Question 1

An increase in the real wage

Accepted Answer

A)  unambiguously increases consumption and increases labour supply. 
B)  increases consumption and has an ambiguous effect on labour supply. 
C)  has an ambiguous effect on consumption and increases labour supply. 
D)  has an ambiguous effect on both consumption and labour supply. 
E)  increases consumption and decreases labour supply. 
A)  unambiguously increases consumption and increases labour supply. 
B)  increases consumption and has an ambiguous effect on labour supply. 
C)  has an ambiguous effect on consumption and increases labour supply. 
D)  has an ambiguous effect on both consumption and labour supply. 
E)  increases consumption and decreases labour supply. B

Question 2

The marginal rate of substitution

Accepted Answer

A)  can be computed by measuring the slope of the indifference curve. 
B)  can be computed by measuring the curvature of the indifference curve. 
C)  cannot be deduced from the properties of the indifference curve. 
D)  can only be computed if we know the prices of all goods. 
E)  can be deduced from the budget line. 
A)  can be computed by measuring the slope of the indifference curve. 
B)  can be computed by measuring the curvature of the indifference curve. 
C)  cannot be deduced from the properties of the indifference curve. 
D)  can only be computed if we know the prices of all goods. 
E)  can be deduced from the budget line. A

Question 3

The optimal consumption bundle is the point representing a consumption-leisure pair that is on the

Accepted Answer

A)  lowest possible indifference curve and is on or outside the consumer's budget constraint. 
B)  lowest possible indifference curve and is on or inside the consumer's budget constraint. 
C)  highest possible indifference curve and is on or outside the consumer's budget constraint. 
D)  highest possible indifference curve and is on or inside the consumer's budget constraint. 
E)  lowest possible indifference curve that maximizes total utility. 
A)  lowest possible indifference curve and is on or outside the consumer's budget constraint. 
B)  lowest possible indifference curve and is on or inside the consumer's budget constraint. 
C)  highest possible indifference curve and is on or outside the consumer's budget constraint. 
D)  highest possible indifference curve and is on or inside the consumer's budget constraint. 
E)  lowest possible indifference curve that maximizes total utility. D

Question 4

As the quantity of capital increases,the marginal product of labour

Accepted Answer

A)  is constant. 
B)  increases. 
C)  decreases. 
D)  may either increase or decrease. 
E)  gets more expensive. 
A)  is constant. 
B)  increases. 
C)  decreases. 
D)  may either increase or decrease. 
E)  gets more expensive.

Question 5

An increase in the real wage

Accepted Answer

A)  represents a pure substitution effect. 
B)  represents a pure income effect. 
C)  represents a combination of income and substitution effects. 
D)  causes a parallel shift in the consumer's budget line. 
E)  leads to no change in labour supply. 
A)  represents a pure substitution effect. 
B)  represents a pure income effect. 
C)  represents a combination of income and substitution effects. 
D)  causes a parallel shift in the consumer's budget line. 
E)  leads to no change in labour supply.

Question 6

Suppose Ford could triple production of Mustangs by tripling its production facilities for those cars.This is an example of

Accepted Answer

A)  constant returns to scale. 
B)  increasing returns to scale. 
C)  decreasing returns to scale. 
D)  the law of diminishing returns. 
E)  diminishing marginal rate of substitution. 
A)  constant returns to scale. 
B)  increasing returns to scale. 
C)  decreasing returns to scale. 
D)  the law of diminishing returns. 
E)  diminishing marginal rate of substitution.

Question 7

The preferences of the representative consumer over consumption and leisure are represented by use of a

Accepted Answer

A)  production function. 
B)  utility function. 
C)  benefit function. 
D)  preference function. 
E)  dynamic function. 
A)  production function. 
B)  utility function. 
C)  benefit function. 
D)  preference function. 
E)  dynamic function.

Question 8

The vertical intercept of the consumer's budget line is equal

Accepted Answer

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

Question 9

An indifference curve

Accepted Answer

A)  connects a set of consumption bundles among which the consumer is indifferent. 
B)  is only useful in analyzing apathetic consumers. 
C)  connects a set of consumers who each have the same preferences. 
D)  is only useful in microeconomics. 
E)  connects a set of consumption and income bundles among which the consumer is indifferent. 
A)  connects a set of consumption bundles among which the consumer is indifferent. 
B)  is only useful in analyzing apathetic consumers. 
C)  connects a set of consumers who each have the same preferences. 
D)  is only useful in microeconomics. 
E)  connects a set of consumption and income bundles among which the consumer is indifferent.

Question 10

A barter economy

Accepted Answer

A)  cannot be a market economy. 
B)  is an economy without monetary exchange. 
C)  is an economy with no business firms. 
D)  is not a competitive economy. 
E)  is a competitive economy. 
A)  cannot be a market economy. 
B)  is an economy without monetary exchange. 
C)  is an economy with no business firms. 
D)  is not a competitive economy. 
E)  is a competitive economy.

Question 11

An indifference curve is best defined as

Accepted Answer

A)  a boundary line between attainable and unattainable choices. 
B)  is a concave curve which ranks preferred consumption bundles. 
C)  a boundary line defining production possibilities. 
D)  the set of all bundles that the consumer enjoys equally well. 
E)  the level of consumption where a consumer is indifferent to receiving more consumption. 
A)  a boundary line between attainable and unattainable choices. 
B)  is a concave curve which ranks preferred consumption bundles. 
C)  a boundary line defining production possibilities. 
D)  the set of all bundles that the consumer enjoys equally well. 
E)  the level of consumption where a consumer is indifferent to receiving more consumption.

Question 12

The principle that consumers and firms optimize

Accepted Answer

A)  is not helpful because some economic agents may behave irrationally. 
B)  is helpful because it allows us to analyze how economic agents respond to changes in their environment. 
C)  only applies to perfectly competitive markets. 
D)  is helpful because it determines the available technology. 
E)  is explained by their work-leisure choices. 
A)  is not helpful because some economic agents may behave irrationally. 
B)  is helpful because it allows us to analyze how economic agents respond to changes in their environment. 
C)  only applies to perfectly competitive markets. 
D)  is helpful because it determines the available technology. 
E)  is explained by their work-leisure choices.

Question 13

An increase in real dividend income minus taxes represents

Accepted Answer

A)  a pure substitution effect. 
B)  a pure income effect. 
C)  a combination of income and substitution effects. 
D)  neither a pure income effect nor a pure substitution effect. 
E)  an income effect which is greater than the substitution effect. 
A)  a pure substitution effect. 
B)  a pure income effect. 
C)  a combination of income and substitution effects. 
D)  neither a pure income effect nor a pure substitution effect. 
E)  an income effect which is greater than the substitution effect.

Question 14

The property of diminishing marginal rate of substitution follows from the property that the indifference curve is

Accepted Answer

A)  downward sloping. 
B)  upward sloping. 
C)  bowed in toward the origin. 
D)  bowed out from the origin. 
E)  concave from the origin. 
A)  downward sloping. 
B)  upward sloping. 
C)  bowed in toward the origin. 
D)  bowed out from the origin. 
E)  concave from the origin.

Question 15

An economy without monetary exchange is called

Accepted Answer

A)  a primitive economy. 
B)  a barter economy. 
C)  a socialist economy. 
D)  an autarky economy. 
E)  a perfectly competitive economy. 
A)  a primitive economy. 
B)  a barter economy. 
C)  a socialist economy. 
D)  an autarky economy. 
E)  a perfectly competitive economy.

Question 16

In macroeconomic analysis,the representative consumer

Accepted Answer

A)  denotes the consumer with the average amount of income. 
B)  plays the role of a stand-in for all consumers in the economy. 
C)  is the consumer who bargains with firms for all workers in the economy. 
D)  is always a misleading fiction. 
E)  is the consumer with an average standard of living. 
A)  denotes the consumer with the average amount of income. 
B)  plays the role of a stand-in for all consumers in the economy. 
C)  is the consumer who bargains with firms for all workers in the economy. 
D)  is always a misleading fiction. 
E)  is the consumer with an average standard of living.

Question 17

As the quantity of labour increases,the marginal product of labour

Accepted Answer

A)  is constant. 
B)  increases. 
C)  decreases. 
D)  may either increase or decrease. 
E)  gets more expensive. 
A)  is constant. 
B)  increases. 
C)  decreases. 
D)  may either increase or decrease. 
E)  gets more expensive.

Question 18

The consumer's work-leisure choice problem focuses on how a consumer's work-leisure decision is affected by the consumer's

Accepted Answer

A)  preferences and productivity. 
B)  productivity and psychology. 
C)  psychology and preferences. 
D)  preferences and constraints. 
E)  Preferences and psychology. 
A)  preferences and productivity. 
B)  productivity and psychology. 
C)  psychology and preferences. 
D)  preferences and constraints. 
E)  Preferences and psychology.

Question 19

When consumption and leisure are both normal goods,an increase in real dividend income minus taxation,the rational consumer

Accepted Answer

A)  increases consumption and increases leisure. 
B)  increases consumption and reduces leisure. 
C)  reduces consumption and increases leisure. 
D)  reduces consumption and reduces leisure.. 
E)  increases consumption and increases work. 
A)  increases consumption and increases leisure. 
B)  increases consumption and reduces leisure. 
C)  reduces consumption and increases leisure. 
D)  reduces consumption and reduces leisure.. 
E)  increases consumption and increases work.

Question 20

For macroeconomic purposes,it is assumed that all consumers in the economy

Accepted Answer

A)  are diverse. 
B)  are not identical. 
C)  are identical. 
D)  exhibit differences. 
E)  exhibit different preferences. 
A)  are diverse. 
B)  are not identical. 
C)  are identical. 
D)  exhibit differences. 
E)  exhibit different preferences.

An increase in the real wage

The marginal rate of substitution

The optimal consumption bundle is the point representing a consumption-leisure pair that is on the

As the quantity of capital increases,the marginal product of labour

An increase in the real wage

Suppose Ford could triple production of Mustangs by tripling its production facilities for those cars.This is an example of

The preferences of the representative consumer over consumption and leisure are represented by use of a

The vertical intercept of the consumer's budget line is equal

An indifference curve

A barter economy

An indifference curve is best defined as

The principle that consumers and firms optimize

An increase in real dividend income minus taxes represents

The property of diminishing marginal rate of substitution follows from the property that the indifference curve is

An economy without monetary exchange is called

In macroeconomic analysis,the representative consumer

As the quantity of labour increases,the marginal product of labour

The consumer's work-leisure choice problem focuses on how a consumer's work-leisure decision is affected by the consumer's

When consumption and leisure are both normal goods,an increase in real dividend income minus taxation,the rational consumer

For macroeconomic purposes,it is assumed that all consumers in the economy

Introduction

Measurement

Business Cycle Measurement

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters

Exam 4: Consumer and Firm Behavior: The Work–Leisure Decision and Profit Maximization

An increase in the real wage

The marginal rate of substitution

The optimal consumption bundle is the point representing a consumption-leisure pair that is on the

As the quantity of capital increases,the marginal product of labour

An increase in the real wage

Suppose Ford could triple production of Mustangs by tripling its production facilities for those cars.This is an example of

The preferences of the representative consumer over consumption and leisure are represented by use of a

The vertical intercept of the consumer's budget line is equal

An indifference curve

A barter economy

An indifference curve is best defined as

The principle that consumers and firms optimize

An increase in real dividend income minus taxes represents

The property of diminishing marginal rate of substitution follows from the property that the indifference curve is

An economy without monetary exchange is called

In macroeconomic analysis,the representative consumer

As the quantity of labour increases,the marginal product of labour

The consumer's work-leisure choice problem focuses on how a consumer's work-leisure decision is affected by the consumer's

When consumption and leisure are both normal goods,an increase in real dividend income minus taxation,the rational consumer

For macroeconomic purposes,it is assumed that all consumers in the economy

Introduction

Measurement

Business Cycle Measurement

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters