Finish the following sentence.

If the price elasticity of demand for a given product is 7, this means that ______________.

A) the percentage change in quantity demanded is 7 times the percentage change in price

B) if the quantity demanded fell by 1 percent, the price would fall by 7 percent

C) if the price was raised by 7 percent, the quantity demanded would fall by 7 percent

D) if the price was raised by 7 percent, the quantity demanded would rise by 7 percent

E) none of the above

If the demand for product X is inelastic, a 4 percent decrease in the price of X will

A. decrease the quantity of X demanded by more than 4 percent.

B. decrease the quantity of X demanded by less than 4 percent.

C. increase the quantity of X demanded by more than 4 percent.

D. increase the quantity of X demanded by less than 4 percent

Soup is an inferior good if the demand curve

a. for soup slopes upward.

b. for soup falls when income rises.

c. for soup falls when the price of a substitute for soup rises.

d. for soup rises when the price of soup falls.

Suppose that, as the price of Y falls from $2.00 to$1.90, the demanded quantity of Y increases from 110 to 118. It can be concluded that the price elasticity of demand is:

A. 4.00.

B. 2.09.

C. 1.37.

D. 3.94.

When demand is price inelastic:

A) Price and total revenue move in the same direction,

B) Price and total revenue move in the opposite direction,

C) Total revenue increases whether the price goes up or down,

D) Total revenue decreases whether the price goes up or down.

Which type of goods is most adversely affected by recessions?

a. Goods for which the income elasticity coefficient is relatively low or negative.

b. Goods for which the cross elasticity coefficient is negative.

c. Goods for which the income elasticity coefficient is relatively high and positive.

d. Goods for which the cross elasticity coefficient is positive.

What is the purpose of charging different groups of customers different prices? Supplement the three broad examples in the Last Word with two additional examples of your own. Hint: Think of price discounts based on group characteristics or time of purchase.

When dealing with externalities, the government:

A) can correct the market failure only in the case of positive externalities.

B) can correct the market failure only in the case of negative externalities.

C) can correct the market failure in both the positive and negative externalities by inducing market participants to internalize the externality.

D) cannot correct for externalities due to consumer rights laws.

Efficiency losses _______________.

a. Are not possible if suppliers are willing to produce and sell a product.

b. Can only result from underproduction.

c. Can only result from overproduction.

d. None of the above

Efficiency losses __________ .

a. Are not possible if suppliers are willing to produce and sell a product.

b. Can only result from underproduction.

c. Can only result from overproduction.

d. None of the above.

Efficiency losses____________________
a. Are not possible if suppliers are willing to produce and sell a product.
b. Can only result from underproduction.
c. Can only result from overproduction.
d. None of the above.

Efficiency losses _______________.

a. Are not possible if suppliers are willing to produce and sell a product.

b. Can only result from underproduction.

c. Can only result from overproduction.

d. None of the above.

Match each of the following characteristics or scenarios with either the term negative externality or the term positive externality.

a. Resources are overallocated.

b. Tammy installs a very nice front garden, raising the property values of all the other houses on her block.

c. Market demand curves are too far to the left (too low).

d. Resources are underallocated.

e. Water pollution from a factory forces neighbors to buy water purifiers.

Which of the following reactions is more likely to occur? Explain.