Question 1

If an increase in the price of one good causes the demand curve for another good to shift to the right,then the two goods are

Accepted Answer

A)  Substitutes 
B)  Complements 
C)  Normal 
D)  Unrelated 
A)  Substitutes 
B)  Complements 
C)  Normal 
D)  Unrelated

Question 2

-Refer to Figure 5.5.Which diagram shows the price-consumption curve resulting from a decrease in the price of good X?

Accepted Answer

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

Question 3

Suppose that an individual consumes just hamburgers and soft drinks.Using a carefully-labeled diagram,derive the price-consumption curve that would result from a decrease in the price of hamburgers.

Accepted Answer

See Figure 5.11.The initial budget line

Question 4

In Canada provincial regulatory boards set tiered prices for electricity.These tiered prices lead to budget lines that are

Accepted Answer

A)  Upward-sloping 
B)  Kinked 
C)  Horizontal at a specific level of electricity consumption 
D)  Vertical at a specific level of electricity consumption 
A)  Upward-sloping 
B)  Kinked 
C)  Horizontal at a specific level of electricity consumption 
D)  Vertical at a specific level of electricity consumption

Question 5

If two goods are substitutes,then an increase in the price of one will cause

Accepted Answer

A)  A leftward shift of the demand curve for the other good 
B)  A rightward shift of the demand curve for the other good 
C)  A movement up and to the left along the demand curve for the other good 
D)  A movement down and to the right along the demand curve for the other good 
A)  A leftward shift of the demand curve for the other good 
B)  A rightward shift of the demand curve for the other good 
C)  A movement up and to the left along the demand curve for the other good 
D)  A movement down and to the right along the demand curve for the other good

Question 6

A consumer's budget constraint is

Accepted Answer

A)  A positively sloped line 
B)  A negatively sloped line 
C)  Convex 
D)  A vertical line at the level of the consumer's income 
A)  A positively sloped line 
B)  A negatively sloped line 
C)  Convex 
D)  A vertical line at the level of the consumer's income

Question 7

If a good is normal,then the Engel curve

Accepted Answer

A)  Slopes upward 
B)  Slopes downward 
C)  Is vertical 
D)  Is horizontal 
A)  Slopes upward 
B)  Slopes downward 
C)  Is vertical 
D)  Is horizontal

Question 8

Using carefully-labeled graphs,explain how an individual demand curve is derived from the utility-maximizing behavior of a consumer.

Accepted Answer

Refer to Figure 5.8.The left panel of Fi

Question 9

The curve that shows how the best affordable consumption bundle changes as the price of a good changes (holding the consumer's income,preferences and all other prices fixed)is called

Accepted Answer

A)  A price-consumption curve 
B)  An individual demand curve 
C)  An income-consumption curve 
D)  A budget line 
A)  A price-consumption curve 
B)  An individual demand curve 
C)  An income-consumption curve 
D)  A budget line

Question 10

-Refer to Figure 5.6.Which diagram shows a decrease in income with bread being normal and soup being inferior?

Accepted Answer

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

Question 11

Suppose that steak is a normal good and vegetables are inferior goods.Using a carefully-labeled diagram,illustrate the income-consumption curve that would result from an increase in a consumer's income.

Accepted Answer

See Figure 5.10.The consumer is initiall

Question 12

Suppose a consumer buy books and DVDs.The price of a book is $10,the price of a DVD is $20 and the consumer's income is $400.If books are measured on the vertical axis and DVDs are measured on the horizontal axis,then the slope of the budget line is

Accepted Answer

A)  2 
B)  -2 
C)  1/2 
D)  -1/2 
A)  2 
B)  -2 
C)  1/2 
D)  -1/2

Question 13

Nicole's income is $1,000 per month.She spends all of it on shoes (S)and books (B).Shoes cost $50 and books cost $25.Her marginal rate of substitution for shoes with books is MRSSB = 2B/3S.Illustrate her utility-maximizing combination of shoes and books and draw her price-consumption curve if the price of books rises to $30.
B. M = PS (2/3)(PB/PS)B + PBB, which implies B = (3/5) (M/PB ) =
B. When PB = $30, B = 20. The new utility-maximizing combination of books and shoes is represented by point b in Figure 5.13. Connecting points a and b gives the price-consumption curve.

Accepted Answer

At the utility-maximizing combination of

Question 14

An affordable consumption bundle is an interior choice if

Accepted Answer

A)  It lies below the budget line 
B)  For each good, there are affordable bundles containing a little bit more of that good and a little bit less of the other good 
C)  For each good, there are no other affordable bundles containing a little bit more of that good and a little bit less of the other good 
D)  It exhausts the consumer's income 
A)  It lies below the budget line 
B)  For each good, there are affordable bundles containing a little bit more of that good and a little bit less of the other good 
C)  For each good, there are no other affordable bundles containing a little bit more of that good and a little bit less of the other good 
D)  It exhausts the consumer's income

Question 15

If the income-consumption path slopes upward,then

Accepted Answer

A)  Both goods are normal goods 
B)  Both goods are inferior goods 
C)  The goods are substitutes 
D)  The goods are complements 
A)  Both goods are normal goods 
B)  Both goods are inferior goods 
C)  The goods are substitutes 
D)  The goods are complements

Question 16

When a good is normal,

Accepted Answer

A)  An increase in income raises consumption at each price, so the demand curve shifts to the left 
B)  An increase in income raises consumption at each price, so the demand curve shifts to the right 
C)  A decrease in income lowers consumption at each price, so the demand curve shifts to the right 
D)  An increase in income lowers consumption at each price, so the demand curve shifts to the left 
A)  An increase in income raises consumption at each price, so the demand curve shifts to the left 
B)  An increase in income raises consumption at each price, so the demand curve shifts to the right 
C)  A decrease in income lowers consumption at each price, so the demand curve shifts to the right 
D)  An increase in income lowers consumption at each price, so the demand curve shifts to the left

Question 17

-Refer to Figure 5.2.Suppose the price of gas is $3,the price of food is $5 and the consumer's income is $300.If the government rations gas to 50 gallons,how much food will the consumer buy?

Accepted Answer

A)  30 
B)  50 
C)  60 
D)  15 
A)  30 
B)  50 
C)  60 
D)  15

Question 18

If everyone in an economy buys and sells goods at market-wide prices

Accepted Answer

A)  People will pay the same prices, so everyone's marginal rate of substitution will be the same 
B)  People will pay the same prices, but will have different marginal rates of substitution 
C)  People will pay different prices, but will have the same marginal rates of substitution 
D)  People will pay different prices and therefore will have different marginal rates of substitution 
A)  People will pay the same prices, so everyone's marginal rate of substitution will be the same 
B)  People will pay the same prices, but will have different marginal rates of substitution 
C)  People will pay different prices, but will have the same marginal rates of substitution 
D)  People will pay different prices and therefore will have different marginal rates of substitution

Question 19

Mike's income is $450 per month.He spends all of it on books (B)and CDs (C).Books cost $10 and CD's cost $15.His preferences correspond to the utility function U(B,C)= BxC.For that utility function,the marginal benefit of books is C and the marginal benefit of CDs is B. How many books and how many CDs will he purchase in a month?

Accepted Answer

A)  10 CDs and 30 Books 
B)  30 CDs and 10 Books 
C)  20 CDs and 15 Books 
D)  15 CDs and 30 Books 
A)  10 CDs and 30 Books 
B)  30 CDs and 10 Books 
C)  20 CDs and 15 Books 
D)  15 CDs and 30 Books

Question 20

The price of bread is $1.50 per pound and the price of butter is $3 per pound.Steve has an income of $30,with which he buys 4 pounds of bread.How many pounds of butter does he buy,assuming he buys nothing else?

Accepted Answer

A)  8 
B)  12 
C)  4 
D)  There is not enough information to answer the question 
A)  8 
B)  12 
C)  4 
D)  There is not enough information to answer the question

If an increase in the price of one good causes the demand curve for another good to shift to the right,then the two goods are

-Refer to Figure 5.5.Which diagram shows the price-consumption curve resulting from a decrease in the price of good X?

Suppose that an individual consumes just hamburgers and soft drinks.Using a carefully-labeled diagram,derive the price-consumption curve that would result from a decrease in the price of hamburgers.

In Canada provincial regulatory boards set tiered prices for electricity.These tiered prices lead to budget lines that are

If two goods are substitutes,then an increase in the price of one will cause

A consumer's budget constraint is

If a good is normal,then the Engel curve

Using carefully-labeled graphs,explain how an individual demand curve is derived from the utility-maximizing behavior of a consumer.

The curve that shows how the best affordable consumption bundle changes as the price of a good changes (holding the consumer's income,preferences and all other prices fixed)is called

-Refer to Figure 5.6.Which diagram shows a decrease in income with bread being normal and soup being inferior?

Suppose that steak is a normal good and vegetables are inferior goods.Using a carefully-labeled diagram,illustrate the income-consumption curve that would result from an increase in a consumer's income.

Suppose a consumer buy books and DVDs.The price of a book is $10,the price of a DVD is $20 and the consumer's income is $400.If books are measured on the vertical axis and DVDs are measured on the horizontal axis,then the slope of the budget line is

An affordable consumption bundle is an interior choice if

If the income-consumption path slopes upward,then

When a good is normal,

-Refer to Figure 5.2.Suppose the price of gas is $3,the price of food is $5 and the consumer's income is $300.If the government rations gas to 50 gallons,how much food will the consumer buy?

If everyone in an economy buys and sells goods at market-wide prices

The price of bread is $1.50 per pound and the price of butter is $3 per pound.Steve has an income of $30,with which he buys 4 pounds of bread.How many pounds of butter does he buy,assuming he buys nothing else?

Introduction

Supply and Demand3

Balancing Benefits and Costs

Principles and Preferences

Rom Demand to Welfare

Technology and Production

Cost

Rofit 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

Filters

Exam 5: Constraints, Choices, and Demand

If an increase in the price of one good causes the demand curve for another good to shift to the right,then the two goods are

-Refer to Figure 5.5.Which diagram shows the price-consumption curve resulting from a decrease in the price of good X?

Suppose that an individual consumes just hamburgers and soft drinks.Using a carefully-labeled diagram,derive the price-consumption curve that would result from a decrease in the price of hamburgers.

In Canada provincial regulatory boards set tiered prices for electricity.These tiered prices lead to budget lines that are

If two goods are substitutes,then an increase in the price of one will cause

A consumer's budget constraint is

If a good is normal,then the Engel curve

Using carefully-labeled graphs,explain how an individual demand curve is derived from the utility-maximizing behavior of a consumer.

The curve that shows how the best affordable consumption bundle changes as the price of a good changes (holding the consumer's income,preferences and all other prices fixed)is called

-Refer to Figure 5.6.Which diagram shows a decrease in income with bread being normal and soup being inferior?

Suppose that steak is a normal good and vegetables are inferior goods.Using a carefully-labeled diagram,illustrate the income-consumption curve that would result from an increase in a consumer's income.

Suppose a consumer buy books and DVDs.The price of a book is $10,the price of a DVD is $20 and the consumer's income is $400.If books are measured on the vertical axis and DVDs are measured on the horizontal axis,then the slope of the budget line is

An affordable consumption bundle is an interior choice if

If the income-consumption path slopes upward,then

When a good is normal,

-Refer to Figure 5.2.Suppose the price of gas is $3,the price of food is $5 and the consumer's income is $300.If the government rations gas to 50 gallons,how much food will the consumer buy?

If everyone in an economy buys and sells goods at market-wide prices

The price of bread is $1.50 per pound and the price of butter is $3 per pound.Steve has an income of $30,with which he buys 4 pounds of bread.How many pounds of butter does he buy,assuming he buys nothing else?

Introduction

Supply and Demand3

Balancing Benefits and Costs

Principles and Preferences

Rom Demand to Welfare

Technology and Production

Cost

Rofit 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

Filters