Question 1

What is one reason a gift card might be less desirable than cash?

Accepted Answer

A)  A gift card requires an individual to purchase from a particular store, which restricts the choice set. 
B)  Cash requires an individual to purchase from a particular country, which restricts the choice set. 
C)  Cash and the gift card are equally desirable, there is no problem here. 
D)  Gift cards are easier to steal or lose relative to cash. 
A)  A gift card requires an individual to purchase from a particular store, which restricts the choice set. 
B)  Cash requires an individual to purchase from a particular country, which restricts the choice set. 
C)  Cash and the gift card are equally desirable, there is no problem here. 
D)  Gift cards are easier to steal or lose relative to cash.

Question 2

The slope of the budget line represents the rate at which the consumer is willing to trade one good for another at any given bundle.

Accepted Answer

A) True 
 B)False

Question 3

Clifford lives by the motto "Eat drink and be merry today,for tomorrow doesn't matter." If today's consumption is represented by "x" and tomorrow's consumption is represented by "y",then which of the following best represents Clifford's utility function?

Accepted Answer

A)  U = x - y 
B)  U = x/y 
C)  U = x 
D)  U = y 
A)  U = x - y 
B)  U = x/y 
C)  U = x 
D)  U = y

Question 4

A consumer buys food (F)and shelter (S).If the consumer's income rises and there is no change in the prices of F or S,the marginal rate of transformation of F for S will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  stay the same. 
D)  change, but there is not enough information to know how. 
A)  increase. 
B)  decrease. 
C)  stay the same. 
D)  change, but there is not enough information to know how.

Question 5

Individuals derive utility from picnics,p,and kayak trips,k.Assuming that an individual's utility is U(p,k)= k0.5p0.5 and income is $100,what is the marginal rate of substitution (MRS)between picnics and kayak trips?

Accepted Answer

A)  MRS = 1. 
B)  MRS = -1. 
C)  MRS = -   
D)  There is no substitution because picnics and kayak trips are perfect complements. 
A)  MRS = 1. 
B)  MRS = -1. 
C)  MRS = -   
D)  There is no substitution because picnics and kayak trips are perfect complements.

Question 6

An indifference curve represents bundles of goods that a consumer

Accepted Answer

A)  views as equally desirable. 
B)  ranks from most preferred to least preferred. 
C)  refers to any other bundle of goods. 
D)  All of the above. 
A)  views as equally desirable. 
B)  ranks from most preferred to least preferred. 
C)  refers to any other bundle of goods. 
D)  All of the above.

Question 7

An interior solution to a consumer's utility maximization problem implies

Accepted Answer

A)  consuming a positive amount of all goods. 
B)  consuming negative amounts of all goods. 
C)  consuming less than optimal amounts of all goods. 
D)  consuming more than an optimal amount of at least one good. 
A)  consuming a positive amount of all goods. 
B)  consuming negative amounts of all goods. 
C)  consuming less than optimal amounts of all goods. 
D)  consuming more than an optimal amount of at least one good.

Question 8

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.

Question 9

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)  B and C. 
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)  B and C.

Question 10

Suppose a taco costs $4 and a burrito costs $2.Moreover,this Mexican restaurant has a special deal.After you've bought 6 burritos,you can buy each extra burrito for $1.50.Assume that tacos are on the vertical axis and burritos on the horizontal axis.What is the marginal rate of transformation (MRT)when 8 burritos are purchased?

Accepted Answer

A)  MRT = 0.375 
B)  MRT = 0.50 
C)  MRT = 2 
D)  MRT = 2.67 
A)  MRT = 0.375 
B)  MRT = 0.50 
C)  MRT = 2 
D)  MRT = 2.67

Question 11

If the prices of both goods and income increase by the same percentage,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 outward without a change in slope. 
D)  Nothing. 
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 outward without a change in slope. 
D)  Nothing.

Question 12

Joe subscribes to an Internet provider that charges $2 per hour.He has $100 per month to spend and is at equilibrium by buying 10 hours of Internet access and $80 worth of other goods.Draw the indifference curve-budget line.If the company switches to a $20 monthly fee for unlimited Internet access,is Joe better off?

Accepted Answer

@#IMG-DLM& See the above figure.Under the new plan

Question 13

Indifference curves cannot intersect.

Accepted Answer

A) True 
 B)False

Question 14

In behavioral economics,the endowment effect refers to

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 when they consider 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 when they consider purchasing. 
D)  most people respond to tax incentives to provide an endowment for their children.

Question 15

A consumer derives utility for "all other goods," g,and cigarettes,s.The price of "all other goods" equals $9 and the price of cigarettes is $10.Now suppose the government implements a $0.50 per-unit tax on cigarettes to encourage a decrease in smoking.How does the tax affect the marginal rate of transformation,MRT?

Accepted Answer

A)  The MRT will decrease to -   . 
B)  The MRT will increase to -   . 
C)  The MRT will increase to -   + 0.05. 
D)  The MRT will decrease to -   - 0.05. 
A)  The MRT will decrease to -   . 
B)  The MRT will increase to -   . 
C)  The MRT will increase to -   + 0.05. 
D)  The MRT will decrease to -   - 0.05.

Question 16

-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What happens if Max receives a $100 cash grant to buy either meat or chicken?

Accepted Answer

A)  Max will double his consumption of both meats. 
B)  Max will spend it all on burger. Because of its lower price, he can buy more of it. 
C)  Max will take advantage of the gift by buying all chicken because it is the more expensive meat. 
D)  There is not enough information to answer the question. 
A)  Max will double his consumption of both meats. 
B)  Max will spend it all on burger. Because of its lower price, he can buy more of it. 
C)  Max will take advantage of the gift by buying all chicken because it is the more expensive meat. 
D)  There is not enough information to answer the question.

Question 17

-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What is the price of chicken?

Accepted Answer

A)  $0.80/lb 
B)  $1.25/lb 
C)  $4/lb 
D)  $5/lb 
A)  $0.80/lb 
B)  $1.25/lb 
C)  $4/lb 
D)  $5/lb

Question 18

The indifference curves for left shoes and right shoes would most likely be

Accepted Answer

A)  upward sloping and concave to the origin. 
B)  downward sloping and convex to the origin. 
C)  downward sloping and straight lines. 
D)  L-shaped. 
A)  upward sloping and concave to the origin. 
B)  downward sloping and convex to the origin. 
C)  downward sloping and straight lines. 
D)  L-shaped.

Question 19

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

Accepted Answer

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

Question 20

Joe's budget constraint equals 500 = 2F + 100S,where $500 is Joe's income,$2 is the price of food (F)and $100 is the price of shelter (S).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

What is one reason a gift card might be less desirable than cash?

The slope of the budget line represents the rate at which the consumer is willing to trade one good for another at any given bundle.

Clifford lives by the motto "Eat drink and be merry today,for tomorrow doesn't matter." If today's consumption is represented by "x" and tomorrow's consumption is represented by "y",then which of the following best represents Clifford's utility function?

A consumer buys food (F)and shelter (S).If the consumer's income rises and there is no change in the prices of F or S,the marginal rate of transformation of F for S will

Individuals derive utility from picnics,p,and kayak trips,k.Assuming that an individual's utility is U(p,k)= k^0.5p^0.5and income is $100,what is the marginal rate of substitution (MRS)between picnics and kayak trips?

An indifference curve represents bundles of goods that a consumer

An interior solution to a consumer's utility maximization problem implies

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

If two bundles are on the same indifference curve,then

If the prices of both goods and income increase by the same percentage,what will happen to the budget line?

Indifference curves cannot intersect.

In behavioral economics,the endowment effect refers to

-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What happens if Max receives a $100 cash grant to buy either meat or chicken?

-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What is the price of chicken?

The indifference curves for left shoes and right shoes would most likely be

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

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

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 4: Consumer Choice

What is one reason a gift card might be less desirable than cash?

The slope of the budget line represents the rate at which the consumer is willing to trade one good for another at any given bundle.

Clifford lives by the motto "Eat drink and be merry today,for tomorrow doesn't matter." If today's consumption is represented by "x" and tomorrow's consumption is represented by "y",then which of the following best represents Clifford's utility function?

A consumer buys food (F)and shelter (S).If the consumer's income rises and there is no change in the prices of F or S,the marginal rate of transformation of F for S will

Individuals derive utility from picnics,p,and kayak trips,k.Assuming that an individual's utility is U(p,k)= k0.5p0.5 and income is $100,what is the marginal rate of substitution (MRS)between picnics and kayak trips?

An indifference curve represents bundles of goods that a consumer

An interior solution to a consumer's utility maximization problem implies

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

If two bundles are on the same indifference curve,then

If the prices of both goods and income increase by the same percentage,what will happen to the budget line?

Indifference curves cannot intersect.

In behavioral economics,the endowment effect refers to

-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What happens if Max receives a $100 cash grant to buy either meat or chicken?

-Max has allocated $100 toward meats for his barbecue.His budget line and an indifference map are shown in the above figure.What is the price of chicken?

The indifference curves for left shoes and right shoes would most likely be

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

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

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Individuals derive utility from picnics,p,and kayak trips,k.Assuming that an individual's utility is U(p,k)= k^0.5p^0.5and income is $100,what is the marginal rate of substitution (MRS)between picnics and kayak trips?