Question 1

A production function describes the

Accepted Answer

A) intellectual possibilities for converting factor inputs into outputs. 
B) amount of resources available to the representative firm. 
C) technological possibilities for converting factor inputs into outputs. 
D) actual process of converting factor inputs into outputs. 
E) amount of labour available to produce outputs. 
A) intellectual possibilities for converting factor inputs into outputs. 
B) amount of resources available to the representative firm. 
C) technological possibilities for converting factor inputs into outputs. 
D) actual process of converting factor inputs into outputs. 
E) amount of labour available to produce outputs. C

Question 2

We assume that the representative consumer's preferences exhibit the properties that

Accepted Answer

A) more is always preferred to less and that each consumer has one strictly favourite good. 
B) more is always preferred to less and that consumers do not like diversity in his or her consumption bundle. 
C) consumption and leisure are both normal goods and that the consumer likes diversity in his or her consumption bundle. 
D) they be convex and that more is always preferred to less. 
E) each consumer has one strictly preferred good and that consumption and leisure are both normal goods. 
A) more is always preferred to less and that each consumer has one strictly favourite good. 
B) more is always preferred to less and that consumers do not like diversity in his or her consumption bundle. 
C) consumption and leisure are both normal goods and that the consumer likes diversity in his or her consumption bundle. 
D) they be convex and that more is always preferred to less. 
E) each consumer has one strictly preferred good and that consumption and leisure are both normal goods. C

Question 3

A consumer's real disposable income equals

Accepted Answer

A) total income minus wage income minus taxes. 
B) total income minus profit income minus taxes. 
C) wage income plus profit income minus taxes. 
D) consumption plus savings minus taxes. 
E) wage income plus consumption expenditures. 
A) total income minus wage income minus taxes. 
B) total income minus profit income minus taxes. 
C) wage income plus profit income minus taxes. 
D) consumption plus savings minus taxes. 
E) wage income plus consumption expenditures. C

Question 4

Perfect substitutes will have

Accepted Answer

A) reverse L-shaped indifference curves. 
B) curved indifference curve, bowed out from the origin. 
C) L-shaped indifference curves. 
D) straight line indifference curves. 
E) curved indifference curves, bowed in from the origin. 
A) reverse L-shaped indifference curves. 
B) curved indifference curve, bowed out from the origin. 
C) L-shaped indifference curves. 
D) straight line indifference curves. 
E) curved indifference curves, bowed in from the origin.

Question 5

The principle that consumers and firms optimize

Accepted Answer

A) is not helpful because some economic agents may behave irrationally. 
B) is helpful because it determines the available technology. 
C) is explained by their work-leisure choices. 
D) only applies to perfectly competitive markets. 
E) is helpful because it allows us to analyze how economic agents respond to changes in their environment. 
A) is not helpful because some economic agents may behave irrationally. 
B) is helpful because it determines the available technology. 
C) is explained by their work-leisure choices. 
D) only applies to perfectly competitive markets. 
E) is helpful because it allows us to analyze how economic agents respond to changes in their environment.

Question 6

In a one-period economy, the expression for the budget constraint is

Accepted Answer

A)  $C = w ( N s + l ) + \pi - T$. 
B)  $C = w ( N s + l ) + \pi + T$. 
C)  $C = w ( h + l ) + \pi - T$. 
D)  $C = w N s + \pi - T$. 
E)  $C = w l = w h + \pi - T$. 
A)  $C = w ( N s + l ) + \pi - T$. 
B)  $C = w ( N s + l ) + \pi + T$. 
C)  $C = w ( h + l ) + \pi - T$. 
D)  $C = w N s + \pi - T$. 
E)  $C = w l = w h + \pi - T$.

Question 7

The consumer's work-leisure choice problem focuses on how a consumer's work-leisure decision is affected by the consumer's

Accepted Answer

A) preferences and psychology. 
B) preferences and productivity. 
C) preferences and constraints. 
D) productivity and psychology. 
E) psychology and preferences. 
A) preferences and psychology. 
B) preferences and productivity. 
C) preferences and constraints. 
D) productivity and psychology. 
E) psychology and preferences.

Question 8

Perfect complements will have

Accepted Answer

A) curved indifference curve, bowed out from the origin. 
B) reverse L-shaped indifference curves. 
C) curved indifference curves, bowed in from the origin. 
D) L-shaped indifference curves. 
E) straight line indifference curves. 
A) curved indifference curve, bowed out from the origin. 
B) reverse L-shaped indifference curves. 
C) curved indifference curves, bowed in from the origin. 
D) L-shaped indifference curves. 
E) straight line indifference curves.

Question 9

A utility function

Accepted Answer

A) measures relative happiness and income of consumers. 
B) needs to measure the absolute level of happiness. 
C) needs to measure relative amounts of happiness for a single individual. 
D) is most useful if it can be influenced by others. 
E) helps compare the relative happiness of two separate consumers. 
A) measures relative happiness and income of consumers. 
B) needs to measure the absolute level of happiness. 
C) needs to measure relative amounts of happiness for a single individual. 
D) is most useful if it can be influenced by others. 
E) helps compare the relative happiness of two separate consumers.

Question 10

In practice

Accepted Answer

A) lump sum taxes affect the effective prices that consumers face in the market. 
B) taxes are not lump sum taxes. 
C) real wages affect the level of lump sum taxes. 
D) the quantity of profits that the consumer received is dictated by lump sum taxes. 
E) taxes have no distortionary effect. 
A) lump sum taxes affect the effective prices that consumers face in the market. 
B) taxes are not lump sum taxes. 
C) real wages affect the level of lump sum taxes. 
D) the quantity of profits that the consumer received is dictated by lump sum taxes. 
E) taxes have no distortionary effect.

Question 11

A static decision is one that

Accepted Answer

A) is made very slowly. 
B) involves only the present. 
C) involves planning over one time period. 
D) involves planning over more than one time period. 
E) involves planning over exactly two time periods. 
A) is made very slowly. 
B) involves only the present. 
C) involves planning over one time period. 
D) involves planning over more than one time period. 
E) involves planning over exactly two time periods.

Question 12

When consumption and leisure are both normal goods, an increase in real dividend income minus taxation, the rational consumer

Accepted Answer

A) reduces consumption and increases leisure. 
B) increases consumption and increases work. 
C) increases consumption and increases leisure. 
D) increases consumption and reduces leisure. 
E) reduces consumption and reduces leisure. 
A) reduces consumption and increases leisure. 
B) increases consumption and increases work. 
C) increases consumption and increases leisure. 
D) increases consumption and reduces leisure. 
E) reduces consumption and reduces leisure.

Question 13

The property of diminishing marginal rate of substitution follows from the property that the indifference curve is

Accepted Answer

A) upward sloping. 
B) downward sloping. 
C) bowed in toward the origin. 
D) concave from the origin. 
E) bowed out from the origin. 
A) upward sloping. 
B) downward sloping. 
C) bowed in toward the origin. 
D) concave from the origin. 
E) bowed out from the origin.

Question 14

An increase in real dividend income minus taxes represents

Accepted Answer

A) a combination of income and substitution effects. 
B) a pure income effect. 
C) a pure substitution effect. 
D) an income effect that is greater than the substitution effect. 
E) neither a pure income effect nor a pure substitution effect. 
A) a combination of income and substitution effects. 
B) a pure income effect. 
C) a pure substitution effect. 
D) an income effect that is greater than the substitution effect. 
E) neither a pure income effect nor a pure substitution effect.

Question 15

The marginal rate of substitution

Accepted Answer

A) can only be computed if we know the prices of all goods. 
B) can be deduced from the budget line. 
C) cannot be deduced from the properties of the indifference curve. 
D) can be computed by measuring the curvature of the indifference curve. 
E) can be computed by measuring the slope of the indifference curve. 
A) can only be computed if we know the prices of all goods. 
B) can be deduced from the budget line. 
C) cannot be deduced from the properties of the indifference curve. 
D) can be computed by measuring the curvature of the indifference curve. 
E) can be computed by measuring the slope of the indifference curve.

Question 16

The preferences of the representative consumer over consumption and leisure are represented by use of a

Accepted Answer

A) benefit function. 
B) production function. 
C) dynamic function. 
D) utility function. 
E) preference function. 
A) benefit function. 
B) production function. 
C) dynamic function. 
D) utility function. 
E) preference function.

Question 17

The slope of the indifference curve is defined as

Accepted Answer

A) the marginal rate of transformation. 
B) the relative price of good Y. 
C) the marginal propensity to substitute. 
D) the marginal rate of substitution. 
E) the marginal propensity to consume. 
A) the marginal rate of transformation. 
B) the relative price of good Y. 
C) the marginal propensity to substitute. 
D) the marginal rate of substitution. 
E) the marginal propensity to consume.

Question 18

When consumption and leisure are both normal goods, an increase in real dividend income minus taxation, the rational consumer

Accepted Answer

A) increases consumption and savings. 
B) increases consumption and reduces labour supply. 
C) reduces consumption and reduces labour supply. 
D) reduces consumption and increases labour supply. 
E) increases consumption and increases labour supply. 
A) increases consumption and savings. 
B) increases consumption and reduces labour supply. 
C) reduces consumption and reduces labour supply. 
D) reduces consumption and increases labour supply. 
E) increases consumption and increases labour supply.

Question 19

In a one-period economy, real consumption

Accepted Answer

A) is typically greater than disposable income. 
B) can be greater than, less than, or equal to disposable income. 
C) is exactly equal to disposable income. 
D) can be less than savings. 
E) is always less than disposable income. 
A) is typically greater than disposable income. 
B) can be greater than, less than, or equal to disposable income. 
C) is exactly equal to disposable income. 
D) can be less than savings. 
E) is always less than disposable income.

Question 20

The optimal consumption bundle is the point representing a consumption-leisure pair that is on the

Accepted Answer

A) lowest possible indifference curve and is on or inside the consumer's budget constraint. 
B) lowest possible indifference curve that maximizes total utility. 
C) highest possible indifference curve and is on or inside the consumer's budget constraint. 
D) highest possible indifference curve and is on or outside the consumer's budget constraint. 
E) lowest possible indifference curve and is on or outside the consumer's budget constraint. 
A) lowest possible indifference curve and is on or inside the consumer's budget constraint. 
B) lowest possible indifference curve that maximizes total utility. 
C) highest possible indifference curve and is on or inside the consumer's budget constraint. 
D) highest possible indifference curve and is on or outside the consumer's budget constraint. 
E) lowest possible indifference curve and is on or outside the consumer's budget constraint.

A production function describes the

We assume that the representative consumer's preferences exhibit the properties that

A consumer's real disposable income equals

Perfect substitutes will have

The principle that consumers and firms optimize

In a one-period economy, the expression for the budget constraint is

The consumer's work-leisure choice problem focuses on how a consumer's work-leisure decision is affected by the consumer's

Perfect complements will have

A utility function

In practice

A static decision is one that

When consumption and leisure are both normal goods, an increase in real dividend income minus taxation, the rational consumer

The property of diminishing marginal rate of substitution follows from the property that the indifference curve is

An increase in real dividend income minus taxes represents

The marginal rate of substitution

The preferences of the representative consumer over consumption and leisure are represented by use of a

The slope of the indifference curve is defined as

When consumption and leisure are both normal goods, an increase in real dividend income minus taxation, the rational consumer

In a one-period economy, real consumption

The optimal consumption bundle is the point representing a consumption-leisure pair that is on the

Introduction

Measurement

Business Cycle Measurement

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: the Consumptionsavings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model With Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models With Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: a Deeper Look

Filters

Exam 4: Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

A production function describes the

We assume that the representative consumer's preferences exhibit the properties that

A consumer's real disposable income equals

Perfect substitutes will have

The principle that consumers and firms optimize

In a one-period economy, the expression for the budget constraint is

The consumer's work-leisure choice problem focuses on how a consumer's work-leisure decision is affected by the consumer's

Perfect complements will have

A utility function

In practice

A static decision is one that

When consumption and leisure are both normal goods, an increase in real dividend income minus taxation, the rational consumer

The property of diminishing marginal rate of substitution follows from the property that the indifference curve is

An increase in real dividend income minus taxes represents

The marginal rate of substitution

The preferences of the representative consumer over consumption and leisure are represented by use of a

The slope of the indifference curve is defined as

When consumption and leisure are both normal goods, an increase in real dividend income minus taxation, the rational consumer

In a one-period economy, real consumption

The optimal consumption bundle is the point representing a consumption-leisure pair that is on the

Introduction

Measurement

Business Cycle Measurement

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: the Consumptionsavings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model With Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models With Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: a Deeper Look

Filters