Question 1

Consider the two following statements:
I.x is an inferior good.
II.x exhibits Giffen's Paradox.
Which of the following is true?

Accepted Answer

A) I implies II,but II does not necessarily imply I. 
B) II implies I,but I does not necessarily imply II. 
C) I and II are statements of the same phenomenon. 
A) I implies II,but II does not necessarily imply I. 
B) II implies I,but I does not necessarily imply II. 
C) I and II are statements of the same phenomenon. B

Question 2

The price elasticity of demand for a vertical demand curve is:

Accepted Answer

A) 0. 
B) -1. 
C) 1. 
D) - infinity. 
A) 0. 
B) -1. 
C) 1. 
D) - infinity. A

Question 3

Demand functions are "homogeneous of degree zero in all prices and income." This means:

Accepted Answer

A) a proportional increase in all prices and income will leave quantities demanded unchanged. 
B) a doubling of all prices will not alter consumption decisions. 
C) prices directly enter individuals' utility functions. 
D) an increase in income will cause all quantities demanded to increase proportionately. 
A) a proportional increase in all prices and income will leave quantities demanded unchanged. 
B) a doubling of all prices will not alter consumption decisions. 
C) prices directly enter individuals' utility functions. 
D) an increase in income will cause all quantities demanded to increase proportionately. A

Question 4

If a consumer purchases only two goods (x and y)and the demand for x is elastic,then a rise in the price of x:

Accepted Answer

A) will cause total spending on good y to rise. 
B) will cause total spending on good y to fall. 
C) will cause total spending on good y to remain unchanged. 
D) will have an indeterminate effect on total spending on good y. 
A) will cause total spending on good y to rise. 
B) will cause total spending on good y to fall. 
C) will cause total spending on good y to remain unchanged. 
D) will have an indeterminate effect on total spending on good y.

Question 5

An individual's demand curve:

Accepted Answer

A) represents the various quantities that a consumer is willing to purchase of a good at various price levels. 
B) is derived from an individual's indifference curve map. 
C) will shift if preferences,prices of other goods,or income change. 
D) all of these answers are correct. 
A) represents the various quantities that a consumer is willing to purchase of a good at various price levels. 
B) is derived from an individual's indifference curve map. 
C) will shift if preferences,prices of other goods,or income change. 
D) all of these answers are correct.

Question 6

Assume x and y are the only two goods a person consumes.If after a rise in pX the quantity demanded of y increases,one could say:

Accepted Answer

A) the income effect dominates the substitution effect. 
B) the substitution effect dominates the income effect. 
C) it is still impossible to determine whether the substitution or income effect dominates. 
D) none of the answers is correct. 
A) the income effect dominates the substitution effect. 
B) the substitution effect dominates the income effect. 
C) it is still impossible to determine whether the substitution or income effect dominates. 
D) none of the answers is correct.

Question 7

If an individual buys only two goods and these must be used in a fixed relationship with one another (e.g. ,coffee and cream for a coffee drinker who never varies the amount of cream used in each cup),then:

Accepted Answer

A) there is no substitution effect from a change in the price of coffee. 
B) there is no income effect from a change in the price of coffee. 
C) Giffen's Paradox must occur if both coffee and cream are inferior goods. 
D) an increase in income will not affect cream purchases. 
A) there is no substitution effect from a change in the price of coffee. 
B) there is no income effect from a change in the price of coffee. 
C) Giffen's Paradox must occur if both coffee and cream are inferior goods. 
D) an increase in income will not affect cream purchases.

Question 8

If the compensated (Hicks)and Marshall demand curves for a good intersect,at that point the Marshall curve will be:

Accepted Answer

A) flatter if this is a normal good. 
B) steeper if this is a normal good. 
C) flatter if this is an inferior good. 
D) horizontal. 
A) flatter if this is a normal good. 
B) steeper if this is a normal good. 
C) flatter if this is an inferior good. 
D) horizontal.

Question 9

Consider the linear demand curve   This demand curve will have a price elasticity of demand of -1 when price is equal to:​

Accepted Answer

A) ​   
B) ​   
C) ​   
D) ​   
A) ​   
B) ​   
C) ​   
D) ​

Question 10

Here are three possible definitions of "Compensating Variation":
I.the amount a person would be willing to pay to avoid a price increase.
II.the amount of additional income needed to allow a person to restore his or her utility back to its initial level after it has been reduced by a price increase.
III.the amount of income that a person who experienced a price increase would be willing to pay to see the price return to its earlier level.
Which of these definitions is (are)correct?

Accepted Answer

A) ​Only I 
B) ​I and II 
C) ​II and III 
D) ​Only III 
A) ​Only I 
B) ​I and II 
C) ​II and III 
D) ​Only III

Question 11

Often economists measure the loss in consumer surplus by looking at the changing area below the Marshallian demand curve.This approach will provide a more accurate measure of the compensating variation of such a price increase if:​

Accepted Answer

A) ​the good occupies a small portion of a person's budget. 
B) ​the good occupies a large portion of a person's budget. 
C) ​the good has many close substitutes. 
D) ​the good has few substitutes. 
A) ​the good occupies a small portion of a person's budget. 
B) ​the good occupies a large portion of a person's budget. 
C) ​the good has many close substitutes. 
D) ​the good has few substitutes.

Question 12

The price elasticity of demand for good x is defined as:

Accepted Answer

A) percentage change in px / percentage change in x. 
B) percentage change in x /percentage change in px. 
C) percentage change in x/percentage change in income. 
D) percentage change in x /percentage change in py. 
A) percentage change in px / percentage change in x. 
B) percentage change in x /percentage change in px. 
C) percentage change in x/percentage change in income. 
D) percentage change in x /percentage change in py.

Question 13

Which of the following will not cause a demand curve to shift position?

Accepted Answer

A) A doubling of the good's price 
B) A doubling of the price of a closely substitutable good 
C) A doubling of income 
D) A shift in preferences 
A) A doubling of the good's price 
B) A doubling of the price of a closely substitutable good 
C) A doubling of income 
D) A shift in preferences

Question 14

The price elasticity of demand for a linear demand curve follows the pattern (moving from high prices to low prices):

Accepted Answer

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

Question 15

If the prices of all goods increase by the same proportion as income,the quantity demanded of good x will:

Accepted Answer

A) decrease. 
B) increase. 
C) remain unchanged. 
D) change in a way that cannot be determined from the information given. 
A) decrease. 
B) increase. 
C) remain unchanged. 
D) change in a way that cannot be determined from the information given.

Question 16

If there are only two goods and these are consumed in fixed proportions,the price elasticities of demand for these two goods will sum to:

Accepted Answer

A) 0.0. 
B) -0.5. 
C) -1.0. 
D) a number between 0 and -1. 
A) 0.0. 
B) -0.5. 
C) -1.0. 
D) a number between 0 and -1.

Question 17

The price elasticity of demand for a horizontal demand curve is:

Accepted Answer

A) 0. 
B) -1. 
C) 1. 
D) - infinity. 
A) 0. 
B) -1. 
C) 1. 
D) - infinity.

Question 18

Consider the following three concepts:
I.Marshall Demand [  ])
II.Indirect Utility [  ])
III.Compensated Demand [  ])
Which of these functions is necessarily homogeneous of degree zero in all its argument?

Accepted Answer

A) All of them 
B) None of them 
C) Only I 
D) I and III,but not II 
A) All of them 
B) None of them 
C) Only I 
D) I and III,but not II

Question 19

Which of the following demand functions is not homogenous of degree zero in px ,py ,and I?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 20

If the demand for a product is elastic,then a rise in price will:

Accepted Answer

A) cause total spending on the good to increase. 
B) cause total spending on the good to decrease. 
C) keep total spending the same,but reduce the quantity demanded. 
D) keep total spending the same,but increase the quantity demanded. 
A) cause total spending on the good to increase. 
B) cause total spending on the good to decrease. 
C) keep total spending the same,but reduce the quantity demanded. 
D) keep total spending the same,but increase the quantity demanded.

Consider the two following statements: I.x is an inferior good. II.x exhibits Giffen's Paradox. Which of the following is true?

The price elasticity of demand for a vertical demand curve is:

Demand functions are "homogeneous of degree zero in all prices and income." This means:

If a consumer purchases only two goods (x and y)and the demand for x is elastic,then a rise in the price of x:

An individual's demand curve:

Assume x and y are the only two goods a person consumes.If after a rise in p_X the quantity demanded of y increases,one could say:

If an individual buys only two goods and these must be used in a fixed relationship with one another (e.g. ,coffee and cream for a coffee drinker who never varies the amount of cream used in each cup),then:

If the compensated (Hicks)and Marshall demand curves for a good intersect,at that point the Marshall curve will be:

Consider the linear demand curve This demand curve will have a price elasticity of demand of -1 when price is equal to:

Often economists measure the loss in consumer surplus by looking at the changing area below the Marshallian demand curve.This approach will provide a more accurate measure of the compensating variation of such a price increase if:

The price elasticity of demand for good x is defined as:

Which of the following will not cause a demand curve to shift position?

The price elasticity of demand for a linear demand curve follows the pattern (moving from high prices to low prices):

If the prices of all goods increase by the same proportion as income,the quantity demanded of good x will:

If there are only two goods and these are consumed in fixed proportions,the price elasticities of demand for these two goods will sum to:

The price elasticity of demand for a horizontal demand curve is:

Consider the following three concepts: I.Marshall Demand [ ]) II.Indirect Utility [ ]) III.Compensated Demand [ ]) Which of these functions is necessarily homogeneous of degree zero in all its argument?

Which of the following demand functions is not homogenous of degree zero in p_x ,p_y ,and I?

If the demand for a product is elastic,then a rise in price will:

Preferences and Utility

Utility Maximization and Choice

Demand Relationships Among Goods

Uncertainty

Game Theory

Production Functions

Cost Functions

Profit Maximization

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

Exam 3: Income and Substitution Effects

Consider the two following statements: I.x is an inferior good. II.x exhibits Giffen's Paradox. Which of the following is true?

The price elasticity of demand for a vertical demand curve is:

Demand functions are "homogeneous of degree zero in all prices and income." This means:

If a consumer purchases only two goods (x and y)and the demand for x is elastic,then a rise in the price of x:

An individual's demand curve:

Assume x and y are the only two goods a person consumes.If after a rise in pX the quantity demanded of y increases,one could say:

If an individual buys only two goods and these must be used in a fixed relationship with one another (e.g. ,coffee and cream for a coffee drinker who never varies the amount of cream used in each cup),then:

If the compensated (Hicks)and Marshall demand curves for a good intersect,at that point the Marshall curve will be:

Consider the linear demand curve This demand curve will have a price elasticity of demand of -1 when price is equal to:​

Often economists measure the loss in consumer surplus by looking at the changing area below the Marshallian demand curve.This approach will provide a more accurate measure of the compensating variation of such a price increase if:​

The price elasticity of demand for good x is defined as:

Which of the following will not cause a demand curve to shift position?

The price elasticity of demand for a linear demand curve follows the pattern (moving from high prices to low prices):

If the prices of all goods increase by the same proportion as income,the quantity demanded of good x will:

If there are only two goods and these are consumed in fixed proportions,the price elasticities of demand for these two goods will sum to:

The price elasticity of demand for a horizontal demand curve is:

Consider the following three concepts: I.Marshall Demand [ ]) II.Indirect Utility [ ]) III.Compensated Demand [ ]) Which of these functions is necessarily homogeneous of degree zero in all its argument?

Which of the following demand functions is not homogenous of degree zero in px ,py ,and I?

If the demand for a product is elastic,then a rise in price will:

Preferences and Utility

Utility Maximization and Choice

Demand Relationships Among Goods

Uncertainty

Game Theory

Production Functions

Cost Functions

Profit Maximization

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

Assume x and y are the only two goods a person consumes.If after a rise in p_X the quantity demanded of y increases,one could say:

Consider the linear demand curve This demand curve will have a price elasticity of demand of -1 when price is equal to:

Often economists measure the loss in consumer surplus by looking at the changing area below the Marshallian demand curve.This approach will provide a more accurate measure of the compensating variation of such a price increase if:

Which of the following demand functions is not homogenous of degree zero in p_x ,p_y ,and I?