Question 1

Betty consumes good x and good y. If the price of x = $3 and the price of y = $4, then

Accepted Answer

A) an extra unit of x costs 4/3 units of y. 
B) an extra unit of y costs 4/3 units of x. 
C) an extra unit of x costs 3/4 units of y. 
D) Both B and C. 
A) an extra unit of x costs 4/3 units of y. 
B) an extra unit of y costs 4/3 units of x. 
C) an extra unit of x costs 3/4 units of y. 
D) Both B and C. D

Question 2

Joe's budget constraint equals 500 = 2F + 100S, where $500 is Joe's income, $2 is the price of food (F, y-axis)and $100 is the price of shelter (S, x-axis). How much food can Joe buy if he buys one unit of shelter?

Accepted Answer

A) 2 units 
B) 200 units 
C) 250 units 
D) 400 units 
A) 2 units 
B) 200 units 
C) 250 units 
D) 400 units B

Question 3

If two indifference curves were to intersect at a point, this would violate the assumption of

Accepted Answer

A) transitivity. 
B) completeness. 
C) Both A and B above. 
D) None of the above. 
A) transitivity. 
B) completeness. 
C) Both A and B above. 
D) None of the above. A

Question 4

If the price of one good increases while the price of the other good and the consumer's income remain unchanged, what will happen to the budget line?

Accepted Answer

A) The budget line rotates inward from the intercept on the axis of the good that did not change in price. 
B) The budget line rotates outward from the intercept on the axis of the good that did not change in price. 
C) The budget line shifts inward without a change in slope. 
D) The budget line shifts outward without a change in slope. 
A) The budget line rotates inward from the intercept on the axis of the good that did not change in price. 
B) The budget line rotates outward from the intercept on the axis of the good that did not change in price. 
C) The budget line shifts inward without a change in slope. 
D) The budget line shifts outward without a change in slope.

Question 5

Convexity of indifference curves implies that consumers are willing to

Accepted Answer

A) give up more "y" to get an extra "x" the more "x" they have. 
B) give up more "y" to get an extra "x" the less "x" they have. 
C) settle for less of both "x" and "y." 
D) acquire more "x" only if they do not have to give up any "y." 
A) give up more "y" to get an extra "x" the more "x" they have. 
B) give up more "y" to get an extra "x" the less "x" they have. 
C) settle for less of both "x" and "y." 
D) acquire more "x" only if they do not have to give up any "y."

Question 6

As the price of a good rises, the consumer will experience

Accepted Answer

A) a desire to consume a different bundle. 
B) a decrease in utility. 
C) a downward or leftward movement on the indifference map. 
D) All of the above. 
A) a desire to consume a different bundle. 
B) a decrease in utility. 
C) a downward or leftward movement on the indifference map. 
D) All of the above.

Question 7

In behavioral economics, the endowment effect refers to the fact that

Accepted Answer

A) most people believe that most wealthy people inherit their wealth. 
B) many people would be indifferent between being endowed with money or knowledge. 
C) many people place a higher value on what they own than the same item they are considering purchasing. 
D) most people respond to tax incentives to provide an endowment for their children. 
A) most people believe that most wealthy people inherit their wealth. 
B) many people would be indifferent between being endowed with money or knowledge. 
C) many people place a higher value on what they own than the same item they are considering purchasing. 
D) most people respond to tax incentives to provide an endowment for their children.

Question 8

If the utility function (U)between food (F)and clothing (C)can be represented as U =   , the marginal utility of food

Accepted Answer

A) is not positive. 
B) does not diminish as food increases. 
C) is not affected by the amount clothing. 
D) increases as one obtains more clothing. 
A) is not positive. 
B) does not diminish as food increases. 
C) is not affected by the amount clothing. 
D) increases as one obtains more clothing.

Question 9

What is the intuition that an expansion of an individual's budget set represents a gain?

Accepted Answer

A) More options are preferred to less. 
B) Money is the root of all happiness. 
C) Information is power. 
D) Scarcity is avoidable with prosperity. 
A) More options are preferred to less. 
B) Money is the root of all happiness. 
C) Information is power. 
D) Scarcity is avoidable with prosperity.

Question 10

In behavioral economics, salience is best exemplified by

Accepted Answer

A) consumers responding differently when posted prices increase rather than when prices increase because of sales tax increases. 
B) consumers responding the same regardless of how prices change. 
C) the end of a controlled experiment. 
D) consumers responding differently when income increases permanently rather than temporarily. 
A) consumers responding differently when posted prices increase rather than when prices increase because of sales tax increases. 
B) consumers responding the same regardless of how prices change. 
C) the end of a controlled experiment. 
D) consumers responding differently when income increases permanently rather than temporarily.

Question 11

-The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks. As the price of snacks rises, the price for juice

Accepted Answer

A) stays the same. 
B) increases. 
C) decreases 
D) might change, but there is not enough information to determine. 
A) stays the same. 
B) increases. 
C) decreases 
D) might change, but there is not enough information to determine.

Question 12

If two bundles are on the same indifference curve, then

Accepted Answer

A) the consumer derives the same level of utility from each. 
B) the consumer derives the same level of ordinal utility from each but not the same level of cardinal utility. 
C) no comparison can be made between the two bundles since utility cannot really be measured. 
D) the MRS between the two bundles equals one. 
A) the consumer derives the same level of utility from each. 
B) the consumer derives the same level of ordinal utility from each but not the same level of cardinal utility. 
C) no comparison can be made between the two bundles since utility cannot really be measured. 
D) the MRS between the two bundles equals one.

Question 13

The principle that "More is better" results in indifference curves

Accepted Answer

A) sloping down. 
B) not intersecting. 
C) reflecting greater preferences the further they are from the origin. 
D) All of the above. 
A) sloping down. 
B) not intersecting. 
C) reflecting greater preferences the further they are from the origin. 
D) All of the above.

Question 14

Behavioral economics extends traditional economic models by

Accepted Answer

A) including insights from psychology and human cognition models. 
B) modeling behavior rather than prices. 
C) admitting that individuals are irrational. 
D) admitting that incentives are very important. 
A) including insights from psychology and human cognition models. 
B) modeling behavior rather than prices. 
C) admitting that individuals are irrational. 
D) admitting that incentives are very important.

Question 15

Measuring "y" on the vertical axis and "x" on the horizontal axis, convexity of indifference curves implies that the MRS of "y" for "x"

Accepted Answer

A) is decreasing as "x" increases. 
B) is increasing as "x" increases. 
C) is constant as "x" increases. 
D) cannot be calculated for large levels of "x." 
A) is decreasing as "x" increases. 
B) is increasing as "x" increases. 
C) is constant as "x" increases. 
D) cannot be calculated for large levels of "x."

Question 16

By selecting a bundle where MRS = MRT, the consumer is

Accepted Answer

A) achieving a corner solution. 
B) reaching the highest possible indifference curve she can afford. 
C) not behaving in an optimal way. 
D) All of the above. 
A) achieving a corner solution. 
B) reaching the highest possible indifference curve she can afford. 
C) not behaving in an optimal way. 
D) All of the above.

Question 17

Consumers allocate their budgets among bundles because

Accepted Answer

A) more is not always better. 
B) bundles are the most efficient way to package goods and services. 
C) consumers face choices and tradeoffs. 
D) they want to minimize trips to the store. 
A) more is not always better. 
B) bundles are the most efficient way to package goods and services. 
C) consumers face choices and tradeoffs. 
D) they want to minimize trips to the store.

Question 18

-The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks. Bobby's demand for snacks is

Accepted Answer

A) unit elastic. 
B) elastic. 
C) inelastic. 
D) perfectly elastic. 
A) unit elastic. 
B) elastic. 
C) inelastic. 
D) perfectly elastic.

Question 19

Joe's income is $500, the price of food (F, y-axis)is $2 per unit, and the price of shelter (S, x-axis)is $100. Which of the following represents his budget constraint?

Accepted Answer

A) 500 = 2F + 100S 
B) F = 250 - 50S 
C) S = 5 - .02F 
D) All of the above. 
A) 500 = 2F + 100S 
B) F = 250 - 50S 
C) S = 5 - .02F 
D) All of the above.

Question 20

Utility is the set of numerical values that

Accepted Answer

A) yields an absolute level of pleasure from a bundle of goods. 
B) reflects the relative ranking of various bundles of goods. 
C) describes how much more a consumer prefers one bundle to another. 
D) yields a cardinal ranking of bundles. 
A) yields an absolute level of pleasure from a bundle of goods. 
B) reflects the relative ranking of various bundles of goods. 
C) describes how much more a consumer prefers one bundle to another. 
D) yields a cardinal ranking of bundles.

Betty consumes good x and good y. If the price of x = $3 and the price of y = $4, then

Joe's budget constraint equals 500 = 2F + 100S, where $500 is Joe's income, $2 is the price of food (F, y-axis)and $100 is the price of shelter (S, x-axis). How much food can Joe buy if he buys one unit of shelter?

If two indifference curves were to intersect at a point, this would violate the assumption of

If the price of one good increases while the price of the other good and the consumer's income remain unchanged, what will happen to the budget line?

Convexity of indifference curves implies that consumers are willing to

As the price of a good rises, the consumer will experience

In behavioral economics, the endowment effect refers to the fact that

If the utility function (U)between food (F)and clothing (C)can be represented as U = , the marginal utility of food

What is the intuition that an expansion of an individual's budget set represents a gain?

In behavioral economics, salience is best exemplified by

-The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks. As the price of snacks rises, the price for juice

If two bundles are on the same indifference curve, then

The principle that "More is better" results in indifference curves

Behavioral economics extends traditional economic models by

Measuring "y" on the vertical axis and "x" on the horizontal axis, convexity of indifference curves implies that the MRS of "y" for "x"

By selecting a bundle where MRS = MRT, the consumer is

Consumers allocate their budgets among bundles because

-The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks. Bobby's demand for snacks is

Joe's income is $500, the price of food (F, y-axis)is $2 per unit, and the price of shelter (S, x-axis)is $100. Which of the following represents his budget constraint?

Utility is the set of numerical values that

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 4: Consumer Choice

Betty consumes good x and good y. If the price of x = $3 and the price of y = $4, then

Joe's budget constraint equals 500 = 2F + 100S, where $500 is Joe's income, $2 is the price of food (F, y-axis)and $100 is the price of shelter (S, x-axis). How much food can Joe buy if he buys one unit of shelter?

If two indifference curves were to intersect at a point, this would violate the assumption of

If the price of one good increases while the price of the other good and the consumer's income remain unchanged, what will happen to the budget line?

Convexity of indifference curves implies that consumers are willing to

As the price of a good rises, the consumer will experience

In behavioral economics, the endowment effect refers to the fact that

If the utility function (U)between food (F)and clothing (C)can be represented as U = , the marginal utility of food

What is the intuition that an expansion of an individual's budget set represents a gain?

In behavioral economics, salience is best exemplified by

-The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks. As the price of snacks rises, the price for juice

If two bundles are on the same indifference curve, then

The principle that "More is better" results in indifference curves

Behavioral economics extends traditional economic models by

Measuring "y" on the vertical axis and "x" on the horizontal axis, convexity of indifference curves implies that the MRS of "y" for "x"

By selecting a bundle where MRS = MRT, the consumer is

Consumers allocate their budgets among bundles because

-The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks. Bobby's demand for snacks is

Joe's income is $500, the price of food (F, y-axis)is $2 per unit, and the price of shelter (S, x-axis)is $100. Which of the following represents his budget constraint?

Utility is the set of numerical values that

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters