.
____ 12. If the University of Michigan increases the price of football tickets, this will result in increasing revenues if the price elasticity of demand is: a. price-inelastic.

b. price-elastic. c. equal to 1. d. perfectly elastic. e. greater than 1.
____ 13. If a good is a necessity with few substitutes, then the price elasticity of demand will tend to be: a. more price-elastic. b. greater than 1. c. equal to 1. d. the same as that of a luxury good. e. more price-inelastic.
____ 14. Other things being equal, the price elasticity of demand for a product will be lower: a. if there are many substitutes available. b. if it is a large part of the consumer's budget. c. in the long run as compared to the short run. d. if there are few or no substitutes available. e. if the good is considered a luxury item.
____ 15. A newspaper typically consumes a smaller fraction of a consumer's budget than a home entertainment system.
Therefore, you would expect the demand for: a. a home entertainment system to be more price-elastic. b. a home entertainment system to be more price-inelastic. c. newspapers to be more price-elastic. d. both to be equally price-elastic. e. newspapers to have a price elasticity of demand approximately equal to zero.
____ 16. If the price of chocolate-covered peanuts increases and the demand for strawberry licorice twists increases, this indicates that these two goods are: a. complementary goods. b. normal goods. c. inferior goods. d. substitute goods. e. unrelated goods.
____ 17. Raina consumes 100% more mechanical pencils when the price of felt-tip pens increases by 50%. For Raina, pencils and pens are ________ and the cross-price elasticity of demand is ________. a. complements; 1 /
2 b. substitutes; – 1 /
2 c. complements; 2 d. substitutes; 2 e. substitutes; 1 /
2
Table 49-1: Consumer Surplus and Phantom Tickets
Student Willingness to Pay
Jessica
Jacquelyn
Brad
Robert
Gwen
$150
125
105
60
25

Table 49-1: Consumer Surplus and
Phantom Tickets
____ 18. (Table 49-1: Consumer Surplus and Phantom Tickets) If the box-office price of a ticket to see Phantom of the
Opera is $50, and there is no other market for tickets, then total consumer surplus for the five students is: a. $100. b. $175. c. $230. d. $240. e. $200.
This table shows some Atlanta college students' willingness to pay to see The
Nutty Nutcracker , by the Atlanta Ballet.
Student
Lois
Willingness to Pay
$100
Miguel
Narum
Oscar
Pat
90
65
50
15
Table 49-2: Consumer Surplus
____ 19. (Table 49-2: Consumer Surplus) If the price of a ticket to see The Nutty Nutcracker is $75, then Lois's consumer surplus is: a. $25. b. $60. c. $75. d. $100. e. $15.
____ 20. (Table 49-2: Consumer Surplus) If the price of a ticket to see The Nutty Nutcracker is $75 and there is no other market for tickets, the total consumer surplus for the five students is: a. $190. b. $125. c. $40. d. $0. e. $150.
Figure 49-2: Consumer Surplus II

____ 21. (Figure 49-2: Consumer Surplus II) At a price of P
1
, consumer surplus equals the area: a. ABP
2
. b. AFP
1
. c. AQ
3
0. d. P
1
P
2
BF.
e. 0 P
1
FQ
1
.
____ 22. (Figure 49-2: Consumer Surplus II) At a price of P
2
, consumer surplus equals the area: a. ABP
2
. b. AFP
1
. c. AQ
3
0. d. P
1
P
2
BF.
e. 0 P
1
FQ
1
.
____ 23. (Figure 49-2: Consumer Surplus II) If the price falls from P
2
to P
1
, consumer surplus increases by the area: a. ABP
2
. b. AFP
1
. c. BGF.
d. P
1
P
2
BF.
e. 0 P
1
FQ
1
.
Figure 49-3: Consumer Surplus III

____ 24. (Figure 49-3: Consumer Surplus III) If the price of the good increases from $3 to $4, consumer surplus will decrease by: a. $5. b. $10. c. $15. d. $20. e. $25.
Student
Tim
Laura
Whitney
Willingness to Sell
$1
30
50
Ralph
Rick
100
150
Table 49-5: Producer Surplus and Phantom Tickets
____ 25. (Table 49-5: Producer Surplus and Phantom Tickets) Given the information in the table, if the price for
Phantom tickets is $55, total producer surplus for the five students is: a. $54. b. $79. c. $84. d. $64. e. $165.
Figure 49-9: Producer Surplus III

____ 26. (Figure 49-9: Producer Surplus III) If the price of the good increases from $3 to $4, producer surplus will increase by: a. $5. b. $15. c. $25. d. $35. e. $20.
____ 27. The total surplus generated in a market is: a. the excess supply due to the imposition of a price floor. b. the surplus that exists when a good is not scarce, defined as the total amount (if any) by which quantity supplied exceeds quantity demanded at a zero price. c. the net benefit to consumers, defined as the excess of consumer surplus over producer surplus. d. the difference between quantity supplied and quantity demanded at a price that exceeds the equilibrium price. e. the sum of consumer surplus and producer surplus.
The table below explains the relationship between the number of reports a firm is willing to prepare and the lowest price in dollars it would be willing to accept to prepare the respective number of reports.
Reports
1st
2nd
Lowest Price Firm
Is Willing to Accept
$2
6
3rd
4th
8
11
5th 15
Table 49-7: Firm's Willingness
____ 28. (Table 49-7: Firm’s Willingness) If the price of a report is $6, how many reports will be produced?

a. 5 b. 4 c. 3 d. 2
____ 29. e. 1
The figure shows the supply and demand curves for a good. If an excise tax equal to $1.10 is imposed on this good, then the price paid by consumers will: a. rise by $1.10. b. rise by $1.33. c. not rise. d. rise by $0.50. e. rise by $1.00.
____ 30. If an excise tax is imposed on beer and collected from the _____, the ________ curve will shift ________ by the amount of the tax. a. sellers; demand; upward b. consumers; supply; downward c. sellers; supply; upward d. sellers; supply; downward e. consumers; demand; upward
____ 31. Which of the following is an example of an excise tax? a. a tax of $0.41 per gallon of gas b. a tax of 12.4% of your wages c. a tax on the value of your property d. a one-time local government tax of $50 e. a state’s 6% sales tax on the purchase of most goods and services.
Figure 50-4: Market for Hamburgers

____ 32. (Figure 50-4: Market for Hamburgers) The figure shows the weekly market for hamburgers at the Tasty Burger
Palace. The equilibrium price of a hamburger is $1.50 and the equilibrium quantity is 400 hamburgers. If the market is originally in equilibrium and the government then imposes an excise tax of $0.80 per unit of the good sold, the government's revenue from the tax will be: a. $175. b. $240. c. $105. d. $90. e. $800
____ 33. Given the demand curve for a good, the more elastic the supply curve, the ________ equilibrium output will fall and the deadweight loss will ________ when the government imposes an excise tax. a. more; be smaller b. more; not exist c. less; be smaller d. less; be larger e. more; be larger
____ 34. Given the supply curve for a good, the more elastic the demand curve, the ________ equilibrium output will fall and the deadweight loss will ________ when the government imposes an excise tax. a. more; be smaller b. more; be larger c. less; be smaller d. less; be larger e. more; not exist
____ 35. How does an excise tax affect consumer surplus and producer surplus
Consumer surplus Producer surplus
(A) Increases Increases
(B) Increases
(C) Decreases
Decreases
Increases
(D)
(E)
Decreases
No change a. A
Decreases
No change

b. B c. C d. D e. E
Figure 50-9: Market for Blue Jeans
____ 36. (Figure 50-9: Market for Blue Jeans) The government recently levied a $10 tax on the producers of blue jeans.
Using the graph, identify the area(s) that represent the loss of producer surplus due to the tax. a. d + e b. e c. d d. d + e + f e. a + b + d + f
Figure 50-10: Tax
____ 37. (Figure 50-10: Tax) Which panel(s) best represents the effects of a progressive income tax? a. A b. B c. C d. A and B e. B and C
____ 38. An efficient way to finance the provision of city services (such as street cleaning) would be to charge all city residents, no matter the level of income, a monthly lump-sum tax. Such a tax would be: a. progressive. b. regressive. c. proportional.

d. a property tax. e. an excise tax.
____ 39. Which of the following is true when a market is in equilibrium and there is no government intervention? a. Total surplus is minimized. b. The deadweight loss is maximized. c. Consumer surplus is necessarily equal to producer surplus. d. Some mutually beneficial trades may be missed. e. No mutually beneficial trades are missed.
____ 40. Coffee and tea are substitutes. If there is an increase in the price of coffee, total surplus in the tea market: a. will increase. b. will decrease. c. will not change. d. may change, but we cannot determine the change without more information. e. will fall to zero.
Units 0 1 2 3 4 5 6 7
Total Utility 0 20 35 45 50 50 45 35
Table 51-1: Utility
____ 41. (Table 51-1: Utility) The marginal utility for the second unit is: a. 35. b. 15. c. 10. d. 5. e. 55.
____ 42. Chuck spends all his income on two goods: tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. The horizontal intercept for Chuck's budget line is equal to ________ units of tacos. a. 50 b. 10 c. 5 d. 100 e. 25
Figure 51-2: Budget Lines for Oranges and Apples

____ 43. (Figure 51-2: Budget Lines for Oranges and Apples) For some time, Sylvester has had $5 per month to spend on oranges and apples. The price of an orange is $0.50 and the price of an apple is $0.25. Which chart(s) show(s) what happens happen to his budget line if his income decreases to $2.50? a. Chart A b. Chart B c. Chart C d. Chart D e. Charts B and C
____ 44. (Figure 51-2: Budget Lines for Oranges and Apples) For some time, Sylvester has had $5 per month to spend on oranges and apples. The price of an orange is $0.50 and the price of an apple is $0.25. Which chart(s) show(s) what happens to his budget line if the price of an orange rises to $1.00 and the price of an apple rises to $0.50? a. Chart A b. Chart B c. Chart C d. Chart D e. Sylvester’s budget line will not change.
____ 45. The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag, and you have $10 to spend on both goods. The maximum quantity of peanuts that you can purchase is ________ bags. a. 5 b. 10 c. 20 d. 40 e. 30
____ 46. Joseph consumes pizza and soda. He is currently consuming three units of pizza and two units of soda. The price of pizza is $5 and the price of soda is $1. If he is consuming the optimal consumption bundle and his marginal utility of pizza is 50, then his marginal utility of soda is:

a. 50. b. 10. c. 5. d. impossible to determine unless you know Joseph's income. e. 25.
Units of
Good X
1
Marginal Utility
Good X
20
Units of
Good Y
1
Marginal Utility
Good Y
12
2
3
4
5
6
16
12
8
4
2
3
4
5
0 6
Table 51-5: Consumer Equilibrium
10
8
6
4
2
____ 47. (Table 51-5: Consumer Equilibrium) Assume that the price of Good X is $1 per unit and the price of Good Y is
$2 per unit, and you consume 4 units of Good X and 2 units of Good Y.
To maximize utility, assuming that the goods are divisible, you would consume: a. less of both X and Y.
b. more of both X and Y.
c. less of X and more of Y.
d. more of X and less of Y.
e. the current quantity of both goods.
____ 48. Nancy is consuming her optimal consumption bundle of burritos and margaritas. Her marginal utility of her last burrito was 75 utils, and each burrito costs $3. Her marginal utility of her last margarita was 100 utils. What is the price of a margarita? a. $1 b. $2 c. $3 d. $4 e. $1.33
____ 49. Assume that a consumer derives more utility by spending an additional dollar on Good A rather than on Good B .
We can assume that: a. the price of Good A is less than the price of Good B . b. the marginal utility per dollar spent on Good A is equal to the marginal utility per dollar spent on Good B . c. the marginal utility per dollar spent on Good A is less than the marginal utility per dollar spent on Good B . d. the price of Good A is less than the price of Good B . e. the marginal utility per dollar spent on Good A is greater than the marginal utility per dollar spent on Good B .
____ 50. If an individual is consuming the utility-maximizing quantities of pizza and soda, then we can conclude that: a. the price of pizza equals the price of soda. b. the marginal utility of pizza is equal to the marginal utility of soda. c. the ratio of the marginal utility to price is the same for pizza and for soda. d. the total utility of pizza is equal to the total utility of soda. e. the individual has split his income equally between soda and pizza.

MULTIPLE CHOICE
1. ANS: E
MSC: Concept-Based
PTS: 1
2. ANS: D PTS: 1
MSC: Critical Thinking
3. ANS: A PTS: 1
MSC: Critical Thinking
4. ANS: C PTS: 1
MSC: Critical Thinking
5. ANS: E PTS: 1
MSC: Critical Thinking
6. ANS: A
MSC: Concept-Based
PTS: 1
7. ANS: A
MSC: Fact-Based
PTS: 1
8. ANS: B PTS: 1
MSC: Critical Thinking
9. ANS: D
MSC: Concept-Based
PTS: 1
10. ANS: D
MSC: Concept-Based
PTS: 1
11. ANS: A PTS: 1
MSC: Analytical Thinking
12. ANS: A
MSC: Concept-Based
PTS: 1
13. ANS: E
MSC: Concept-Based
PTS: 1
14. ANS: D
MSC: Concept-Based
PTS: 1
15. ANS: A PTS: 1
MSC: Critical Thinking
16. ANS: D PTS: 1
MSC: Critical Thinking
17. ANS: D PTS: 1
MSC: Critical Thinking
18. ANS: D PTS: 1
MSC: Critical Thinking
19. ANS: A PTS: 1
MSC: Critical Thinking
20. ANS: C PTS: 1
MSC: Critical Thinking
21. ANS: B PTS: 1
MSC: Critical Thinking
22. ANS: A PTS: 1
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
REF: Module 46/10
REF: Module 46/10
REF: Module 46/10
REF: Module 47/11
REF: Module 47/11
REF: Module 47/11
REF: Module 47/11
REF: Module 47/11
REF: Module 47/11
REF: Module 47/11
REF: Module 47/11
REF: Module 47/11
REF: Module 47/11
REF: Module 47/11
REF: Module 47/11
REF: Module 48/12
REF: Module 48/12
REF: Module 49/13
REF: Module 49/13
REF: Module 49/13
REF: Module 49/13
REF: Module 49/13

MSC: Critical Thinking
23. ANS: D PTS: 1
MSC: Critical Thinking
24. ANS: C PTS: 1
MSC: Critical Thinking
25. ANS: C PTS: 1
MSC: Critical Thinking
26. ANS: D PTS: 1
MSC: Critical Thinking
27. ANS: E
MSC: Definitional
PTS: 1
28. ANS: D PTS: 1
MSC: Critical Thinking
29. ANS: D PTS: 1
MSC: Critical Thinking
30. ANS: C
MSC: Concept-Based
PTS: 1
31. ANS: A
MSC: Concept-Based
PTS: 1
32. ANS: B PTS: 1
MSC: Critical Thinking
33. ANS: E
MSC: Concept-Based
PTS: 1
34. ANS: B
MSC: Concept-Based
PTS: 1
35. ANS: D PTS: 1
MSC: Critical Thinking
36. ANS: A PTS: 1
MSC: Critical Thinking
37. ANS: B PTS: 1
MSC: Critical Thinking
38. ANS: B
MSC: Concept-Based
PTS: 1
39. ANS: E
MSC: Concept-Based
PTS: 1
40. ANS: A PTS: 1
MSC: Critical Thinking
41. ANS: B
MSC: Concept-Based
PTS: 1
42. ANS: B PTS: 1
MSC: Critical Thinking
43. ANS: C PTS: 1
MSC: Critical Thinking
44. ANS: C PTS: 1
MSC: Critical Thinking
45. ANS: D PTS: 1
MSC: Analytical Thinking
46. ANS: B PTS: 1
MSC: Critical Thinking
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
DIF: M
REF: Module 49/13
REF: Module 49/13
REF: Module 49/13
REF: Module 49/13
REF: Module 49/13
REF: Module 49/13
REF: Module 50/14
REF: Module 50/14
REF: Module 50/14
REF: Module 50/14
REF: Module 50/14
REF: Module 50/14
REF: Module 50/14
REF: Module 50/14
REF: Module 50/14
REF: Module 50/14
REF: Module 50/14
REF: Module 50/14
REF: Module 51/15
REF: Module 51/15
REF: Module 51/15
REF: Module 51/15
REF: Module 51/15
REF: Module 51/15

47. ANS: D PTS: 1
MSC: Critical Thinking
48. ANS: D PTS: 1
MSC: Analytical Thinking
49. ANS: E
MSC: Concept-Based
PTS: 1
50. ANS: C
MSC: Concept-Based
PTS: 1
DIF: M
DIF: M
DIF: M
DIF: M
REF: Module 51/15
REF: Module 51/15
REF: Module 51/15
REF: Module 51/15