Question 1

Refer to Figure 6.6.What area represents the compensation for reduced consumption that results from an increase in the price of gasoline from $1.75 to $3.00 per gallon?

Accepted Answer

A)  a + b 
B)  a + b + e 
C)  c + d + e 
D)  d + e 
A)  a + b 
B)  a + b + e 
C)  c + d + e 
D)  d + e

Question 2

For low wages,the labor supply curve slopes ______; for higher wages it slopes ______.

Accepted Answer

A)  upward; downward 
B)  downward; upward 
C)  downward; downward 
D)  upward; upward 
A)  upward; downward 
B)  downward; upward 
C)  downward; downward 
D)  upward; upward

Question 3

The effect of a compensated price change is known as:

Accepted Answer

A)  the price effect of a price change. 
B)  the income effect of a price change. 
C)  the substitution effect of a price change. 
D)  the replacement effect of a price change. 
A)  the price effect of a price change. 
B)  the income effect of a price change. 
C)  the substitution effect of a price change. 
D)  the replacement effect of a price change.

Question 4

______ is a fixed-weight index that is based on a consumption bundle actually purchased in the base year.

Accepted Answer

A)  A Lespeyres price index 
B)  Compensating variation 
C)  Real income 
D)  The inflation rate 
A)  A Lespeyres price index 
B)  Compensating variation 
C)  Real income 
D)  The inflation rate

Question 5

Which of the following best describes labor force participation rates for men and women over the period 1960 to 2000?

Accepted Answer

A)  Labor force participation rates for both men and women increased. 
B)  Labor force participation rates for both men and women decreased. 
C)  Labor force participation rates for men increased while labor force participation rates for women decreased. 
D)  Labor force participation rates for men declined while labor force participation rates for women increased. 
A)  Labor force participation rates for both men and women increased. 
B)  Labor force participation rates for both men and women decreased. 
C)  Labor force participation rates for men increased while labor force participation rates for women decreased. 
D)  Labor force participation rates for men declined while labor force participation rates for women increased.

Question 6

The income effect of a price change is:

Accepted Answer

A)  always consistent with the Law of Demand. 
B)  never consistent with the Law of Demand. 
C)  consistent with the Law of Demand only for normal goods. 
D)  consistent with the Law of Demand only for inferior goods. 
A)  always consistent with the Law of Demand. 
B)  never consistent with the Law of Demand. 
C)  consistent with the Law of Demand only for normal goods. 
D)  consistent with the Law of Demand only for inferior goods.

Question 7

Which of the following statements is true,assuming leisure is a normal good?

Accepted Answer

A)  If the income effect is sufficiently large, the labor supply curve will bend backwards. 
B)  If the income effect is sufficiently small, the labor supply curve will bend backwards. 
C)  If the income effect is sufficiently large, the labor supply curve will slope down. 
D)  If the income effect is sufficiently large, the labor supply curve will shift to the left. 
A)  If the income effect is sufficiently large, the labor supply curve will bend backwards. 
B)  If the income effect is sufficiently small, the labor supply curve will bend backwards. 
C)  If the income effect is sufficiently large, the labor supply curve will slope down. 
D)  If the income effect is sufficiently large, the labor supply curve will shift to the left.

Question 8

Refer to Figure 6.6.What area represents the compensation for an increase in the price of gasoline from $1.75 to $3.00 per gallon?

Accepted Answer

A)  a + b + c + d + e 
B)  f + g + h 
C)  a + b + c 
D)  d + e 
A)  a + b + c + d + e 
B)  f + g + h 
C)  a + b + c 
D)  d + e

Question 9

A demand curve that shows the relationship between the price of a good and the amount of the good consumed holding the consumer's income fixed and allowing their well-being to vary is called:

Accepted Answer

A)  an uncompensated demand curve. 
B)  a compensated demand curve. 
C)  a Hicksian demand curve. 
D)  a derived demand curve. 
A)  an uncompensated demand curve. 
B)  a compensated demand curve. 
C)  a Hicksian demand curve. 
D)  a derived demand curve.

Question 10

Which of the following does NOT occur when the price of a good increases?

Accepted Answer

A)  The good becomes more expensive relative to all other goods. 
B)  The consumer's purchasing power increases. 
C)  Consumers shift their purchases away from the more expensive good. 
D)  The consumer is effectively poorer than before the increase in price. 
A)  The good becomes more expensive relative to all other goods. 
B)  The consumer's purchasing power increases. 
C)  Consumers shift their purchases away from the more expensive good. 
D)  The consumer is effectively poorer than before the increase in price.

Question 11

When income effects are small:

Accepted Answer

A)  there is no difference between the uncompensated demand curve and the uncompensated demand curve. 
B)  the uncompensated demand curve will be relatively far from the compensated demand curve. 
C)  the compensated demand curve will intersect the uncompensated demand curve. 
D)  the uncompensated demand curve lies close to the compensated demand curve. 
A)  there is no difference between the uncompensated demand curve and the uncompensated demand curve. 
B)  the uncompensated demand curve will be relatively far from the compensated demand curve. 
C)  the compensated demand curve will intersect the uncompensated demand curve. 
D)  the uncompensated demand curve lies close to the compensated demand curve.

Question 12

What must occur for a good to violate the Law of Demand?

Accepted Answer

A)  The good must be normal and the income effect must be larger than the substitution effect. 
B)  The good must be normal and the substitution effect must be larger than the income effect. 
C)  The good must be inferior and the income effect must be larger than the substitution effect. 
D)  The good must be inferior and the substitution effect must be larger than the income effect. 
A)  The good must be normal and the income effect must be larger than the substitution effect. 
B)  The good must be normal and the substitution effect must be larger than the income effect. 
C)  The good must be inferior and the income effect must be larger than the substitution effect. 
D)  The good must be inferior and the substitution effect must be larger than the income effect.

Question 13

The change in the cost of living over time is referred to as:

Accepted Answer

A)  inflation. 
B)  substitution bias. 
C)  a fixed-weight price index. 
D)  real income. 
A)  inflation. 
B)  substitution bias. 
C)  a fixed-weight price index. 
D)  real income.

Question 14

A Hicksian,or compensated,demand curve reflects:

Accepted Answer

A)  only the substitution effect of a price change. 
B)  only the income effect of a price change. 
C)  both the income and substitution effects of a price change. 
D)  neither the income nor the substitution effects of a price change. 
A)  only the substitution effect of a price change. 
B)  only the income effect of a price change. 
C)  both the income and substitution effects of a price change. 
D)  neither the income nor the substitution effects of a price change.

Question 15

The substitution bias refers to:

Accepted Answer

A)  the failure of the Lespeyres index to capture a consumer's tendency to purchase the same bundle of goods as prices change. 
B)  the substitution effect is positive for a price increase. 
C)  the substitution effect is negative for an inferior good. 
D)  the failure of the Lespeyres index to capture a consumer's tendency to substitute away from goods that have become more expensive. 
A)  the failure of the Lespeyres index to capture a consumer's tendency to purchase the same bundle of goods as prices change. 
B)  the substitution effect is positive for a price increase. 
C)  the substitution effect is negative for an inferior good. 
D)  the failure of the Lespeyres index to capture a consumer's tendency to substitute away from goods that have become more expensive.

Question 16

If a good is normal,then the income effect is _____ for a price increase and _____ for a price decrease.

Accepted Answer

A)  positive; negative 
B)  positive; positive 
C)  negative; negative 
D)  negative; positive 
A)  positive; negative 
B)  positive; positive 
C)  negative; negative 
D)  negative; positive

Question 17

A Marshallian,or uncompensated,demand curve reflects:

Accepted Answer

A)  only the substitution effect of a price change. 
B)  only the income effect of a price change. 
C)  both the income and substitution effects of a price change. 
D)  neither the income nor the substitution effects of a price change. 
A)  only the substitution effect of a price change. 
B)  only the income effect of a price change. 
C)  both the income and substitution effects of a price change. 
D)  neither the income nor the substitution effects of a price change.

Question 18

Refer to Figure 6.3.Suppose the price of pizza is $9.75.Then consumer surplus is:

Accepted Answer

A)  $3.75. 
B)  $3.50. 
C)  $29.25. 
D)  $33.00. 
A)  $3.75. 
B)  $3.50. 
C)  $29.25. 
D)  $33.00.

Question 19

Refer to Figure 6.3.Suppose the price of pizza is $8.50.Then the consumer will purchase _____ pizzas and the net benefit is ______.

Accepted Answer

A)  5; $9.50 
B)  4; $8.00 
C)  5; $3.50 
D)  4; $9.50 
A)  5; $9.50 
B)  4; $8.00 
C)  5; $3.50 
D)  4; $9.50

Question 20

Suppose that Amber's demand for gasoline is given by G = 1000 - 200PG,where G stands for gallons of gas and PG represents the price of gas.
(a)Suppose gas sells for $2 per gallon.What is Amber's consumer surplus? Illustrate your answer graphically.
(b)Suppose the price of gas rises to $3 per gallon.What is the change in Amber's consumer surplus? Illustrate this change in your graph.

Accepted Answer

(a)Amber's demand curve is shown in Figu

Refer to Figure 6.6.What area represents the compensation for reduced consumption that results from an increase in the price of gasoline from $1.75 to $3.00 per gallon?

For low wages,the labor supply curve slopes ; for higher wages it slopes .

The effect of a compensated price change is known as:

______ is a fixed-weight index that is based on a consumption bundle actually purchased in the base year.

Which of the following best describes labor force participation rates for men and women over the period 1960 to 2000?

The income effect of a price change is:

Which of the following statements is true,assuming leisure is a normal good?

Refer to Figure 6.6.What area represents the compensation for an increase in the price of gasoline from $1.75 to $3.00 per gallon?

A demand curve that shows the relationship between the price of a good and the amount of the good consumed holding the consumer's income fixed and allowing their well-being to vary is called:

Which of the following does NOT occur when the price of a good increases?

When income effects are small:

What must occur for a good to violate the Law of Demand?

The change in the cost of living over time is referred to as:

A Hicksian,or compensated,demand curve reflects:

The substitution bias refers to:

If a good is normal,then the income effect is _ for a price increase and _ for a price decrease.

A Marshallian,or uncompensated,demand curve reflects:

Refer to Figure 6.3.Suppose the price of pizza is $9.75.Then consumer surplus is:

Refer to Figure 6.3.Suppose the price of pizza is $8.50.Then the consumer will purchase _ pizzas and the net benefit is __.

Introduction

Supply and Demand

Balancing Benefits and Costs

Consumer Preferences

Constraints, Choices, and Demand

Technology and Production

Cost

Profit Maximization

Choices Involving Time

Choices Involving Risk

Choices Involving Strategy

Behavioral Economics

Equilibrium and Efficiency

Market Intervention

General Equilibrium, Efficiency, and Equity

Monopoly

Pricing Policies

Oligopoly

Externalities and Public Goods

Asymmetric Information

Filters

Exam 6: Demand and Welfare

Refer to Figure 6.6.What area represents the compensation for reduced consumption that results from an increase in the price of gasoline from $1.75 to $3.00 per gallon?

For low wages,the labor supply curve slopes ______; for higher wages it slopes ______.

The effect of a compensated price change is known as:

______ is a fixed-weight index that is based on a consumption bundle actually purchased in the base year.

Which of the following best describes labor force participation rates for men and women over the period 1960 to 2000?

The income effect of a price change is:

Which of the following statements is true,assuming leisure is a normal good?

Refer to Figure 6.6.What area represents the compensation for an increase in the price of gasoline from $1.75 to $3.00 per gallon?

A demand curve that shows the relationship between the price of a good and the amount of the good consumed holding the consumer's income fixed and allowing their well-being to vary is called:

Which of the following does NOT occur when the price of a good increases?

When income effects are small:

What must occur for a good to violate the Law of Demand?

The change in the cost of living over time is referred to as:

A Hicksian,or compensated,demand curve reflects:

The substitution bias refers to:

If a good is normal,then the income effect is _____ for a price increase and _____ for a price decrease.

A Marshallian,or uncompensated,demand curve reflects:

Refer to Figure 6.3.Suppose the price of pizza is $9.75.Then consumer surplus is:

Refer to Figure 6.3.Suppose the price of pizza is $8.50.Then the consumer will purchase _____ pizzas and the net benefit is ______.

Introduction

Supply and Demand

Balancing Benefits and Costs

Consumer Preferences

Constraints, Choices, and Demand

Technology and Production

Cost

Profit Maximization

Choices Involving Time

Choices Involving Risk

Choices Involving Strategy

Behavioral Economics

Equilibrium and Efficiency

Market Intervention

General Equilibrium, Efficiency, and Equity

Monopoly

Pricing Policies

Oligopoly

Externalities and Public Goods

Asymmetric Information

Filters

For low wages,the labor supply curve slopes ; for higher wages it slopes .

If a good is normal,then the income effect is _ for a price increase and _ for a price decrease.

Refer to Figure 6.3.Suppose the price of pizza is $8.50.Then the consumer will purchase _ pizzas and the net benefit is __.