Question 1

(Figure: Batting Gloves and Baseball Hats I) The income effect of the price increase causes consumption of baseball hats to:

Accepted Answer

A)  decrease by 1. 
B)  decrease by 3. 
C)  decrease by 4. 
D)  increase by 1. 
A)  decrease by 1. 
B)  decrease by 3. 
C)  decrease by 4. 
D)  increase by 1. B

Question 2

Siti is one of many consumers in the yellow onion market. Which of the following statements is (are) TRUE?
I. Siti's demand curve must have the same slope as that of the market demand curve.
II. Siti's demand curve must be to the right of the market demand curve.
III. Siti's demand curve is either as flat as or flatter than the market demand curve.

Accepted Answer

A)  II and III 
B)  I 
C)  II 
D)  III 
A)  II and III 
B)  I 
C)  II 
D)  III D

Question 3

(Figure: Black Jack Video Games and Fries III) What is the demand equation?

Accepted Answer

Note the kink at a price of $5 and a quantity of 2 units. This will lead to a two-segment demand curve with price ranges of $5 < P < $10 and P < $5. The segment above $5 will be Q = 4 - 0.4P and below $4 it will be Q = 14 - 2.4P.

Question 4

(Figure: Beef Jerky and Scallops I)   According to the figure, scallops are a (an) ____ good.

Accepted Answer

A)  normal 
B)  inferior 
C)  Giffen 
D)  superior 
A)  normal 
B)  inferior 
C)  Giffen 
D)  superior

Question 5

(Figure: Good Y and Good X II) Which of the following statements are TRUE?   I. The demand curve for good Y shifted outward.
II) The demand curve for good Y shifted inward.
III) The demand curve for good X shifted inward.
IV) The price of good Y decreased, causing an increase in the quantity demanded of good Y.

Accepted Answer

A)  II and III 
B)  I, III, and IV 
C)  III and IV 
D)  I and IV 
A)  II and III 
B)  I, III, and IV 
C)  III and IV 
D)  I and IV

Question 6

Julie spends all of her income on gasoline and pizza. Gasoline costs $4 per gallon and pizza costs $2 per slice. When Julie's income is $50 per week, she purchases 5 gallons of gasoline and 15 slices of pizza. When her income rises to $80 per week, she buys 15 gallons of gasoline and 10 slices of pizza. Which of the following statements is true?

Accepted Answer

A)  Both gasoline and pizza are normal goods. 
B)  Gasoline is a luxury good. 
C)  Pizza is a luxury good. 
D)  Both gasoline and pizza are inferior goods. 
A)  Both gasoline and pizza are normal goods. 
B)  Gasoline is a luxury good. 
C)  Pizza is a luxury good. 
D)  Both gasoline and pizza are inferior goods.

Question 7

Suppose that a consumer has utility U(X,Y) = 2XY + X and income of $499 to spend on goods X and Y.
a. The prices of X and Y are $1 and $2 per unit, respectively. Use a Lagrangian to solve for the optimal basket of goods.
b. Suppose that the price of X increases to $2 per unit. Use a Lagrangian to solve for the new optimal basket of goods. Find the total effect of the price change on the consumption of each good.
c. Use a Lagrangian to find the substitution effect of the increase in the price of good X on the consumption of each good. What income would the consumer need to attain the original level of utility if the price of X increased to $2 per unit?
d. Find the income effect of the increase in the price of good X on the consumption of each good. Are the goods normal or inferior? Explain.
e. Show that the total effect of the increase in the price of X is equal to the sum of the substitution effect and the income effect.

Accepted Answer

a. Write out the constrained utility max

Question 8

Suppose a consumer spends her income on lobster and frozen pizza. Assume that the consumer has an income of $60, the price of lobster is $6, and the price of frozen pizza is $6.
a. Using indifference curves and budget constraints, show the income and substitution effects associated with a decrease in the price of frozen pizza. Assume frozen pizza is an inferior good and lobster is a normal good.
b. Using indifference curves and budget constraints, show the income and substitution effects associated with a decrease in the price of frozen pizza. Assume frozen pizza is a Giffen good and lobster is a normal good.

Accepted Answer

a. @#IMG-DLM& For an inferior good, the income eff

Question 9

Suppose that there are two goods, X and Y. The utility function is   
The price of Y is $2 per unit and the price of X is P. Derive the Hicksian demand curve for X for utility equal to 2,000 units.

Accepted Answer

Write out the constrained optimization p

Question 10

(Figure: Quantity of Good Y and X IV) The price of good Y decreased from $20 to $10.   Goods X and Y are considered ____.

Accepted Answer

A)  complements 
B)  substitutes 
C)  unrelated goods 
D)  inferior goods 
A)  complements 
B)  substitutes 
C)  unrelated goods 
D)  inferior goods

Question 11

Suppose that there are two goods, X and Y. The utility function is U = XY + 2Y. The price of X is P, and the price of Y is $5. Income is $60. The demand for X as a function of P is X = ____.

Accepted Answer

A)  (30 - P) / P 
B)  (20 - P) / P 
C)  (2 - P) / P 
D)  2P 
A)  (30 - P) / P 
B)  (20 - P) / P 
C)  (2 - P) / P 
D)  2P

Question 12

To use calculus to decompose the total effect of a price change into substitution and income effects, it is necessary to solve all of the following EXCEPT the consumer's:

Accepted Answer

A)  utility-maximization problem at the original prices. 
B)  utility-maximization problem at the new prices. 
C)  expenditure-minimization problem at the new prices and original utility level. 
D)  expenditure-minimization problem at the original prices and new utility level. 
A)  utility-maximization problem at the original prices. 
B)  utility-maximization problem at the new prices. 
C)  expenditure-minimization problem at the new prices and original utility level. 
D)  expenditure-minimization problem at the original prices and new utility level.

Question 13

Eidi has $100 to spend on video blackjack at $1 per game and French fries at $1 per basket.
​
Graph Eidi's budget constraint, putting video games on the vertical axis and French fries on the horizontal axis. Using an indifference curve, show Eidi's optimal consumption bundle at 20 blackjack games and 80 baskets of fries.

Accepted Answer

The answer of Eidi has $100 to spend on video...

Question 14

(Figure: Quantity of Good Y and X IV) The price of good Y decreased from $20 to $10.   The cross-price elasticity of demand for good X with respect to good Y is ____.

Accepted Answer

A)  positive 
B)  negative 
C)  zero 
D)  infinite 
A)  positive 
B)  negative 
C)  zero 
D)  infinite

Question 15

(Figure: Beef Jerky and Scallops I)   According to the figure, the substitution effect associated with the increase in the price of scallops is a movement from ____ to _____ scallops.

Accepted Answer

A)  6; 5 
B)  6; 2 
C)  5; 2 
D)  5; 6 
A)  6; 5 
B)  6; 2 
C)  5; 2 
D)  5; 6

Question 16

Which of the following statements about Hicksian demand curves is FALSE?

Accepted Answer

A)  They are also known as compensated demand curves. 
B)  They can be derived by solving the consumer's expenditure minimization problem to find the bundle of goods after the price change that would give her the same level of utility as before the price change. 
C)  They indicate that the quantity demanded of X is inversely related to the price of X, all else being equal. 
D)  They have an income effect as well as a substitution effect. 
A)  They are also known as compensated demand curves. 
B)  They can be derived by solving the consumer's expenditure minimization problem to find the bundle of goods after the price change that would give her the same level of utility as before the price change. 
C)  They indicate that the quantity demanded of X is inversely related to the price of X, all else being equal. 
D)  They have an income effect as well as a substitution effect.

Question 17

Yasmine has $40 weekly to spend on restaurant meals (priced at $10 per meal) and bowling (priced at $2 per game).
a. Graph Yasmine's budget constraint, placing restaurant meals on the vertical axis and bowling games on the horizontal axis. Illustrate Yasmine's optimal consumption bundle, composed of 1 restaurant meal and 15 games of bowling.
b. Suppose that the price of bowling increases to $4 per game. Illustrate Yasmine's new budget constraint along with her new optimal consumption bundle, composed of 2 restaurant meals and 5 games of bowling.
c. Draw Yasmine's demand curve for bowling, indicating her quantities demanded at $2 and $4.

Accepted Answer

The answer of Yasmine has $40 weekly to spend on...

Question 18

(Figure: Good Y and Good X V) In panel (a), the price of good X is $1.50 per unit and the price of good Y is $3 per unit. In panel (b), the consumer's income increased from $400 to $480.
Panel (a) Panel (b)  
 
Using panel (b), good X is a (an) _____ good.

Accepted Answer

A)  necessity 
B)  luxury 
C)  inferior 
D)  Giffen 
A)  necessity 
B)  luxury 
C)  inferior 
D)  Giffen

Question 19

(Figure: Books and Paintings I) Which of the following statements is TRUE?

Accepted Answer

A)  Books are an inferior good at income levels greater than those associated with bundle B. 
B)  Books are an inferior good at income levels greater than those associated with bundle C. 
C)  Both books and paintings are normal goods up to the income level corresponding to bundle D. 
D)  Paintings are an inferior good at income levels higher than those associated with these bundles. 
A)  Books are an inferior good at income levels greater than those associated with bundle B. 
B)  Books are an inferior good at income levels greater than those associated with bundle C. 
C)  Both books and paintings are normal goods up to the income level corresponding to bundle D. 
D)  Paintings are an inferior good at income levels higher than those associated with these bundles.

Question 20

Suppose that there are two goods, X and Y. The utility function is   
The price of Y is $1 per unit and the price of X is P. Derive the Hicksian demand curve for X for utility equal to 50,000 units.

Accepted Answer

Write out the constrained optimization p

(Figure: Batting Gloves and Baseball Hats I) The income effect of the price increase causes consumption of baseball hats to:

(Figure: Black Jack Video Games and Fries III) What is the demand equation?

(Figure: Beef Jerky and Scallops I) According to the figure, scallops are a (an) ____ good.

Suppose that there are two goods, X and Y. The utility function is The price of Y is $2 per unit and the price of X is P. Derive the Hicksian demand curve for X for utility equal to 2,000 units.

(Figure: Quantity of Good Y and X IV) The price of good Y decreased from $20 to $10. Goods X and Y are considered ____.

Suppose that there are two goods, X and Y. The utility function is U = XY + 2Y. The price of X is P, and the price of Y is $5. Income is $60. The demand for X as a function of P is X = ____.

To use calculus to decompose the total effect of a price change into substitution and income effects, it is necessary to solve all of the following EXCEPT the consumer's:

(Figure: Quantity of Good Y and X IV) The price of good Y decreased from $20 to $10. The cross-price elasticity of demand for good X with respect to good Y is ____.

(Figure: Beef Jerky and Scallops I) According to the figure, the substitution effect associated with the increase in the price of scallops is a movement from to _ scallops.

Which of the following statements about Hicksian demand curves is FALSE?

(Figure: Good Y and Good X V) In panel (a), the price of good X is $1.50 per unit and the price of good Y is $3 per unit. In panel (b), the consumer's income increased from $400 to $480. Panel (a) Panel (b) Using panel (b), good X is a (an) _____ good.

(Figure: Books and Paintings I) Which of the following statements is TRUE?

Suppose that there are two goods, X and Y. The utility function is The price of Y is $1 per unit and the price of X is P. Derive the Hicksian demand curve for X for utility equal to 50,000 units.

Adventures in Microeconomics

Supply and Demand

Using Supply and Demand to Analyze Markets

Consumer Behavior

Producer Behavior

Costs

Supply in a Competitive Market

Market Power and Monopoly

Market Power and Pricing Strategies

Imperfect Competition

Game Theory

Factor Markets

Investment, Time, and Insurance

General Equilibrium

Asymmetric Information

Externalities and Public Goods

Behavioral and Experimental Economics

Filters

Exam 5: Individual and Market Demand

(Figure: Batting Gloves and Baseball Hats I) The income effect of the price increase causes consumption of baseball hats to:

(Figure: Black Jack Video Games and Fries III) What is the demand equation?

(Figure: Beef Jerky and Scallops I) According to the figure, scallops are a (an) ____ good.

Suppose that there are two goods, X and Y. The utility function is The price of Y is $2 per unit and the price of X is P. Derive the Hicksian demand curve for X for utility equal to 2,000 units.

(Figure: Quantity of Good Y and X IV) The price of good Y decreased from $20 to $10. Goods X and Y are considered ____.

Suppose that there are two goods, X and Y. The utility function is U = XY + 2Y. The price of X is P, and the price of Y is $5. Income is $60. The demand for X as a function of P is X = ____.

To use calculus to decompose the total effect of a price change into substitution and income effects, it is necessary to solve all of the following EXCEPT the consumer's:

(Figure: Quantity of Good Y and X IV) The price of good Y decreased from $20 to $10. The cross-price elasticity of demand for good X with respect to good Y is ____.

(Figure: Beef Jerky and Scallops I) According to the figure, the substitution effect associated with the increase in the price of scallops is a movement from ____ to _____ scallops.

Which of the following statements about Hicksian demand curves is FALSE?

(Figure: Good Y and Good X V) In panel (a), the price of good X is $1.50 per unit and the price of good Y is $3 per unit. In panel (b), the consumer's income increased from $400 to $480. Panel (a) Panel (b) Using panel (b), good X is a (an) _____ good.

(Figure: Books and Paintings I) Which of the following statements is TRUE?

Suppose that there are two goods, X and Y. The utility function is The price of Y is $1 per unit and the price of X is P. Derive the Hicksian demand curve for X for utility equal to 50,000 units.

Adventures in Microeconomics

Supply and Demand

Using Supply and Demand to Analyze Markets

Consumer Behavior

Producer Behavior

Costs

Supply in a Competitive Market

Market Power and Monopoly

Market Power and Pricing Strategies

Imperfect Competition

Game Theory

Factor Markets

Investment, Time, and Insurance

General Equilibrium

Asymmetric Information

Externalities and Public Goods

Behavioral and Experimental Economics

Filters

(Figure: Beef Jerky and Scallops I) According to the figure, the substitution effect associated with the increase in the price of scallops is a movement from to _ scallops.