Question 1

FIGURE 6-9
-Refer to Figure 6-9. In part i), the line joining points A, B, and C is known as , which shows how
)

Accepted Answer

A)  a price-consumption line; consumption changes as relative prices change, with money income constant 
B)  an income-consumption line; consumption changes as income changes, with relative prices held constant 
C)  a price-consumption line; consumption changes as money income and relative prices change 
D)  an income-consumption line; consumption changes with changing relative prices and constant income 
E)  an indifference map; the value of various combinations of two goods changes 
A)  a price-consumption line; consumption changes as relative prices change, with money income constant 
B)  an income-consumption line; consumption changes as income changes, with relative prices held constant 
C)  a price-consumption line; consumption changes as money income and relative prices change 
D)  an income-consumption line; consumption changes with changing relative prices and constant income 
E)  an indifference map; the value of various combinations of two goods changes

Question 2

The table below shows the total value in dollars) that Andrew gets from playing 9-hole rounds of golf.   TABLE 6-3
-Since there is a limited supply of diamonds in the world, the consumption of diamonds

Accepted Answer

A)  takes place at relatively low marginal value. 
B)  takes priority over some other good. 
C)  is no less important than consumption of water. 
D)  takes place at relatively high marginal value. 
E)  should be regulated by the government. 
A)  takes place at relatively low marginal value. 
B)  takes priority over some other good. 
C)  is no less important than consumption of water. 
D)  takes place at relatively high marginal value. 
E)  should be regulated by the government.

Question 3

The diagram below shows a set of budget lines facing a household.
   FIGURE 6-8
-Refer to Figure 6-8. The movement of the budget line from ab to db could be caused by

Accepted Answer

A)  a decrease in money income. 
B)  an increase in the price of housing. 
C)  a decrease in the price of housing. 
D)  an increase in the price of food. 
E)  a decrease in the price of food. 
A)  a decrease in money income. 
B)  an increase in the price of housing. 
C)  a decrease in the price of housing. 
D)  an increase in the price of food. 
E)  a decrease in the price of food.

Question 4

In indifference curve analysis, a point to the left of the consumerʹs 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)  shows a combination of goods that are beyond the income of the household. 
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)  shows a combination of goods that are beyond the income of the household.

Question 5

The figures below show Chrisʹs consumption of specialty coffee per week.
   FIGURE 6-10
-Refer to Figure 6-10. Suppose Chrisʹs income is such that he is able to buy no more than 10 specialty coffees per week. If Chris is maximizing his utility at this level of income, how many specialty coffees is he consuming per week?

Accepted Answer

A)  2 
B)  4 
C)  5 
D)  6 
E)  10 
A)  2 
B)  4 
C)  5 
D)  6 
E)  10

Question 6

FIGURE 6-1
-Refer to Figure 6-1. Marginal utility is zero when total utility is

Accepted Answer

A)  equal to zero. 
B)  is decreasing. 
C)  is increasing. 
D)  equal to marginal utility. 
E)  at its maximum. 
A)  equal to zero. 
B)  is decreasing. 
C)  is increasing. 
D)  equal to marginal utility. 
E)  at its maximum.

Question 7

If consumption of an extra unit of a product delivers a positive marginal utility, then consumption of that additional unit would mean

Accepted Answer

A)  that total utility is also zero. 
B)  that total utility would not change. 
C)  that total utility would be increasing. 
D)  that total utility would be decreasing. 
E)  that the consumer would no longer receive any satisfaction from any consumption of this good. 
A)  that total utility is also zero. 
B)  that total utility would not change. 
C)  that total utility would be increasing. 
D)  that total utility would be decreasing. 
E)  that the consumer would no longer receive any satisfaction from any consumption of this good.

Question 8

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. The maximum utility that a consumer can obtain from toffee bars and bags of cashews per week is

Accepted Answer

A)  22. 
B)  54. 
C)  56. 
D)  64. 
E)  74. 
A)  22. 
B)  54. 
C)  56. 
D)  64. 
E)  74.

Question 9

Assume a person reveals the following demand conditions. At a price of $10, quantity demanded is zero; and at a price of $1, quantity demanded is 10 units.

Accepted Answer

A)  The consumer surplus will be zero at a price of $10. 
B)  The consumer surplus will be the area under the entire demand curve. 
C)  The consumer surplus is zero at a price of $1. 
D)  Demand decreases as the price decreases. 
E)  The lower the price the smaller the consumer surplus. 
A)  The consumer surplus will be zero at a price of $10. 
B)  The consumer surplus will be the area under the entire demand curve. 
C)  The consumer surplus is zero at a price of $1. 
D)  Demand decreases as the price decreases. 
E)  The lower the price the smaller the consumer surplus.

Question 10

Given a particular market demand curve, consumer surplus is

Accepted Answer

A)  less the lower the price and the smaller the output. 
B)  less the lower the price and the larger the output. 
C)  greater the higher the price and the smaller the output. 
D)  greater the lower the price and the smaller the output. 
E)  greater the lower the price and the larger the output. 
A)  less the lower the price and the smaller the output. 
B)  less the lower the price and the larger the output. 
C)  greater the higher the price and the smaller the output. 
D)  greater the lower the price and the smaller the output. 
E)  greater the lower the price and the larger the output.

Question 11

FIGURE 6-2
-Marginal utility analysis predicts a downward-sloping demand curve for good X because

Accepted Answer

A)  as PX falls, the ratio MUX/PX becomes smaller, causing the consumer to purchase more of good X. 
B)  as PX rises, the consumer increases purchases of X such that MUX/PX is equal to MU/P for all other products. 
C)  utility-maximizing consumers equate marginal utility received for each product consumed. 
D)  all demand curves are downward sloping, regardless of the behaviour of consumers. 
E)  as PX falls, the consumer increases purchases of X until MUX/PX is equal to MU/P for all other products. 
A)  as PX falls, the ratio MUX/PX becomes smaller, causing the consumer to purchase more of good X. 
B)  as PX rises, the consumer increases purchases of X such that MUX/PX is equal to MU/P for all other products. 
C)  utility-maximizing consumers equate marginal utility received for each product consumed. 
D)  all demand curves are downward sloping, regardless of the behaviour of consumers. 
E)  as PX falls, the consumer increases purchases of X until MUX/PX is equal to MU/P for all other products.

Question 12

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. How many movies will Dave rent per week such that the consumer surplus on the last unit is zero?

Accepted Answer

A)  1 
B)  3 
C)  5 
D)  6 
E)  7 
A)  1 
B)  3 
C)  5 
D)  6 
E)  7

Question 13

FIGURE 6-9
-Refer to Figure 6-9. In part ii), the consumerʹs move from point Z to point Y is caused by

Accepted Answer

A)  a change in the consumerʹs preferences towards milk. 
B)  an increase in the price of milk. 
C)  an increase in the price of bread. 
D)  a decrease in the price of bread. 
E)  a decrease in money income. 
A)  a change in the consumerʹs preferences towards milk. 
B)  an increase in the price of milk. 
C)  an increase in the price of bread. 
D)  a decrease in the price of bread. 
E)  a decrease in money income.

Question 14

Suppose the price of potatoes falls and we observe a decrease in an individualʹs purchases of potatoes. Which of the following can we infer?

Accepted Answer

A)  The income effect is negative and outweighs the substitution effect. 
B)  The income effect is negative and reinforces the substitution effect. 
C)  The income effect just offsets the substitution effect. 
D)  The income effect is positive and exceeds the substitution effect. 
E)  The substitution effect outweighs the income effect. 
A)  The income effect is negative and outweighs the substitution effect. 
B)  The income effect is negative and reinforces the substitution effect. 
C)  The income effect just offsets the substitution effect. 
D)  The income effect is positive and exceeds the substitution effect. 
E)  The substitution effect outweighs the income effect.

Question 15

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 price of toffee bars is $1 each, bags of cashews are $2 each, and this consumer has $7 per week to spend on these two snacks, how many of each will he/she purchase to maximize utility?

Accepted Answer

A)  0 toffee bars and 3 bags of cashews 
B)  1 toffee bars and 3 bags of cashews 
C)  2 toffee bars and 2 bags of cashews 
D)  3 toffee bars and 2 bags of cashews 
E)  7 toffee bars and 0 bags of cashews 
A)  0 toffee bars and 3 bags of cashews 
B)  1 toffee bars and 3 bags of cashews 
C)  2 toffee bars and 2 bags of cashews 
D)  3 toffee bars and 2 bags of cashews 
E)  7 toffee bars and 0 bags of cashews

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 smallest income effect?

Accepted Answer

A)  groceries 
B)  restaurant meals 
C)  gasoline 
D)  paperclips 
E)  dishwashers 
A)  groceries 
B)  restaurant meals 
C)  gasoline 
D)  paperclips 
E)  dishwashers

Question 17

Sophie consumes two goods paperback novels and visits to the movies.
   FIGURE 6-12
-Refer to Figure 6-12. Sophieʹs movement from point A to point C is

Accepted Answer

A)  the income effect of an increase in the price of paperback novels. 
B)  the total effect of a decrease in the price of paperback novels. 
C)  the income effect of a decrease in the price of paperback novels. 
D)  the substitution effect of an increase in the price of paperback novels. 
E)  the total effect of a change in money income. 
A)  the income effect of an increase in the price of paperback novels. 
B)  the total effect of a decrease in the price of paperback novels. 
C)  the income effect of a decrease in the price of paperback novels. 
D)  the substitution effect of an increase in the price of paperback novels. 
E)  the total effect of a change in money income.

Question 18

FIGURE 6-2
-Consider a consumer who divides his income between spending on good X and good Y. The opportunity cost of good X in terms of good Y is reflected by the

Accepted Answer

A)  absolute price of good X. 
B)  absolute price of good Y. 
C)  ratio of the price of X to the price of Y. 
D)  ratio of the price of Y to the price of X. 
E)  price of good X relative to the prices of all other goods. 
A)  absolute price of good X. 
B)  absolute price of good Y. 
C)  ratio of the price of X to the price of Y. 
D)  ratio of the price of Y to the price of X. 
E)  price of good X relative to the prices of all other goods.

Question 19

At a garage sale, Dominique purchases a sewing machine for $30 when she was willing to pay $55. If the sewing machine costs $200 new, Dominiqueʹs consumer surplus would be

Accepted Answer

A)  $0. 
B)  $25. 
C)  $120. 
D)  $145. 
E)  $170. 
A)  $0. 
B)  $25. 
C)  $120. 
D)  $145. 
E)  $170.

Question 20

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
-Consider the income and substitution effects of price changes. The substitution effect is the change in quantity demanded that occurs

Accepted Answer

A)  as a result of a change in absolute prices, with real income held constant. 
B)  as a result of a change in relative prices with money income held constant. 
C)  as a result of a change in relative prices, with real income held constant. 
D)  when one good is substituted for another. 
E)  with a change in the relative prices of two or more goods. 
A)  as a result of a change in absolute prices, with real income held constant. 
B)  as a result of a change in relative prices with money income held constant. 
C)  as a result of a change in relative prices, with real income held constant. 
D)  when one good is substituted for another. 
E)  with a change in the relative prices of two or more goods.

Exam 6: Consumer Behaviour

FIGURE 6-9 -Refer to Figure 6-9. In part i), the line joining points A, B, and C is known as , which shows how )

The table below shows the total value in dollars) that Andrew gets from playing 9-hole rounds of golf. TABLE 6-3 -Since there is a limited supply of diamonds in the world, the consumption of diamonds

The diagram below shows a set of budget lines facing a household. FIGURE 6-8 -Refer to Figure 6-8. The movement of the budget line from ab to db could be caused by

In indifference curve analysis, a point to the left of the consumerʹs budget line

FIGURE 6-1 -Refer to Figure 6-1. Marginal utility is zero when total utility is

If consumption of an extra unit of a product delivers a positive marginal utility, then consumption of that additional unit would mean

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. The maximum utility that a consumer can obtain from toffee bars and bags of cashews per week is

Assume a person reveals the following demand conditions. At a price of $10, quantity demanded is zero; and at a price of $1, quantity demanded is 10 units.

Given a particular market demand curve, consumer surplus is

FIGURE 6-2 -Marginal utility analysis predicts a downward-sloping demand curve for good X because

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. How many movies will Dave rent per week such that the consumer surplus on the last unit is zero?

FIGURE 6-9 -Refer to Figure 6-9. In part ii), the consumerʹs move from point Z to point Y is caused by

Suppose the price of potatoes falls and we observe a decrease in an individualʹs purchases of potatoes. Which of the following can we infer?

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 smallest income effect?

Sophie consumes two goods paperback novels and visits to the movies. FIGURE 6-12 -Refer to Figure 6-12. Sophieʹs movement from point A to point C is

FIGURE 6-2 -Consider a consumer who divides his income between spending on good X and good Y. The opportunity cost of good X in terms of good Y is reflected by the

At a garage sale, Dominique purchases a sewing machine for $30 when she was willing to pay $55. If the sewing machine costs $200 new, Dominiqueʹs consumer surplus would be

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