Question 1

A negatively-sloped Engel curve implies a Giffen good.

Accepted Answer

A) True 
 B)False

Question 2

Suppose the consumer's income elasticity for good $x$ is -0.10 when monthly income is $1,000, and the consumer's income elasticity for good $x$ is 0.10 when monthly income is $2,000. From this information we can infer that good $x$ is a Giffen good.

Accepted Answer

A) True 
 B)False

Question 3

A positively-sloped Engel curve implies a(n):

Accepted Answer

A) inferior good. 
B) normal good. 
C) Giffen good. 
D) marginal good. 
A) inferior good. 
B) normal good. 
C) Giffen good. 
D) marginal good.

Question 4

Suppose when the consumer's income rises by 100%, the consumer's consumption of good $x$ only increases by 1%. We can infer that the consumer's income elasticity for good $x$ is:

Accepted Answer

A)  $- 0.01$ 
B)  $- 1$ 
C)  $0.01$ 
D)  1 
A)  $- 0.01$ 
B)  $- 1$ 
C)  $0.01$ 
D)  1

Question 5

The market demand curve is the horizontal sum of the individual demands for each price.

Accepted Answer

A) True 
 B)False

Question 6

The "substitution bias" of the CPI refers to the fact that the CPI measures the change in expenditures necessary to consume a fixed basket of goods, whereas in reality the optimal consumption basket changes as prices change.

Accepted Answer

A) True 
 B)False

Question 7

Suppose the consumer's income elasticity for good $x$ is -0.10 when monthly income is $1,000, and the consumer's income elasticity for good $x$ is 0.10 when monthly income is $2,000. From this information we can infer that good $x$ is a normal good for low levels of income and an inferior good for high levels of income.

Accepted Answer

A) True 
 B)False

Question 8

As the price of a good increases, holding the consumer's income and the price of the other good constant, the budget line will:

Accepted Answer

A) shift inward toward the origin. 
B) shift outward away from the origin. 
C) rotate the budget line inward toward the origin. 
D) rotate the budget line outward away from the origin. 
A) shift inward toward the origin. 
B) shift outward away from the origin. 
C) rotate the budget line inward toward the origin. 
D) rotate the budget line outward away from the origin.

Question 9

The substitution effect is:

Accepted Answer

A) the change in the amount of the good consumed holding the level of income constant. 
B) the change in the amount of the good consumed as the price of the good changes holding income constant. 
C) the change in the amount of the good consumed as the price of the good changes holding utility constant. 
D) the change in the amount of the good consumed holding relative prices constant and changing the level of income. 
A) the change in the amount of the good consumed holding the level of income constant. 
B) the change in the amount of the good consumed as the price of the good changes holding income constant. 
C) the change in the amount of the good consumed as the price of the good changes holding utility constant. 
D) the change in the amount of the good consumed holding relative prices constant and changing the level of income.

Question 10

In this chapter, the term negative network externality describes:

Accepted Answer

A) the positive effect of consuming chocolate as income rises. 
B) the snob effect. 
C) the bandwagon effect. 
D) the impact of a polluting firm on its local environment. 
A) the positive effect of consuming chocolate as income rises. 
B) the snob effect. 
C) the bandwagon effect. 
D) the impact of a polluting firm on its local environment.

Question 11

The concept of equivalent variation means:

Accepted Answer

A) the change in income necessary to hold the consumer at the final level of utility as price changes. 
B) the change in income necessary to restore the consumer to the initial level of utility as price changes. 
C) the income effect. 
D) the substitution effect. 
A) the change in income necessary to hold the consumer at the final level of utility as price changes. 
B) the change in income necessary to restore the consumer to the initial level of utility as price changes. 
C) the income effect. 
D) the substitution effect.

Question 12

Consider a market with $Q ^ { d } = 240 - 6 P \text { and } Q ^ { s } = 2 P$ .What is the consumer surplus in this market?

Accepted Answer

A) 1,000 
B) 300 
C) 750 
D) 500 
A) 1,000 
B) 300 
C) 750 
D) 500

Question 13

One way of thinking of consumer surplus might be described as:

Accepted Answer

A) the total value of the sum of the difference of all consumers' willingness to pay for an item relative to the actual cost of the item in the market. 
B) the excess amount that consumers earn relative to the poverty line. 
C) the level of satisfaction that consumers reach from consuming an item. 
D) the excess of consumer demand relative to supply. 
A) the total value of the sum of the difference of all consumers' willingness to pay for an item relative to the actual cost of the item in the market. 
B) the excess amount that consumers earn relative to the poverty line. 
C) the level of satisfaction that consumers reach from consuming an item. 
D) the excess of consumer demand relative to supply.

Question 14

If a consumer's preferences for two goods, say food and clothing, are such that as income increases, consumption of food and clothing both increase, we can say that:

Accepted Answer

A) food and clothing are inferior goods. 
B) food is a normal good and clothing is an inferior good. 
C) food is an inferior good and clothing is a normal good. 
D) food and clothing are both normal goods. 
A) food and clothing are inferior goods. 
B) food is a normal good and clothing is an inferior good. 
C) food is an inferior good and clothing is a normal good. 
D) food and clothing are both normal goods.

Question 15

Suppose that a consumer's demand curve for a good can be expressed as $P = 50 - 4 Q ^ { d }$ . Suppose that the market is initially in equilibrium at a price of $10. What is the consumer surplus at the original equilibrium price?

Accepted Answer

A) 100 
B) 150 
C) 200 
D) 250. 
A) 100 
B) 150 
C) 200 
D) 250.

Question 16

If the price of a good falls, the substitution effect will always induce the consumer to consume at least as much of the good as before the price change.

Accepted Answer

A) True 
 B)False

Question 17

A network externality can be said to exist when:

Accepted Answer

A) a recording artist appears on a popular TV show leading to an increase in popularity and record sales; this is called the "snob effect". 
B) a recording artist appears on a popular TV show leading to an increase in popularity and record sales; this is called the "bandwagon effect". 
C) many people try to access the internet at the same time leading to a system crash. 
D) two television networks decide to merge. 
A) a recording artist appears on a popular TV show leading to an increase in popularity and record sales; this is called the "snob effect". 
B) a recording artist appears on a popular TV show leading to an increase in popularity and record sales; this is called the "bandwagon effect". 
C) many people try to access the internet at the same time leading to a system crash. 
D) two television networks decide to merge.

Question 18

Consumer surplus is defined as:

Accepted Answer

A) The difference between the discounted amount and the original amount purchased of a good. 
B) The difference between the maximum amount a consumer is willing to pay for a good and the amount he or she must actually pay when purchasing 
C) The difference between the cost of producing a good and its purchase price. 
D) The amount of the good purchased by a consumer over and above the minimum amount that the customer wanted of the good. 
A) The difference between the discounted amount and the original amount purchased of a good. 
B) The difference between the maximum amount a consumer is willing to pay for a good and the amount he or she must actually pay when purchasing 
C) The difference between the cost of producing a good and its purchase price. 
D) The amount of the good purchased by a consumer over and above the minimum amount that the customer wanted of the good.

Question 19

Under what circumstances is the demand curve downward-sloping?

Accepted Answer

A) When the good is not a Giffen good. 
B) When the good is a Giffen good. 
C) When the good is an inferior good and the income effect outweighs the substitution effect. 
D) The demand curve is always downward-sloping. 
A) When the good is not a Giffen good. 
B) When the good is a Giffen good. 
C) When the good is an inferior good and the income effect outweighs the substitution effect. 
D) The demand curve is always downward-sloping.

Question 20

Under what circumstances is the demand curve upward-sloping?

Accepted Answer

A) When the good is a normal good. 
B) When the good is an inferior good and the substitution effect outweighs the income effect. 
C) When the good is an inferior good and the income effect outweighs the substitution effect. 
D) The demand curve can never be upward-sloping. 
A) When the good is a normal good. 
B) When the good is an inferior good and the substitution effect outweighs the income effect. 
C) When the good is an inferior good and the income effect outweighs the substitution effect. 
D) The demand curve can never be upward-sloping.

A negatively-sloped Engel curve implies a Giffen good.

Suppose the consumer's income elasticity for good $x$ is -0.10 when monthly income is $1,000, and the consumer's income elasticity for good $x$ is 0.10 when monthly income is $2,000. From this information we can infer that good $x$ is a Giffen good.

A positively-sloped Engel curve implies a(n):

Suppose when the consumer's income rises by 100%, the consumer's consumption of good $x$ only increases by 1%. We can infer that the consumer's income elasticity for good $x$ is:

The market demand curve is the horizontal sum of the individual demands for each price.

The "substitution bias" of the CPI refers to the fact that the CPI measures the change in expenditures necessary to consume a fixed basket of goods, whereas in reality the optimal consumption basket changes as prices change.

As the price of a good increases, holding the consumer's income and the price of the other good constant, the budget line will:

The substitution effect is:

In this chapter, the term negative network externality describes:

The concept of equivalent variation means:

Consider a market with $Q ^ { d } = 240 - 6 P \text { and } Q ^ { s } = 2 P$ .What is the consumer surplus in this market?

One way of thinking of consumer surplus might be described as:

If a consumer's preferences for two goods, say food and clothing, are such that as income increases, consumption of food and clothing both increase, we can say that:

Suppose that a consumer's demand curve for a good can be expressed as $P = 50 - 4 Q ^ { d }$ . Suppose that the market is initially in equilibrium at a price of $10. What is the consumer surplus at the original equilibrium price?

If the price of a good falls, the substitution effect will always induce the consumer to consume at least as much of the good as before the price change.

A network externality can be said to exist when:

Consumer surplus is defined as:

Under what circumstances is the demand curve downward-sloping?

Under what circumstances is the demand curve upward-sloping?

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

Exam 5: The Theory of Demand

A negatively-sloped Engel curve implies a Giffen good.

Suppose the consumer's income elasticity for good xxx is -0.10 when monthly income is $1,000, and the consumer's income elasticity for good xxx is 0.10 when monthly income is $2,000. From this information we can infer that good xxx is a Giffen good.

A positively-sloped Engel curve implies a(n):

Suppose when the consumer's income rises by 100%, the consumer's consumption of good xxx only increases by 1%. We can infer that the consumer's income elasticity for good xxx is:

The market demand curve is the horizontal sum of the individual demands for each price.

The "substitution bias" of the CPI refers to the fact that the CPI measures the change in expenditures necessary to consume a fixed basket of goods, whereas in reality the optimal consumption basket changes as prices change.

As the price of a good increases, holding the consumer's income and the price of the other good constant, the budget line will:

The substitution effect is:

In this chapter, the term negative network externality describes:

The concept of equivalent variation means:

Consider a market with Qd=240−6P and Qs=2PQ ^ { d } = 240 - 6 P \text { and } Q ^ { s } = 2 PQd=240−6P and Qs=2P .What is the consumer surplus in this market?

One way of thinking of consumer surplus might be described as:

If a consumer's preferences for two goods, say food and clothing, are such that as income increases, consumption of food and clothing both increase, we can say that:

Suppose that a consumer's demand curve for a good can be expressed as P=50−4QdP = 50 - 4 Q ^ { d }P=50−4Qd . Suppose that the market is initially in equilibrium at a price of $10. What is the consumer surplus at the original equilibrium price?

If the price of a good falls, the substitution effect will always induce the consumer to consume at least as much of the good as before the price change.

A network externality can be said to exist when:

Consumer surplus is defined as:

Under what circumstances is the demand curve downward-sloping?

Under what circumstances is the demand curve upward-sloping?

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

Suppose the consumer's income elasticity for good $x$ is -0.10 when monthly income is $1,000, and the consumer's income elasticity for good $x$ is 0.10 when monthly income is $2,000. From this information we can infer that good $x$ is a Giffen good.

Suppose when the consumer's income rises by 100%, the consumer's consumption of good $x$ only increases by 1%. We can infer that the consumer's income elasticity for good $x$ is:

Consider a market with $Q ^ { d } = 240 - 6 P \text { and } Q ^ { s } = 2 P$ .What is the consumer surplus in this market?

Suppose that a consumer's demand curve for a good can be expressed as $P = 50 - 4 Q ^ { d }$ . Suppose that the market is initially in equilibrium at a price of $10. What is the consumer surplus at the original equilibrium price?