Question 1

What is the horizontal intercept of the budget line, given that M = $1,000, PX = $50, and PY = $40?

Accepted Answer

A) 2000.0. 
B) 20.0. 
C) 25.0. 
D) 11.11. 
A) 2000.0. 
B) 20.0. 
C) 25.0. 
D) 11.11.

Question 2

If a worker receives a fixed payment of $100 plus $10 for every hour she works, what is the maximum total earnings the worker can receive if they are restricted to a maximum of 12 hours of work per day?

Accepted Answer

A) $220. 
B) $120. 
C) $340. 
D) $125. 
A) $220. 
B) $120. 
C) $340. 
D) $125.

Question 3

Explain what would happen to the equilibrium consumption of two goods, X and Y, if (a) income doubled and all prices tripled, (b) all prices doubled and income tripled, and (c) all prices and income doubled.In each case, show the effects when both goods are normal goods and when one good is a normal good and the other an inferior good.

Accepted Answer

a.When both goods are normal, the consum

Question 4

If you were running an advertising campaign for designer men's suits, you should target families with:

Accepted Answer

A) lower incomes. 
B) higher incomes. 
C) poor taste in clothing. 
D) similar tastes and preferences. 
A) lower incomes. 
B) higher incomes. 
C) poor taste in clothing. 
D) similar tastes and preferences.

Question 5

A consumer has a choice of spending $13,000 on a Honda or $9,000 on a Saturn.She is observed buying the Saturn.Does this mean the consumer prefers the Saturn? Explain your answer.

Accepted Answer

No.We conclude that the consum

Question 6

Suppose the utility function for a firm manager is U = $\pi$ + bQ, where Q is output, $\pi$ is profit, and b is a positive constant.How would the firm's output compare with what it would be if the manager's objective was to maximize profit?

Accepted Answer

A) It would be greater than the profit-maximizing output. 
B) It would be less than the profit-maximizing output. 
C) It would be the same as the profit-maximizing output. 
D) None of the statements associated with this question are correct. 
A) It would be greater than the profit-maximizing output. 
B) It would be less than the profit-maximizing output. 
C) It would be the same as the profit-maximizing output. 
D) None of the statements associated with this question are correct.

Question 7

The revenues earned by the firm from the consumer may be maximized under

Accepted Answer

A) the regular price offer. 
B) the buy one get one free offer. 
C) 50% discount offer. 
D) 40% discount offer. 
A) the regular price offer. 
B) the buy one get one free offer. 
C) 50% discount offer. 
D) 40% discount offer.

Question 8

Running a supermarket involves

Accepted Answer

A) a lower level of risk than running a gourmet shop. 
B) a higher level of risk than running a gourmet shop. 
C) the same level of risk as running a gourmet shop. 
D) all of the statements associated with this question are correct. 
A) a lower level of risk than running a gourmet shop. 
B) a higher level of risk than running a gourmet shop. 
C) the same level of risk as running a gourmet shop. 
D) all of the statements associated with this question are correct.

Question 9

What is the maximum amount of good X that can be purchased if X and Y are the only two goods available for purchase and Px = $10, Py = $20, Y = 5, and M = 400?

Accepted Answer

A) 80. 
B) 20. 
C) 40. 
D) 30. 
A) 80. 
B) 20. 
C) 40. 
D) 30.

Question 10

A cash gift causes the budget line to

Accepted Answer

A) shift to the right in a parallel fashion. 
B) shift to the left in a parallel fashion. 
C) rotate clockwise. 
D) none of the statements associated with this question are correct. 
A) shift to the right in a parallel fashion. 
B) shift to the left in a parallel fashion. 
C) rotate clockwise. 
D) none of the statements associated with this question are correct.

Question 11

Mitchell's money income is $150, the price of X is $2, and the price of Y is $2.Given these prices and income, Mitchell buys 50 units of X and 25 units of Y.Call this combination of X and Y bundle J.At bundle J Mitchell's MRS is 2.At bundle J, if Mitchell increases consumption of Y by 1 unit how many units of X can he give up and still reach the same level of utility?

Accepted Answer

A) ½. 
B) 1. 
C) 2. 
D) 4. 
A) ½. 
B) 1. 
C) 2. 
D) 4.

Question 12

Suppose that consumers' preferences are well behaved in that properties 4-1 - 4-4 are satisfied.Furthermore, assume that X is a normal good, Y is an inferior good and the price of good X increases.Then the substitution effect will lead consumers to consume

Accepted Answer

A) more of good X and more of good Y. 
B) less of good X and more of good Y. 
C) less of good X and less of good Y. 
D) more of good X and less of good Y. 
A) more of good X and more of good Y. 
B) less of good X and more of good Y. 
C) less of good X and less of good Y. 
D) more of good X and less of good Y.

Question 13

Some individuals choose to undertake risky prospects while others choose safer ones, because they have different

Accepted Answer

A) degrees of transitivity. 
B) marginal rates of substitution between risk and reward. 
C) income elasticities. 
D) marginal utilities. 
A) degrees of transitivity. 
B) marginal rates of substitution between risk and reward. 
C) income elasticities. 
D) marginal utilities.

Question 14

A price decrease causes a consumer's "real" income to:

Accepted Answer

A) increase. 
B) decrease. 
C) remain unchanged. 
D) decrease or increase depending on the size of the price change. 
A) increase. 
B) decrease. 
C) remain unchanged. 
D) decrease or increase depending on the size of the price change.

Question 15

The budget set defines the combinations of good X and Y that

Accepted Answer

A) are desirable to the consumer. 
B) are affordable to the consumer. 
C) maximizes consumer's utility. 
D) maximizes supplier's profit. 
A) are desirable to the consumer. 
B) are affordable to the consumer. 
C) maximizes consumer's utility. 
D) maximizes supplier's profit.

Question 16

If shoes and socks are complements and both are normal goods, show graphically what would happen to the consumption of shoes and socks if
a.the price of shoes decreased.
b.consumer incomes increased.
B.
   Figure 4-9a
   b.Since both goods are normal, an increase in income leads to greater consumption of each good, as illustrated by the movement from C to D in Figure 4-9b.
Figure 4-9b

Accepted Answer

a.As shown in Figure 4-9a, a decrease in

Question 17

Individuals who purchase services and goods for the purpose of consumption are:

Accepted Answer

A) consumers. 
B) managers. 
C) workers. 
D) agents. 
A) consumers. 
B) managers. 
C) workers. 
D) agents.

Question 18

Suppose a manager views both quantity and profit as "goods." Such a manager will then have an indifference curve that

Accepted Answer

A) is tangent to the profit curve somewhere between quantities of 0 and 2.5. 
B) is tangent to the profit curve somewhere between quantities of 2.5 and 5. 
C) intersects the profit curve at a quantity exactly equal to 2.5. 
D) intersects the profit curve at a quantity exactly equal to 5. 
A) is tangent to the profit curve somewhere between quantities of 0 and 2.5. 
B) is tangent to the profit curve somewhere between quantities of 2.5 and 5. 
C) intersects the profit curve at a quantity exactly equal to 2.5. 
D) intersects the profit curve at a quantity exactly equal to 5.

Question 19

If the price of good X increases, what will happen to the budget line?

Accepted Answer

A) It will shift outward. 
B) It will become steeper. 
C) It will become flatter. 
D) It will shift inward. 
A) It will shift outward. 
B) It will become steeper. 
C) It will become flatter. 
D) It will shift inward.

Question 20

Natalie is always willing to give up 10 ounces of licorice for 1 ounce of chocolate.Mitchell, on the other hand, will always give up 10 ounces of chocolate for 1 ounce of licorice.Based on this information, answer the following questions:
a.Do Natalie's preferences exhibit a diminishing marginal rate of substitution between chocolate and licorice? Why or why not?
b.Assuming that Natalie and Mitchell have the same amount of money to spend on chocolate and licorice, who will purchase the most licorice? Why?

Accepted Answer

a.No, since she is always willing to giv

What is the horizontal intercept of the budget line, given that M = $1,000, P_X = $50, and P_Y = $40?

If a worker receives a fixed payment of $100 plus $10 for every hour she works, what is the maximum total earnings the worker can receive if they are restricted to a maximum of 12 hours of work per day?

If you were running an advertising campaign for designer men's suits, you should target families with:

A consumer has a choice of spending $13,000 on a Honda or $9,000 on a Saturn.She is observed buying the Saturn.Does this mean the consumer prefers the Saturn? Explain your answer.

Suppose the utility function for a firm manager is U = $\pi$ + bQ, where Q is output, $\pi$ is profit, and b is a positive constant.How would the firm's output compare with what it would be if the manager's objective was to maximize profit?

The revenues earned by the firm from the consumer may be maximized under

Running a supermarket involves

What is the maximum amount of good X that can be purchased if X and Y are the only two goods available for purchase and P_x = $10, P_y = $20, Y = 5, and M = 400?

A cash gift causes the budget line to

Suppose that consumers' preferences are well behaved in that properties 4-1 - 4-4 are satisfied.Furthermore, assume that X is a normal good, Y is an inferior good and the price of good X increases.Then the substitution effect will lead consumers to consume

Some individuals choose to undertake risky prospects while others choose safer ones, because they have different

A price decrease causes a consumer's "real" income to:

The budget set defines the combinations of good X and Y that

Individuals who purchase services and goods for the purpose of consumption are:

Suppose a manager views both quantity and profit as "goods." Such a manager will then have an indifference curve that

If the price of good X increases, what will happen to the budget line?

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

Exam 4: The Theory of Individual Behavior

What is the horizontal intercept of the budget line, given that M = $1,000, PX = $50, and PY = $40?

If a worker receives a fixed payment of $100 plus $10 for every hour she works, what is the maximum total earnings the worker can receive if they are restricted to a maximum of 12 hours of work per day?

If you were running an advertising campaign for designer men's suits, you should target families with:

A consumer has a choice of spending $13,000 on a Honda or $9,000 on a Saturn.She is observed buying the Saturn.Does this mean the consumer prefers the Saturn? Explain your answer.

Suppose the utility function for a firm manager is U = π\piπ + bQ, where Q is output, π\piπ is profit, and b is a positive constant.How would the firm's output compare with what it would be if the manager's objective was to maximize profit?

The revenues earned by the firm from the consumer may be maximized under

Running a supermarket involves

What is the maximum amount of good X that can be purchased if X and Y are the only two goods available for purchase and Px = $10, Py = $20, Y = 5, and M = 400?

A cash gift causes the budget line to

Suppose that consumers' preferences are well behaved in that properties 4-1 - 4-4 are satisfied.Furthermore, assume that X is a normal good, Y is an inferior good and the price of good X increases.Then the substitution effect will lead consumers to consume

Some individuals choose to undertake risky prospects while others choose safer ones, because they have different

A price decrease causes a consumer's "real" income to:

The budget set defines the combinations of good X and Y that

Individuals who purchase services and goods for the purpose of consumption are:

Suppose a manager views both quantity and profit as "goods." Such a manager will then have an indifference curve that

If the price of good X increases, what will happen to the budget line?

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

What is the horizontal intercept of the budget line, given that M = $1,000, P_X = $50, and P_Y = $40?

Suppose the utility function for a firm manager is U = $\pi$ + bQ, where Q is output, $\pi$ is profit, and b is a positive constant.How would the firm's output compare with what it would be if the manager's objective was to maximize profit?

What is the maximum amount of good X that can be purchased if X and Y are the only two goods available for purchase and P_x = $10, P_y = $20, Y = 5, and M = 400?