Question 1

The income effect refers to:

Accepted Answer

A) changes in income because of changes in business investment. 
B) changes in money or nominal income because of changes in wages. 
C) a change in the quantity demanded of a good because of an implicit change in the buyer's income caused by a change in the price of a good or service. 
D) a change in the quantity demanded of a good because of a change in the buyer's money income. 
A) changes in income because of changes in business investment. 
B) changes in money or nominal income because of changes in wages. 
C) a change in the quantity demanded of a good because of an implicit change in the buyer's income caused by a change in the price of a good or service. 
D) a change in the quantity demanded of a good because of a change in the buyer's money income.

Question 2

The law of diminishing marginal utility indicates that the marginal utility curve eventually becomes:

Accepted Answer

A) vertical. 
B) U-shaped. 
C) upward sloping. 
D) downward sloping. 
A) vertical. 
B) U-shaped. 
C) upward sloping. 
D) downward sloping.

Question 3

Which of the following is (are)true?

Accepted Answer

A) The goal of a consumer is to maximize utility. 
B) A consumer will consume each good at a level that yields the maximum utility possible. 
C) Rich consumers are not constrained by income or budget constraints. 
D) A and C are true. 
A) The goal of a consumer is to maximize utility. 
B) A consumer will consume each good at a level that yields the maximum utility possible. 
C) Rich consumers are not constrained by income or budget constraints. 
D) A and C are true.

Question 4

If you are willing to give up 10 units of good Y (on the vertical axis)for 5 units of good X (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:

Accepted Answer

A) 0.5. 
B) 2. 
C) 5. 
D) 10. 
A) 0.5. 
B) 2. 
C) 5. 
D) 10.

Question 5

Assume that the total utilities for the fifth and sixth units of a good consumed are 83 and 97, respectively.The marginal utility for the sixth unit is:

Accepted Answer

A) -14. 
B) 14. 
C) 83. 
D) 97. 
A) -14. 
B) 14. 
C) 83. 
D) 97.

Question 6

The term utility is used by economists in describing consumer preferences.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend on both goods, the maximum quantity of Cracker Jacks that you can purchase is _______ boxes.

Accepted Answer

A) 5 
B) 10 
C) 20 
D) 40 
A) 5 
B) 10 
C) 20 
D) 40

Question 8

-In terms of indifference curves, the equilibrium-purchase combination is determined by the:

Accepted Answer

A) intersection of a budget line and an indifference curve. 
B) tangency of a budget line and an indifference curve. 
C) tangency of a price consumption curve and an income consumption curve. 
D) intersection of an income consumption curve and a price consumption curve. 
A) intersection of a budget line and an indifference curve. 
B) tangency of a budget line and an indifference curve. 
C) tangency of a price consumption curve and an income consumption curve. 
D) intersection of an income consumption curve and a price consumption curve.

Question 9

-(Exhibit: Consumer Equilibrium 3)Assume that you are consuming the combination of goods at point I.Given budget constraint FL, utility can:

Accepted Answer

A) not be increased. 
B) be increased by consuming more of good A and less of good B. 
C) be increased by consuming less of good A and more of good B. 
D) be increased by consuming more of both goods. 
A) not be increased. 
B) be increased by consuming more of good A and less of good B. 
C) be increased by consuming less of good A and more of good B. 
D) be increased by consuming more of both goods.

Question 10

A budget constraint is:

Accepted Answer

A) a consumer's restriction on spending. 
B) a consumer's total utility. 
C) a consumer's marginal utility. 
D) the income effect. 
A) a consumer's restriction on spending. 
B) a consumer's total utility. 
C) a consumer's marginal utility. 
D) the income effect.

Question 11

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend and decide to purchase 8 bags of M&Ms, the maximum quantity of Cracker Jacks that you can purchase is ________ boxes.

Accepted Answer

A) 10 
B) 12 
C) 16 
D) 20 
A) 10 
B) 12 
C) 16 
D) 20

Question 12

If a consumer purchases a combination of commodities x and y such that MUx/Px = 20 and MUy/Py = 10, to maximize utility, the consumers should buy.

Accepted Answer

A) less of x and more of y. 
B) more of x and less of y. 
C) more of both x and y. 
D) less of both x and y. 
A) less of x and more of y. 
B) more of x and less of y. 
C) more of both x and y. 
D) less of both x and y.

Question 13

When total utility is at a maximum, marginal utility is:

Accepted Answer

A) rising. 
B) at its average value. 
C) at a maximum. 
D) zero. 
A) rising. 
B) at its average value. 
C) at a maximum. 
D) zero.

Question 14

Higher indifference curves:

Accepted Answer

A) have lesser levels of utility than lower curves. 
B) have greater levels of utility than lower curves. 
C) have the same levels of utility as lower curves. 
D) may have either lesser or greater levels of utility than lower curves. 
A) have lesser levels of utility than lower curves. 
B) have greater levels of utility than lower curves. 
C) have the same levels of utility as lower curves. 
D) may have either lesser or greater levels of utility than lower curves.

Question 15

Greater levels of utility are achieved:

Accepted Answer

A) on higher indifference curves. 
B) on lower indifference curves. 
C) by moving up to the left on a given indifference curve. 
D) by moving down to the right on a given indifference curve. 
A) on higher indifference curves. 
B) on lower indifference curves. 
C) by moving up to the left on a given indifference curve. 
D) by moving down to the right on a given indifference curve.

Question 16

A change in the ability to purchase a good because its price has increased is most closely related to the:

Accepted Answer

A) output effect. 
B) income effect. 
C) nominal effect. 
D) substitution effect. 
A) output effect. 
B) income effect. 
C) nominal effect. 
D) substitution effect.

Question 17

If the price of a good falls, the consumer will increase the quantity demanded.

Accepted Answer

A) True 
 B)False

Question 18

If a consumer purchases a combination of commodities a and b such that MUa/Pa = 50 and MUb/Pb = 30, to maximize utility, the consumer should buy:

Accepted Answer

A) less of both a and b. 
B) more of both a and b. 
C) more of a and less of b. 
D) less of a and more of b. 
A) less of both a and b. 
B) more of both a and b. 
C) more of a and less of b. 
D) less of a and more of b.

Question 19

Market demand curves are found by:

Accepted Answer

A) determining the quantities demanded by all buyers at each price. 
B) adding the individual supply curves at each price. 
C) recording the quantities supplied in the market at each price. 
D) doing all of the above. 
A) determining the quantities demanded by all buyers at each price. 
B) adding the individual supply curves at each price. 
C) recording the quantities supplied in the market at each price. 
D) doing all of the above.

Question 20

-(Exhibit: Consumer Equilibrium 3)An unattainable level of utility, given budget constraint FL, is at point:

Accepted Answer

A) G. 
B) H. 
C) I. 
D) J. 
A) G. 
B) H. 
C) I. 
D) J.

Exam 7: Aggregate Demand and Aggregate Supply

The income effect refers to:

The law of diminishing marginal utility indicates that the marginal utility curve eventually becomes:

Which of the following is (are)true?

If you are willing to give up 10 units of good Y (on the vertical axis)for 5 units of good X (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:

Assume that the total utilities for the fifth and sixth units of a good consumed are 83 and 97, respectively.The marginal utility for the sixth unit is:

The term utility is used by economists in describing consumer preferences.

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend on both goods, the maximum quantity of Cracker Jacks that you can purchase is _______ boxes.

-In terms of indifference curves, the equilibrium-purchase combination is determined by the:

-(Exhibit: Consumer Equilibrium 3)Assume that you are consuming the combination of goods at point I.Given budget constraint FL, utility can:

A budget constraint is:

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend and decide to purchase 8 bags of M&Ms, the maximum quantity of Cracker Jacks that you can purchase is ________ boxes.

If a consumer purchases a combination of commodities x and y such that MUx/Px = 20 and MUy/Py = 10, to maximize utility, the consumers should buy.

When total utility is at a maximum, marginal utility is:

Higher indifference curves:

Greater levels of utility are achieved:

A change in the ability to purchase a good because its price has increased is most closely related to the:

If the price of a good falls, the consumer will increase the quantity demanded.

If a consumer purchases a combination of commodities a and b such that MUa/Pa = 50 and MUb/Pb = 30, to maximize utility, the consumer should buy:

Market demand curves are found by:

-(Exhibit: Consumer Equilibrium 3)An unattainable level of utility, given budget constraint FL, is at point:

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Economic Growth

The Nature and Creation of Money

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Inflation and Unemployment

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Macroeconomics: the Big Picture

Measuring Total Income and Output

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Macro Inflation and Unemployment

Macro a Brief History of Macroeconomic Thought and Policy

Economic Development

Socialist Economies in Transition

Filters

If a consumer purchases a combination of commodities x and y such that MU_x/P_x = 20 and MU_y/P_y = 10, to maximize utility, the consumers should buy.

If a consumer purchases a combination of commodities a and b such that MU_a/P_a = 50 and MU_b/P_b = 30, to maximize utility, the consumer should buy: