Question 1

The opportunity cost of time is:

Accepted Answer

A) the price marked on a product. 
B) the wage rate. 
C) the product of the wage rate and the time required for consumption. 
D) the sum of the wage rate and the time required for consumption. 
A) the price marked on a product. 
B) the wage rate. 
C) the product of the wage rate and the time required for consumption. 
D) the sum of the wage rate and the time required for consumption. C

Question 2

If a good is neither normal nor inferior, then:

Accepted Answer

A) EV is larger than CV. 
B) there is no CS. 
C) EV is smaller than CS. 
D) EV, CV, and CS are the same. 
A) EV is larger than CV. 
B) there is no CS. 
C) EV is smaller than CS. 
D) EV, CV, and CS are the same. D

Question 3

Better apples tend to get shipped out because:

Accepted Answer

A) nonlocals tend to demand better apples. 
B) better apples keep better. 
C) better apples fall in relative price as they travel further. 
D) better apples are normal goods. 
A) nonlocals tend to demand better apples. 
B) better apples keep better. 
C) better apples fall in relative price as they travel further. 
D) better apples are normal goods. C

Question 4

The water diamond paradox illustrates that:

Accepted Answer

A) diamonds are more abundant than water. 
B) water is more abundant than diamonds. 
C) people foolishly waste water. 
D) diamonds are more important than water. 
A) diamonds are more abundant than water. 
B) water is more abundant than diamonds. 
C) people foolishly waste water. 
D) diamonds are more important than water.

Question 5

For an inferior good:

Accepted Answer

A) the income effect is positive when the price decreases. 
B) the income effect is negative when the price increases. 
C) the income effect is zero when the price increases. 
D) the income effect is positive when the price increases. 
A) the income effect is positive when the price decreases. 
B) the income effect is negative when the price increases. 
C) the income effect is zero when the price increases. 
D) the income effect is positive when the price increases.

Question 6

For normal goods the substitution effect is:

Accepted Answer

A) unrelated to the price. 
B) negatively related to the price. 
C) positively related to the price. 
D) ambiguously related to the price. 
A) unrelated to the price. 
B) negatively related to the price. 
C) positively related to the price. 
D) ambiguously related to the price.

Question 7

Figure 4A
 
-The indifference map in Figure 4A illustrates the effect of a:

Accepted Answer

A) price decrease in x1. 
B) price increase in x2. 
C) change in the consumer's income. 
D) price decrease in x2. 
A) price decrease in x1. 
B) price increase in x2. 
C) change in the consumer's income. 
D) price decrease in x2.

Question 8

Joe's utility function is given by U(x,y)= min[x,y] . The price of x is $4 and the price of y is $2 and Joe's income is $12. If the price of x decreases to $2 but Joe's income stays constant, then:

Accepted Answer

A) the substitution effect is zero. 
B) the substitution effect exceeds the income effect. 
C) the income effect is zero. 
D) the total effect is zero. 
A) the substitution effect is zero. 
B) the substitution effect exceeds the income effect. 
C) the income effect is zero. 
D) the total effect is zero.

Question 9

If the Laspeyres quantity index is less than 1, then:

Accepted Answer

A) the consumption bundle in period 1 is preferred to that of period 0. 
B) the consumption bundles cannot be compared. 
C) both consumption bundles are equally preferred. 
D) the consumption bundle in period 0 is preferred to that of period 1. 
A) the consumption bundle in period 1 is preferred to that of period 0. 
B) the consumption bundles cannot be compared. 
C) both consumption bundles are equally preferred. 
D) the consumption bundle in period 0 is preferred to that of period 1.

Question 10

Giffen goods are goods for which the price and quantity:

Accepted Answer

A) move in the same direction. 
B) move in separate directions. 
C) are independent of each other. 
D) move in opposite directions. 
A) move in the same direction. 
B) move in separate directions. 
C) are independent of each other. 
D) move in opposite directions.

Question 11

If a good is neither normal nor inferior, then:

Accepted Answer

A) there is no EV. 
B) EV is larger than CV. 
C) EV is smaller than CV. 
D) EV and CV are the same. 
A) there is no EV. 
B) EV is larger than CV. 
C) EV is smaller than CV. 
D) EV and CV are the same.

Question 12

If a good is normal, then:

Accepted Answer

A) the income effect is larger than the substitution effect. 
B) the income effect moves in the same direction as the substitution effect. 
C) the income effect moves in the opposite direction of the substitution effect. 
D) the income and substitution effects are ambiguous. 
A) the income effect is larger than the substitution effect. 
B) the income effect moves in the same direction as the substitution effect. 
C) the income effect moves in the opposite direction of the substitution effect. 
D) the income and substitution effects are ambiguous.

Question 13

Joe's utility function is given by U(x,y)= min[x,y]. The price of x is $4 and the price of y is $2 and Joe's income is $12. If the price of x decreases to $2 but Joe's income stays constant, then:

Accepted Answer

A) the substitution effect is equal to 3. 
B) the substitution effect is equal to 2. 
C) the substitution effect is zero. 
D) the substitution effect is equal to 1. 
A) the substitution effect is equal to 3. 
B) the substitution effect is equal to 2. 
C) the substitution effect is zero. 
D) the substitution effect is equal to 1.

Question 14

Costco typically has lower prices than its competitors and charges a membership fee. The membership fee is an example of

Accepted Answer

A) substitution effect 
B) consumer surplus 
C) compensating variation 
D) equivalent variation 
A) substitution effect 
B) consumer surplus 
C) compensating variation 
D) equivalent variation

Question 15

CV and EV are equal when:

Accepted Answer

A) the substitution effect is negative. 
B) when the income effect is non- zero. 
C) they equal the change in consumer's surplus. 
D) both A and B are correct 
A) the substitution effect is negative. 
B) when the income effect is non- zero. 
C) they equal the change in consumer's surplus. 
D) both A and B are correct

Question 16

When the price of a good changes, the substitution effect can found by comparing the equilibrium quantities purchased:

Accepted Answer

A) on the new budget line and a line parallel to the old budget line tangent to the new indifference curve. 
B) on the old budget line and on the new budget line. 
C) the new budget line and a line parallel to the new budget line tangent to the old indifference curve. 
D) on the old budget line and a line parallel to the new budget line tangent to the old indifference curve. 
A) on the new budget line and a line parallel to the old budget line tangent to the new indifference curve. 
B) on the old budget line and on the new budget line. 
C) the new budget line and a line parallel to the new budget line tangent to the old indifference curve. 
D) on the old budget line and a line parallel to the new budget line tangent to the old indifference curve.

Question 17

For a Giffen good:

Accepted Answer

A) the income effect is positive and is dominated by the substitution effect 
B) the income effect is negative and dominates the substitution effect 
C) the income effect is positive and dominates the substitution effect 
D) the income effect is negative and is dominated by the substitution effect 
A) the income effect is positive and is dominated by the substitution effect 
B) the income effect is negative and dominates the substitution effect 
C) the income effect is positive and dominates the substitution effect 
D) the income effect is negative and is dominated by the substitution effect

Question 18

Assume convex preferences and a negative cross price elasticity. If the price of good 1 increases, the substitution effect causes

Accepted Answer

A) consumption of good 1 to rise and good 1 to fall 
B) consumption of good 2 to rise and good 1 to fall 
C) consumption of good 2 to fall and good 1 to fall 
D) consumption of good 1 to fall and good 2 to remain unchanged 
A) consumption of good 1 to rise and good 1 to fall 
B) consumption of good 2 to rise and good 1 to fall 
C) consumption of good 2 to fall and good 1 to fall 
D) consumption of good 1 to fall and good 2 to remain unchanged

Question 19

There is some evidence that the introduction of mandatory seat belts while driving has led to more accidents. If this is the case, it must be that:

Accepted Answer

A) substitution is not involved in this outcome. 
B) the economists making this case believe there are many drivers deciding to have an accident on purpose. 
C) there is no parallel between this effect and the similar one offered by the advent of air bags. 
D) seat belts offered some perverse incentives to drivers. 
A) substitution is not involved in this outcome. 
B) the economists making this case believe there are many drivers deciding to have an accident on purpose. 
C) there is no parallel between this effect and the similar one offered by the advent of air bags. 
D) seat belts offered some perverse incentives to drivers.

Question 20

Joe's utility function is given by U(x,y)= min[x,y]. The price of x is $4 and the price of y is $2 and Joe's income is $12. If the price of x decreases to $2 but Joe's income stays constant, then:

Accepted Answer

A) the income effect is zero. 
B) the income effect is equal to 2. 
C) the income effect is equal to 1. 
D) the total effect is zero. 
A) the income effect is zero. 
B) the income effect is equal to 2. 
C) the income effect is equal to 1. 
D) the total effect is zero.

The opportunity cost of time is:

If a good is neither normal nor inferior, then:

Better apples tend to get shipped out because:

The water diamond paradox illustrates that:

For an inferior good:

For normal goods the substitution effect is:

Figure 4A -The indifference map in Figure 4A illustrates the effect of a:

Joe's utility function is given by U(x,y)= min[x,y] . The price of x is $4 and the price of y is $2 and Joe's income is $12. If the price of x decreases to $2 but Joe's income stays constant, then:

If the Laspeyres quantity index is less than 1, then:

Giffen goods are goods for which the price and quantity:

If a good is neither normal nor inferior, then:

If a good is normal, then:

Joe's utility function is given by U(x,y)= min[x,y]. The price of x is $4 and the price of y is $2 and Joe's income is $12. If the price of x decreases to $2 but Joe's income stays constant, then:

Costco typically has lower prices than its competitors and charges a membership fee. The membership fee is an example of

CV and EV are equal when:

When the price of a good changes, the substitution effect can found by comparing the equilibrium quantities purchased:

For a Giffen good:

Assume convex preferences and a negative cross price elasticity. If the price of good 1 increases, the substitution effect causes

There is some evidence that the introduction of mandatory seat belts while driving has led to more accidents. If this is the case, it must be that:

Joe's utility function is given by U(x,y)= min[x,y]. The price of x is $4 and the price of y is $2 and Joe's income is $12. If the price of x decreases to $2 but Joe's income stays constant, then:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

Exam 4: More Demand Theory

The opportunity cost of time is:

If a good is neither normal nor inferior, then:

Better apples tend to get shipped out because:

The water diamond paradox illustrates that:

For an inferior good:

For normal goods the substitution effect is:

Figure 4A -The indifference map in Figure 4A illustrates the effect of a:

Joe's utility function is given by U(x,y)= min[x,y] . The price of x is $4 and the price of y is $2 and Joe's income is $12. If the price of x decreases to $2 but Joe's income stays constant, then:

If the Laspeyres quantity index is less than 1, then:

Giffen goods are goods for which the price and quantity:

If a good is neither normal nor inferior, then:

If a good is normal, then:

Joe's utility function is given by U(x,y)= min[x,y]. The price of x is $4 and the price of y is $2 and Joe's income is $12. If the price of x decreases to $2 but Joe's income stays constant, then:

Costco typically has lower prices than its competitors and charges a membership fee. The membership fee is an example of

CV and EV are equal when:

When the price of a good changes, the substitution effect can found by comparing the equilibrium quantities purchased:

For a Giffen good:

Assume convex preferences and a negative cross price elasticity. If the price of good 1 increases, the substitution effect causes

There is some evidence that the introduction of mandatory seat belts while driving has led to more accidents. If this is the case, it must be that:

Joe's utility function is given by U(x,y)= min[x,y]. The price of x is $4 and the price of y is $2 and Joe's income is $12. If the price of x decreases to $2 but Joe's income stays constant, then:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

Intertemporal Decision Making and Capital Values

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters