Question 1

If the income effect of a price change is negative and larger in absolute terms than the substitution effect, then the demand curve will be

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  vertical. 
D)  horizontal. 
E)  of indeterminate slope. 
A)  upward sloping. 
B)  downward sloping. 
C)  vertical. 
D)  horizontal. 
E)  of indeterminate slope.

Question 2

The table below shows the quantities of toffee bars and bags of cashews that a consumer could consume over a 1-week period.   TABLE 6-1
-Refer to Table 6-1. If the prices of both toffee bars and bags of cashews are $2 and this consumer has $14 per week to spend on these two snacks, what is the maximum total utility achievable?

Accepted Answer

A)  10 
B)  15 
C)  33 
D)  45 
E)  57 
A)  10 
B)  15 
C)  33 
D)  45 
E)  57

Question 3

Suppose a consumer can purchase only two goods, pasta and cheese. Let the quantity of pasta be measured on the vertical axis and the quantity of cheese be measured on the horizontal axis. If the price of pasta falls, with no change in the price of cheese or in the consumerʹs money income, then the budget line for the consumer will rotate

Accepted Answer

A)  toward the origin and become flatter. 
B)  toward the origin and become steeper. 
C)  away from the origin and become flatter. 
D)  away from the origin and become steeper. 
E)  outward parallel to the existing budget line. 
A)  toward the origin and become flatter. 
B)  toward the origin and become steeper. 
C)  away from the origin and become flatter. 
D)  away from the origin and become steeper. 
E)  outward parallel to the existing budget line.

Question 4

The condition required for a consumer to be maximizing utility, for any pair of products, X and Y, is

Accepted Answer

A)  PXMUX) = PYMUY). 
B)  MUX = MUY. 
C)  MUX/PX = MUY/PY. 
D)  MUX/PY = MUY/PX. 
E)  PX = PY. 
A)  PXMUX) = PYMUY). 
B)  MUX = MUY. 
C)  MUX/PX = MUY/PY. 
D)  MUX/PY = MUY/PX. 
E)  PX = PY.

Question 5

Daveʹs Consumer Surplus on Movie Rentals per Week
yes, we know no one rents movies anymore, but it makes a good example!)
   TABLE 6-2
-Refer to Table 6-2. Assuming Dave maximizes his utility when the price is $5, his consumer surplus in dollars) on each movie rental in order from 1 through 7 is as follows:

Accepted Answer

A)  10.00, 18.00, 24.50, 30.00, 35.00, 39.50, 43.75. 
B)  5.00, 3.00, 1.50, 0.50, 0, 0, 0. 
C)  10.00, 8.00, 6.50, 5.50, 5.00, 4.50, 4.25. 
D)  5.00 on all units. 
E)  0 on all units. 
A)  10.00, 18.00, 24.50, 30.00, 35.00, 39.50, 43.75. 
B)  5.00, 3.00, 1.50, 0.50, 0, 0, 0. 
C)  10.00, 8.00, 6.50, 5.50, 5.00, 4.50, 4.25. 
D)  5.00 on all units. 
E)  0 on all units.

Question 6

Given a particular consumerʹs indifference map, the further the indifference curve is from the origin

Accepted Answer

A)  the lower the marginal rate of substitution. 
B)  the higher the marginal rate of substitution. 
C)  the lower the level of satisfaction. 
D)  the higher the level of satisfaction. 
E)  the more goods are included. 
A)  the lower the marginal rate of substitution. 
B)  the higher the marginal rate of substitution. 
C)  the lower the level of satisfaction. 
D)  the higher the level of satisfaction. 
E)  the more goods are included.

Question 7

The total value that Doug places on his consumption of computer games equals

Accepted Answer

A)  the price multiplied by quantity demanded. 
B)  his marginal utility multiplied by quantity demanded. 
C)  price times marginal value. 
D)  the total amount he pays for all the games he purchases. 
E)  his total expenditure on computer games plus his consumer surplus. 
A)  the price multiplied by quantity demanded. 
B)  his marginal utility multiplied by quantity demanded. 
C)  price times marginal value. 
D)  the total amount he pays for all the games he purchases. 
E)  his total expenditure on computer games plus his consumer surplus.

Question 8

Diagrams A, B, and C show 3 individual consumersʹ demand curves for cement. Consumers A, B, and C constitute the entire monthly cement market in this region.
   FIGURE 6-3
-Refer to Figure 6-3. What is the market demand in cubic metres per month) for cement at a price of $80 per cubic metre?

Accepted Answer

A)  0 
B)  1000 
C)  2000 
D)  3000 
E)  4000 
A)  0 
B)  1000 
C)  2000 
D)  3000 
E)  4000

Question 9

Any consumption point that is on the budget line

Accepted Answer

A)  indicates consumption spending beyond current income. 
B)  implies the household is paying above-market prices for the goods in question. 
C)  implies the household is paying below-market prices for the goods in question. 
D)  implies that the household is not spending all of its income on the goods in question. 
E)  implies that the household is spending all of its income on the goods in question. 
A)  indicates consumption spending beyond current income. 
B)  implies the household is paying above-market prices for the goods in question. 
C)  implies the household is paying below-market prices for the goods in question. 
D)  implies that the household is not spending all of its income on the goods in question. 
E)  implies that the household is spending all of its income on the goods in question.

Question 10

FIGURE 6-2
-Refer to Figure 6-2. If the price of X is $2 and the price of Y is $1 and the consumer is buying 4 units of X and 2 units of Y, the consumerʹs total utility is

Accepted Answer

A)  8. 
B)  10. 
C)  52. 
D)  56. 
E)  69. 
A)  8. 
B)  10. 
C)  52. 
D)  56. 
E)  69.

Question 11

FIGURE 6-2
-Refer to Figure 6-2. Suppose the price of Y is $1 and the consumerʹs income is $10. Initially, the price of X is $2 and the consumer is buying 3 units of good X and 4 units of good Y. If the price of X then falls to $1, what quantities of X and Y will he/she now purchase in order to maximize total utility?

Accepted Answer

A)  2 X and 8 Y. 
B)  3 X and 7 Y. 
C)  4 X and 6 Y. 
D)  5 X and 5 Y. 
E)  6 X and 4 Y. 
A)  2 X and 8 Y. 
B)  3 X and 7 Y. 
C)  4 X and 6 Y. 
D)  5 X and 5 Y. 
E)  6 X and 4 Y.

Question 12

In which of the following situations will an individualʹs purchasing power be unaffected?

Accepted Answer

A)  money income is cut in half and the prices of all goods and services fall by 50% 
B)  money income falls and the price of one good falls 
C)  money income doubles and the prices of all goods and services are cut in half 
D)  money income doubles and the prices of all goods and services remain constant 
E)  money income is cut in half and prices of all goods and services remain constant 
A)  money income is cut in half and the prices of all goods and services fall by 50% 
B)  money income falls and the price of one good falls 
C)  money income doubles and the prices of all goods and services are cut in half 
D)  money income doubles and the prices of all goods and services remain constant 
E)  money income is cut in half and prices of all goods and services remain constant

Question 13

The substitution effect of a price change

Accepted Answer

A)  will result in the consumer buying less of a good at a lower price. 
B)  will result in the consumer buying less of a good at a higher price. 
C)  outweighs the income effect for Giffen goods. 
D)  is equal to the income effect for normal goods. 
E)  is equal to the income effect for inferior goods. 
A)  will result in the consumer buying less of a good at a lower price. 
B)  will result in the consumer buying less of a good at a higher price. 
C)  outweighs the income effect for Giffen goods. 
D)  is equal to the income effect for normal goods. 
E)  is equal to the income effect for inferior goods.

Question 14

Consumer surplus is

Accepted Answer

A)  the sum of the marginal values to the consumer. 
B)  the total value that a consumer receives from the purchase of a particular good. 
C)  a measure of the gains that a consumer forgoes by buying this product rather than another. 
D)  the difference between what the consumer is willing to pay for all the units consumed and what he or she actually paid. 
E)  the consumption of a commodity above and beyond the amount required by the consumer. 
A)  the sum of the marginal values to the consumer. 
B)  the total value that a consumer receives from the purchase of a particular good. 
C)  a measure of the gains that a consumer forgoes by buying this product rather than another. 
D)  the difference between what the consumer is willing to pay for all the units consumed and what he or she actually paid. 
E)  the consumption of a commodity above and beyond the amount required by the consumer.

Question 15

FIGURE 6-2
-Christine is allocating her household expenditure between cleaning services and gardening services in order to maximize the householdʹs total utility. For the quantities of cleaning and gardening services she has chosen, an increase in the price of cleaning service will, ceteris paribus,

Accepted Answer

A)  increase the marginal utility of a unit of cleaning service. 
B)  reduce the marginal utility per dollar spent on cleaning service. 
C)  reduce the marginal utility of a unit of cleaning service. 
D)  increase the marginal utility per dollar spent on cleaning service. 
E)  have no effect on the marginal utility per dollar spent on cleaning service. 
A)  increase the marginal utility of a unit of cleaning service. 
B)  reduce the marginal utility per dollar spent on cleaning service. 
C)  reduce the marginal utility of a unit of cleaning service. 
D)  increase the marginal utility per dollar spent on cleaning service. 
E)  have no effect on the marginal utility per dollar spent on cleaning service.

Question 16

Consider the substitution and income effects of a 15% increase in the price of a good. Of the goods listed below, which is most likely to have the largest income effect?

Accepted Answer

A)  salt 
B)  paperclips 
C)  socks 
D)  tennis balls 
E)  electricity 
A)  salt 
B)  paperclips 
C)  socks 
D)  tennis balls 
E)  electricity

Question 17

The substitution effect of a price change leads consumers to their demand for goods whose prices have risen. The income effect leads consumers to buy less of all goods whose prices have risen.

Accepted Answer

A)  reduce; normal 
B)  increase; inferior 
C)  increase; normal 
D)  reduce; Giffen 
E)  reduce; complement 
A)  reduce; normal 
B)  increase; inferior 
C)  increase; normal 
D)  reduce; Giffen 
E)  reduce; complement

Question 18

Diagrams A, B, and C show 3 individual consumersʹ demand curves for cement. Consumers A, B, and C constitute the entire monthly cement market in this region.
   FIGURE 6-3
-Refer to Figure 6-3. What is the market demand in cubic metres per month) for cement at a price of $60 per cubic metre?

Accepted Answer

A)  0 
B)  1000 
C)  2000 
D)  3000 
E)  4000 
A)  0 
B)  1000 
C)  2000 
D)  3000 
E)  4000

Question 19

Suppose there are only two goods, A and B, and that consumer income is constant. If the price of good A falls and the consumption of good B rises, we can conclude that

Accepted Answer

A)  A is a normal good. 
B)  B is a normal good. 
C)  A is an inferior good. 
D)  B is an inferior good. 
E)  both A and B are normal goods. 
A)  A is a normal good. 
B)  B is a normal good. 
C)  A is an inferior good. 
D)  B is an inferior good. 
E)  both A and B are normal goods.

Question 20

The table below shows output, marginal cost, and average variable cost for the production of pairs of shoes. All costs are in dollars.   TABLE 7-6
-Economists use the term ʺmarginal utilityʺ to describe the

Accepted Answer

A)  change in total satisfaction caused by consumption of an additional unit of a good. 
B)  average utility of each unit of a good consumed. 
C)  inverse of the measure of total utility. 
D)  total satisfaction received from consumption of a good. 
E)  price paid for every unit consumed. 
A)  change in total satisfaction caused by consumption of an additional unit of a good. 
B)  average utility of each unit of a good consumed. 
C)  inverse of the measure of total utility. 
D)  total satisfaction received from consumption of a good. 
E)  price paid for every unit consumed.

Exam 6: Consumer Behaviour

If the income effect of a price change is negative and larger in absolute terms than the substitution effect, then the demand curve will be

The condition required for a consumer to be maximizing utility, for any pair of products, X and Y, is

Given a particular consumerʹs indifference map, the further the indifference curve is from the origin

The total value that Doug places on his consumption of computer games equals

Diagrams A, B, and C show 3 individual consumersʹ demand curves for cement. Consumers A, B, and C constitute the entire monthly cement market in this region. FIGURE 6-3 -Refer to Figure 6-3. What is the market demand in cubic metres per month) for cement at a price of $80 per cubic metre?

Any consumption point that is on the budget line

FIGURE 6-2 -Refer to Figure 6-2. If the price of X is $2 and the price of Y is $1 and the consumer is buying 4 units of X and 2 units of Y, the consumerʹs total utility is

In which of the following situations will an individualʹs purchasing power be unaffected?

The substitution effect of a price change

Consumer surplus is

Consider the substitution and income effects of a 15% increase in the price of a good. Of the goods listed below, which is most likely to have the largest income effect?

The substitution effect of a price change leads consumers to their demand for goods whose prices have risen. The income effect leads consumers to buy less of all goods whose prices have risen.

Diagrams A, B, and C show 3 individual consumersʹ demand curves for cement. Consumers A, B, and C constitute the entire monthly cement market in this region. FIGURE 6-3 -Refer to Figure 6-3. What is the market demand in cubic metres per month) for cement at a price of $60 per cubic metre?

Suppose there are only two goods, A and B, and that consumer income is constant. If the price of good A falls and the consumption of good B rises, we can conclude that

The table below shows output, marginal cost, and average variable cost for the production of pairs of shoes. All costs are in dollars. TABLE 7-6 -Economists use the term ʺmarginal utilityʺ to describe the

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