Question 1

A good is normal for a consumer if

Accepted Answer

A)  it is always consumed in a consistent quantity. 
B)  its consumption rises when income rises. 
C)  its consumption falls when income rises. 
D)  some minimal level of the good must be consumed to assure the consumer's survival. 
E)  the assumption of "more is always preferred to less" holds. 
A)  it is always consumed in a consistent quantity. 
B)  its consumption rises when income rises. 
C)  its consumption falls when income rises. 
D)  some minimal level of the good must be consumed to assure the consumer's survival. 
E)  the assumption of "more is always preferred to less" holds. B

Question 2

The marginal rate of substitution is defined as

Accepted Answer

A)  the amount of good Y substituted for good X by a consumer. 
B)  the amount of good Y that a consumer is willing to substitute for good X and stay at a given level of satisfaction. 
C)  the feasible rate of substitution given prices. 
D)  the slope of the utility function. 
E)  the convexity of the indifference curve. 
A)  the amount of good Y substituted for good X by a consumer. 
B)  the amount of good Y that a consumer is willing to substitute for good X and stay at a given level of satisfaction. 
C)  the feasible rate of substitution given prices. 
D)  the slope of the utility function. 
E)  the convexity of the indifference curve. B

Question 3

A consumption bundle

Accepted Answer

A)  is a particular combination of consumption and leisure. 
B)  only measures a quantity of goods and services, but not the amount of leisure. 
C)  is a method of bringing home consumption goods. 
D)  measures the quality of a particular good. 
E)  is a particular combination of work and leisure. 
A)  is a particular combination of consumption and leisure. 
B)  only measures a quantity of goods and services, but not the amount of leisure. 
C)  is a method of bringing home consumption goods. 
D)  measures the quality of a particular good. 
E)  is a particular combination of work and leisure. A

Question 4

If the real wage is equal to 7 widgets, and only an integer number of workers can be hired, The Widget Company should hire

Accepted Answer

A)  2 workers. 
B)  3 workers. 
C)  4 workers. 
D)  5 workers. 
E)  6 workers. 
A)  2 workers. 
B)  3 workers. 
C)  4 workers. 
D)  5 workers. 
E)  6 workers.

Question 5

The marginal product of the second widget worker hired is

Accepted Answer

A)  2. 
B)  8. 
C)  10. 
D)  12. 
E)  22. 
A)  2. 
B)  8. 
C)  10. 
D)  12. 
E)  22.

Question 6

We assume that the representative consumer's preferences exhibit the properties that

Accepted Answer

A)  they evolve over time and that more is always preferred to less. 
B)  more is preferred to less and that the consumer prefers diversity. 
C)  the consumer likes diversity and that more is sometimes preferred to less. 
D)  more is sometimes preferred to less and that consumption and leisure are both normal goods. 
E)  less consumption is preferred to more leisure and that consumption and leisure are both normal goods. 
A)  they evolve over time and that more is always preferred to less. 
B)  more is preferred to less and that the consumer prefers diversity. 
C)  the consumer likes diversity and that more is sometimes preferred to less. 
D)  more is sometimes preferred to less and that consumption and leisure are both normal goods. 
E)  less consumption is preferred to more leisure and that consumption and leisure are both normal goods.

Question 7

The profit-maximizing quantity of labour equates the marginal product of labour with

Accepted Answer

A)  total factor productivity. 
B)  the marginal product of capital. 
C)  the real wage. 
D)  the average product of labour. 
E)  the slope of the production function. 
A)  total factor productivity. 
B)  the marginal product of capital. 
C)  the real wage. 
D)  the average product of labour. 
E)  the slope of the production function.

Question 8

The vertical intercept of the consumer's budget line is equal to

Accepted Answer

A)  h + $ \frac{\pi-T}{w} $ 
B)  wh + $\pi$ - T. 
C)  c + w(l - h). 
D)  $\pi$ - T. 
E)  wh - T. 
A)  h + $ \frac{\pi-T}{w} $ 
B)  wh + $\pi$ - T. 
C)  c + w(l - h). 
D)  $\pi$ - T. 
E)  wh - T.

Question 9

A static decision is one that

Accepted Answer

A)  is made very slowly. 
B)  involves planning over one time period. 
C)  involves planning over exactly two time periods. 
D)  involves planning over more than one time period. 
E)  involves only the present. 
A)  is made very slowly. 
B)  involves planning over one time period. 
C)  involves planning over exactly two time periods. 
D)  involves planning over more than one time period. 
E)  involves only the present.

Question 10

That indifference curves are downward sloping

Accepted Answer

A)  is not true. 
B)  follows from the fact that more is preferred to less. 
C)  follows from the property that the consumer likes diversity in his or her consumption bundle. 
D)  follows from the property that consumption and leisure are normal goods. 
E)  follows from the fact that there is a direct relationship between consumption and leisure bundles. 
A)  is not true. 
B)  follows from the fact that more is preferred to less. 
C)  follows from the property that the consumer likes diversity in his or her consumption bundle. 
D)  follows from the property that consumption and leisure are normal goods. 
E)  follows from the fact that there is a direct relationship between consumption and leisure bundles.

Question 11

In practice,

Accepted Answer

A)  taxes are not lump sum taxes. 
B)  real wages affect the level of lump sum taxes. 
C)  the quantity of profits that the consumer received is dictated by lump sum taxes. 
D)  lump sum taxes affect the effective prices that consumers face in the market. 
E)  taxes have no distortionary effect. 
A)  taxes are not lump sum taxes. 
B)  real wages affect the level of lump sum taxes. 
C)  the quantity of profits that the consumer received is dictated by lump sum taxes. 
D)  lump sum taxes affect the effective prices that consumers face in the market. 
E)  taxes have no distortionary effect.

Question 12

That indifference curves are bowed in toward the origin

Accepted Answer

A)  is not true. 
B)  follows from the fact that more is preferred to less. 
C)  follows from the property that the consumer likes diversity in his or her consumption bundle. 
D)  follows from the property that consumption and leisure are normal goods. 
E)  follows from the fact that there is a direct relationship between consumption and leisure bundles. 
A)  is not true. 
B)  follows from the fact that more is preferred to less. 
C)  follows from the property that the consumer likes diversity in his or her consumption bundle. 
D)  follows from the property that consumption and leisure are normal goods. 
E)  follows from the fact that there is a direct relationship between consumption and leisure bundles.

Question 13

As the quantity of labour increases, the marginal product of labour

Accepted Answer

A)  is constant. 
B)  increases. 
C)  decreases. 
D)  may either increase or decrease. 
E)  gets more expensive. 
A)  is constant. 
B)  increases. 
C)  decreases. 
D)  may either increase or decrease. 
E)  gets more expensive.

Question 14

The marginal product of a factor of production

Accepted Answer

A)  is equal to the ratio of the amount that factor of production to the amount of output produced. 
B)  is equal to the amount of additional output that can be produced with one additional unit of each factor input. 
C)  is equal to the amount of additional output that can be produced with one additional unit of that factor input, holding constant the quantities of the other factor inputs. 
D)  always exceeds the average product of that factor input, holding constant the quantities of the other factor inputs. 
E)  is equal to the additional output that can be produced with an additional change in total factor productivity. 
A)  is equal to the ratio of the amount that factor of production to the amount of output produced. 
B)  is equal to the amount of additional output that can be produced with one additional unit of each factor input. 
C)  is equal to the amount of additional output that can be produced with one additional unit of that factor input, holding constant the quantities of the other factor inputs. 
D)  always exceeds the average product of that factor input, holding constant the quantities of the other factor inputs. 
E)  is equal to the additional output that can be produced with an additional change in total factor productivity.

Question 15

A consumer's real disposable income equals

Accepted Answer

A)  wage income plus consumption expenditures. 
B)  wage income plus profit income minus taxes. 
C)  total income minus profit income minus taxes. 
D)  total income minus wage income minus taxes. 
E)  consumption plus savings minus taxes. 
A)  wage income plus consumption expenditures. 
B)  wage income plus profit income minus taxes. 
C)  total income minus profit income minus taxes. 
D)  total income minus wage income minus taxes. 
E)  consumption plus savings minus taxes.

Question 16

A consumer maximizes satisfaction at the point where his subjective valuation of good X measured as the amount of good Y he or she is willing to give up to obtain an additional unit of X equals

Accepted Answer

A)  the slope of the indifference curve through that point. 
B)  one over the slope of the indifference curve through that point. 
C)  Px / Py. 
D)  Py / Px. 
E)  Y / Px. 
A)  the slope of the indifference curve through that point. 
B)  one over the slope of the indifference curve through that point. 
C)  Px / Py. 
D)  Py / Px. 
E)  Y / Px.

Question 17

The marginal rate of substitution

Accepted Answer

A)  can be computed by measuring the slope of the indifference curve. 
B)  can be computed by measuring the curvature of the indifference curve. 
C)  cannot be deduced from the properties of the indifference curve. 
D)  can only be computed if we know the prices of all goods. 
E)  can be deduced from the budget line. 
A)  can be computed by measuring the slope of the indifference curve. 
B)  can be computed by measuring the curvature of the indifference curve. 
C)  cannot be deduced from the properties of the indifference curve. 
D)  can only be computed if we know the prices of all goods. 
E)  can be deduced from the budget line.

Question 18

A utility function

Accepted Answer

A)  needs to measure the absolute level of happiness. 
B)  needs to measure relative amounts of happiness for a single individual. 
C)  helps compare the relative happiness of two separate consumers. 
D)  is most useful if it can be influenced by others. 
E)  measures relative happiness and income of consumers. 
A)  needs to measure the absolute level of happiness. 
B)  needs to measure relative amounts of happiness for a single individual. 
C)  helps compare the relative happiness of two separate consumers. 
D)  is most useful if it can be influenced by others. 
E)  measures relative happiness and income of consumers.

Question 19

The shape of the indifference curve depends on

Accepted Answer

A)  the price of goods. 
B)  the family income. 
C)  the substitutability between goods for the household. 
D)  the level of happiness for the household. 
E)  the relative price of good Y. 
A)  the price of goods. 
B)  the family income. 
C)  the substitutability between goods for the household. 
D)  the level of happiness for the household. 
E)  the relative price of good Y.

Question 20

With consumption on the vertical axis and leisure on the horizontal axis, the slope of the budget line is equal to

Accepted Answer

A)  w. 
B)  -w. 
C)  $\pi$. 
D)  -$\pi$. 
E)  wh + $\pi$. - T. 
A)  w. 
B)  -w. 
C)  $\pi$. 
D)  -$\pi$. 
E)  wh + $\pi$. - T.

A good is normal for a consumer if

The marginal rate of substitution is defined as

A consumption bundle

If the real wage is equal to 7 widgets, and only an integer number of workers can be hired, The Widget Company should hire

The marginal product of the second widget worker hired is

We assume that the representative consumer's preferences exhibit the properties that

The profit-maximizing quantity of labour equates the marginal product of labour with

The vertical intercept of the consumer's budget line is equal to

A static decision is one that

That indifference curves are downward sloping

In practice,

That indifference curves are bowed in toward the origin

As the quantity of labour increases, the marginal product of labour

The marginal product of a factor of production

A consumer's real disposable income equals

A consumer maximizes satisfaction at the point where his subjective valuation of good X measured as the amount of good Y he or she is willing to give up to obtain an additional unit of X equals

The marginal rate of substitution

A utility function

The shape of the indifference curve depends on

With consumption on the vertical axis and leisure on the horizontal axis, the slope of the budget line is equal to

Introduction

Measurement

Business Cycle Measurement

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters

Exam 4: Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

A good is normal for a consumer if

The marginal rate of substitution is defined as

A consumption bundle

If the real wage is equal to 7 widgets, and only an integer number of workers can be hired, The Widget Company should hire

The marginal product of the second widget worker hired is

We assume that the representative consumer's preferences exhibit the properties that

The profit-maximizing quantity of labour equates the marginal product of labour with

The vertical intercept of the consumer's budget line is equal to

A static decision is one that

That indifference curves are downward sloping

In practice,

That indifference curves are bowed in toward the origin

As the quantity of labour increases, the marginal product of labour

The marginal product of a factor of production

A consumer's real disposable income equals

A consumer maximizes satisfaction at the point where his subjective valuation of good X measured as the amount of good Y he or she is willing to give up to obtain an additional unit of X equals

The marginal rate of substitution

A utility function

The shape of the indifference curve depends on

With consumption on the vertical axis and leisure on the horizontal axis, the slope of the budget line is equal to

Introduction

Measurement

Business Cycle Measurement

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters