Question 1

-Refer to Figure above. The income effect is shown by the movement

Accepted Answer

A)  From bundle A to bundle C 
B)  From bundle A to bundle B 
C)  From bundle B to bundle C 
D)  From bundle C to bundle B 
A)  From bundle A to bundle C 
B)  From bundle A to bundle B 
C)  From bundle B to bundle C 
D)  From bundle C to bundle B D

Question 2

Stewie spends all of his income on movie rentals (R) and noodles (N). His marginal rate of substitution for rentals with noodles is given by MRSRN = 20/√ R. Suppose that movies rent for $2 and noodles cost $1. Plot his income-consumption curve, his Engle curve for movie rentals and his Engel curve for noodles.

Accepted Answer

Start with the utility maximizing condition 20/√R = P_R/P_N = $2/$1. Solving for R yields R = 100, implying Stewie spends $200 on movie rentals. That means he spends $2(M-200) on noodles. So, for income levels less than $200, Stewie only rents movies. His incomeconsumption curve, his Engle curve for movie rentals and his Engel curve for noodles are shown in Figure 5.14.

Start with the utility maximizing condition 20/√R = P<sub>R</sub>/P<sub>N</sub> = $2/$1. Solving for R yields R = 100, implying Stewie spends $200 on movie rentals. That means he spends $2(M-200) on noodles. So, for income levels less than $200, Stewie only rents movies. His incomeconsumption curve, his Engle curve for movie rentals and his Engel curve for noodles are shown in Figure 5.14.

Question 3

-Refer to Figure above. If the price is $1,500, then consumer surplus is equal to

Accepted Answer

A)  $175,000 
B)  $535,000 
C)  $1,000 
D)  $262,500 
A)  $175,000 
B)  $535,000 
C)  $1,000 
D)  $262,500 A

Question 4

For low wages, the leisure demand curve slopes ______; for higher wages it slopes ______.

Accepted Answer

A)  Upward; downward 
B)  Downward; upward 
C)  Downward; downward 
D)  Upward; upward 
A)  Upward; downward 
B)  Downward; upward 
C)  Downward; downward 
D)  Upward; upward

Question 5

Suppose a consumer's nominal income is $50,000 and the cost-of-living index is 1.3. The consumer's real income is

Accepted Answer

A)  $50,000 
B)  $65,000 
C)  $53,000 
D)  $38, 462 
A)  $50,000 
B)  $65,000 
C)  $53,000 
D)  $38, 462

Question 6

-Refer to Figure above. Suppose the price of pizza is $8.50. Then the consumer will purchase _____ pizzas and the net benefit is ______.

Accepted Answer

A)  5; $9.50 
B)  4; $8.00 
C)  5; $3.50 
D)  4; $9.50 
A)  5; $9.50 
B)  4; $8.00 
C)  5; $3.50 
D)  4; $9.50

Question 7

-Refer to Figure above. Suppose the price of pizza is $9.75. Then consumer surplus is ______.

Accepted Answer

A)  $3.75 
B)  $3.50 
C)  $29.25 
D)  $33.00 
A)  $3.75 
B)  $3.50 
C)  $29.25 
D)  $33.00

Question 8

Which of the following does NOT describe a compensating variation?

Accepted Answer

A)  The amount of money that exactly compensates a consumer for a change in economic circumstances 
B)  The amount of money that produces an equivalent effect on a consumer's well-being 
C)  The most some one (someone) is willing to pay to experience something beneficial 
D)  The least someone is willing to pay to experience something harmful 
A)  The amount of money that exactly compensates a consumer for a change in economic circumstances 
B)  The amount of money that produces an equivalent effect on a consumer's well-being 
C)  The most some one (someone) is willing to pay to experience something beneficial 
D)  The least someone is willing to pay to experience something harmful

Question 9

Which of the following does NOT occur when the price of a good increases?

Accepted Answer

A)  The good becomes more expensive relative to all other goods 
B)  The consumer's purchasing power increases 
C)  Consumers shift their purchases away from the more expensive good 
D)  The consumer is effectively poorer than before the increase in price 
A)  The good becomes more expensive relative to all other goods 
B)  The consumer's purchasing power increases 
C)  Consumers shift their purchases away from the more expensive good 
D)  The consumer is effectively poorer than before the increase in price

Question 10

A consumer's budget constraint is determined by

Accepted Answer

A)  The consumer's income 
B)  The consumer's income and preferences 
C)  The consumer's income and the prices of the goods they buy 
D)  The consumer's preferences and the prices of the goods they buy 
A)  The consumer's income 
B)  The consumer's income and preferences 
C)  The consumer's income and the prices of the goods they buy 
D)  The consumer's preferences and the prices of the goods they buy

Question 11

-Refer to Figure above. The substitution effect is shown by the movement

Accepted Answer

A)  From bundle A to bundle C 
B)  From bundle A to bundle B 
C)  From bundle B to bundle C 
D)  From bundle C to bundle B 
A)  From bundle A to bundle C 
B)  From bundle A to bundle B 
C)  From bundle B to bundle C 
D)  From bundle C to bundle B

Question 12

Whenever a consumer purchases good X but not good Y, then

Accepted Answer

A)  MRSXY >= PX/PY at the chosen bundle 
B)  MRSXY X/PY at the chosen bundle 
C)  MRSXY = PX/PY at the chosen bundle 
D)  MRSXY = -PX/PY at the chosen bundle 
A)  MRSXY >= PX/PY at the chosen bundle 
B)  MRSXY X/PY at the chosen bundle 
C)  MRSXY = PX/PY at the chosen bundle 
D)  MRSXY = -PX/PY at the chosen bundle

Question 13

-Refer to Figure above. Which graph represents an increase in the consumer's income?

Accepted Answer

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

Question 14

The effect of a compensated price change is known as:

Accepted Answer

A)  The price effect of a price change 
B)  The income effect of a price change 
C)  The substitution effect of a price change 
D)  The replacement effect of a price change 
A)  The price effect of a price change 
B)  The income effect of a price change 
C)  The substitution effect of a price change 
D)  The replacement effect of a price change

-Refer to Figure above. The income effect is shown by the movement

-Refer to Figure above. If the price is $1,500, then consumer surplus is equal to

For low wages, the leisure demand curve slopes ; for higher wages it slopes .

Suppose a consumer's nominal income is $50,000 and the cost-of-living index is 1.3. The consumer's real income is

-Refer to Figure above. Suppose the price of pizza is $8.50. Then the consumer will purchase _ pizzas and the net benefit is __.

-Refer to Figure above. Suppose the price of pizza is $9.75. Then consumer surplus is ______.

Which of the following does NOT describe a compensating variation?

Which of the following does NOT occur when the price of a good increases?

A consumer's budget constraint is determined by

-Refer to Figure above. The substitution effect is shown by the movement

Whenever a consumer purchases good X but not good Y, then

-Refer to Figure above. Which graph represents an increase in the consumer's income?

The effect of a compensated price change is known as:

Supply, Demand, Balancing Benefits, Costs, Principles and Preferences

Technology and Production

Cost

Choices Involving Time and Profit Maximization

Behavioral Economics, Choices Involving Strateg and Choices Involving Risk

Equilibrium and Efficiency

Market Intervention

General Equilibrium, Efficiency, and Equity

Monopoly

Pricing Policies

Oligopoly

Externalities and Public Goods

Filters

Exam 2: From Demand to Welfare, Constraints, Choices, and Demand

-Refer to Figure above. The income effect is shown by the movement

-Refer to Figure above. If the price is $1,500, then consumer surplus is equal to

For low wages, the leisure demand curve slopes ______; for higher wages it slopes ______.

Suppose a consumer's nominal income is $50,000 and the cost-of-living index is 1.3. The consumer's real income is

-Refer to Figure above. Suppose the price of pizza is $8.50. Then the consumer will purchase _____ pizzas and the net benefit is ______.

-Refer to Figure above. Suppose the price of pizza is $9.75. Then consumer surplus is ______.

Which of the following does NOT describe a compensating variation?

Which of the following does NOT occur when the price of a good increases?

A consumer's budget constraint is determined by

-Refer to Figure above. The substitution effect is shown by the movement

Whenever a consumer purchases good X but not good Y, then

-Refer to Figure above. Which graph represents an increase in the consumer's income?

The effect of a compensated price change is known as:

Supply, Demand, Balancing Benefits, Costs, Principles and Preferences

Technology and Production

Cost

Choices Involving Time and Profit Maximization

Behavioral Economics, Choices Involving Strateg and Choices Involving Risk

Equilibrium and Efficiency

Market Intervention

General Equilibrium, Efficiency, and Equity

Monopoly

Pricing Policies

Oligopoly

Externalities and Public Goods

Filters

For low wages, the leisure demand curve slopes ; for higher wages it slopes .

-Refer to Figure above. Suppose the price of pizza is $8.50. Then the consumer will purchase _ pizzas and the net benefit is __.