Question 1

Given that income is $300, the price of good Y is $15, and the price of good X is $20, what is the vertical intercept of the budget line?

Accepted Answer

A)  4,500 
B)  300 
C)  20 
D)  15 
A)  4,500 
B)  300 
C)  20 
D)  15

Question 2

Managers can get workers to work longer hours:

Accepted Answer

A)  by increasing wages on all hours worked. 
B)  by lowering wages on all hours worked. 
C)  with higher overtime pay in excess of regular hourly pay. 
D)  with lower overtime pay in excess of regular hourly pay. 
A)  by increasing wages on all hours worked. 
B)  by lowering wages on all hours worked. 
C)  with higher overtime pay in excess of regular hourly pay. 
D)  with lower overtime pay in excess of regular hourly pay.

Question 3

Over the past decade, medical costs have increased more rapidly than other prices. In order to illustrate how rising medical costs have affected consumer alternatives, let X represent the quantity of medical services, and let Y represent the quantity of other goods. Furthermore, let income (M) be measured in hundreds of dollars, the price of medical services and other goods in terms of dollars per minute, with M = 100, Px = 4, and Py = 5.
a. Graph the budget line, and determine the market rate of substitution.
b. Illustrate the budget set.
c. Show in your graph what happens to the budget constraint if Px increases to $10.
d. What is the meaning of the slope of the two budget constraints?

Accepted Answer

a. See Figure 04-02.

b. The budget set

Question 4

The firm manager with indifference curves which are convex from the origin (output on the horizontal axis and profit on the vertical axis) views:

Accepted Answer

A)  only profits to be "goods." 
B)  only outputs to be "goods." 
C)  both profits and outputs to be "goods." 
D)  None of the statements is correct. 
A)  only profits to be "goods." 
B)  only outputs to be "goods." 
C)  both profits and outputs to be "goods." 
D)  None of the statements is correct.

Question 5

Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume that both X and Y are inferior goods and the price of good Y increases. Then the substitution effect will lead consumers to consume:

Accepted Answer

A)  more of good X and more of good Y. 
B)  less of good X and more of good Y. 
C)  less of good X and less of good Y. 
D)  more of good X and less of good Y. 
A)  more of good X and more of good Y. 
B)  less of good X and more of good Y. 
C)  less of good X and less of good Y. 
D)  more of good X and less of good Y.

Question 6

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

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  decrease or increase depending on the size of the price change. 
A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  decrease or increase depending on the size of the price change.

Question 7

The property that rules out indifference curves that cross is:

Accepted Answer

A)  completeness. 
B)  transitivity. 
C)  diminishing marginal rate of substitution. 
D)  independence. 
A)  completeness. 
B)  transitivity. 
C)  diminishing marginal rate of substitution. 
D)  independence.

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 = $5, Py = $10, X = 20, and M = 500?

Accepted Answer

A)  40 
B)  25 
C)  50 
D)  75 
A)  40 
B)  25 
C)  50 
D)  75

Question 9

Suppose a manager's preferences depend only on profit. Such a manager will then have an indifference curve that:

Accepted Answer

A)  is tangent to the profit curve somewhere between quantities of 0 and 2.5. 
B)  is tangent to the profit curve somewhere between quantities of 2.5 and 5. 
C)  is tangent to the profit curve at a quantity exactly equal to 2.5. 
D)  intersects the profit curve at a quantity exactly equal to 5. 
A)  is tangent to the profit curve somewhere between quantities of 0 and 2.5. 
B)  is tangent to the profit curve somewhere between quantities of 2.5 and 5. 
C)  is tangent to the profit curve at a quantity exactly equal to 2.5. 
D)  intersects the profit curve at a quantity exactly equal to 5.

Question 10

If you are in the business of selling chicken and the price of chicken and the price of beef both were to drop dramatically, what should you do with your inventory level of chicken?

Accepted Answer

A)  Keep it the same. 
B)  Decrease the inventory. 
C)  Increase the inventory. 
D)  Get into the beef business. 
A)  Keep it the same. 
B)  Decrease the inventory. 
C)  Increase the inventory. 
D)  Get into the beef business.

Question 11

Ann's money income is $250, the price of X is $3, and the price of Y is $2. Given these prices and income, Ann buys 60 units of X and 35 units of Y. Call this combination of X and Y bundle J. At bundle J Ann's MRS is 2. Given these prices and income, what is Ann's equilibrium consumption of X?

Accepted Answer

A)  X  60 
D)  None of the statements is correct. 
A)  X  60 
D)  None of the statements is correct.

Question 12

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 minimum the worker can earn in a day?

Accepted Answer

A)  $50 
B)  $100 
C)  $192 
D)  $200 
A)  $50 
B)  $100 
C)  $192 
D)  $200

Question 13

If the slope of the budget line is steeper than the slope of the indifference curve, and X is on the horizontal axis:

Accepted Answer

A)  the consumer is willing to give up more of good X to get an additional unit of good Y than is necessary under the current market prices. 
B)  MRS > PX/PY. 
C)  MRS = -PX/PY. 
D)  the consumer is willing to give up more of good Y to get an additional unit of good X than is necessary under the current market prices. 
A)  the consumer is willing to give up more of good X to get an additional unit of good Y than is necessary under the current market prices. 
B)  MRS > PX/PY. 
C)  MRS = -PX/PY. 
D)  the consumer is willing to give up more of good Y to get an additional unit of good X than is necessary under the current market prices.

Question 14

The firm manager with horizontal indifference curves (output on the horizontal axis, profit on the vertical axis) views:

Accepted Answer

A)  only profits to be "goods." 
B)  only output to be "goods." 
C)  both profits and outputs to be "goods." 
D)  None of the statements is correct. 
A)  only profits to be "goods." 
B)  only output to be "goods." 
C)  both profits and outputs to be "goods." 
D)  None of the statements is correct.

Question 15

Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume that both X and Y are normal goods and that the price of good Y increases. 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 increase in the consumption of good X. 
B)  The income and substitution effects reinforce one another, leading to an overall decrease in the consumption of good X. 
C)  There will be an indeterminate effect on the consumption of good X. 
D)  The income and substitution effects will reinforce one another, leading to an overall increase in the consumption of good Y. 
A)  The income and substitution effects reinforce one another, leading to an overall increase in the consumption of good X. 
B)  The income and substitution effects reinforce one another, leading to an overall decrease in the consumption of good X. 
C)  There will be an indeterminate effect on the consumption of good X. 
D)  The income and substitution effects will reinforce one another, leading to an overall increase in the consumption of good Y.

Question 16

The marginal rate of substitution (MRS) determines the rate at which a consumer is willing to substitute between two goods in order to achieve:

Accepted Answer

A)  a higher level of satisfaction. 
B)  a lower level of satisfaction. 
C)  the same level of satisfaction. 
D)  None of the statements is correct. 
A)  a higher level of satisfaction. 
B)  a lower level of satisfaction. 
C)  the same level of satisfaction. 
D)  None of the statements is correct.

Question 17

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 X increases. Then the substitution effect will lead consumers to consume:

Accepted Answer

A)  more of good X and more of good Y. 
B)  less of good X and more of good Y. 
C)  less of good X and less of good Y. 
D)  more of good X and less of good Y. 
A)  more of good X and more of good Y. 
B)  less of good X and more of good Y. 
C)  less of good X and less of good Y. 
D)  more of good X and less of good Y.

Question 18

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. The fixed payment for this worker is:

Accepted Answer

A)  $7. 
B)  $24. 
C)  $60. 
D)  $0. 
A)  $7. 
B)  $24. 
C)  $60. 
D)  $0.

Question 19

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

Accepted Answer

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

Question 20

If money income triples and the price of all goods doubles, then the:

Accepted Answer

A)  budget line remains unchanged. 
B)  consumer is worse off due to inflation. 
C)  consumer will buy more of normal goods. 
D)  budget line will shift in. 
A)  budget line remains unchanged. 
B)  consumer is worse off due to inflation. 
C)  consumer will buy more of normal goods. 
D)  budget line will shift in.

Given that income is $300, the price of good Y is $15, and the price of good X is $20, what is the vertical intercept of the budget line?

Managers can get workers to work longer hours:

The firm manager with indifference curves which are convex from the origin (output on the horizontal axis and profit on the vertical axis) views:

Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume that both X and Y are inferior goods and the price of good Y increases. Then the substitution effect will lead consumers to consume:

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

The property that rules out indifference curves that cross is:

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 = $5, P_y = $10, X = 20, and M = 500?

Suppose a manager's preferences depend only on profit. Such a manager will then have an indifference curve that:

If you are in the business of selling chicken and the price of chicken and the price of beef both were to drop dramatically, what should you do with your inventory level of chicken?

Ann's money income is $250, the price of X is $3, and the price of Y is $2. Given these prices and income, Ann buys 60 units of X and 35 units of Y. Call this combination of X and Y bundle J. At bundle J Ann's MRS is 2. Given these prices and income, what is Ann's equilibrium consumption of X?

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 minimum the worker can earn in a day?

If the slope of the budget line is steeper than the slope of the indifference curve, and X is on the horizontal axis:

The firm manager with horizontal indifference curves (output on the horizontal axis, profit on the vertical axis) views:

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

The marginal rate of substitution (MRS) determines the rate at which a consumer is willing to substitute between two goods in order to achieve:

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 X increases. Then the substitution effect will lead consumers to consume:

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. The fixed payment for this worker is:

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

If money income triples and the price of all goods doubles, then 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

Given that income is $300, the price of good Y is $15, and the price of good X is $20, what is the vertical intercept of the budget line?

Managers can get workers to work longer hours:

The firm manager with indifference curves which are convex from the origin (output on the horizontal axis and profit on the vertical axis) views:

Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume that both X and Y are inferior goods and the price of good Y increases. Then the substitution effect will lead consumers to consume:

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

The property that rules out indifference curves that cross is:

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 = $5, Py = $10, X = 20, and M = 500?

Suppose a manager's preferences depend only on profit. Such a manager will then have an indifference curve that:

If you are in the business of selling chicken and the price of chicken and the price of beef both were to drop dramatically, what should you do with your inventory level of chicken?

Ann's money income is $250, the price of X is $3, and the price of Y is $2. Given these prices and income, Ann buys 60 units of X and 35 units of Y. Call this combination of X and Y bundle J. At bundle J Ann's MRS is 2. Given these prices and income, what is Ann's equilibrium consumption of X?

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 minimum the worker can earn in a day?

If the slope of the budget line is steeper than the slope of the indifference curve, and X is on the horizontal axis:

The firm manager with horizontal indifference curves (output on the horizontal axis, profit on the vertical axis) views:

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

The marginal rate of substitution (MRS) determines the rate at which a consumer is willing to substitute between two goods in order to achieve:

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 X increases. Then the substitution effect will lead consumers to consume:

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. The fixed payment for this worker is:

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

If money income triples and the price of all goods doubles, then 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

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 = $5, P_y = $10, X = 20, and M = 500?