Question 1

In general,changes in the price of a good:

Accepted Answer

A) causes a substitution effect only. 
B) causes an income effect only. 
C) causes both an income and substitution effect. 
D) usually has no effect. 
A) causes a substitution effect only. 
B) causes an income effect only. 
C) causes both an income and substitution effect. 
D) usually has no effect.

Question 2

Grace has just eaten a slice of pizza and received a utility of 8.If she chooses to eat a second slice:

Accepted Answer

A) she will experience a drop in total utility. 
B) she is not acting rationally. 
C) she will derive less than a utility of 8 from it. 
D) None of these is true. 
A) she will experience a drop in total utility. 
B) she is not acting rationally. 
C) she will derive less than a utility of 8 from it. 
D) None of these is true.

Question 3

The Golden Rule "Do unto others as you would have done unto you" is an example of the economic concept of:

Accepted Answer

A) marginal utility. 
B) altruism. 
C) reciprocity. 
D) selfishness. 
A) marginal utility. 
B) altruism. 
C) reciprocity. 
D) selfishness.

Question 4

Mary makes a New Year's resolution to lose weight.On January 3rd,Mary decides to go to Ben & Jerry's for ice cream instead of going to the gym.Using the concept of revealed preference,we can conclude that Mary:

Accepted Answer

A) is not a rational individual. 
B) actually gains more utility from ice cream than working out. 
C) is a liar. 
D) All of these are true. 
A) is not a rational individual. 
B) actually gains more utility from ice cream than working out. 
C) is a liar. 
D) All of these are true.

Question 5

The concept of utility maximization:

Accepted Answer

A) is solely used to measure an individual's satisfaction with his consumption choices. 
B) can be used broadly to think about choices made motivated by satisfaction,envy,status,or kindness. 
C) assumes each individual seeks to increase his own personal satisfaction regardless of others. 
D) None of these is true. 
A) is solely used to measure an individual's satisfaction with his consumption choices. 
B) can be used broadly to think about choices made motivated by satisfaction,envy,status,or kindness. 
C) assumes each individual seeks to increase his own personal satisfaction regardless of others. 
D) None of these is true.

Question 6

This table shows the different combinations of goods that Jack can consume,given that his income to spend on these two items is $10.  
Considering the information in the table shown,if Jack consumes 2 popsicles and 2 ice cream cones:

Accepted Answer

A) Jack still has $4 left to spend. 
B) Jack still has $6 left to spend. 
C) Jack still has $8 left to spend. 
D) Jack still has $2 left to spend. 
A) Jack still has $4 left to spend. 
B) Jack still has $6 left to spend. 
C) Jack still has $8 left to spend. 
D) Jack still has $2 left to spend.

Question 7

Katie just finished a bottle of Coke.Using the concept of marginal utility,we can say:

Accepted Answer

A) the utility she will gain if she drinks another will reduce her total utility. 
B) the utility she will gain if she drinks another might reduce her total utility. 
C) the utility she will gain if she drinks another will be the same as that of her first. 
D) None of these is necessarily true. 
A) the utility she will gain if she drinks another will reduce her total utility. 
B) the utility she will gain if she drinks another might reduce her total utility. 
C) the utility she will gain if she drinks another will be the same as that of her first. 
D) None of these is necessarily true.

Question 8

Sam has $400 a month to spend on either tanning sessions or rounds of golf.Tanning sessions are $20 each,and a round of golf is $50.A point on Sam's budget constraint would be:

Accepted Answer

A) 20 tanning sessions and 8 rounds of golf. 
B) 10 tanning sessions and 5 rounds of golf. 
C) 10 tanning sessions and 4 rounds of golf. 
D) 10 tanning sessions and 2 rounds of golf. 
A) 20 tanning sessions and 8 rounds of golf. 
B) 10 tanning sessions and 5 rounds of golf. 
C) 10 tanning sessions and 4 rounds of golf. 
D) 10 tanning sessions and 2 rounds of golf.

Question 9

In general,an increase in the price of a good:

Accepted Answer

A) will cause the substitution effect to be bigger than the income effect. 
B) will cause the income effect to be bigger than the substitution effect. 
C) will cause both an income and substitution effect. 
D) usually will have no effect. 
A) will cause the substitution effect to be bigger than the income effect. 
B) will cause the income effect to be bigger than the substitution effect. 
C) will cause both an income and substitution effect. 
D) usually will have no effect.

Question 10

This graph shows three different budget constraints: A,B,andC.
 
If Gary has budget constraint A,and the price of milk is $3 a gallon,what is Gary's income?

Accepted Answer

A) $9 
B) $27 
C) $12 
D) Cannot answer this without knowing the price of soda. 
A) $9 
B) $27 
C) $12 
D) Cannot answer this without knowing the price of soda.

Question 11

After browsing several pairs of shoes,Bob buys a pair of Nike running shoes.Economists would say that:

Accepted Answer

A) Bob is revealing his strong distaste for New Balance running shoes. 
B) Bob is revealing he will always choose Nike over any other shoe brand. 
C) Bob will get more utility per dollar from the Nike running shoes than any other in the store. 
D) Bob made a poor choice,if he really prefers Adidas. 
A) Bob is revealing his strong distaste for New Balance running shoes. 
B) Bob is revealing he will always choose Nike over any other shoe brand. 
C) Bob will get more utility per dollar from the Nike running shoes than any other in the store. 
D) Bob made a poor choice,if he really prefers Adidas.

Question 12

Quinn's income to spend each month on two normal goods,bowling or eating out,is $100.It costs $10 to bowl for the night,and it costs $20 for Quinn to eat at a restaurant.Quinn currently consumes four nights of bowling and three meals at a restaurant.If the price of bowling increased to $15,the income effect would predict:

Accepted Answer

A) Quinn would consume less of each good. 
B) Quinn would consume more of each good. 
C) Quinn would consume more bowling and less meals out. 
D) Quinn would consume less bowling and more meals out. 
A) Quinn would consume less of each good. 
B) Quinn would consume more of each good. 
C) Quinn would consume more bowling and less meals out. 
D) Quinn would consume less bowling and more meals out.

Question 13

Ethan enjoys buying books and going to the movies.He has income of $150 to spend on these two goods each month.The price of a book is $15 and the price of going to the movies is also $15.He currently consumes four books and six movies a month.If the price of a book drops to $10,the substitution effect would predict:

Accepted Answer

A) Ethan would consume more of each good. 
B) Ethan would consume less of each good. 
C) Ethan would consume more books and fewer movies. 
D) Ethan would consume fewer books and more movies. 
A) Ethan would consume more of each good. 
B) Ethan would consume less of each good. 
C) Ethan would consume more books and fewer movies. 
D) Ethan would consume fewer books and more movies.

Question 14

The substitution effect can be defined as:

Accepted Answer

A) the change in consumption that results from a change in the relative price of goods. 
B) the change in consumption that results from increased effective wealth due to lower prices. 
C) the change in consumption that results from increased effective wealth due to getting a raise. 
D) the change in income that results from increased effective consumption due to lower prices 
A) the change in consumption that results from a change in the relative price of goods. 
B) the change in consumption that results from increased effective wealth due to lower prices. 
C) the change in consumption that results from increased effective wealth due to getting a raise. 
D) the change in income that results from increased effective consumption due to lower prices

Question 15

A budget constraint:

Accepted Answer

A) shows different bundles of goods that all yield the same total utility. 
B) shows different bundles of goods that all cost the same amount. 
C) shows different bundles of goods that all maximize an individual's utility. 
D) shows how much income is needed to maximize total utility. 
A) shows different bundles of goods that all yield the same total utility. 
B) shows different bundles of goods that all cost the same amount. 
C) shows different bundles of goods that all maximize an individual's utility. 
D) shows how much income is needed to maximize total utility.

Question 16

Utility is:

Accepted Answer

A) at the heart of all microeconomic thinking. 
B) a way of describing the value that a person places on something. 
C) what drives decision making in individuals. 
D) All of these are true. 
A) at the heart of all microeconomic thinking. 
B) a way of describing the value that a person places on something. 
C) what drives decision making in individuals. 
D) All of these are true.

Question 17

A budget constraint is:

Accepted Answer

A) a line that is composed of all the possible combinations of goods and services that a consumer can buy with his or her income. 
B) a line that is composed of all the possible combinations of goods and services that a consumer can choose to maximize his or her total utility. 
C) a line that is composed of the additional utility gained from consuming possible combinations of goods and services that a consumer can buy with his or her income. 
D) a line that is composed of the total utility gained from consuming all possible combinations of goods and services that a consumer can buy with his or her income. 
A) a line that is composed of all the possible combinations of goods and services that a consumer can buy with his or her income. 
B) a line that is composed of all the possible combinations of goods and services that a consumer can choose to maximize his or her total utility. 
C) a line that is composed of the additional utility gained from consuming possible combinations of goods and services that a consumer can buy with his or her income. 
D) a line that is composed of the total utility gained from consuming all possible combinations of goods and services that a consumer can buy with his or her income.

Question 18

Johnny spends his day doing a variety of activities;he spends the morning exercising and doing yard work,reads in the afternoon,and hosts a dinner party in the evening.Economists would best explain his choice to do a variety of activities instead of a single activity using the concept of:

Accepted Answer

A) tastes and preferences 
B) budget constraints 
C) diminishing marginal utility 
D) income effect 
A) tastes and preferences 
B) budget constraints 
C) diminishing marginal utility 
D) income effect

Question 19

One baseline assumption that economists make is:

Accepted Answer

A) people are rational utility maximizers. 
B) people will always choose short-term benefits to longer-term payoffs. 
C) people will not always choose what makes them happiest. 
D) people are unpredictable. 
A) people are rational utility maximizers. 
B) people will always choose short-term benefits to longer-term payoffs. 
C) people will not always choose what makes them happiest. 
D) people are unpredictable.

Question 20

Quinn's income to spend on either bowling or eating out each month is $100.It costs $10 to bowl for the night and it costs $20 for Quinn to eat at a restaurant.A point on Quinn's budget constraint would be:

Accepted Answer

A) 10 nights of bowling and 5 trips to the restaurant. 
B) 4 nights of bowling and 3 trips to the restaurant. 
C) 3 nights of bowling and 4 trips to the restaurant. 
D) 2 nights of bowling and 5 trips to the restaurant. 
A) 10 nights of bowling and 5 trips to the restaurant. 
B) 4 nights of bowling and 3 trips to the restaurant. 
C) 3 nights of bowling and 4 trips to the restaurant. 
D) 2 nights of bowling and 5 trips to the restaurant.

Exam 7: Consumer Behavior

In general,changes in the price of a good:

Grace has just eaten a slice of pizza and received a utility of 8.If she chooses to eat a second slice:

The Golden Rule "Do unto others as you would have done unto you" is an example of the economic concept of:

Mary makes a New Year's resolution to lose weight.On January 3rd,Mary decides to go to Ben & Jerry's for ice cream instead of going to the gym.Using the concept of revealed preference,we can conclude that Mary:

The concept of utility maximization:

This table shows the different combinations of goods that Jack can consume,given that his income to spend on these two items is $10. Considering the information in the table shown,if Jack consumes 2 popsicles and 2 ice cream cones:

Katie just finished a bottle of Coke.Using the concept of marginal utility,we can say:

Sam has $400 a month to spend on either tanning sessions or rounds of golf.Tanning sessions are $20 each,and a round of golf is $50.A point on Sam's budget constraint would be:

In general,an increase in the price of a good:

This graph shows three different budget constraints: A,B,andC. If Gary has budget constraint A,and the price of milk is $3 a gallon,what is Gary's income?

After browsing several pairs of shoes,Bob buys a pair of Nike running shoes.Economists would say that:

The substitution effect can be defined as:

A budget constraint:

Utility is:

A budget constraint is:

Johnny spends his day doing a variety of activities;he spends the morning exercising and doing yard work,reads in the afternoon,and hosts a dinner party in the evening.Economists would best explain his choice to do a variety of activities instead of a single activity using the concept of:

One baseline assumption that economists make is:

Quinn's income to spend on either bowling or eating out each month is $100.It costs $10 to bowl for the night and it costs $20 for Quinn to eat at a restaurant.A point on Quinn's budget constraint would be:

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Mary makes a New Year's resolution to lose weight.On January 3^rd,Mary decides to go to Ben & Jerry's for ice cream instead of going to the gym.Using the concept of revealed preference,we can conclude that Mary: