Question 1

An in-kind gift causes the budget line to:

Accepted Answer

A)  shift to the right in a parallel fashion. 
B)  shift to the left in a parallel fashion. 
C)  rotate counterclockwise. 
D)  None of the statements is correct. 
A)  shift to the right in a parallel fashion. 
B)  shift to the left in a parallel fashion. 
C)  rotate counterclockwise. 
D)  None of the statements is correct.

Question 2

A price increase causes a consumer's "real" income to:

Accepted Answer

A)  decrease. 
B)  increase. 
C)  remain unchanged. 
D)  vary along the budget line. 
A)  decrease. 
B)  increase. 
C)  remain unchanged. 
D)  vary along the budget line.

Question 3

Along the same indifference curve, MRS is ________ as more of one good is obtained.

Accepted Answer

A)  constant 
B)  increasing 
C)  decreasing 
D)  varying irregularly 
A)  constant 
B)  increasing 
C)  decreasing 
D)  varying irregularly

Question 4

The possible goods and services a consumer can afford to consume represents the:

Accepted Answer

A)  consumer behavior. 
B)  consumer preferences. 
C)  consumer status. 
D)  consumer opportunities. 
A)  consumer behavior. 
B)  consumer preferences. 
C)  consumer status. 
D)  consumer opportunities.

Question 5

When the price of one good decreases, the associated substitution effect is represented by a:

Accepted Answer

A)  move from one indifference to a higher indifference curve since real income is now higher. 
B)  move from one indifference to a lower indifference curve since real income is now lower. 
C)  move along a given indifference curve holding real income constant. 
D)  move along a given indifference curve since real income increases. 
A)  move from one indifference to a higher indifference curve since real income is now higher. 
B)  move from one indifference to a lower indifference curve since real income is now lower. 
C)  move along a given indifference curve holding real income constant. 
D)  move along a given indifference curve since real income increases.

Question 6

The difference between a price decrease and an increase in income is that

Accepted Answer

A)  A price decrease does not affect the consumption of other goods, while an increase in income does. 
B)  An increase in income does not affect the slope of the budget line, while a decrease in price does change the slope. 
C)  A price decrease decreases real income, while an increase in income increases real income. 
D)  A price decrease leaves real income unchanged, while an increase in income increases real income. 
A)  A price decrease does not affect the consumption of other goods, while an increase in income does. 
B)  An increase in income does not affect the slope of the budget line, while a decrease in price does change the slope. 
C)  A price decrease decreases real income, while an increase in income increases real income. 
D)  A price decrease leaves real income unchanged, while an increase in income increases real income.

Question 7

While at a discount shoe store, a customer asked a clerk, "I see that your shoes are 'buy one, get one free-limit one free pair per customer.' Will you sell me one pair for half price?" The clerk answered, "I can't do that." When the customer started to leave the store, the clerk hastily offered, "However, I am authorized to give you a 40 percent discount on any pair in the store." Assuming the consumer has $200 to spend on shoes (X) or all other goods (Y), and that shoes cost $100 per pair, answer the following questions:
a. Illustrate the consumer's opportunity set with the "buy one, get one free" deal and with a 50 percent discount.
b. Why was the 40 percent discount offered only after the consumer rejected the "buy one, get one free" deal and started to leave the store?
c. Why was the clerk willing to offer a "buy one, get one free" deal, but unwilling to sell a pair of shoes for half price?

Accepted Answer

a. The straight line connecting points A

Question 8

By the transitivity property, if A

Accepted Answer

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

Question 9

Mitchell's money income is $150, the price of X is $2, and the price of Y is $2. Given these prices and income, Mitchell buys 50 units of X and 25 units of Y. Call this combination of X and Y bundle J. At bundle J, Mitchell's MRS is 2. At bundle J, if Mitchell increases consumption of Y by 1 unit, how many units of X must he give up in order to satisfy his budget constraint?

Accepted Answer

A)  ½ 
B)  1 
C)  2 
D)  4 
A)  ½ 
B)  1 
C)  2 
D)  4

Question 10

The idea that a consumer is limited to selecting a bundle of goods that is affordable is captured by the:

Accepted Answer

A)  budget constraint. 
B)  indifference curve. 
C)  consumer equilibrium. 
D)  price changes. 
A)  budget constraint. 
B)  indifference curve. 
C)  consumer equilibrium. 
D)  price changes.

Question 11

The maximum quantity of good Y that is affordable is:

Accepted Answer

A)  M/PX. 
B)  M/X. 
C)  M/PY. 
D)  M/Y. 
A)  M/PX. 
B)  M/X. 
C)  M/PY. 
D)  M/Y.

Question 12

If an increase in the price of good X leads to an increase in the consumption of good Y, then goods X and Y are called:

Accepted Answer

A)  substitutes. 
B)  complements. 
C)  normal goods. 
D)  inferior goods. 
A)  substitutes. 
B)  complements. 
C)  normal goods. 
D)  inferior goods.

Question 13

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and he can use 24 hours per day. What is the equation for the worker's opportunity set? (E is total earnings and L is leisure.)

Accepted Answer

A)  E = 100 - 8L 
B)  E = 192 - 8L 
C)  E = 292 - 8L 
D)  None of the statements is correct. 
A)  E = 100 - 8L 
B)  E = 192 - 8L 
C)  E = 292 - 8L 
D)  None of the statements is correct.

Question 14

By the property of "more is better" and transitivity, indifference curves:

Accepted Answer

A)  can intersect one another only once. 
B)  can intersect one another only twice. 
C)  do not intersect one another. 
D)  may overlap one another. 
A)  can intersect one another only once. 
B)  can intersect one another only twice. 
C)  do not intersect one another. 
D)  may overlap one another.

Question 15

If a consumer is given a $10 gift certificate good only for items in store X, and all items in store X are normal goods, then the consumer desires to consume:

Accepted Answer

A)  more goods in store X. 
B)  fewer goods in store X. 
C)  the same amount of goods in store X. 
D)  None of the statements is correct. 
A)  more goods in store X. 
B)  fewer goods in store X. 
C)  the same amount of goods in store X. 
D)  None of the statements is correct.

Question 16

If you wish to open a store and you do not like risk, it would be wise to sell:

Accepted Answer

A)  only normal goods. 
B)  a mix of normal and inferior goods. 
C)  all inferior goods. 
D)  None of the statements is correct. 
A)  only normal goods. 
B)  a mix of normal and inferior goods. 
C)  all inferior goods. 
D)  None of the statements is correct.

Question 17

If the price of computers decreases, then the:

Accepted Answer

A)  sales of a substitute, such as a telephone, decrease. 
B)  sales of a substitute, such as a telephone, increase. 
C)  inventory of computers increases. 
D)  inventory of computer software increases. 
A)  sales of a substitute, such as a telephone, decrease. 
B)  sales of a substitute, such as a telephone, increase. 
C)  inventory of computers increases. 
D)  inventory of computer software increases.

Question 18

The substitution effect isolates the change in the consumption of a good caused by:

Accepted Answer

A)  the lower "real" income. 
B)  the change in consumer preferences. 
C)  the change in the market rate of substitution. 
D)  None of the statements is correct. 
A)  the lower "real" income. 
B)  the change in consumer preferences. 
C)  the change in the market rate of substitution. 
D)  None of the statements is correct.

Question 19

When the price of a good increases with other things unchanged, the real income of the consumer:

Accepted Answer

A)  is unchanged. 
B)  increases. 
C)  decreases. 
D)  None of the statements is correct. 
A)  is unchanged. 
B)  increases. 
C)  decreases. 
D)  None of the statements is correct.

Question 20

The upper boundary of the budget set is the:

Accepted Answer

A)  indifference curve. 
B)  origin. 
C)  budget line. 
D)  vertical intercept. 
A)  indifference curve. 
B)  origin. 
C)  budget line. 
D)  vertical intercept.

An in-kind gift causes the budget line to:

A price increase causes a consumer's "real" income to:

Along the same indifference curve, MRS is ________ as more of one good is obtained.

The possible goods and services a consumer can afford to consume represents the:

When the price of one good decreases, the associated substitution effect is represented by a:

The difference between a price decrease and an increase in income is that

By the transitivity property, if A

The idea that a consumer is limited to selecting a bundle of goods that is affordable is captured by the:

The maximum quantity of good Y that is affordable is:

If an increase in the price of good X leads to an increase in the consumption of good Y, then goods X and Y are called:

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and he can use 24 hours per day. What is the equation for the worker's opportunity set? (E is total earnings and L is leisure.)

By the property of "more is better" and transitivity, indifference curves:

If a consumer is given a $10 gift certificate good only for items in store X, and all items in store X are normal goods, then the consumer desires to consume:

If you wish to open a store and you do not like risk, it would be wise to sell:

If the price of computers decreases, then the:

The substitution effect isolates the change in the consumption of a good caused by:

When the price of a good increases with other things unchanged, the real income of the consumer:

The upper boundary of the budget set is the:

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

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Exam 4: The Theory of Individual Behavior

An in-kind gift causes the budget line to:

A price increase causes a consumer's "real" income to:

Along the same indifference curve, MRS is ________ as more of one good is obtained.

The possible goods and services a consumer can afford to consume represents the:

When the price of one good decreases, the associated substitution effect is represented by a:

The difference between a price decrease and an increase in income is that

By the transitivity property, if A

The idea that a consumer is limited to selecting a bundle of goods that is affordable is captured by the:

The maximum quantity of good Y that is affordable is:

If an increase in the price of good X leads to an increase in the consumption of good Y, then goods X and Y are called:

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and he can use 24 hours per day. What is the equation for the worker's opportunity set? (E is total earnings and L is leisure.)

By the property of "more is better" and transitivity, indifference curves:

If a consumer is given a $10 gift certificate good only for items in store X, and all items in store X are normal goods, then the consumer desires to consume:

If you wish to open a store and you do not like risk, it would be wise to sell:

If the price of computers decreases, then the:

The substitution effect isolates the change in the consumption of a good caused by:

When the price of a good increases with other things unchanged, the real income of the consumer:

The upper boundary of the budget set is the:

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters