Question 1

The property that rules out indifference curves that cross is:

Accepted Answer

A) completeness. 
B) transitivity. 
C) diminishing marginal rate of substitution. 
D) independence. 
A) completeness. 
B) transitivity. 
C) diminishing marginal rate of substitution. 
D) independence.

Question 2

Given that income is $300, the price of good Y is $15, and the price of good X is $20.What is the vertical intercept of the budget line?

Accepted Answer

A) 4,500. 
B) 300. 
C) 20. 
D) 15. 
A) 4,500. 
B) 300. 
C) 20. 
D) 15.

Question 3

Suppose that consumers' preferences are well behaved in that properties 4-1 - 4-4 are satisfied.Furthermore, assume that both X and Y are normal goods and that the price of good X increases.Then, which of the following effect is known with certainty.

Accepted Answer

A) the income and substitution effect reinforce one another leading to an overall increase in the consumption of good X. 
B) the income and substitution effect reinforce one another leading to an overall decrease in the consumption of good X. 
C) the income and substitution effect will have competing effects leading to an indeterminate impact on the consumption of good X. 
D) the income and substitution effect will reinforce one another leading to an overall increase in the consumption of good Y. 
A) the income and substitution effect reinforce one another leading to an overall increase in the consumption of good X. 
B) the income and substitution effect reinforce one another leading to an overall decrease in the consumption of good X. 
C) the income and substitution effect will have competing effects leading to an indeterminate impact on the consumption of good X. 
D) the income and substitution effect will reinforce one another leading to an overall increase in the consumption of good Y.

Question 4

The difference between a price increase and a decrease in income is that

Accepted Answer

A) A decrease in income does not affect the slope of the budget line while an increase in price does change the slope. 
B) A price increase does not affect the consumption of other goods while a decrease in income does. 
C) A price increase will increase real income while a decrease in income will increase real income. 
D) None of the statements associated with this question are correct. 
A) A decrease in income does not affect the slope of the budget line while an increase in price does change the slope. 
B) A price increase does not affect the consumption of other goods while a decrease in income does. 
C) A price increase will increase real income while a decrease in income will increase real income. 
D) None of the statements associated with this question are correct.

Question 5

Use indifference curve and constraint analysis to analyze the behavior of employees who are paid
a.An hourly wage rate of $4 per hour.
b.A fixed hour wage of $4 per hour; plus an overtime bonus of $4 for every hour worked in excess of eight hours.
c.A fixed salary of $40 per day, plus $4 for each hour worked.
d.Which of the above schemes would yield the largest number of hours worked? Explain.

Accepted Answer

a.This is shown as the opportunity set t

Question 6

A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of:

Accepted Answer

A) more is better. 
B) completeness. 
C) substitutability. 
D) complementarity. 
A) more is better. 
B) completeness. 
C) substitutability. 
D) complementarity.

Question 7

If the price of a good purchased by a utility maximizing consumer goes down, all other things remain the same, and the consumer's income is adjusted so that he can just barely attain his previous level of satisfaction, and if the consumer had indifference curves of the usual shape it will be found that

Accepted Answer

A) more of the good will be purchased than before. 
B) less of the good will be purchased than before. 
C) the same amount of the good will be purchased as before. 
D) the consumer will stop purchasing the good at all. 
A) more of the good will be purchased than before. 
B) less of the good will be purchased than before. 
C) the same amount of the good will be purchased as before. 
D) the consumer will stop purchasing the good at all.

Question 8

Normally owners of firms should try to induce their managers to care:

Accepted Answer

A) solely about output. 
B) about profits and output. 
C) solely about profits. 
D) none of the statements associated with this question are correct. 
A) solely about output. 
B) about profits and output. 
C) solely about profits. 
D) none of the statements associated with this question are correct.

Question 9

Along the same indifference curve, MRS is

Accepted Answer

A) constant as more of one good is obtained. 
B) increasing as more of one good is obtained. 
C) decreasing as more of one good is obtained. 
D) varying irregularly as more of one good is obtained. 
A) constant as more of one good is obtained. 
B) increasing as more of one good is obtained. 
C) decreasing as more of one good is obtained. 
D) varying irregularly as more of one good is obtained.

Question 10

If the price of a good rises, then the equilibrium consumption of that good

Accepted Answer

A) increases if it is an inferior good. 
B) decreases if it is a normal good. 
C) remains the same. 
D) none of the statements associated with this question are correct. 
A) increases if it is an inferior good. 
B) decreases if it is a normal good. 
C) remains the same. 
D) none of the statements associated with this question are correct.

Question 11

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and Px = $10, Py = $15, X = 30, and M = 600?

Accepted Answer

A) 10 
B) 15 
C) 20 
D) 25 
A) 10 
B) 15 
C) 20 
D) 25

Question 12

The firm manager with horizontal indifference curves (output on the horizontal axis, profit on the vertical axis) views

Accepted Answer

A) only profits to be "goods." 
B) only output to be "goods." 
C) both profits and outputs to be "goods." 
D) none of the statements associated with this question are correct. 
A) only profits to be "goods." 
B) only output to be "goods." 
C) both profits and outputs to be "goods." 
D) none of the statements associated with this question are correct.

Question 13

The idea that a consumer is limited to selecting a bundle of goods that is affordable is captured by the:

Accepted Answer

A) budget constraint. 
B) indifference curve. 
C) consumer equilibrium. 
D) price changes. 
A) budget constraint. 
B) indifference curve. 
C) consumer equilibrium. 
D) price changes.

Question 14

The possibility of the endless cyclical preference is eliminated by the property of

Accepted Answer

A) completeness. 
B) more and better. 
C) diminishing marginal rate of substitution. 
D) transitivity. 
A) completeness. 
B) more and better. 
C) diminishing marginal rate of substitution. 
D) transitivity.

Question 15

Suppose that consumers' preferences are well behaved in that properties 4-1 - 4-4 are satisfied.Furthermore, assume that both X and Y are normal goods and that the price of good Y increases.Then, which of the following effect is known with certainty.

Accepted Answer

A) the income and substitution effect reinforce one another leading to an overall increase in the consumption of good X. 
B) the income and substitution effect reinforce one another leading to an overall decrease in the consumption of good X. 
C) there will be an indeterminate effect on the consumption of good X. 
D) the income and substitution effect will reinforce one another leading to an overall increase in the consumption of good Y. 
A) the income and substitution effect reinforce one another leading to an overall increase in the consumption of good X. 
B) the income and substitution effect reinforce one another leading to an overall decrease in the consumption of good X. 
C) there will be an indeterminate effect on the consumption of good X. 
D) the income and substitution effect will reinforce one another leading to an overall increase in the consumption of good Y.

Question 16

Suppose we are given that the value of a particular utility function is a constant.That is, U(X,Y) = c.Then, the total derivative of this relation is

Accepted Answer

A) ($\partial$U/$\partial$X)dX + ($\partial$U/$\partial$Y)dY = c. 
B) ($\partial$U/$\partial$X)dX + ($\partial$U/$\partial$Y)dY = 0. 
C) ($\partial$Y/$\partial$X)dX + ($\partial$X/$\partial$Y)dY = 0. 
D) ($\partial$Y/$\partial$X)dU + ($\partial$X/$\partial$Y)dU = c. 
A) ($\partial$U/$\partial$X)dX + ($\partial$U/$\partial$Y)dY = c. 
B) ($\partial$U/$\partial$X)dX + ($\partial$U/$\partial$Y)dY = 0. 
C) ($\partial$Y/$\partial$X)dX + ($\partial$X/$\partial$Y)dY = 0. 
D) ($\partial$Y/$\partial$X)dU + ($\partial$X/$\partial$Y)dU = c.

Question 17

If the price of a good Y falls, then the marginal rate of substitution between X and Y

Accepted Answer

A) increases. 
B) decreases. 
C) remains the same. 
D) depends on whether X and Y are normal or inferior goods, and cannot tell without that information. 
A) increases. 
B) decreases. 
C) remains the same. 
D) depends on whether X and Y are normal or inferior goods, and cannot tell without that information.

Question 18

After a price decrease for good X, the new consumer equilibrium level of good X will be:

Accepted Answer

A) higher than before the price change. 
B) lower than before the price change. 
C) indeterminate without more information. 
D) the same as before the price change. 
A) higher than before the price change. 
B) lower than before the price change. 
C) indeterminate without more information. 
D) the same as before the price change.

Question 19

Consider a two good world, with commodities X and Y.If Y is an inferior good, then an increase in consumer income cannot

Accepted Answer

A) decrease the demand for Y. 
B) decrease the demand for X. 
C) increase the demand for X. 
D) make the consumer better off. 
A) decrease the demand for Y. 
B) decrease the demand for X. 
C) increase the demand for X. 
D) make the consumer better off.

Question 20

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

Accepted Answer

A) decrease. 
B) increase. 
C) remain unchanged. 
D) vary along the budget line. 
A) decrease. 
B) increase. 
C) remain unchanged. 
D) vary along the budget line.

The property that rules out indifference curves that cross is:

Given that income is $300, the price of good Y is $15, and the price of good X is $20.What is the vertical intercept of the budget line?

Suppose that consumers' preferences are well behaved in that properties 4-1 - 4-4 are satisfied.Furthermore, assume that both X and Y are normal goods and that the price of good X increases.Then, which of the following effect is known with certainty.

The difference between a price increase and a decrease in income is that

A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of:

Normally owners of firms should try to induce their managers to care:

Along the same indifference curve, MRS is

If the price of a good rises, then the equilibrium consumption of that good

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and P_x = $10, P_y = $15, X = 30, and M = 600?

The firm manager with horizontal indifference curves (output on the horizontal axis, profit on the vertical axis) views

The idea that a consumer is limited to selecting a bundle of goods that is affordable is captured by the:

The possibility of the endless cyclical preference is eliminated by the property of

Suppose that consumers' preferences are well behaved in that properties 4-1 - 4-4 are satisfied.Furthermore, assume that both X and Y are normal goods and that the price of good Y increases.Then, which of the following effect is known with certainty.

Suppose we are given that the value of a particular utility function is a constant.That is, U(X,Y) = c.Then, the total derivative of this relation is

If the price of a good Y falls, then the marginal rate of substitution between X and Y

After a price decrease for good X, the new consumer equilibrium level of good X will be:

Consider a two good world, with commodities X and Y.If Y is an inferior good, then an increase in consumer income cannot

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

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

The property that rules out indifference curves that cross is:

Given that income is $300, the price of good Y is $15, and the price of good X is $20.What is the vertical intercept of the budget line?

Suppose that consumers' preferences are well behaved in that properties 4-1 - 4-4 are satisfied.Furthermore, assume that both X and Y are normal goods and that the price of good X increases.Then, which of the following effect is known with certainty.

The difference between a price increase and a decrease in income is that

A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of:

Normally owners of firms should try to induce their managers to care:

Along the same indifference curve, MRS is

If the price of a good rises, then the equilibrium consumption of that good

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and Px = $10, Py = $15, X = 30, and M = 600?

The firm manager with horizontal indifference curves (output on the horizontal axis, profit on the vertical axis) views

The idea that a consumer is limited to selecting a bundle of goods that is affordable is captured by the:

The possibility of the endless cyclical preference is eliminated by the property of

Suppose that consumers' preferences are well behaved in that properties 4-1 - 4-4 are satisfied.Furthermore, assume that both X and Y are normal goods and that the price of good Y increases.Then, which of the following effect is known with certainty.

Suppose we are given that the value of a particular utility function is a constant.That is, U(X,Y) = c.Then, the total derivative of this relation is

If the price of a good Y falls, then the marginal rate of substitution between X and Y

After a price decrease for good X, the new consumer equilibrium level of good X will be:

Consider a two good world, with commodities X and Y.If Y is an inferior good, then an increase in consumer income cannot

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

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 maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and P_x = $10, P_y = $15, X = 30, and M = 600?