question
Utility measures
answer
A: Consumer Satisfaction*
B: The usefulness of a product.
C: The consumer's budget.
D: The cost of a consumption bundle.
B: The usefulness of a product.
C: The consumer's budget.
D: The cost of a consumption bundle.
question
A curve representing all consumption bundles for which a consumer is equally well-off is:
answer
A:Utility function.
B:Demand function.
C:Indifference curve*
DLBudget constraint.
B:Demand function.
C:Indifference curve*
DLBudget constraint.
question
Which assumption ensures that indifference curves never cross?
answer
A:More is better than less
B:Completeness
C:Transitivity*
D:Preference for variety
B:Completeness
C:Transitivity*
D:Preference for variety
question
Indifference curves that are relatively flat indicate that the consumer has a(n):
answer
A:Relative preference for good X.
B:Relative preference for good Y.*
C:Strong preference for variety.
D: There isn't enough information to answer this question.
B:Relative preference for good Y.*
C:Strong preference for variety.
D: There isn't enough information to answer this question.
question
The slope of the budget constraint is:
answer
A: −MUx/MUy
B: −MUy/MUx
C: −Px/Py*
D: −Py/Px
B: −MUy/MUx
C: −Px/Py*
D: −Py/Px
question
The vertical intercept of the budget constraint is equal to:
answer
A: Py
B: I
C: I/Py*
D: I/Qy
B: I
C: I/Py*
D: I/Qy
question
Suppose Al considers paper maps and dashboard-mounted maps to be perfect substitutes. Which of the following statements best describes Al's optimal choice?
answer
A: Al will spend ½ of his income on paper maps and ½ on dashboard maps.
B: Al will spend all of his income on the good with the lowest marginal utility per dollar.
C: Al will spend all of his income on the good with the lowest price*
D: Al will spend all of his income on the good with the highest marginal utility per dollar*
B: Al will spend all of his income on the good with the lowest marginal utility per dollar.
C: Al will spend all of his income on the good with the lowest price*
D: Al will spend all of his income on the good with the highest marginal utility per dollar*
question
If a consumer decreases consumption of good x as her income rises, then good x must be a(n) ________ good.
answer
A: Normal
B: Inferior*
C: Ordinary
D: Giffen
B: Inferior*
C: Ordinary
D: Giffen
question
A good with an income elasticity of demand greater than 1 is often referred to as:
answer
A: Inferior
B: Normal
C: Luxury
D: Both B and C are correct*
B: Normal
C: Luxury
D: Both B and C are correct*
question
The income expansion path plots consumption of good x against:
answer
A: Income
B: The price of good x.
C: Consumption of good y. *
D: None of the above is correct.
B: The price of good x.
C: Consumption of good y. *
D: None of the above is correct.
question
The Engel curve plots consumption of good x against:
answer
A: Income*
B: Consumption of good y.
C: The price of good x.
D: None of the above is correct.
B: Consumption of good y.
C: The price of good x.
D: None of the above is correct.
question
If good x is an inferior good, the Engel curve will exhibit:
answer
A: First a positive slope, then negative sloped Engel curve. *
B: First a negative slope, then positive sloped Engel curve.
C: A positive sloped Engel curve.
D: A negative sloped Engel curve.
B: First a negative slope, then positive sloped Engel curve.
C: A positive sloped Engel curve.
D: A negative sloped Engel curve.
question
The total effect of a price change on consumption decomposed into two parts:
answer
A: The price effect and the income effect.
B: The price effect and the purchasing power effect.
C: The substitution effect and the income effect.*
D: The price effect and the income effect.
B: The price effect and the purchasing power effect.
C: The substitution effect and the income effect.*
D: The price effect and the income effect.
question
The substitution effect measures:
answer
A: The cost (or gain) faced by a consumer when switching between two substitute goods.
B: The change in a consumer's consumption choice after relative prices change. *
C: The change in a consumer's consumption choice after purchasing power changes.
D: The change in consumption resulting from a change in income.
B: The change in a consumer's consumption choice after relative prices change. *
C: The change in a consumer's consumption choice after purchasing power changes.
D: The change in consumption resulting from a change in income.
question
The income effect measures:
answer
A: The cost (or gain) faced by a consumer when switching between two substitute goods.
B: The change in a consumer's consumption choice after purchasing power changes.
C: The change in consumption resulting from a change in income.
D: The change in a consumer's consumption choice after relative prices change.
B: The change in a consumer's consumption choice after purchasing power changes.
C: The change in consumption resulting from a change in income.
D: The change in a consumer's consumption choice after relative prices change.
question
R: Which of the following will result in a shift of the demand curve to the right (increase in demand)?
answer
A: A decrease in the price of the good.*
B: An increase in consumer income.
C: A decrease in input prices.
D: A decrease in the price of a substitute good.
B: An increase in consumer income.
C: A decrease in input prices.
D: A decrease in the price of a substitute good.
question
R: Which of the following will result in a shift of the supply curve to the right (increase in supply)?
answer
A: A decrease in the price of the good.
B: An increase in consumer income.*
C: A decrease in input prices.
D: A decrease in the price of a substitute good.
B: An increase in consumer income.*
C: A decrease in input prices.
D: A decrease in the price of a substitute good.
question
R:Consider the market for burritos. Which of the following will result in an increase in the equilibrium price of burritos?
answer
A: An increase in the price of beans (an input)*.
B: New advancements in burrito-making technology.
C: News report on the negative health risks of burritos.
D: An increase in the price of tortilla chips (a complement).
B: New advancements in burrito-making technology.
C: News report on the negative health risks of burritos.
D: An increase in the price of tortilla chips (a complement).
question
R:Consider the market for burritos. Which of the following will result in an increase in the equilibrium quantity of burritos?
answer
A: An increase in the price of beans (an input).
B: New advancements in burrito-making technology.
C:News report on the negative health risks of burritos.
D:An increase in the price of tortilla chips (a complement).
B: New advancements in burrito-making technology.
C:News report on the negative health risks of burritos.
D:An increase in the price of tortilla chips (a complement).
question
R: The price elasticity of demand is represented by the following formula:
answer
A: ΔQD/ΔP
B: ΔP/ΔQD
C: %ΔQD/%ΔP *
D: None of the above is correct.
B: ΔP/ΔQD
C: %ΔQD/%ΔP *
D: None of the above is correct.
question
R: If the price elasticity of demand, ED = −0.5, we say the good has:
answer
A: Inelastic demand.*
B: Elastic demand.
C: Unit elastic demand.
D: Perfectly inelastic demand.
B: Elastic demand.
C: Unit elastic demand.
D: Perfectly inelastic demand.
question
R: If the price elasticity of demand, ED = −1, we say the good has:
answer
A: Inelastic demand.
B: Elastic demand.
C: Unit elastic demand.*
D: Perfectly inelastic demand.
B: Elastic demand.
C: Unit elastic demand.*
D: Perfectly inelastic demand.
question
R:If the price elasticity of supply, ES = ∞, we say the good has:
answer
A: Inelastic supply.
B: Elastic supply.
C: Unit elastic supply.
D: Perfectly elastic supply.*
B: Elastic supply.
C: Unit elastic supply.
D: Perfectly elastic supply.*
question
R:If the cross-price elasticity of demand, EDXY < 0, we say the goods are:
answer
A:Normal.
B: Inferior.
C:Substitutes.
D:Complements.*
B: Inferior.
C:Substitutes.
D:Complements.*
question
R: Ryan would be willing to pay $1 for a lollypop, Sarah would be willing to pay $0.50. The price of the lollypop is $0.75. What is Ryan and Sarah's combined consumer surplus?
answer
A: $0
B: $0.25*
C: $0.50
D: $0.75
B: $0.25*
C: $0.50
D: $0.75
question
R: Tom would be willing to sell his yo-yo for $1.75, Megan would be willing to sell her yo-yo for $1.50. If the equilibrium price is $2, what is the combined value of Tom and Megan's producer surplus?
answer
A: $0
B: $0.25
C: $0.50
D: $0.75*
B: $0.25
C: $0.50
D: $0.75*
question
R: Suppose an increase in the supply of yo-yos shifts the supply curve to the right. What should happen to producer surplus?
answer
A: Producer surplus will be unchanged.
B: Producer surplus will increase.
C: Producer surplus will fall.
D: The change is ambiguous.*
B: Producer surplus will increase.
C: Producer surplus will fall.
D: The change is ambiguous.*
question
R:Suppose an increase in the supply of yo-yos shifts the supply curve to the right. What should happen to consumer surplus?
answer
A: Consumer surplus will increase.*
B: Consumer surplus will be unchanged.
C: Consumer surplus will fall.
D: The change is ambiguous.
B: Consumer surplus will be unchanged.
C: Consumer surplus will fall.
D: The change is ambiguous.
question
R: A price ceiling is:
answer
A: Always binding
B: Never binding
C: Only binding if equilibrium price is below the ceiling
D: Only binding if equilibrium price is above the ceiling*
B: Never binding
C: Only binding if equilibrium price is below the ceiling
D: Only binding if equilibrium price is above the ceiling*
question
R: A price floor is:
answer
A: Only binding if equilibrium price is below the floor*
B: Only binding if equilibrium price is above the floor
C: Always binding
D: Never bindingA
B: Only binding if equilibrium price is above the floor
C: Always binding
D: Never bindingA
question
R: Deadweight loss is:
answer
A: The loss to consumers and producers from a shift in the demand curve.
B: The loss to consumers and producers from a shift in the supply curve.
C: The loss to consumers and producers from a market inefficiency.*
D: None of the above.
B: The loss to consumers and producers from a shift in the supply curve.
C: The loss to consumers and producers from a market inefficiency.*
D: None of the above.
question
R: Each of the following will result in a deadweight loss, except:
answer
A: A price floor on wages (minimum wage)
B: A decrease in supply after a natural disaster.*
C: A quota restricting quantity of output.
D: A tax on the good.
B: A decrease in supply after a natural disaster.*
C: A quota restricting quantity of output.
D: A tax on the good.
question
R: The amount of deadweight loss depends upon:
answer
A: The elasticity of supply
B: The elasticity of demand
C: Value of the tax
D: All of the above*
B: The elasticity of demand
C: Value of the tax
D: All of the above*
question
R: The burden of a tax depends on all of the following, except:
answer
A: Elasticity of supply
B: Elasticity of demand
C:Value of the tax
D: Legal incidence*
B: Elasticity of demand
C:Value of the tax
D: Legal incidence*
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