Chapter 4

Which of the following is most likely to be elastic with respect to demand?

Airline travel in the long run.

Suppose a university raises its tuition by 8 percent and as a result the enrollment of students drops by 4 percent. The price elasticity of demand for this circumstance would be:

0.5

If the price elasticity of demand for a product is 2.3, this means that quantity demanded will increase by _______ for each _______ decrease in price, ceteris paribus.

2.3 percent; 1 percent

Q Consumed // TU // MU 1 // 32 // 32 2 // - // 12 3 // 52 // - 4 // - // 5 In the utility schedule table, the total utility when two units are consumed is:

44 untils

Q Consumed // TU // MU 1 // 32 // 32 2 // - // 12 3 // 52 // - 4 // - // 5 In the utility schedule table, the marginal utility of the third unit is:

8 utils

According to the law of demand:

As the price of a good falls, the quantity demanded will increase in a given time period, ceteris paribus.

By which of the following means can the university reduce the size of the crowd at its football game and simultaneously earn more revenue to finance a new stadium?

By raising ticket prices when demand for tickets is inelastic.

Suppose the price elasticity of demand for tacos is 0.80. If the price of tacos increases by 10 percent, then the quantity demanded of tacos should, ceteris paribus:

Decrease by 8 percent.

The law of diminishing marginal utility helps to explain the:

Downward-sloping demand curve.

Suppose the local government decides to reduce traffic congestion on a bridge by imposing a toll. The toll will be most effective if the price elasticity of demand for the bridge is:

Elastic

Which of the following is most likely to be inelastic with respect to demand?

Illegal drugs.

Assume a price elasticity of demand of 0.50. If the tobacco lobby is successful in reducing a tax on the price of cigarettes by 10 percent, the quantity demanded will:

Increase by 5 percent.

When income increases, the demand for most products:

Increases and the demand curve shifts to the right.

People find it difficult to get along without necessities, therefore demand for necessities:

Is relatively inelastic.

Maximum total utility is achieved where:

Marginal utility equals zero.

If the price elasticity of demand is 1.0 and a firm raises its price by 15 percent, then total revenue will:

Not change

If demand is inelastic, then:

Quantity demanded is not very responsive to changes in price.

Price elasticity of demand shows how:

Quantity demanded responds to price changes.

The objective of advertising, from an economic perspective, is to shift the demand curve to the:

Right and decrease price elasticity of demand.

The market demand curve is calculated by:

Summing the quantities demanded from individual demand curves at all prices.

Which of the following is NOT a determinant of demand for a good?

Technological advances

At some point during a meal, each extra bite provides less and less additional satisfaction. This can be explained by:

The law of diminishing marginal utility.

Which of the following causes the market demand curve for a good to shift?

The number of buyers in the market.

If the marginal utility for slices of pizza is decreasing but positive, then:

The total utility for slices of pizza is increasing.

Which of the following statements is NOT correct?

Total revenue will fall if consumer's response to a price cut is relatively smaller than the price cut.

The difference between total utility and marginal utility is that:

Total utility is the complete satisfaction from consuming a product while marginal utility is the satisfaction from consuming one additional unit of a product.

If marginal utility is negative, then:

Total utility will decrease with additional consumption.

Assume that we are using the midpoint method of calculating the price elasticity of demand. If a firm finds that it can sell 20,000 units at a price of $5 per unit and 25,000 units at a price of $4 per unit, then demand in this price range is:

Unitary elastic

If the percentage change in quantity demanded is exactly equal to the percentage change in price, then demand is:

Unitary elastic.

If the price of battery-powered flashlights falls and the demand for flashlight batteries rises, then flashlights and batteries are:

complements

A price cut will increase the total revenue a firm receives, ceteris paribus, only if the demand for its product is:

elastic

If the price of potato chips rises and the demand for pretzels rises, then potato chips and pretzels are:

substitutes