Question 1

Figure 3B
 
-Which of the following is the lump- sum budget line in Figure 3B?

Accepted Answer

A) AH 
B) BF 
C) IJ 
D) AG 
A) AH 
B) BF 
C) IJ 
D) AG

Question 2

Excise taxes are imposed when society's primary objective is to:

Accepted Answer

A) encourage behaviour. 
B) change preferences. 
C) raise revenue. 
D) discourage behaviour. 
A) encourage behaviour. 
B) change preferences. 
C) raise revenue. 
D) discourage behaviour.

Question 3

Beth consumes two goods, x1 and x2, and her income is $120. The price of x1 is $10, and the price of x2 is $5. If her indifference curves exhibit a diminishing marginal rate of substitution and if her marginal rate of substitution at bundle (7, 10)is 1, then her utility maximizing bundle is:

Accepted Answer

A) (7, 10). 
B) (6, 12). 
C) on the budget line to the left of (7, 10). 
D) on the budget line to the right of (7, 10). 
A) (7, 10). 
B) (6, 12). 
C) on the budget line to the left of (7, 10). 
D) on the budget line to the right of (7, 10).

Question 4

Percy currently buys soup at $4 per bowl, and tea at $2 per cup. His marginal utility from soup is 12 and his marginal utility from tea is 8. The opportunity cost of purchasing one more cup of tea is:

Accepted Answer

A) 1.5 
B) 2 
C) 0.66 
D) 0.5 
A) 1.5 
B) 2 
C) 0.66 
D) 0.5

Question 5

The fact that most bundles of goods purchased at a given store are more expensive if bought elsewhere:

Accepted Answer

A) is a sign of deeply discounted prices. 
B) can be interpreted in a wide variety of ways. 
C) is a clear proof that this store is cheaper on average than other stores. 
D) is an illustration of the maximization process. 
A) is a sign of deeply discounted prices. 
B) can be interpreted in a wide variety of ways. 
C) is a clear proof that this store is cheaper on average than other stores. 
D) is an illustration of the maximization process.

Question 6

If the price of the house you just bought went up:

Accepted Answer

A) you are worse off because you pay higher taxes for the same house. 
B) you are better off because you can substitute among a wide variety of items in your consumption bundle. 
C) you are better off because you made a quick capital gain. 
D) you are worse off because you face higher prices in the economy. 
A) you are worse off because you pay higher taxes for the same house. 
B) you are better off because you can substitute among a wide variety of items in your consumption bundle. 
C) you are better off because you made a quick capital gain. 
D) you are worse off because you face higher prices in the economy.

Question 7

Price elasticity of demand for a product tends to be greater:

Accepted Answer

A) the lower its price. 
B) the more broadly the product is defined. 
C) the closer substitutes are for it. 
D) the less close substitutes are for it. 
A) the lower its price. 
B) the more broadly the product is defined. 
C) the closer substitutes are for it. 
D) the less close substitutes are for it.

Question 8

Joseph's utility function is given by xA +2xB, where xA denotes his consumption of apples and xB his consumption of bananas. If a banana cost 50 cents and an apple costs also 50 cents, how many bananas will he buy if his income is $10?

Accepted Answer

A) 0 
B) 10 
C) 20 
D) 5 
A) 0 
B) 10 
C) 20 
D) 5

Question 9

Figure 3A
 
-This consumer's utility maximizing consumption bundle is illustrated in Figure 3A. Which assumption about consumer preferences guarantees it is not point B?

Accepted Answer

A) continuity 
B) transitivity 
C) nonsatiation 
D) completeness 
A) continuity 
B) transitivity 
C) nonsatiation 
D) completeness

Question 10

Given the choice between a lump- sum tax and an excise tax that raises the same revenue, a consumer:

Accepted Answer

A) will be hard- pressed to choose one option over the other. 
B) will choose the the excise tax. 
C) will choose the lump- sum tax. 
D) is indifferent between the two. 
A) will be hard- pressed to choose one option over the other. 
B) will choose the the excise tax. 
C) will choose the lump- sum tax. 
D) is indifferent between the two.

Question 11

Stephen's demand for x1 can be expressed by the equation x1=0.4m/P1P2. What is the own price elasticity of demand when income, m, is $20,000, the price of good 1 is $5, and the price of good 2 is $7.50?

Accepted Answer

Own price elasticity can be ca

Question 12

Beth consumes two goods, x1 and x2, and her income is $120. The price of x1 is $10, and the price of
X2 is $5. Her budget line intersects the x2 axis at consumption bundle:

Accepted Answer

A) (0, 24). 
B) (0, 12). 
C) (24, 0). 
D) (12, 0). 
A) (0, 24). 
B) (0, 12). 
C) (24, 0). 
D) (12, 0).

Question 13

Figure 3B
 
-Which of the following is the excise budget line in Figure 3B?

Accepted Answer

A) BF 
B) AG 
C) AH 
D) IJ 
A) BF 
B) AG 
C) AH 
D) IJ

Question 14

Figure 3A
 
-This consumer's utility maximizing consumption bundle is what point in Figure 3A?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 15

If the market demand for oranges is relatively inelastic with respect to price, orange consumers:

Accepted Answer

A) will buy fewer oranges at any higher price but will spend more money on oranges. 
B) will buy fewer oranges at any higher price and will spend less money on oranges. 
C) will buy more oranges at any higher price. 
D) pay no attention to price in their purchasing decisions. 
A) will buy fewer oranges at any higher price but will spend more money on oranges. 
B) will buy fewer oranges at any higher price and will spend less money on oranges. 
C) will buy more oranges at any higher price. 
D) pay no attention to price in their purchasing decisions.

Question 16

Which of the following statements is false on theoretical grounds?

Accepted Answer

A) It is possible that all goods are normal. 
B) It is possible that all goods are inferior. 
C) It is possible that all goods are essential. 
D) It is possible that all goods are inessential. 
A) It is possible that all goods are normal. 
B) It is possible that all goods are inferior. 
C) It is possible that all goods are essential. 
D) It is possible that all goods are inessential.

Question 17

Mr. Inflexible's utility function is U(x1,x2)= min(x1,x2). The price of x1 is $1, the price of x2 is $2, and Mr. Inflexible's budget is $120. His utility maximizing consumption bundle is:

Accepted Answer

A) (20, 40). 
B) (20, 50). 
C) (40, 40). 
D) (60, 30). 
A) (20, 40). 
B) (20, 50). 
C) (40, 40). 
D) (60, 30).

Question 18

Suppose that px = 2 and py = 5. Jane spends her $100 income on 25 units of x and 10 units of y. When the price of x doubled to $10 per unit, Jane's father gave her an extra $50 so that she could buy the same bundle that she did before the price change. Assuming convex indifference curves, which of the following statements is true?

Accepted Answer

A) No conclusions can be drawn regarding Jill's welfare unless we know her utility function 
B) Jill is just as well off as before the price change 
C) Jill is actually better off now than she was before 
D) Jill is worse off now than she was before 
A) No conclusions can be drawn regarding Jill's welfare unless we know her utility function 
B) Jill is just as well off as before the price change 
C) Jill is actually better off now than she was before 
D) Jill is worse off now than she was before

Question 19

If an excise tax on good x and a lump- sum tax put Ms. Arbitrary on the same indifference curve, she would:

Accepted Answer

A) have identical budget lines under the two taxes. 
B) consume more of x given the excise tax than given the lump- sum tax. 
C) prefer the lump- sum tax. 
D) consume no more of x given the excise tax than given the lump- sum tax. 
A) have identical budget lines under the two taxes. 
B) consume more of x given the excise tax than given the lump- sum tax. 
C) prefer the lump- sum tax. 
D) consume no more of x given the excise tax than given the lump- sum tax.

Question 20

If goods A and B are complements

Accepted Answer

A) the price- consumption path is downward sloping 
B) the price- consumption path is upward sloping 
C) the income- consumption line is downward sloping 
D) the income- consumption line is upward sloping 
A) the price- consumption path is downward sloping 
B) the price- consumption path is upward sloping 
C) the income- consumption line is downward sloping 
D) the income- consumption line is upward sloping

Figure 3B -Which of the following is the lump- sum budget line in Figure 3B?

Excise taxes are imposed when society's primary objective is to:

Beth consumes two goods, x₁and x₂, and her income is $120. The price of x₁is $10, and the price of x₂is $5. If her indifference curves exhibit a diminishing marginal rate of substitution and if her marginal rate of substitution at bundle (7, 10)is 1, then her utility maximizing bundle is:

Percy currently buys soup at $4 per bowl, and tea at $2 per cup. His marginal utility from soup is 12 and his marginal utility from tea is 8. The opportunity cost of purchasing one more cup of tea is:

The fact that most bundles of goods purchased at a given store are more expensive if bought elsewhere:

If the price of the house you just bought went up:

Price elasticity of demand for a product tends to be greater:

Joseph's utility function is given by x_A+2x_B, where x_Adenotes his consumption of apples and x_B his consumption of bananas. If a banana cost 50 cents and an apple costs also 50 cents, how many bananas will he buy if his income is $10?

Figure 3A -This consumer's utility maximizing consumption bundle is illustrated in Figure 3A. Which assumption about consumer preferences guarantees it is not point B?

Given the choice between a lump- sum tax and an excise tax that raises the same revenue, a consumer:

Stephen's demand for x1 can be expressed by the equation x1=0.4m/P₁P₂. What is the own price elasticity of demand when income, m, is $20,000, the price of good 1 is $5, and the price of good 2 is $7.50?

Beth consumes two goods, x₁and x₂, and her income is $120. The price of x₁is $10, and the price of X₂is $5. Her budget line intersects the x₂axis at consumption bundle:

Figure 3B -Which of the following is the excise budget line in Figure 3B?

Figure 3A -This consumer's utility maximizing consumption bundle is what point in Figure 3A?

If the market demand for oranges is relatively inelastic with respect to price, orange consumers:

Which of the following statements is false on theoretical grounds?

Mr. Inflexible's utility function is U(x₁,x₂)= min(x₁,x₂). The price of x₁is $1, the price of x₂is $2, and Mr. Inflexible's budget is $120. His utility maximizing consumption bundle is:

If an excise tax on good x and a lump- sum tax put Ms. Arbitrary on the same indifference curve, she would:

If goods A and B are complements

Microeconomics: a Working Methodology

A Theory of Preferences

More 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 3: Demand Theory

Figure 3B -Which of the following is the lump- sum budget line in Figure 3B?

Excise taxes are imposed when society's primary objective is to:

Beth consumes two goods, x1 and x2, and her income is $120. The price of x1 is $10, and the price of x2 is $5. If her indifference curves exhibit a diminishing marginal rate of substitution and if her marginal rate of substitution at bundle (7, 10)is 1, then her utility maximizing bundle is:

Percy currently buys soup at $4 per bowl, and tea at $2 per cup. His marginal utility from soup is 12 and his marginal utility from tea is 8. The opportunity cost of purchasing one more cup of tea is:

The fact that most bundles of goods purchased at a given store are more expensive if bought elsewhere:

If the price of the house you just bought went up:

Price elasticity of demand for a product tends to be greater:

Joseph's utility function is given by xA +2xB, where xA denotes his consumption of apples and xB his consumption of bananas. If a banana cost 50 cents and an apple costs also 50 cents, how many bananas will he buy if his income is $10?

Figure 3A -This consumer's utility maximizing consumption bundle is illustrated in Figure 3A. Which assumption about consumer preferences guarantees it is not point B?

Given the choice between a lump- sum tax and an excise tax that raises the same revenue, a consumer:

Stephen's demand for x1 can be expressed by the equation x1=0.4m/P1P2. What is the own price elasticity of demand when income, m, is $20,000, the price of good 1 is $5, and the price of good 2 is $7.50?

Beth consumes two goods, x1 and x2, and her income is $120. The price of x1 is $10, and the price of X2 is $5. Her budget line intersects the x2 axis at consumption bundle:

Figure 3B -Which of the following is the excise budget line in Figure 3B?

Figure 3A -This consumer's utility maximizing consumption bundle is what point in Figure 3A?

If the market demand for oranges is relatively inelastic with respect to price, orange consumers:

Which of the following statements is false on theoretical grounds?

Mr. Inflexible's utility function is U(x1,x2)= min(x1,x2). The price of x1 is $1, the price of x2 is $2, and Mr. Inflexible's budget is $120. His utility maximizing consumption bundle is:

If an excise tax on good x and a lump- sum tax put Ms. Arbitrary on the same indifference curve, she would:

If goods A and B are complements

Microeconomics: a Working Methodology

A Theory of Preferences

More 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

Beth consumes two goods, x₁and x₂, and her income is $120. The price of x₁is $10, and the price of x₂is $5. If her indifference curves exhibit a diminishing marginal rate of substitution and if her marginal rate of substitution at bundle (7, 10)is 1, then her utility maximizing bundle is:

Joseph's utility function is given by x_A+2x_B, where x_Adenotes his consumption of apples and x_B his consumption of bananas. If a banana cost 50 cents and an apple costs also 50 cents, how many bananas will he buy if his income is $10?

Stephen's demand for x1 can be expressed by the equation x1=0.4m/P₁P₂. What is the own price elasticity of demand when income, m, is $20,000, the price of good 1 is $5, and the price of good 2 is $7.50?

Beth consumes two goods, x₁and x₂, and her income is $120. The price of x₁is $10, and the price of X₂is $5. Her budget line intersects the x₂axis at consumption bundle:

Mr. Inflexible's utility function is U(x₁,x₂)= min(x₁,x₂). The price of x₁is $1, the price of x₂is $2, and Mr. Inflexible's budget is $120. His utility maximizing consumption bundle is: