Question 1

The maximum quantity of good X that is affordable is:

Accepted Answer

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

Question 2

A cash 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 clockwise. 
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 clockwise. 
D)  None of the statements is correct.

Question 3

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 = 0, and M = 400?

Accepted Answer

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

Question 4

Suppose the following Lagrangian is formed to maximize a consumer's utility subject to her budget constraint:   The first-order conditions for this problem imply:

Accepted Answer

A)  MRS = 10. 
B)  PX/PY = 10. 
C) 
  
D)  All of the statements associated with this question are correct. 
A)  MRS = 10. 
B)  PX/PY = 10. 
C) 
  
D)  All of the statements associated with this question are correct.

Question 5

If the price of a good falls, then the equilibrium consumption of that good:

Accepted Answer

A)  increases if it is an inferior good. 
B)  decreases if it is a normal good. 
C)  remains the same. 
D)  None of the statements is correct. 
A)  increases if it is an inferior good. 
B)  decreases if it is a normal good. 
C)  remains the same. 
D)  None of the statements is correct.

Question 6

Consider a two-good world, with commodities X and Y. If Y is an inferior good, then an increase in consumer income CANNOT:

Accepted Answer

A)  decrease the demand for Y. 
B)  decrease the demand for X. 
C)  increase the demand for X. 
D)  make the consumer better off. 
A)  decrease the demand for Y. 
B)  decrease the demand for X. 
C)  increase the demand for X. 
D)  make the consumer better off.

Question 7

Given that income is $750 and PX = $32 and PY = $8, what is the market rate of substitution between goods X and Y?

Accepted Answer

A)  -0.75 
B)  -3 
C)  -4 
D)  -25 
A)  -0.75 
B)  -3 
C)  -4 
D)  -25

Question 8

Normally, owners of firms should try to induce their managers to care:

Accepted Answer

A)  solely about output. 
B)  about profits and output. 
C)  solely about profits. 
D)  None of the statements associated with this question is correct. 
A)  solely about output. 
B)  about profits and output. 
C)  solely about profits. 
D)  None of the statements associated with this question is correct.

Question 9

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 market rate of substitution between leisure and income?

Accepted Answer

A)  $5 
B)  $8 
C)  $10 
D)  None of the statements is correct. 
A)  $5 
B)  $8 
C)  $10 
D)  None of the statements is correct.

Question 10

If the price of good X increases, what will happen to the budget line?

Accepted Answer

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

Question 11

If the price of good X decreases, what will happen to the budget line?

Accepted Answer

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

Question 12

Suppose that three consumers are in the market for good X. Consumer 1's (inverse) demand is PX = 40 - 5QX; Consumer 2's (inverse) demand is PX = 10 - QX; and Consumer 3's (inverse) demand is PX = 30 - 2QX. When PX = $5, the market will demand:

Accepted Answer

A)  15.5 units. 
B)  -12 units. 
C)  24.5 units. 
D)  None of the statements is correct. 
A)  15.5 units. 
B)  -12 units. 
C)  24.5 units. 
D)  None of the statements is correct.

Question 13

Clothing stores frequently run "sales" where they discount clothing prices by as much as 25 percent. What impact, if any, would you expect these "sales" to have on a store that specializes in selling shoes produced by Rockport?

Accepted Answer

Since shoes and clothing are p

Question 14

What are the advantages to a firm of selling gift certificates?

Accepted Answer

A)  Greater quantity sold if your good is a normal good. 
B)  Greater quantity sold if your good is an inferior good. 
C)  Reduced strain on the refund department and greater quantity sold if your good is a normal good. 
D)  Reduced strain on the refund department and greater quantity sold if your good is an inferior good. 
A)  Greater quantity sold if your good is a normal good. 
B)  Greater quantity sold if your good is an inferior good. 
C)  Reduced strain on the refund department and greater quantity sold if your good is a normal good. 
D)  Reduced strain on the refund department and greater quantity sold if your good is an inferior good.

Question 15

If widgets and gidgets are complements and both are normal goods, then an increase in the demand for widgets will result from:

Accepted Answer

A)  an increase in the price of widgets. 
B)  a decrease in income. 
C)  a decrease in the price of gidgets. 
D)  an increase in the price of widgets and a decrease in income. 
A)  an increase in the price of widgets. 
B)  a decrease in income. 
C)  a decrease in the price of gidgets. 
D)  an increase in the price of widgets and a decrease in income.

Question 16

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

Accepted Answer

A)  a decrease in income does not affect the slope of the budget line, while an increase in price does change the slope. 
B)  a price increase does not affect the consumption of other goods, while a decrease in income does. 
C)  a price increase will increase real income, while a decrease in income will increase real income. 
D)  None of the statements is correct. 
A)  a decrease in income does not affect the slope of the budget line, while an increase in price does change the slope. 
B)  a price increase does not affect the consumption of other goods, while a decrease in income does. 
C)  a price increase will increase real income, while a decrease in income will increase real income. 
D)  None of the statements is correct.

Question 17

What is the horizontal intercept of the budget line, given that M = $1,000, PX = $50, and PY = $40?

Accepted Answer

A)  2000.0 
B)  20.0 
C)  25.0 
D)  11.11 
A)  2000.0 
B)  20.0 
C)  25.0 
D)  11.11

Question 18

Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume that X is a normal good, Y is an inferior good, and the price of good Y decreases. Then, which of the following effects is known with certainty?

Accepted Answer

A)  The income and substitution effects reinforce one another leading to an overall decrease in the consumption of good X. 
B)  The income and substitution effects will have competing effects, leading to an indeterminate impact on the consumption of good Y. 
C)  The income and substitution effects will reinforce one another, leading to an overall increase in the consumption of good Y. 
D)  The income and substitution effects will reinforce one another, leading to an overall decrease in the consumption of good Y. 
E)  The income and substitution effects will reinforce one another, leading to an overall increase in the consumption of good X. 
A)  The income and substitution effects reinforce one another leading to an overall decrease in the consumption of good X. 
B)  The income and substitution effects will have competing effects, leading to an indeterminate impact on the consumption of good Y. 
C)  The income and substitution effects will reinforce one another, leading to an overall increase in the consumption of good Y. 
D)  The income and substitution effects will reinforce one another, leading to an overall decrease in the consumption of good Y. 
E)  The income and substitution effects will reinforce one another, leading to an overall increase in the consumption of good X.

Question 19

If widgets and gidgets are complements and both are normal goods, then a decrease in the demand for widgets will result from:

Accepted Answer

A)  an increase in the price of widgets. 
B)  a decrease in income. 
C)  a decrease in the price of gidgets. 
D)  a decrease in the price of gidgets and a decrease in income. 
A)  an increase in the price of widgets. 
B)  a decrease in income. 
C)  a decrease in the price of gidgets. 
D)  a decrease in the price of gidgets and a decrease in income.

Question 20

If the price of a good Y falls, then the marginal rate of substitution between X and Y:

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains the same. 
D)  depends on whether X and Y are normal or inferior goods, and we cannot tell without that information. 
A)  increases. 
B)  decreases. 
C)  remains the same. 
D)  depends on whether X and Y are normal or inferior goods, and we cannot tell without that information.

The maximum quantity of good X that is affordable is:

A cash gift causes the budget line to:

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 = 0, and M = 400?

Suppose the following Lagrangian is formed to maximize a consumer's utility subject to her budget constraint: The first-order conditions for this problem imply:

If the price of a good falls, then the equilibrium consumption of that good:

Consider a two-good world, with commodities X and Y. If Y is an inferior good, then an increase in consumer income CANNOT:

Given that income is $750 and P_X = $32 and P_Y = $8, what is the market rate of substitution between goods X and Y?

Normally, owners of firms should try to induce their managers to care:

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 market rate of substitution between leisure and income?

If the price of good X increases, what will happen to the budget line?

If the price of good X decreases, what will happen to the budget line?

Suppose that three consumers are in the market for good X. Consumer 1's (inverse) demand is P_X = 40 - 5Q_X; Consumer 2's (inverse) demand is P_X = 10 - Q_X; and Consumer 3's (inverse) demand is P_X = 30 - 2Q_X. When P_X = $5, the market will demand:

Clothing stores frequently run "sales" where they discount clothing prices by as much as 25 percent. What impact, if any, would you expect these "sales" to have on a store that specializes in selling shoes produced by Rockport?

What are the advantages to a firm of selling gift certificates?

If widgets and gidgets are complements and both are normal goods, then an increase in the demand for widgets will result from:

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

What is the horizontal intercept of the budget line, given that M = $1,000, P_X = $50, and P_Y = $40?

Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume that X is a normal good, Y is an inferior good, and the price of good Y decreases. Then, which of the following effects is known with certainty?

If widgets and gidgets are complements and both are normal goods, then a decrease in the demand for widgets will result from:

If the price of a good Y falls, then the marginal rate of substitution between X and Y:

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

The maximum quantity of good X that is affordable is:

A cash gift causes the budget line to:

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 = 0, and M = 400?

Suppose the following Lagrangian is formed to maximize a consumer's utility subject to her budget constraint: The first-order conditions for this problem imply:

If the price of a good falls, then the equilibrium consumption of that good:

Consider a two-good world, with commodities X and Y. If Y is an inferior good, then an increase in consumer income CANNOT:

Given that income is $750 and PX = $32 and PY = $8, what is the market rate of substitution between goods X and Y?

Normally, owners of firms should try to induce their managers to care:

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 market rate of substitution between leisure and income?

If the price of good X increases, what will happen to the budget line?

If the price of good X decreases, what will happen to the budget line?

Suppose that three consumers are in the market for good X. Consumer 1's (inverse) demand is PX = 40 - 5QX; Consumer 2's (inverse) demand is PX = 10 - QX; and Consumer 3's (inverse) demand is PX = 30 - 2QX. When PX = $5, the market will demand:

Clothing stores frequently run "sales" where they discount clothing prices by as much as 25 percent. What impact, if any, would you expect these "sales" to have on a store that specializes in selling shoes produced by Rockport?

What are the advantages to a firm of selling gift certificates?

If widgets and gidgets are complements and both are normal goods, then an increase in the demand for widgets will result from:

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

What is the horizontal intercept of the budget line, given that M = $1,000, PX = $50, and PY = $40?

Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume that X is a normal good, Y is an inferior good, and the price of good Y decreases. Then, which of the following effects is known with certainty?

If widgets and gidgets are complements and both are normal goods, then a decrease in the demand for widgets will result from:

If the price of a good Y falls, then the marginal rate of substitution between X and Y:

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 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 = 0, and M = 400?

Given that income is $750 and P_X = $32 and P_Y = $8, what is the market rate of substitution between goods X and Y?

Suppose that three consumers are in the market for good X. Consumer 1's (inverse) demand is P_X = 40 - 5Q_X; Consumer 2's (inverse) demand is P_X = 10 - Q_X; and Consumer 3's (inverse) demand is P_X = 30 - 2Q_X. When P_X = $5, the market will demand:

What is the horizontal intercept of the budget line, given that M = $1,000, P_X = $50, and P_Y = $40?