Question 1

The marginal rate of substitution

Accepted Answer

A) always has a positive algebraic value. 
B) is constant as one moves along a particular indifference curve. 
C) is the amount of one good the consumer is willing to give up in exchange for another so as to keep total satisfaction unchanged. 
D) is the amount of one good the consumer is willing to give up in exchange for another so as to keep total expenditure unchanged. 
E) is equal to the price ratio on the budget line. 
A) always has a positive algebraic value. 
B) is constant as one moves along a particular indifference curve. 
C) is the amount of one good the consumer is willing to give up in exchange for another so as to keep total satisfaction unchanged. 
D) is the amount of one good the consumer is willing to give up in exchange for another so as to keep total expenditure unchanged. 
E) is equal to the price ratio on the budget line.

Question 2

Bjorn is a student with a monthly budget of $500,which he allocates between transportation services and "all other goods." Suppose the price of transportation is $5 per unit,and the price of "all other goods" is $20 per unit.The marginal utility he currently receives from his consumption of transportation services is 60.What is his marginal utility from the consumption of "all other goods" if he is maximizing his utility?

Accepted Answer

A) 5 
B) 20 
C) 25 
D) 200 
E) 240 
A) 5 
B) 20 
C) 25 
D) 200 
E) 240

Question 3

The figures below show Chris's consumption of specialty coffee per week.   FIGURE 6-10
-Refer to Figure 6-10.The two diagrams in Figure 6-10 are showing

Accepted Answer

A) the change in Chris's preferences toward specialty coffee. 
B) that Chris is indifferent between bundles A,B and C. 
C) the derivation of Chris's demand curve for specialty coffee. 
D) that Chris is indifferent between points D,E and F. 
E) the derivation of Chris's indifference curve for specialty coffee. 
A) the change in Chris's preferences toward specialty coffee. 
B) that Chris is indifferent between bundles A,B and C. 
C) the derivation of Chris's demand curve for specialty coffee. 
D) that Chris is indifferent between points D,E and F. 
E) the derivation of Chris's indifference curve for specialty coffee.

Question 4

A demand curve for a normal good is downward sloping due to

Accepted Answer

A) the income effect. 
B) the substitution effect. 
C) the combination of income and substitution effects. 
D) neither the substitution effect nor the income effect. 
E) the Giffen effect. 
A) the income effect. 
B) the substitution effect. 
C) the combination of income and substitution effects. 
D) neither the substitution effect nor the income effect. 
E) the Giffen effect.

Question 5

The table below shows the total value (in dollars)that Andrew gets from playing 9-hole rounds of golf.
   TABLE 6-3
-Refer to Table 6-3.If the price of a 9-hole round of golf is $9,then Andrew will play ________ rounds per month.

Accepted Answer

A) 2 
B) 3 
C) 4 
D) 5 
E) 6 
A) 2 
B) 3 
C) 4 
D) 5 
E) 6

Question 6

When a consumer's marginal rate of substitution between X and Y is equal to the ratio of prices for X and Y,and when the consumer is spending all available income,then

Accepted Answer

A) the budget line is tangent to an indifference curve. 
B) the consumer is not maximizing his utility. 
C) a higher indifference curve can be reached given the existing budget line. 
D) the budget line is tangent to the indifference curve at all quantities of X and Y. 
E) all budget lines are tangent to all indifference curves. 
A) the budget line is tangent to an indifference curve. 
B) the consumer is not maximizing his utility. 
C) a higher indifference curve can be reached given the existing budget line. 
D) the budget line is tangent to the indifference curve at all quantities of X and Y. 
E) all budget lines are tangent to all indifference curves.

Question 7

The table below shows the total value (in dollars)that Andrew gets from playing 9-hole rounds of golf.
   TABLE 6-3
-Refer to Table 6-3.If the price of a 9-hole round of golf is $19,then Andrew will play ________ rounds per month.

Accepted Answer

A) 2 
B) 3 
C) 4 
D) 5 
E) 6 or more 
A) 2 
B) 3 
C) 4 
D) 5 
E) 6 or more

Question 8

FIGURE 6-6
-Refer to Figure 6-6.Suppose the market price is p*.In this case,the total value consumers place on consuming Q* units is outlined by the area

Accepted Answer

A) BCD. 
B) ABD. 
C) ADE. 
D) ACDE. 
E) ABDF. 
A) BCD. 
B) ABD. 
C) ADE. 
D) ACDE. 
E) ABDF.

Question 9

The table below shows the total value (in dollars)that Andrew gets from playing 9-hole rounds of golf.
   TABLE 6-3
-Refer to Table 6-3.Andrew values the 4th round of golf at a marginal value of

Accepted Answer

A) $16. 
B) $92. 
C) $108. 
D) $310. 
E) $430. 
A) $16. 
B) $92. 
C) $108. 
D) $310. 
E) $430.

Question 10

In which of the following situations will an individual's purchasing power be unaffected?

Accepted Answer

A) all absolute prices fall by 15% and money income falls by 15% 
B) all relative prices fall by 15% and money income falls by 15% 
C) all relative prices rise by 15% and money income falls by 15% 
D) all absolute prices remain constant and money income falls by 15% 
E) all relative prices remain constant and money income rises by 15% 
A) all absolute prices fall by 15% and money income falls by 15% 
B) all relative prices fall by 15% and money income falls by 15% 
C) all relative prices rise by 15% and money income falls by 15% 
D) all absolute prices remain constant and money income falls by 15% 
E) all relative prices remain constant and money income rises by 15%

Question 11

If money income is reduced by half,and the prices of all goods consumed by the household are reduced by half,the household's budget line will

Accepted Answer

A) not change. 
B) shift inward. 
C) shift outward. 
D) become steeper. 
E) become flatter. 
A) not change. 
B) shift inward. 
C) shift outward. 
D) become steeper. 
E) become flatter.

Question 12

6A-4 Deriving the Demand Curve
-Refer to Figure 6-9.In part (i),the line joining points A,B,and C is known as ________,which shows how ________.

Accepted Answer

A) a price-consumption line; consumption changes as relative prices change,with money income constant 
B) an income-consumption line; consumption changes as income changes,with relative prices held constant 
C) a price-consumption line; consumption changes as money income and relative prices change 
D) an income-consumption line; consumption changes with changing relative prices and constant income 
E) an indifference map; the value of various combinations of two goods changes 
A) a price-consumption line; consumption changes as relative prices change,with money income constant 
B) an income-consumption line; consumption changes as income changes,with relative prices held constant 
C) a price-consumption line; consumption changes as money income and relative prices change 
D) an income-consumption line; consumption changes with changing relative prices and constant income 
E) an indifference map; the value of various combinations of two goods changes

Question 13

6A-5 Income and Substitution Effects   FIGURE 6-11
-Refer to Figure 6-11.Suppose the consumer begins at E1.The income and substitution effects of the reduction in the price of X are represented as follows:

Accepted Answer

A) the distance Q1d shows the substitution effect and the distance Q2e shows the income effect. 
B) the distance de shows the income effect and the distance cd shows the substitution effect. 
C) the distance Q1Q2 shows the income effect and the distance Q2Q3 shows the substitution effect. 
D) the distance Q1Q2 shows the substitution effect and the distance Q2Q3 shows the income effect. 
E) the distance Q1Q3 shows the substitution effect and the distance Q2Q3 shows the income effect. 
A) the distance Q1d shows the substitution effect and the distance Q2e shows the income effect. 
B) the distance de shows the income effect and the distance cd shows the substitution effect. 
C) the distance Q1Q2 shows the income effect and the distance Q2Q3 shows the substitution effect. 
D) the distance Q1Q2 shows the substitution effect and the distance Q2Q3 shows the income effect. 
E) the distance Q1Q3 shows the substitution effect and the distance Q2Q3 shows the income effect.

Question 14

If all consumers in an economy have maximized their utility,and they face a given set of market prices,then each consumer will have identical

Accepted Answer

A) total utilities for each good. 
B) marginal utilities for each good. 
C) marginal utilities per unit of each good. 
D) ratios of marginal utility to price for each good. 
E) consumption of each good. 
A) total utilities for each good. 
B) marginal utilities for each good. 
C) marginal utilities per unit of each good. 
D) ratios of marginal utility to price for each good. 
E) consumption of each good.

Question 15

Given a particular market demand curve,consumer surplus is

Accepted Answer

A) less the lower the price and the smaller the output. 
B) less the lower the price and the larger the output. 
C) greater the higher the price and the smaller the output. 
D) greater the lower the price and the smaller the output. 
E) greater the lower the price and the larger the output. 
A) less the lower the price and the smaller the output. 
B) less the lower the price and the larger the output. 
C) greater the higher the price and the smaller the output. 
D) greater the lower the price and the smaller the output. 
E) greater the lower the price and the larger the output.

Question 16

Assume you are consuming two goods,X and Y.X and Y are both normal goods but they are not close complements.The price of good X increases but the price of Y remains unchanged.However,you are given enough additional income to ensure that your utility remains unchanged.What happens to your consumption of good X?

Accepted Answer

A) it increases 
B) it stays the same 
C) it increases or decreases 
D) it decreases 
E) it increases over the long run 
A) it increases 
B) it stays the same 
C) it increases or decreases 
D) it decreases 
E) it increases over the long run

Question 17

FIGURE 6-2
-Refer to Figure 6-2.Suppose the price of X is $2,the price of Y is $1,and the consumer's income is $10.The consumer is currently buying 4 units of good X and 2 units of good Y.In order to maximize his utility,he should

Accepted Answer

A) make no changes - he is already maximizing his total utility. 
B) buy the same amount of X but less Y. 
C) buy more of X but the same amount Y. 
D) buy more of X and less Y. 
E) buy more Y and less X. 
A) make no changes - he is already maximizing his total utility. 
B) buy the same amount of X but less Y. 
C) buy more of X but the same amount Y. 
D) buy more of X and less Y. 
E) buy more Y and less X.

Question 18

FIGURE 6-2
-Refer to Figure 6-2.Suppose that the price of Y is $1 and the consumer's income is $10.Initially,the price of X is $2 and the consumer is buying 4 units of good Y.If the price of X then falls to $1,which of the following pairs of quantities of X correctly completes the demand schedule below? Price of X: $1 $2
Quantity Demanded of X: ________ ________

Accepted Answer

A) 2; 4 
B) 4; 4 
C) 4; 3 
D) 6; 3 
E) 6; 4 
A) 2; 4 
B) 4; 4 
C) 4; 3 
D) 6; 3 
E) 6; 4

Question 19

FIGURE 6-1
-Refer to Figure 6-1.The consumer's total utility is

Accepted Answer

A) increasing at an increasing rate. 
B) increasing at a decreasing rate. 
C) decreasing at an increasing rate. 
D) decreasing at a decreasing rate. 
E) constant. 
A) increasing at an increasing rate. 
B) increasing at a decreasing rate. 
C) decreasing at an increasing rate. 
D) decreasing at a decreasing rate. 
E) constant.

Question 20

FIGURE 6-1
-Refer to Figure 6-1.The marginal utility of the second unit of the good consumed is

Accepted Answer

A) 10. 
B) 20. 
C) 30. 
D) 40. 
E) 50. 
A) 10. 
B) 20. 
C) 30. 
D) 40. 
E) 50.

Exam 6: Consumer Behaviour

The marginal rate of substitution

The figures below show Chris's consumption of specialty coffee per week. FIGURE 6-10 -Refer to Figure 6-10.The two diagrams in Figure 6-10 are showing

A demand curve for a normal good is downward sloping due to

The table below shows the total value (in dollars)that Andrew gets from playing 9-hole rounds of golf. TABLE 6-3 -Refer to Table 6-3.If the price of a 9-hole round of golf is $9,then Andrew will play ________ rounds per month.

When a consumer's marginal rate of substitution between X and Y is equal to the ratio of prices for X and Y,and when the consumer is spending all available income,then

The table below shows the total value (in dollars)that Andrew gets from playing 9-hole rounds of golf. TABLE 6-3 -Refer to Table 6-3.If the price of a 9-hole round of golf is $19,then Andrew will play ________ rounds per month.

FIGURE 6-6 -Refer to Figure 6-6.Suppose the market price is p*.In this case,the total value consumers place on consuming Q* units is outlined by the area

The table below shows the total value (in dollars)that Andrew gets from playing 9-hole rounds of golf. TABLE 6-3 -Refer to Table 6-3.Andrew values the 4th round of golf at a marginal value of

In which of the following situations will an individual's purchasing power be unaffected?

If money income is reduced by half,and the prices of all goods consumed by the household are reduced by half,the household's budget line will

6A-4 Deriving the Demand Curve -Refer to Figure 6-9.In part (i),the line joining points A,B,and C is known as ________,which shows how ________.

6A-5 Income and Substitution Effects FIGURE 6-11 -Refer to Figure 6-11.Suppose the consumer begins at E1.The income and substitution effects of the reduction in the price of X are represented as follows:

If all consumers in an economy have maximized their utility,and they face a given set of market prices,then each consumer will have identical

Given a particular market demand curve,consumer surplus is

FIGURE 6-2 -Refer to Figure 6-2.Suppose the price of X is $2,the price of Y is $1,and the consumer's income is $10.The consumer is currently buying 4 units of good X and 2 units of good Y.In order to maximize his utility,he should

FIGURE 6-1 -Refer to Figure 6-1.The consumer's total utility is

FIGURE 6-1 -Refer to Figure 6-1.The marginal utility of the second unit of the good consumed is

Economic Issues and Concepts

Economic Theories,Data,and Graphs

Demand, Supply, and Price

Elasticity

Price Controls and Market Efficiency

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, cartels, and Price Discrimination

Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets and Income Inequality

Interest Rates and the Capital Market

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

What Macroeconomics Is All About

The Measurement of National Income

The Simplest Short-Run Macro Model

Adding Government and Trade to the Simple Macro Model

Output and Prices in the Short Run

From the Short Run to the Long Run: The Adjustment of Factor Prices

Long-Run Economic Growth

Money and Banking

Money, Interest Rates, and Economic Activity

Monetary Policy in Canada

Inflation and Disinflation

Unemployment Fluctuations and the Nairu

Government Debt and Deficits

The Gains From International Trade

Trade Policy

Exchange Rates and the Balance of Payments

Filters

FIGURE 6-6 -Refer to Figure 6-6.Suppose the market price is p.In this case,the total value consumers place on consuming Q units is outlined by the area

6A-4 Deriving the Demand Curve -Refer to Figure 6-9.In part (i),the line joining points A,B,and C is known as ,which shows how .

6A-5 Income and Substitution Effects FIGURE 6-11 -Refer to Figure 6-11.Suppose the consumer begins at E₁.The income and substitution effects of the reduction in the price of X are represented as follows: