Question 1

​What is the most likely effect of the development of XBOX with DVD capabilities on the DVD player industry?
A)​Increased price elasticity of demand for the DVD player industry because XBOX are complements
B)decreased price elasticity of demand for the DVD player industry because XBOX are complements
C)Increased price elasticity of demand for the DVD player industry because XBOX are substitutes
D)​decreased price elasticity of demand for the DVD player industry because XBOX are substitutes

Accepted Answer

The development of XBOX with DVD capabilities creates more substitutes for DVD players, causing consumers to have more options to choose from. This increase in substitutes will lead to an increase in price elasticity of demand for the DVD player industry, as consumers can easily switch to alternative products.

Question 2

​Use the following table for question
 
-If the government wants to decrease the quantity consumed of cigarettes 20%,what percentage of tax would they have to levy on cigarette consumption?​
A)​20%
B)30%
C)40%
D)​50%

Accepted Answer

According to the table provided, the price elasticity of demand for cigarettes is -0.5, indicating that for every 1% increase in the price of cigarettes, the quantity consumed will decrease by 0.5%. To achieve a 20% decrease in quantity consumed, the government must increase the price by 40% (20%/0.5%). Therefore, the percentage of tax that they would have to levy on cigarette consumption is 40%.

Question 3

​A product can be classified as an inferior good if an increase in the income causes
A)​A decrease in the quantity demanded
B)A decrease in demand
C)An increase in demand
D)​An increase in the quantity demanded.

Accepted Answer

An inferior good is a good for which demand decreases as income increases. This means that an increase in income (a positive change) would lead to a decrease in the quantity demanded (a negative change). Therefore, answer choice A is the correct answer.

Question 4

​Use the following table for question
 
-​If the government wants to decrease the quantity consumed of alcohol by 20%,what percentage of tax would they have to levy on alcohol consumption?
A)​20%
B)30%
C)40%
D)​50%

Accepted Answer

The answer of ​Use the following table for question
 
-​If...

Question 5

​If mortgages and houses are complements in consumption and interest rates decrease,we would expect to see
A)​An increase in demand for houses
B)An decrease in demand for houses
C)An increase in the quantity of houses demanded
D)​An decrease in the quantity of houses demanded

Accepted Answer

When interest rates decrease, it becomes cheaper to obtain a mortgage. As mortgages and houses are complements in consumption, a decrease in the cost of obtaining a mortgage would lead to an increase in demand for houses, as people will be more likely to purchase a new house or upgrade their existing property. This means that choice A (an increase in demand for houses) is the correct answer.

Question 6

​What is the most likely effect of the development of cell phones on the pay phone industry?
A)​the own price elasticity of pay phones increases
B)the own price elasticity of pay phones decreases
C)the price elasticity of home phones does not change
D)​none of the above

Accepted Answer

The development of cell phones likely increases the own price elasticity of pay phones because consumers have more substitutes available, making them more sensitive to price changes in pay phones.

Question 7

​Use the following table for question
 
-​Which of the three product has a unitary elastic demand curve?
A)​Cigarettes
B)Alcohol
C)Sodas
D)​None of the above

Accepted Answer

The answer of ​Use the following table for question
 
-​Which...

Question 8

​If Dell and Toshiba computers are substitutes and the price of dell computers increases we would expect to see
A)​An increase in demand for Toshiba computers
B)An decrease in demand for Toshiba computers
C)An increase in the quantity of Toshiba computers demanded
D)​An decrease in the quantity of Toshiba computers demanded

Accepted Answer

If Dell and Toshiba computers are substitutes, an increase in the price of Dell computers would make Toshiba computers relatively cheaper and more attractive to consumers. This would likely result in an increase in demand for Toshiba computers.

Question 9

What is a normal good?​
A)​A good whose demand increases when income decreases
B)A good whose demand decreases when income decreases
C)A good whose demand increases when price increases
D)​Both B&C

Accepted Answer

A normal good is a good whose demand decreases when income decreases. This is because as income decreases, people have less money to spend on goods and may switch to cheaper alternatives, resulting in a decrease in demand for the good in question.

Question 10

​Jim recently graduated from college.His income increased dramatically;from$5000 a year to $60,000 a year.Jim decides that instead of using the bus,he would buy a car.This implies that
A)​The car is a normal goods for Jim
B)The car is an inferior goods for Jim
C)The bus and the car are complementary for Jim
D)​Need information on the price of cars

Accepted Answer

With an increase in income, Jim decides to buy a car instead of using public transportation. Since he views the car as an upgrade over taking the bus and would rather have a car, the car is a normal good for Jim.

Question 11

​Use the following table for question
 
-​If the government wants to decrease the quantity consumed of soda by 30%,what percentage of tax would they have to levy on soda consumption?
A)​10%
B)20%
C)30%
D)​40%

Accepted Answer

The answer of ​Use the following table for question
 
-​If...

Question 12

​Jim saw a decrease in the quantity demanded for his firm's product from 8000 to 6000 units a week when he raised the price of the product from $200 to $250.Based on this information,the price elasticity of demand for Jim's product is
A)​>1
B)1
C)<1
D)​0

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the quantity demanded decreased by 25% ([8000-6000]/8000), and the price increased by 25% ([250-200]/200). The elasticity is 1 (25%/25%), indicating unitary elasticity, but due to the decrease in quantity demanded with an increase in price, it suggests a greater responsiveness, thus >1. My explanation was incorrect in stating the elasticity directly as 1; the correct interpretation of the given changes suggests an elasticity greater than 1, as the proportional change in quantity is equal to the proportional change in price, indicating a high sensitivity to price changes.

Question 13

​If your income goes up by 2% and,in response,the quantity demanded of good x rises by 3%, good x can be considered
A)​An inferior good
B)A normal good
C)A public good
D)​A private good

Accepted Answer

If the income and quantity demanded of a good have a positive relationship, it indicates that the good is a normal good. Therefore, option B is the correct answer as an increase in income by 2% results in a 3% increase in the quantity demanded of good x.

Question 14

If a decrease in the price of a good decreases the total revenue,the demand for the good is​
A)​price elastic
B)price inelastic
C)income elastic
D)​income inelastic

Accepted Answer

When the demand for a good is price inelastic, a decrease in price leads to a smaller percentage increase in quantity demanded, resulting in a decrease in total revenue. This is because consumers are not very responsive to price changes for inelastic goods.

Question 15

An economist estimated the cross-price elasticity for peanut butter and jelly to be -1.5.Based on this information,we know the goods are
A)​inferior goods.
B)complements.
C)inelastic.
D)​substitutes.

Accepted Answer

A negative cross-price elasticity indicates that the goods are complements, meaning that when the price of one good (peanut butter) increases, the demand for the other good (jelly) decreases. The magnitude of -1.5 indicates that the relationship is strong, meaning that a 1% increase in the price of peanut butter will result in a 1.5% decrease in the quantity of jelly demanded.

Question 16

​As the price of video games is raised from $20to $25,their quantity demanded fell from 1.5 million copies to 1 million copies. The price elasticity of demand for video games is:
A)​-0.55
B)-1.8
C)-1.33
D)​-2.08

Accepted Answer

The answer of ​As the price of video games is...

Question 17

​For substitutes,cross price elasticity of demand is:
A)​Negative
B)Positive
C)between zero and one only
D)​zero.

Accepted Answer

Cross price elasticity of demand measures the responsiveness of demand for one good to a change in the price of another good. For substitutes, an increase in price of one good will lead to an increase in demand for the other good, making the cross price elasticity of demand positive.

Question 18

​Use the following table for question
 
-​If the government could raise taxes on one good,which product should the government increase tax rates in order to raise tax revenue?
A)​Cigarettes
B)Alcohol
C)Sodas
D)​None of the above

Accepted Answer

Cigarettes are a good target for tax increases because they are a harmful product that is often consumed by low-income individuals. Increasing taxes on cigarettes can help to reduce smoking rates and generate revenue for the government.

Question 19

​Based on the information above,video games have
A)​A unitary elastic demand
B)An inelastic demand
C)An elastic demand
D)​A perfectly elastic demand

Accepted Answer

The article mentions that video game prices are a major factor in consumer purchasing decisions and that there are substitute goods available (e.g. streaming services, other forms of entertainment). These factors suggest that the demand for video games is elastic, meaning that changes in price will have a significant impact on the quantity demanded by consumers.

Question 20

​If your income goes up by 2% and,in response,the quantity demanded of good x falls by 3%,the good x can be considered
A)​An inferior good
B)A normal good
C)A public good
D)​A private good

Accepted Answer

​Inferior goods are those for which the quantity demanded decreases as income increases, while normal goods are those for which the quantity demanded increases as income increases. Since the income elasticity of demand is negative (-1.5), good x can be considered an inferior good. When income goes up by 2%, the quantity demanded of good x falls by 3%, which implies that the good is sensitive to changes in income levels.

Quiz 5: Simple Pricing

What is the most likely effect of the development of XBOX with DVD capabilities on the DVD player industry?

Use the following table for question -If the government wants to decrease the quantity consumed of cigarettes 20%,what percentage of tax would they have to levy on cigarette consumption?

A product can be classified as an inferior good if an increase in the income causes

Use the following table for question -If the government wants to decrease the quantity consumed of alcohol by 20%,what percentage of tax would they have to levy on alcohol consumption?

If mortgages and houses are complements in consumption and interest rates decrease,we would expect to see

What is the most likely effect of the development of cell phones on the pay phone industry?

Use the following table for question -Which of the three product has a unitary elastic demand curve?

If Dell and Toshiba computers are substitutes and the price of dell computers increases we would expect to see

What is a normal good?

Jim recently graduated from college.His income increased dramatically;from$5000 a year to $60,000 a year.Jim decides that instead of using the bus,he would buy a car.This implies that

Use the following table for question -If the government wants to decrease the quantity consumed of soda by 30%,what percentage of tax would they have to levy on soda consumption?

Jim saw a decrease in the quantity demanded for his firm's product from 8000 to 6000 units a week when he raised the price of the product from $200 to $250.Based on this information,the price elasticity of demand for Jim's product is

If your income goes up by 2% and,in response,the quantity demanded of good x rises by 3%, good x can be considered

If a decrease in the price of a good decreases the total revenue,the demand for the good is

An economist estimated the cross-price elasticity for peanut butter and jelly to be -1.5.Based on this information,we know the goods are

As the price of video games is raised from $20to $25,their quantity demanded fell from 1.5 million copies to 1 million copies. The price elasticity of demand for video games is:

For substitutes,cross price elasticity of demand is:

Use the following table for question -If the government could raise taxes on one good,which product should the government increase tax rates in order to raise tax revenue?

Based on the information above,video games have

If your income goes up by 2% and,in response,the quantity demanded of good x falls by 3%,the good x can be considered

Quiz 5: Simple Pricing

​What is the most likely effect of the development of XBOX with DVD capabilities on the DVD player industry?

​Use the following table for question -If the government wants to decrease the quantity consumed of cigarettes 20%,what percentage of tax would they have to levy on cigarette consumption?​

​A product can be classified as an inferior good if an increase in the income causes

​Use the following table for question -​If the government wants to decrease the quantity consumed of alcohol by 20%,what percentage of tax would they have to levy on alcohol consumption?

​If mortgages and houses are complements in consumption and interest rates decrease,we would expect to see

​What is the most likely effect of the development of cell phones on the pay phone industry?

​Use the following table for question -​Which of the three product has a unitary elastic demand curve?

​If Dell and Toshiba computers are substitutes and the price of dell computers increases we would expect to see

What is a normal good?​

​Jim recently graduated from college.His income increased dramatically;from$5000 a year to $60,000 a year.Jim decides that instead of using the bus,he would buy a car.This implies that

​Use the following table for question -​If the government wants to decrease the quantity consumed of soda by 30%,what percentage of tax would they have to levy on soda consumption?

​Jim saw a decrease in the quantity demanded for his firm's product from 8000 to 6000 units a week when he raised the price of the product from $200 to $250.Based on this information,the price elasticity of demand for Jim's product is

​If your income goes up by 2% and,in response,the quantity demanded of good x rises by 3%, good x can be considered

If a decrease in the price of a good decreases the total revenue,the demand for the good is​