Question 1

If you get great pleasure from anticipating a fun event which of the following is true?

Accepted Answer

A) You have a higher marginal rate of time preference than if you didn't get that pleasure. 
B) Your intertemporal indifference curve is steeper than it would be without that pleasure. 
C) You likely have more savings than you would have without the anticipatory pleasure. 
D) All of these are true. 
A) You have a higher marginal rate of time preference than if you didn't get that pleasure. 
B) Your intertemporal indifference curve is steeper than it would be without that pleasure. 
C) You likely have more savings than you would have without the anticipatory pleasure. 
D) All of these are true. C

Question 2

According to the analysis in your textbook, the school voucher program would

Accepted Answer

A) increase the level of spending on education. 
B) decrease the level of spending on education. 
C) leave the level of spending on education the same. 
D) force some people to leave the public school system. 
A) increase the level of spending on education. 
B) decrease the level of spending on education. 
C) leave the level of spending on education the same. 
D) force some people to leave the public school system. A

Question 3

If the demand function for city bus rides is P = 100 - 10Q and the present price of a ride is 50, then

Accepted Answer

A) raising prices will increase city revenue. 
B) raising prices will decrease city revenue. 
C) raising prices will not change city revenue. 
D) from the information given it is not clear what would happen to city revenue if price is increased. 
A) raising prices will increase city revenue. 
B) raising prices will decrease city revenue. 
C) raising prices will not change city revenue. 
D) from the information given it is not clear what would happen to city revenue if price is increased. B

Question 4

Upon what is your current consumption dependent according to Milton Friedman?

Accepted Answer

A) The income you earn today. 
B) The income you expect to earn later in life. 
C) The present value of your lifetime income. 
D) The future value of your present income. 
A) The income you earn today. 
B) The income you expect to earn later in life. 
C) The present value of your lifetime income. 
D) The future value of your present income.

Question 5

The graphs below show an economy of two people with identical incomes in two years. They have different preference patterns as shown.
  Why is the market for loanable funds not in equilibrium?

Accepted Answer

The supply of loanable funds e

Question 6

If you had a windfall of $5,000 in the present time period and you save some of it, your saving behavior would likely be due to the fact that

Accepted Answer

A) your marginal utility of present income falls as your income goes up. 
B) the extra income changes the slope of your time preference indifference curves making then steeper. 
C) your indifference curves for present and future income are vertical. 
D) your indifference curves for present and future are horizontal. 
A) your marginal utility of present income falls as your income goes up. 
B) the extra income changes the slope of your time preference indifference curves making then steeper. 
C) your indifference curves for present and future income are vertical. 
D) your indifference curves for present and future are horizontal.

Question 7

The graphs below show an economy of two people with identical incomes in two years. They have different preference patterns as shown.
  What will happen in the market to bring about equilibrium?

Accepted Answer

The interest rate will fall rotating the

Question 8

The consumer price index overestimates inflation because it

Accepted Answer

A) compares prices of what consumers actually buy rather than a fixed basket of goods. 
B) allows consumers to move along a given indifference curve from one year to the next. 
C) measures the cost of a market basket in the second year that has too many units of the most inflated items. 
D) uses the second year's market basket as the base rather than the first year's basket. 
A) compares prices of what consumers actually buy rather than a fixed basket of goods. 
B) allows consumers to move along a given indifference curve from one year to the next. 
C) measures the cost of a market basket in the second year that has too many units of the most inflated items. 
D) uses the second year's market basket as the base rather than the first year's basket.

Question 9

In general, most people

Accepted Answer

A) have a positive time preference. 
B) have a negative time preference. 
C) value the present and the future about the same. 
D) have a negative time preference for food and basic necessities and a positive time preference for services and luxuries. 
A) have a positive time preference. 
B) have a negative time preference. 
C) value the present and the future about the same. 
D) have a negative time preference for food and basic necessities and a positive time preference for services and luxuries.

Question 10

Suppose you receive Y1 of your income this period and Y2 of your income next period. If you can either borrow or lend at an interest rate r, what is the most you can consume in the current period?

Accepted Answer

A) Y1(1 + r) + Y2 
B) Y2(1 + r) + Y1 
C) Y1/(1 + r) + Y2 
D) Y2/(1 + r) + Y1 
A) Y1(1 + r) + Y2 
B) Y2(1 + r) + Y1 
C) Y1/(1 + r) + Y2 
D) Y2/(1 + r) + Y1

Question 11

According to the analysis in your text, the school voucher program would

Accepted Answer

A) increase the quality of education. 
B) decrease the quality of education. 
C) not affect education quality, but would make lower income families better off. 
D) increase the quality of education, but not improve the welfare of low income families. 
A) increase the quality of education. 
B) decrease the quality of education. 
C) not affect education quality, but would make lower income families better off. 
D) increase the quality of education, but not improve the welfare of low income families.

Question 12

This graph below shows a consumer facing a choice between a cash gift or merchandise of greater value.
  Show, using a sketch graph, why a consumer prefers a cash gift rather than a larger gift of merchandise.

Accepted Answer

The answer of This graph below shows a consumer facing...

Question 13

An interest rate increase to 4 percent will cause you to

Accepted Answer

A) save more of your income. 
B) save less of your income. 
C) be more time patient. 
D) be more time impatient. 
A) save more of your income. 
B) save less of your income. 
C) be more time patient. 
D) be more time impatient.

Question 14

If markets for addictive drugs have a more elastic demand curve than is often thought, and if addicts tend to be unstable people with low incomes, we might speculate that the most likely reason for the surprising elasticity estimates is that

Accepted Answer

A) the substitution effect is smaller than expected because addicts aren't as addicted as we thought. 
B) the income effect has a more constraining effect than we had anticipated. 
C) addictive drugs are inferior goods. 
D) the income and substitution effects work in opposite directions. 
A) the substitution effect is smaller than expected because addicts aren't as addicted as we thought. 
B) the income effect has a more constraining effect than we had anticipated. 
C) addictive drugs are inferior goods. 
D) the income and substitution effects work in opposite directions.

Question 15

Say the bus authority in your city increased the typical bus fare from $1.00 to $1.50 and that due to this increase total revenue increased by 20%. Based on this we know that the price elasticity of bus rides in your neighborhood is (assume demand curve is linear):

Accepted Answer

A) 0.4. 
B) 0.8. 
C) 1. 
D) 1.5. 
A) 0.4. 
B) 0.8. 
C) 1. 
D) 1.5.

Question 16

One thousand dollars given to you a year from now is worth __________ to you today if the relevant discount rate is 10%.

Accepted Answer

A) $1,000 
B) $1,100 
C) $909 
D) $900 
A) $1,000 
B) $1,100 
C) $909 
D) $900

Question 17

In analyzing the gasoline tax and subsidy policy discussed in the text, the final solution illustrates that

Accepted Answer

A) consumers are worse off than they were before the policy began. 
B) consumers do not cut back on fuel consumption. 
C) the government is made better off financially. 
D) social welfare increases. 
A) consumers are worse off than they were before the policy began. 
B) consumers do not cut back on fuel consumption. 
C) the government is made better off financially. 
D) social welfare increases.

Question 18

If the demand function for apples is P = 1 - Q, how much consumer surplus does the consumer gain when the price of the apples equals 5?

Accepted Answer

A) 25 
B) 5 
C) 20 
D) 12.5 
A) 25 
B) 5 
C) 20 
D) 12.5

Question 19

Colin's demand for golf at his local club each season is P = 50 - 2Q. If the golf course charges $26 dollars per round of golf, how much could it charge Colin in a membership fee before he would not play there?

Accepted Answer

A) $1,250 
B) $144 
C) $288 
D) $312 
A) $1,250 
B) $144 
C) $288 
D) $312

Question 20

You have $20,000 of current income and $45,000 of future income. The interest rate between the current and future period is 2 percent. When you allocate consumption optimally between the two periods the marginal rate of time preference between the two periods is

Accepted Answer

A) -1.02. 
B) -1.00. 
C) -1.80. 
D) 0.80. 
A) -1.02. 
B) -1.00. 
C) -1.80. 
D) 0.80.

If you get great pleasure from anticipating a fun event which of the following is true?

According to the analysis in your textbook, the school voucher program would

If the demand function for city bus rides is P = 100 - 10Q and the present price of a ride is 50, then

Upon what is your current consumption dependent according to Milton Friedman?

The graphs below show an economy of two people with identical incomes in two years. They have different preference patterns as shown. Why is the market for loanable funds not in equilibrium?

If you had a windfall of $5,000 in the present time period and you save some of it, your saving behavior would likely be due to the fact that

The graphs below show an economy of two people with identical incomes in two years. They have different preference patterns as shown. What will happen in the market to bring about equilibrium?

The consumer price index overestimates inflation because it

In general, most people

Suppose you receive Y1 of your income this period and Y2 of your income next period. If you can either borrow or lend at an interest rate r, what is the most you can consume in the current period?

According to the analysis in your text, the school voucher program would

This graph below shows a consumer facing a choice between a cash gift or merchandise of greater value. Show, using a sketch graph, why a consumer prefers a cash gift rather than a larger gift of merchandise.

An interest rate increase to 4 percent will cause you to

If markets for addictive drugs have a more elastic demand curve than is often thought, and if addicts tend to be unstable people with low incomes, we might speculate that the most likely reason for the surprising elasticity estimates is that

Say the bus authority in your city increased the typical bus fare from $1.00 to $1.50 and that due to this increase total revenue increased by 20%. Based on this we know that the price elasticity of bus rides in your neighborhood is (assume demand curve is linear):

One thousand dollars given to you a year from now is worth __________ to you today if the relevant discount rate is 10%.

In analyzing the gasoline tax and subsidy policy discussed in the text, the final solution illustrates that

If the demand function for apples is P = 1 - Q, how much consumer surplus does the consumer gain when the price of the apples equals 5?

Colin's demand for golf at his local club each season is P = 50 - 2Q. If the golf course charges $26 dollars per round of golf, how much could it charge Colin in a membership fee before he would not play there?

You have $20,000 of current income and $45,000 of future income. The interest rate between the current and future period is 2 percent. When you allocate consumption optimally between the two periods the marginal rate of time preference between the two periods is

Thinking Like an Economist

Supply and Demand

Rational Consumer Choice

Individual and Market Demand

The Economics of Information and Choice Under Uncertainty

Departures From Standard Rational Choice Models With and Without Regret

Production

Costs

Perfect Competition

Monopoly

A Game-Theoretic Approach to Strategic Behavior

Oligopoly and Monopolistic Competition

Labor

Capital

Externalities, Property Rights, and the Coase Theorem

General Equilibrium and Market Efficiency

Government

Filters

Exam 5: Applications of Rational Choice and Demand Theories

If you get great pleasure from anticipating a fun event which of the following is true?

According to the analysis in your textbook, the school voucher program would

If the demand function for city bus rides is P = 100 - 10Q and the present price of a ride is 50, then

Upon what is your current consumption dependent according to Milton Friedman?

The graphs below show an economy of two people with identical incomes in two years. They have different preference patterns as shown. Why is the market for loanable funds not in equilibrium?

If you had a windfall of $5,000 in the present time period and you save some of it, your saving behavior would likely be due to the fact that

The graphs below show an economy of two people with identical incomes in two years. They have different preference patterns as shown. What will happen in the market to bring about equilibrium?

The consumer price index overestimates inflation because it

In general, most people

Suppose you receive Y1 of your income this period and Y2 of your income next period. If you can either borrow or lend at an interest rate r, what is the most you can consume in the current period?

According to the analysis in your text, the school voucher program would

This graph below shows a consumer facing a choice between a cash gift or merchandise of greater value. Show, using a sketch graph, why a consumer prefers a cash gift rather than a larger gift of merchandise.

An interest rate increase to 4 percent will cause you to

If markets for addictive drugs have a more elastic demand curve than is often thought, and if addicts tend to be unstable people with low incomes, we might speculate that the most likely reason for the surprising elasticity estimates is that

Say the bus authority in your city increased the typical bus fare from $1.00 to $1.50 and that due to this increase total revenue increased by 20%. Based on this we know that the price elasticity of bus rides in your neighborhood is (assume demand curve is linear):

One thousand dollars given to you a year from now is worth __________ to you today if the relevant discount rate is 10%.

In analyzing the gasoline tax and subsidy policy discussed in the text, the final solution illustrates that

If the demand function for apples is P = 1 - Q, how much consumer surplus does the consumer gain when the price of the apples equals 5?

Colin's demand for golf at his local club each season is P = 50 - 2Q. If the golf course charges $26 dollars per round of golf, how much could it charge Colin in a membership fee before he would not play there?

You have $20,000 of current income and $45,000 of future income. The interest rate between the current and future period is 2 percent. When you allocate consumption optimally between the two periods the marginal rate of time preference between the two periods is

Thinking Like an Economist

Supply and Demand

Rational Consumer Choice

Individual and Market Demand

The Economics of Information and Choice Under Uncertainty

Departures From Standard Rational Choice Models With and Without Regret

Production

Costs

Perfect Competition

Monopoly

A Game-Theoretic Approach to Strategic Behavior

Oligopoly and Monopolistic Competition

Labor

Capital

Externalities, Property Rights, and the Coase Theorem

General Equilibrium and Market Efficiency

Government

Filters