Question 1

Figure 3.2.3
-Refer to Figure 3.2.3 above. The rotation of the budget line could have been caused by:

Accepted Answer

A)  an increase in income. 
B)  an increase in the price of food. 
C)  a decrease in the price of food. 
D)  an increase in the preference for food. 
A)  an increase in income. 
B)  an increase in the price of food. 
C)  a decrease in the price of food. 
D)  an increase in the preference for food.

Question 2

Suppose a consumer only purchases food and clothing, and food is plotted along the horizontal axis of the consumer's indifference map. If the price of clothing increases and the price of food and income do not change, then the budget line changes by rotating:

Accepted Answer

A)  counter-clockwise about the fixed vertical axis intercept. 
B)  clockwise about the fixed vertical axis intercept. 
C)  counter-clockwise about the fixed horizontal axis intercept. 
D)  clockwise about the fixed horizontal axis intercept. 
E)  none of the above 
A)  counter-clockwise about the fixed vertical axis intercept. 
B)  clockwise about the fixed vertical axis intercept. 
C)  counter-clockwise about the fixed horizontal axis intercept. 
D)  clockwise about the fixed horizontal axis intercept. 
E)  none of the above

Question 3

A budget line shows the combinations of:

Accepted Answer

A)  prices that place a limit on the purchase and consumption of two goods. 
B)  two goods that can be purchased with a given income, and given the prices of the two goods. 
C)  two goods that can be purchase at various levels of income. 
D)  the quantities of two goods that can be purchased at various prices. 
A)  prices that place a limit on the purchase and consumption of two goods. 
B)  two goods that can be purchased with a given income, and given the prices of the two goods. 
C)  two goods that can be purchase at various levels of income. 
D)  the quantities of two goods that can be purchased at various prices.

Question 4

May enjoys spending her free time with her friends at the mall and solving problems from her microeconomics text. She has 16 hours per week of free time. Diagram May's time constraint. If   and   where F is her time spent with friends at the mall and P is her time spent working problems, how much time should May spend at each activity?

Accepted Answer

The time constraint is @#IMG-DLM& Since the price

Question 5

Assume that food is measured on the horizontal axis and clothing on the vertical axis. If the price of food falls relative to that of clothing, the budget line will:

Accepted Answer

A)  become flatter. 
B)  become steeper. 
C)  shift outward. 
D)  become steeper or flatter depending on the relationship between prices and income. 
A)  become flatter. 
B)  become steeper. 
C)  shift outward. 
D)  become steeper or flatter depending on the relationship between prices and income.

Question 6

The revealed preference approach can provide more informative comparisons of market baskets if we also assume that the consumer's indifference curves are:

Accepted Answer

A)  concave. 
B)  convex. 
C)  incomplete. 
D)  intransitive. 
A)  concave. 
B)  convex. 
C)  incomplete. 
D)  intransitive.

Question 7

Figure 3.2.3
-Suppose a consumer only purchases food and clothing, and food is plotted along the horizontal axis of the consumer's indifference map. If the price of food and clothing increase and income does not change, then the budget line changes by rotating:

Accepted Answer

A)  counter-clockwise about the fixed vertical axis intercept. 
B)  clockwise about the fixed vertical axis intercept. 
C)  counter-clockwise about the fixed horizontal axis intercept. 
D)  clockwise about the fixed horizontal axis intercept. 
E)  none of the above 
A)  counter-clockwise about the fixed vertical axis intercept. 
B)  clockwise about the fixed vertical axis intercept. 
C)  counter-clockwise about the fixed horizontal axis intercept. 
D)  clockwise about the fixed horizontal axis intercept. 
E)  none of the above

Question 8

Consider the following three market baskets:Table 3.1
  
-Refer to Table 3.1. If preferences satisfy all four of the basic assumptions:

Accepted Answer

A)  A is on the same indifference curve as B. 
B)  B is on the same indifference curve as C. 
C)  A is preferred to C. 
D)  B is preferred to A. 
E)  Both A and B answer choices are correct. 
A)  A is on the same indifference curve as B. 
B)  B is on the same indifference curve as C. 
C)  A is preferred to C. 
D)  B is preferred to A. 
E)  Both A and B answer choices are correct.

Question 9

Tammy and Tad's father has given each of them a debit card and allows each of them to use the card to spend $500 each month. Tammy and Tad use their $500 to buy only CDs and gasoline. In February, the price of a CD was $10 and the price of gasoline was $1 per gallon. At these prices, Tammy purchased 45 CDs and 50 gallons of gas. Tad consumed 20 CDs and 300 gallons of gas. For the month of March, Tammy and Tad's father lost the records indicating who had which debit card. From the bank statement in March, their father learned that the price of a CD was $12 and a gallon of gas cost $0.80. The first debit card was used to purchase 235 gallons of gas and 26 CDs. The second debit card was used to purchase 265 gallons of gas and 24 CDs. Using revealed preference theory, identify which card Tammy must possess.

Accepted Answer

@#IMG-DLM& From the diagram, we see that point D i

Question 10

The field of behavioral economics has been built around which of the following assertions?

Accepted Answer

A)  Consumers have preferences among the various goods and services available to them. 
B)  Consumers face budget constraints which put limits on what they can buy. 
C)  Consumers may not be as rational and well-informed as economists make them out to be. 
D)  Consumers ignore the information they obtain and tend to make more irrational than rational decisions. 
A)  Consumers have preferences among the various goods and services available to them. 
B)  Consumers face budget constraints which put limits on what they can buy. 
C)  Consumers may not be as rational and well-informed as economists make them out to be. 
D)  Consumers ignore the information they obtain and tend to make more irrational than rational decisions.

Question 11

Marginal utility measures:

Accepted Answer

A)  the slope of the indifference curve. 
B)  the additional satisfaction from consuming one more unit of a good. 
C)  the slope of the budget line. 
D)  the marginal rate of substitution. 
E)  none of the above 
A)  the slope of the indifference curve. 
B)  the additional satisfaction from consuming one more unit of a good. 
C)  the slope of the budget line. 
D)  the marginal rate of substitution. 
E)  none of the above

Question 12

A utility function that generates a ranking of market baskets in order of most to least preferred is called:

Accepted Answer

A)  a cardinal utility function. 
B)  an ordinal utility function. 
C)  either an ordinal or a cardinal function. Both types of functions use this ranking. 
D)  neither an ordinal nor a cardinal function. Neither type uses this ranking. 
A)  a cardinal utility function. 
B)  an ordinal utility function. 
C)  either an ordinal or a cardinal function. Both types of functions use this ranking. 
D)  neither an ordinal nor a cardinal function. Neither type uses this ranking.

Question 13

Suppose the table below lists the price and consumption levels of food and clothing during 1990 and 2000. Calculate a Laspeyres and Paasche index using 1990 as the base year.

Accepted Answer

The Laspeyres Index

Question 14

To understand consumer behavior and how consumer decisions are made, it is necessary and/or sufficient to work with:

Accepted Answer

A)  cardinal utility functions only. 
B)  ordinal utility functions only. 
C)  both cardinal and ordinal utility functions. 
D)  either ordinal or cardinal functions, but not both. 
A)  cardinal utility functions only. 
B)  ordinal utility functions only. 
C)  both cardinal and ordinal utility functions. 
D)  either ordinal or cardinal functions, but not both.

Question 15

The fact that Alice spends no money on travel:

Accepted Answer

A)  implies that she does not derive any satisfaction from travel. 
B)  implies that she is at a corner solution. 
C)  implies that her MRS does not equal the price ratio. 
D)  Any of the above are possible. 
A)  implies that she does not derive any satisfaction from travel. 
B)  implies that she is at a corner solution. 
C)  implies that her MRS does not equal the price ratio. 
D)  Any of the above are possible.

Question 16

Satisfaction from consumption is maximized when:

Accepted Answer

A)  marginal cost equals zero. 
B)  marginal benefit equals zero. 
C)  marginal benefit equals marginal cost. 
D)  marginal benefit is maximum. 
A)  marginal cost equals zero. 
B)  marginal benefit equals zero. 
C)  marginal benefit equals marginal cost. 
D)  marginal benefit is maximum.

Question 17

Select from the following, the issues that consumer theory can help to resolve.

Accepted Answer

A)  How consumer allocate their incomes to the purchase of goods and services 
B)  Problems involving corporate policy 
C)  Problems involving public policy 
D)  All of the above 
A)  How consumer allocate their incomes to the purchase of goods and services 
B)  Problems involving corporate policy 
C)  Problems involving public policy 
D)  All of the above

Question 18

An increase in income, holding prices constant, can be represented as:

Accepted Answer

A)  a change in the slope of the budget line. 
B)  a parallel outward shift in the budget line. 
C)  an outward shift in the budget line with its slope becoming flatter. 
D)  a parallel inward shift in the budget line. 
A)  a change in the slope of the budget line. 
B)  a parallel outward shift in the budget line. 
C)  an outward shift in the budget line with its slope becoming flatter. 
D)  a parallel inward shift in the budget line.

Question 19

Consider the following three market baskets:Table 3.1
  
-Two goods for which the marginal rate of substitution is zero or infinite are:

Accepted Answer

A)  perfect substitutes. 
B)  perfect complements. 
C)  goods considered "bads." 
D)  substitutes and complements at the same time. 
A)  perfect substitutes. 
B)  perfect complements. 
C)  goods considered "bads." 
D)  substitutes and complements at the same time.

Question 20

Figure 3.1.7
-Refer to Figure 3.1.7 above. This indifference map shows that: this consumer:

Accepted Answer

A)  prefers a car with more acceleration and less space. 
B)  prefers more expensive rather than less expensive cars. 
C)  is indifferent between acceleration and space at all levels of utility. 
D)  all of the above 
A)  prefers a car with more acceleration and less space. 
B)  prefers more expensive rather than less expensive cars. 
C)  is indifferent between acceleration and space at all levels of utility. 
D)  all of the above

Figure 3.2.3 -Refer to Figure 3.2.3 above. The rotation of the budget line could have been caused by:

Suppose a consumer only purchases food and clothing, and food is plotted along the horizontal axis of the consumer's indifference map. If the price of clothing increases and the price of food and income do not change, then the budget line changes by rotating:

A budget line shows the combinations of:

Assume that food is measured on the horizontal axis and clothing on the vertical axis. If the price of food falls relative to that of clothing, the budget line will:

The revealed preference approach can provide more informative comparisons of market baskets if we also assume that the consumer's indifference curves are:

Figure 3.2.3 -Suppose a consumer only purchases food and clothing, and food is plotted along the horizontal axis of the consumer's indifference map. If the price of food and clothing increase and income does not change, then the budget line changes by rotating:

Consider the following three market baskets:Table 3.1 -Refer to Table 3.1. If preferences satisfy all four of the basic assumptions:

The field of behavioral economics has been built around which of the following assertions?

Marginal utility measures:

A utility function that generates a ranking of market baskets in order of most to least preferred is called:

Suppose the table below lists the price and consumption levels of food and clothing during 1990 and 2000. Calculate a Laspeyres and Paasche index using 1990 as the base year.

To understand consumer behavior and how consumer decisions are made, it is necessary and/or sufficient to work with:

The fact that Alice spends no money on travel:

Satisfaction from consumption is maximized when:

Select from the following, the issues that consumer theory can help to resolve.

An increase in income, holding prices constant, can be represented as:

Consider the following three market baskets:Table 3.1 -Two goods for which the marginal rate of substitution is zero or infinite are:

Figure 3.1.7 -Refer to Figure 3.1.7 above. This indifference map shows that: this consumer:

Preliminaries

The Basics of Supply and Demand

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment, Time, and Capital Markets

General Equilibrium and Economic Efficiency

Markets With Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Exam 3: Consumer Behavior

Figure 3.2.3 -Refer to Figure 3.2.3 above. The rotation of the budget line could have been caused by:

Suppose a consumer only purchases food and clothing, and food is plotted along the horizontal axis of the consumer's indifference map. If the price of clothing increases and the price of food and income do not change, then the budget line changes by rotating:

A budget line shows the combinations of:

Assume that food is measured on the horizontal axis and clothing on the vertical axis. If the price of food falls relative to that of clothing, the budget line will:

The revealed preference approach can provide more informative comparisons of market baskets if we also assume that the consumer's indifference curves are:

Figure 3.2.3 -Suppose a consumer only purchases food and clothing, and food is plotted along the horizontal axis of the consumer's indifference map. If the price of food and clothing increase and income does not change, then the budget line changes by rotating:

Consider the following three market baskets:Table 3.1 -Refer to Table 3.1. If preferences satisfy all four of the basic assumptions:

The field of behavioral economics has been built around which of the following assertions?

Marginal utility measures:

A utility function that generates a ranking of market baskets in order of most to least preferred is called:

Suppose the table below lists the price and consumption levels of food and clothing during 1990 and 2000. Calculate a Laspeyres and Paasche index using 1990 as the base year.

To understand consumer behavior and how consumer decisions are made, it is necessary and/or sufficient to work with:

The fact that Alice spends no money on travel:

Satisfaction from consumption is maximized when:

Select from the following, the issues that consumer theory can help to resolve.

An increase in income, holding prices constant, can be represented as:

Consider the following three market baskets:Table 3.1 -Two goods for which the marginal rate of substitution is zero or infinite are:

Figure 3.1.7 -Refer to Figure 3.1.7 above. This indifference map shows that: this consumer:

Preliminaries

The Basics of Supply and Demand

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment, Time, and Capital Markets

General Equilibrium and Economic Efficiency

Markets With Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters