Question 1

Many gourmet shops go out of business during recessions since they sell almost exclusively:

Accepted Answer

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

Question 2

At a very basic level, food and shelter constitute the two most important goods needed to sustain human life. Accordingly, assume that a poor person must allocate his income solely between food and shelter.
a. Show that if shelter is an inferior good, food must be a normal good.
b. If food is a normal good, is shelter necessarily an inferior good? Explain, and show your answer graphically.

Accepted Answer

a. Let the quantities of food and shelte

Question 3

Most workers view leisure and income as:

Accepted Answer

A)  goods. 
B)  bads. 
C)  goods and bads, respectively. 
D)  bads and goods, respectively. 
A)  goods. 
B)  bads. 
C)  goods and bads, respectively. 
D)  bads and goods, respectively.

Question 4

If the price of good X is $10 and the price of good Y is $5, how much of good X will the consumer purchase if her income is $15?

Accepted Answer

A)  0 
B)  2 
C)  3 
D)  Cannot tell based on the above information. 
A)  0 
B)  2 
C)  3 
D)  Cannot tell based on the above information.

Question 5

What is the maximum amount of good X that can be purchased if X and Y are the only two goods available for purchase and Px = $10, Py = $20, Y = 5, and M = 400?

Accepted Answer

A)  80 
B)  20 
C)  40 
D)  30 
A)  80 
B)  20 
C)  40 
D)  30

Question 6

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 the relative prices of two goods. 
C)  the change in consumer preferences. 
D)  None of the statements is correct. 
A)  the lower "real" income. 
B)  the change in the relative prices of two goods. 
C)  the change in consumer preferences. 
D)  None of the statements is correct.

Question 7

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. What is the price to the worker of consuming an additional hour of leisure?

Accepted Answer

A)  $24 
B)  $7 
C)  $12 
D)  $10 
A)  $24 
B)  $7 
C)  $12 
D)  $10

Question 8

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and Px = $10, Py = $20, X = 20, and M = 400?

Accepted Answer

A)  10 
B)  20 
C)  5 
D)  0 
A)  10 
B)  20 
C)  5 
D)  0

Question 9

If a consumer's income decreases, what will happen to the budget line?

Accepted Answer

A)  It will shift outward. 
B)  It will become steeper. 
C)  It will become flatter. 
D)  It will shift inward. 
A)  It will shift outward. 
B)  It will become steeper. 
C)  It will become flatter. 
D)  It will shift inward.

Question 10

If an increase in the price of good X leads to a decrease 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 11

The absolute value of the slope of the indifference curve is called the:

Accepted Answer

A)  marginal revenue. 
B)  average rate of substitution. 
C)  marginal rate of substitution. 
D)  marginal cost. 
A)  marginal revenue. 
B)  average rate of substitution. 
C)  marginal rate of substitution. 
D)  marginal cost.

Question 12

The property that implies that indifference curves are convex to the origin is:

Accepted Answer

A)  more is better. 
B)  completeness. 
C)  transitivity. 
D)  diminishing marginal rate of substitution. 
A)  more is better. 
B)  completeness. 
C)  transitivity. 
D)  diminishing marginal rate of substitution.

Question 13

Given that income is $200 and the price of good Y is $40, what is the vertical intercept of the budget line?

Accepted Answer

A)  8,000 
B)  20 
C)  1/5 
D)  5 
A)  8,000 
B)  20 
C)  1/5 
D)  5

Question 14

A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of:

Accepted Answer

A)  more is better. 
B)  completeness. 
C)  substitutability. 
D)  complementarity. 
A)  more is better. 
B)  completeness. 
C)  substitutability. 
D)  complementarity.

Question 15

The substitution effect reflects how a consumer will react to a different:

Accepted Answer

A)  marginal rate of substitution. 
B)  market rate of substitution. 
C)  level of real income. 
D)  level of nominal income. 
A)  marginal rate of substitution. 
B)  market rate of substitution. 
C)  level of real income. 
D)  level of nominal income.

Question 16

The affordable bundle that yields the greatest satisfaction to the consumer is:

Accepted Answer

A)  the maximum bundle. 
B)  the equilibrium consumption bundle. 
C)  the allowable purchasing bundle. 
D)  the most popular bundle. 
A)  the maximum bundle. 
B)  the equilibrium consumption bundle. 
C)  the allowable purchasing bundle. 
D)  the most popular bundle.

Question 17

How does a decrease in the price of good X affect the market rate of substitution between goods X and Y?

Accepted Answer

A)  It increases. 
B)  It decreases. 
C)  It remains unchanged. 
D)  Indeterminable without more information. 
A)  It increases. 
B)  It decreases. 
C)  It remains unchanged. 
D)  Indeterminable without more information.

Question 18

Managers can get workers to work longer hours by:

Accepted Answer

A)  offering overtime pay. 
B)  offering a higher flat wage rate on all hours worked. 
C)  decreasing the hourly wage scale. 
D)  None of the statements is correct. 
A)  offering overtime pay. 
B)  offering a higher flat wage rate on all hours worked. 
C)  decreasing the hourly wage scale. 
D)  None of the statements is correct.

Question 19

Joe consumes 48 units of food and 12 units of clothing. If food is an inferior good:

Accepted Answer

A)  Joe would strictly prefer receiving a $10 gift certificate at a clothing store to receiving $10 in cash. 
B)  Joe would strictly prefer receiving $10 in cash to receiving a $10 gift certificate at a clothing store. 
C)  Joe would be indifferent between receiving a $10 gift certificate at a clothing store and receiving $10 in cash. 
D)  upon receiving a $10 gift certificate at a clothing store, Joe would consume less clothing and more food. 
A)  Joe would strictly prefer receiving a $10 gift certificate at a clothing store to receiving $10 in cash. 
B)  Joe would strictly prefer receiving $10 in cash to receiving a $10 gift certificate at a clothing store. 
C)  Joe would be indifferent between receiving a $10 gift certificate at a clothing store and receiving $10 in cash. 
D)  upon receiving a $10 gift certificate at a clothing store, Joe would consume less clothing and more food.

Question 20

If sugar and Nutrasweet are substitutes, then we can be certain that an increase in the price of sugar will lead to an increase in the consumption of:

Accepted Answer

A)  Nutrasweet only. 
B)  sugar only. 
C)  sugar and Nutrasweet. 
D)  None of the statements is correct. 
A)  Nutrasweet only. 
B)  sugar only. 
C)  sugar and Nutrasweet. 
D)  None of the statements is correct.

Many gourmet shops go out of business during recessions since they sell almost exclusively:

Most workers view leisure and income as:

If the price of good X is $10 and the price of good Y is $5, how much of good X will the consumer purchase if her income is $15?

What is the maximum amount of good X that can be purchased if X and Y are the only two goods available for purchase and P_x = $10, P_y = $20, Y = 5, and M = 400?

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

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. What is the price to the worker of consuming an additional hour of leisure?

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and P_x = $10, P_y = $20, X = 20, and M = 400?

If a consumer's income decreases, what will happen to the budget line?

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

The absolute value of the slope of the indifference curve is called the:

The property that implies that indifference curves are convex to the origin is:

Given that income is $200 and the price of good Y is $40, what is the vertical intercept of the budget line?

A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of:

The substitution effect reflects how a consumer will react to a different:

The affordable bundle that yields the greatest satisfaction to the consumer is:

How does a decrease in the price of good X affect the market rate of substitution between goods X and Y?

Managers can get workers to work longer hours by:

Joe consumes 48 units of food and 12 units of clothing. If food is an inferior good:

If sugar and Nutrasweet are substitutes, then we can be certain that an increase in the price of sugar will lead to an increase in the consumption of:

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

Exam 4: The Theory of Individual Behavior

Many gourmet shops go out of business during recessions since they sell almost exclusively:

Most workers view leisure and income as:

If the price of good X is $10 and the price of good Y is $5, how much of good X will the consumer purchase if her income is $15?

What is the maximum amount of good X that can be purchased if X and Y are the only two goods available for purchase and Px = $10, Py = $20, Y = 5, and M = 400?

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

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. What is the price to the worker of consuming an additional hour of leisure?

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and Px = $10, Py = $20, X = 20, and M = 400?

If a consumer's income decreases, what will happen to the budget line?

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

The absolute value of the slope of the indifference curve is called the:

The property that implies that indifference curves are convex to the origin is:

Given that income is $200 and the price of good Y is $40, what is the vertical intercept of the budget line?

A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of:

The substitution effect reflects how a consumer will react to a different:

The affordable bundle that yields the greatest satisfaction to the consumer is:

How does a decrease in the price of good X affect the market rate of substitution between goods X and Y?

Managers can get workers to work longer hours by:

Joe consumes 48 units of food and 12 units of clothing. If food is an inferior good:

If sugar and Nutrasweet are substitutes, then we can be certain that an increase in the price of sugar will lead to an increase in the consumption of:

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

What is the maximum amount of good X that can be purchased if X and Y are the only two goods available for purchase and P_x = $10, P_y = $20, Y = 5, and M = 400?

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and P_x = $10, P_y = $20, X = 20, and M = 400?