Question 1

By the property of "more is better," the consumer views the products under consideration as:

Accepted Answer

A)  goods. 
B)  bads. 
C)  inferior goods. 
D)  normal. 
A)  goods. 
B)  bads. 
C)  inferior goods. 
D)  normal.

Question 2

A firm manager with vertical 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 3

Natalie is always willing to give up 10 ounces of licorice for 1 ounce of chocolate. Mitchell, on the other hand, will always give up 10 ounces of chocolate for 1 ounce of licorice. Based on this information, answer the following questions:
a. Do Natalie's preferences exhibit a diminishing marginal rate of substitution between chocolate and licorice? Why or why not?
b. Assuming that Natalie and Mitchell have the same amount of money to spend on chocolate and licorice, who will purchase the most licorice? Why?

Accepted Answer

a. No, since she is always willing to gi

Question 4

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. How much is this person working if her daily earnings are $116?

Accepted Answer

A)  18 hours 
B)  16 hours 
C)  12 hours 
D)  8 hours 
A)  18 hours 
B)  16 hours 
C)  12 hours 
D)  8 hours

Question 5

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 = $15, X = 30, and M = 600?

Accepted Answer

A)  10 
B)  15 
C)  20 
D)  25 
A)  10 
B)  15 
C)  20 
D)  25

Question 6

In order to encourage energy conservation, many public utility companies charge consumers a higher rate on units of electricity consumed in excess of some threshold amount. In contrast, a common marketing ploy by other firms is to offer "quantity discounts" to consumers who purchase large quantities of a good. To illustrate how these pricing schemes alter the typical consumer's opportunity set, suppose income = $100, Px = $2 if the consumer buys less than 40 units of X, Px = $3 if the consumer buys more than 40 units of X, and Py = $5. Draw the budget constraint. How would the budget constraint change if the price decreased to $1 after 40 units of X were consumed?

Accepted Answer

@#IMG-DLM& Figure 4-9a represents the bu

Question 7

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 can he give up and still reach the same level of utility?

Accepted Answer

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

Question 8

Individuals who purchase services and goods for the purpose of consumption are:

Accepted Answer

A)  consumers. 
B)  managers. 
C)  workers. 
D)  agents. 
A)  consumers. 
B)  managers. 
C)  workers. 
D)  agents.

Question 9

Suppose an individual's marginal rate of substitution is three slices of pizza for one beer at the present bundle of beer and pizza she is consuming. If the price of beer is $1.00 and the price of a slice of pizza is $1.50, is the consumer maximizing her welfare? If not, how should she change her consumption?

Accepted Answer

Since the ratio of beer prices

Question 10

Use indifference curve and constraint analysis to analyze the behavior of employees who are paid:
a. An hourly wage rate of $4 per hour.
b. A fixed hourly wage of $4 per hour, plus an overtime bonus of $4 for every hour worked in excess of eight hours.
c. A fixed salary of $40 per day, plus $4 for each hour worked.
d. Which of the above schemes would yield the largest number of hours worked? Explain.

Accepted Answer

a. This is shown as the opportunity set

Question 11

Which is more preferred between a cash gift and an in-kind gift?

Accepted Answer

A)  A cash gift. 
B)  An in-kind gift. 
C)  Both are equally preferred. 
D)  None of the statements is correct. 
A)  A cash gift. 
B)  An in-kind gift. 
C)  Both are equally preferred. 
D)  None of the statements is correct.

Question 12

If a firm offers to pay a worker $10 for each hour of leisure the worker gives up, the $10 implies the:

Accepted Answer

A)  marginal rate of substitution between leisure and income. 
B)  market rate of substitution between leisure and income. 
C)  market rate of transformation between leisure and income. 
D)  marginal rate of transformation between leisure and income. 
A)  marginal rate of substitution between leisure and income. 
B)  market rate of substitution between leisure and income. 
C)  market rate of transformation between leisure and income. 
D)  marginal rate of transformation between leisure and income.

Question 13

Which of the following is most likely NOT an example of a normal good?

Accepted Answer

A)  Lobster 
B)  Sports cars 
C)  Bus travel 
D)  Jacuzzis 
A)  Lobster 
B)  Sports cars 
C)  Bus travel 
D)  Jacuzzis

Question 14

The total earnings of a worker are represented by E = 150 + $12(24 - L), where E is earnings and L is the number of hours of leisure. How much will the worker earn if he takes 16 hours of leisure per day?

Accepted Answer

A)  $96 
B)  $246 
C)  $278 
D)  $342 
A)  $96 
B)  $246 
C)  $278 
D)  $342

Question 15

The slope of the budget line represents:

Accepted Answer

A)  the marginal rate of substitution. 
B)  the market rate of substitution. 
C)  the budget rate of substitution. 
D)  the opportunity rate of substitution. 
A)  the marginal rate of substitution. 
B)  the market rate of substitution. 
C)  the budget rate of substitution. 
D)  the opportunity rate of substitution.

Question 16

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

Question 17

Suppose a consumer with an income of $100 is faced with Px = 1 and Py = 1/2. What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)?

Accepted Answer

A)  0.50 
B)  -1.0 
C)  -2.0 
D)  -4.0 
A)  0.50 
B)  -1.0 
C)  -2.0 
D)  -4.0

Question 18

A stockholder named Sue must cast a vote for chair of the board. Sue prefers Mr. Lee to Ms. Doe, Ms. Doe to Mr. James, and Mr. James to Mr. Lee.
a. Are Sue's preferences consistent with our assumptions about consumer behavior? Explain.
b. If all stockholders had the same preferences as Sue, who would win the appointment as chair of the board? Explain.

Accepted Answer

a. No, her preferences are not consisten

Question 19

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

Accepted Answer

A)  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. 
B)  MRS X/PY. 
C)  MRS X/PY. 
D)  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. 
A)  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. 
B)  MRS X/PY. 
C)  MRS X/PY. 
D)  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.

Question 20

Running a supermarket involves:

Accepted Answer

A)  a lower level of risk than running a gourmet shop. 
B)  a higher level of risk than running a gourmet shop. 
C)  the same level of risk as running a gourmet shop. 
D)  All of the statements associated with this question are correct. 
A)  a lower level of risk than running a gourmet shop. 
B)  a higher level of risk than running a gourmet shop. 
C)  the same level of risk as running a gourmet shop. 
D)  All of the statements associated with this question are correct.

By the property of "more is better," the consumer views the products under consideration as:

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

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. How much is this person working if her daily earnings are $116?

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 = $15, X = 30, and M = 600?

Individuals who purchase services and goods for the purpose of consumption are:

Which is more preferred between a cash gift and an in-kind gift?

If a firm offers to pay a worker $10 for each hour of leisure the worker gives up, the $10 implies the:

Which of the following is most likely NOT an example of a normal good?

The total earnings of a worker are represented by E = 150 + $12(24 - L), where E is earnings and L is the number of hours of leisure. How much will the worker earn if he takes 16 hours of leisure per day?

The slope of the budget line represents:

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 increases. Then, which of the following effects is known with certainty?

Suppose a consumer with an income of $100 is faced with P_x = 1 and P_y = 1/2. What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)?

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

Running a supermarket involves:

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

By the property of "more is better," the consumer views the products under consideration as:

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

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. How much is this person working if her daily earnings are $116?

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 = $15, X = 30, and M = 600?

Individuals who purchase services and goods for the purpose of consumption are:

Which is more preferred between a cash gift and an in-kind gift?

If a firm offers to pay a worker $10 for each hour of leisure the worker gives up, the $10 implies the:

Which of the following is most likely NOT an example of a normal good?

The total earnings of a worker are represented by E = 150 + $12(24 - L), where E is earnings and L is the number of hours of leisure. How much will the worker earn if he takes 16 hours of leisure per day?

The slope of the budget line represents:

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 increases. Then, which of the following effects is known with certainty?

Suppose a consumer with an income of $100 is faced with Px = 1 and Py = 1/2. What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)?

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

Running a supermarket involves:

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 = $15, X = 30, and M = 600?

Suppose a consumer with an income of $100 is faced with P_x = 1 and P_y = 1/2. What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)?