Question 1

The quantity of a good that people seek to sell at a given price is the quantity demanded.

Accepted Answer

A) True 
 B)False  False

Question 2

When the price of a good increases, the substitution effect must lead the agent to consume more.

Accepted Answer

A) True 
 B)False  False

Question 3

The impact of an income-induced change in demand caused by a change in price is called the income effect.

Accepted Answer

A) True 
 B)False  True

Question 4

On the vertical axis of a demand curve graph, the variable measured is the

Accepted Answer

A)  consumer's income 
B)  quantity demanded of the good 
C)  price of the good 
A)  consumer's income 
B)  quantity demanded of the good 
C)  price of the good

Question 5

If a price decrease causes income and substitution effects that work in opposite directions, but the quantity demanded nevertheless increases, the good must be a

Accepted Answer

A)  normal good 
B)  superior good 
C)  Giffen good 
A)  normal good 
B)  superior good 
C)  Giffen good

Question 6

A normal good is a good whose demand curve

Accepted Answer

A)  is upward sloping 
B)  is downward sloping 
C)  jumps from one point on the quantity axis to another, leaving a gap 
A)  is upward sloping 
B)  is downward sloping 
C)  jumps from one point on the quantity axis to another, leaving a gap

Question 7

On the horizontal axis of a demand curve graph, the variable measured is the

Accepted Answer

A)  consumer's income 
B)  quantity demanded of the good 
C)  price of the good 
A)  consumer's income 
B)  quantity demanded of the good 
C)  price of the good

Question 8

A price-consumption path is drawn by connecting the

Accepted Answer

A)  various veritcal intercepts of the rotated budget lines 
B)  various horizontal intercepts of the rotated budget lines 
C)  points of tangencies between indifference curves and rotated budget lines 
A)  various veritcal intercepts of the rotated budget lines 
B)  various horizontal intercepts of the rotated budget lines 
C)  points of tangencies between indifference curves and rotated budget lines

Question 9

When markets are large and competitive, the consumer merely chooses the bundle of goods that provides the most utility given

Accepted Answer

A)  income and tastes only 
B)  income, tastes, and the prices prevailing in the market 
C)  the prices prevailing in the market only 
A)  income and tastes only 
B)  income, tastes, and the prices prevailing in the market 
C)  the prices prevailing in the market only

Question 10

A demand curve represents graphically the relationship between the quantity of a good demanded by a consumer and the price of that good as the price varies.

Accepted Answer

A) True 
 B)False

Question 11

What happens to the substitution and income effects to cause a normal good to have a downward-sloping demand curve?

Accepted Answer

First, the substitution effect always mo

Question 12

If the optimal consumption bundle occurs at the corner of the feasible set, the agent most likely has

Accepted Answer

A)  convex preferences 
B)  nonconvex preferences 
C)  nonstrictly convex preferences 
A)  convex preferences 
B)  nonconvex preferences 
C)  nonstrictly convex preferences

Question 13

Every point on a demand curve is also a point on a(n)

Accepted Answer

A)  income expansion path 
B)  indifference map 
C)  price-consumption path 
A)  income expansion path 
B)  indifference map 
C)  price-consumption path

Question 14

Is the typical demand curve used in microeconomics compensated or uncompensated?

Accepted Answer

The typical demand curve inclu

Question 15

A compensated demand function represents the relationship between the price of a good and the quantity demanded, which includes both the substitution and income effects of price changes.

Accepted Answer

A) True 
 B)False

Question 16

Homothetic preferences imply that consumers will increase the purchases of goods proportionately as their incomes increase and prices stay constant.

Accepted Answer

A) True 
 B)False

Question 17

-Refer to Exhibit 4-2. This income expansion path depicts a(n)

Accepted Answer

A)  superior good 
B)  normal good 
C)  inferior good 
A)  superior good 
B)  normal good 
C)  inferior good

Question 18

-Refer to Exhibit 4-1. A shift from budget line BB' to CC' means that the consumer has

Accepted Answer

A)  equal income 
B)  more income 
C)  less income 
A)  equal income 
B)  more income 
C)  less income

Question 19

The substitution effect must always be ___________ in direction to the effect of a price change.

Accepted Answer

A)  identical 
B)  independent 
C)  opposite 
A)  identical 
B)  independent 
C)  opposite

Question 20

An inferior good is a good for which demand decreases as the income of the consumer increases and the relative prices remain constant.

Accepted Answer

A) True 
 B)False

Exam 4: Demand and Behavior in Markets

The quantity of a good that people seek to sell at a given price is the quantity demanded.

When the price of a good increases, the substitution effect must lead the agent to consume more.

The impact of an income-induced change in demand caused by a change in price is called the income effect.

On the vertical axis of a demand curve graph, the variable measured is the

If a price decrease causes income and substitution effects that work in opposite directions, but the quantity demanded nevertheless increases, the good must be a

A normal good is a good whose demand curve

On the horizontal axis of a demand curve graph, the variable measured is the

A price-consumption path is drawn by connecting the

When markets are large and competitive, the consumer merely chooses the bundle of goods that provides the most utility given

A demand curve represents graphically the relationship between the quantity of a good demanded by a consumer and the price of that good as the price varies.

What happens to the substitution and income effects to cause a normal good to have a downward-sloping demand curve?

If the optimal consumption bundle occurs at the corner of the feasible set, the agent most likely has

Every point on a demand curve is also a point on a(n)

Is the typical demand curve used in microeconomics compensated or uncompensated?

A compensated demand function represents the relationship between the price of a good and the quantity demanded, which includes both the substitution and income effects of price changes.

Homothetic preferences imply that consumers will increase the purchases of goods proportionately as their incomes increase and prices stay constant.

-Refer to Exhibit 4-2. This income expansion path depicts a(n)

-Refer to Exhibit 4-1. A shift from budget line BB' to CC' means that the consumer has

The substitution effect must always be ___________ in direction to the effect of a price change.

An inferior good is a good for which demand decreases as the income of the consumer increases and the relative prices remain constant.

Economics and Institutions: a Shift of Emphasis

Consumers and Their Preferences

Utilities Indifference Curves

Some Applications of Consumer Demand, and Welfare Analysis

Uncertainty and the Emergence of Insurance

Uncertainty Applications and Criticisms

The Discovery of Production and Its Technology

Cost and Choice

Cost Curves

Game Theory and the Tools of Strategic Business Analysis

Decision Making Over Time

The Internal Organization of the Firm

Perfectly Competitive Markets: Short-Run Analysis

Competitive Markets in the Long Run

Market Institutions and Auctions

The Age of Entrepreneurship: Monopoly

Natural Monopoly and the Economics of Regulation

The World of Oligopoly: Preliminaries to Successful Entry

Market Entry and the Emergence of Perfect Competition

The Problem of Exchange

General Equilibrium and the Origins of the Free Market and Interventionist Ideologies

Moral Hazard and Adverse Selection: Informational Market Failures

Externalities: the Free Market Interventionist Battle Continues

Public Goods, the Consequences of Strategic Voting Behavior, and the Role of Government

Input Markets and the Origins of Class Conflict

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