Question 1

If goods x and y are complements,then the cross price elasticity of demand between them will be

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) infinity. 
A) positive. 
B) negative. 
C) zero. 
D) infinity. B

Question 2

Quasi-concavity of utility functions insures that with only two goods,these goods must be

Accepted Answer

A) gross substitutes. 
B) gross complements. 
C) net substitutes. 
D) net complements. 
A) gross substitutes. 
B) gross complements. 
C) net substitutes. 
D) net complements. C

Question 3

If the demand for x is given by $x = k p _ { x } ^ { - 1.2 } p _ { y } ^ { 0.5 } I ^ { 0.7 }$ ,which of parameter values hold?

Accepted Answer

A) $e _ { x , p _ { x } } = 1.2 e _ { x , I } = .7 e _ { y , p _ { x } } = .5$ . 
B) $e _ { x , p _ { x } } = - 1.2 e _ { x , p _ { y } } = .5 e _ { x , 1 } = .7$ . 
C) $e _ { x , p _ { k } } = - 1.2 \quad e _ { y , p _ { y } } = .7 \quad e _ { x , I } = .5$ . 
D) None of these relations hold since the demand function is not homogeneous of degree zero in $p _ { x } , p _ { y } , \text { and I. }$ 
A) $e _ { x , p _ { x } } = 1.2 e _ { x , I } = .7 e _ { y , p _ { x } } = .5$ . 
B) $e _ { x , p _ { x } } = - 1.2 e _ { x , p _ { y } } = .5 e _ { x , 1 } = .7$ . 
C) $e _ { x , p _ { k } } = - 1.2 \quad e _ { y , p _ { y } } = .7 \quad e _ { x , I } = .5$ . 
D) None of these relations hold since the demand function is not homogeneous of degree zero in $p _ { x } , p _ { y } , \text { and I. }$ B

Question 4

The primary additional insight provided by expanding the theory of choice from two to three goods is that a pair of goods may now be

Accepted Answer

A) gross substitutes. 
B) gross complements. 
C) net substitutes. 
D) net complements. 
A) gross substitutes. 
B) gross complements. 
C) net substitutes. 
D) net complements.

Question 5

"Hicks' Second Law of Demand" states that "most" goods must be

Accepted Answer

A) gross substitutes. 
B) gross complements. 
C) net substitutes. 
D) net complements. 
A) gross substitutes. 
B) gross complements. 
C) net substitutes. 
D) net complements.

Question 6

A generalization of Engel's Law is given by

Accepted Answer

A) $e _ { x , p _ { y } } + e _ { y , x } + e _ { x , 1 } = 1$ . 
B) $s _ { x } e _ { x , I } + s _ { y } e _ { y , I } = l$ . 
C) $e _ { x , p _ { y } } + e _ { y , p _ { x } } + e _ { x , p _ { x } } + e _ { y , p _ { y } } = 0$ . 
D) $s _ { x } + s _ { y } = l$ . 
A) $e _ { x , p _ { y } } + e _ { y , x } + e _ { x , 1 } = 1$ . 
B) $s _ { x } e _ { x , I } + s _ { y } e _ { y , I } = l$ . 
C) $e _ { x , p _ { y } } + e _ { y , p _ { x } } + e _ { x , p _ { x } } + e _ { y , p _ { y } } = 0$ . 
D) $s _ { x } + s _ { y } = l$ .

Question 7

If a rise in the price x causes less y to be demanded,

Accepted Answer

A) x and y are gross complements. 
B) x and y are gross substitutes. 
C) x and y are net complements. 
D) x and y are net substitutes. 
A) x and y are gross complements. 
B) x and y are gross substitutes. 
C) x and y are net complements. 
D) x and y are net substitutes.

Question 8

If utility is separable in a three-good utility function $\left[ U \left( x _ { 1 } , x _ { 2 } , x _ { 3 } \right) = U _ { 1 } \left( x _ { 1 } \right) + U _ { 2 } \left( x _ { 2 } \right) + U _ { 3 } \left( x _ { 3 } \right) , U _ { i } ^ { \prime } > 0 \quad U _ { i } ^ { \prime } < 0 \right]$ then for changes in $p _ { 1 } , x _ { 2 } \text { and } x _ { 3 } \text { must }$

Accepted Answer

A) both be gross substitutes for x1 . 
B) both be gross complements for x1 . 
C) be such that if one is a gross substitute for x1 ,the other is a gross complement for x1 . 
D) both be gross substitutes or both be gross complements for x. 
A) both be gross substitutes for x1 . 
B) both be gross complements for x1 . 
C) be such that if one is a gross substitute for x1 ,the other is a gross complement for x1 . 
D) both be gross substitutes or both be gross complements for x.

Question 9

With only two goods,x and y,if x and y are gross substitutes,a rise in px must necessarily

Accepted Answer

A) increase spending in x. 
B) reduce spending in x. 
C) increase spending in y. 
D) reduce spending in y. 
A) increase spending in x. 
B) reduce spending in x. 
C) increase spending in y. 
D) reduce spending in y.

Question 10

Homogeneity of the demand function is shown by:

Accepted Answer

A) $e _ { x , p _ { x } } + e _ { x , p _ { y } } + e _ { \chi , 1 } = 0$ . 
B) $e _ { x , p _ { x } } + e _ { \chi , p _ { y } } + e _ { \chi , l } = 1$ . 
C) $s _ { x } e _ { x , p _ { \lambda } } + s _ { y } e _ { x , p _ { y } } = - e _ { x , I }$ . 
D) $s _ { x } e _ { x , I } + s _ { y } e _ { y , I } = l$ . 
A) $e _ { x , p _ { x } } + e _ { x , p _ { y } } + e _ { \chi , 1 } = 0$ . 
B) $e _ { x , p _ { x } } + e _ { \chi , p _ { y } } + e _ { \chi , l } = 1$ . 
C) $s _ { x } e _ { x , p _ { \lambda } } + s _ { y } e _ { x , p _ { y } } = - e _ { x , I }$ . 
D) $s _ { x } e _ { x , I } + s _ { y } e _ { y , I } = l$ .

Question 11

For the "Composite Commodity Theorem" to hold,all goods in the composite must

Accepted Answer

A) have constant prices. 
B) have constant relative prices. 
C) be used in fixed proportions. 
D) be net complements. 
A) have constant prices. 
B) have constant relative prices. 
C) be used in fixed proportions. 
D) be net complements.

Question 12

With the Cobb-Douglas utility function $U ( x , y ) = \sqrt { x y }$ ,x and y are

Accepted Answer

A) net and gross substitutes. 
B) net substitutes and gross complements. 
C) net substitutes and neither gross substitutes or complements. 
D) net and gross complements. 
A) net and gross substitutes. 
B) net substitutes and gross complements. 
C) net substitutes and neither gross substitutes or complements. 
D) net and gross complements.

Question 13

For the Cobb-Douglas utility function with two goods,the sum of the own price elasticities of demand must be

Accepted Answer

A) 0. 
B) -1. 
C) -2 
D) any number between 0 and -4. 
A) 0. 
B) -1. 
C) -2 
D) any number between 0 and -4.

Question 14

The elasticity of the compensated demand curve $\left( e _ { x , p _ { \lambda } } \right)$ can be computed as

Accepted Answer

A) $l - e _ { x , p _ { \lambda } }$ 
B) $l - e _ { x , p _ { x } } - e _ { x , p _ { y } }$ 
C) $s _ { x } e _ { x , I } + e _ { x, p _ {  { x } } }$ 
D) $s _ { x } \left( e _ { x , I } - e _ { x , p _ { x } } \right) .$ 
A) $l - e _ { x , p _ { \lambda } }$ 
B) $l - e _ { x , p _ { x } } - e _ { x , p _ { y } }$ 
C) $s _ { x } e _ { x , I } + e _ { x, p _ {  { x } } }$ 
D) $s _ { x } \left( e _ { x , I } - e _ { x , p _ { x } } \right) .$

Question 15

Two goods are Hicksian (net)substitutes if a rise in the price of one causes a(n)

Accepted Answer

A) decline in the quantity demanded of the other holding nominal income constant. 
B) increase in the quantity demanded of the other holding nominal income constant. 
C) decline in the quantity demanded of the other holding utility constant. 
D) increase in the quantity demanded of the other holding utility constant. 
A) decline in the quantity demanded of the other holding nominal income constant. 
B) increase in the quantity demanded of the other holding nominal income constant. 
C) decline in the quantity demanded of the other holding utility constant. 
D) increase in the quantity demanded of the other holding utility constant.

Question 16

Symmetry of net substitution effects is one of the principal conclusions of the theory of utility maximization.Which two mathematical theorems are used to prove this symmetry?

Accepted Answer

A) Taylor's Theorem and Fundamental Theorem of Calculus. 
B) Cauchy's Theorem and DeMonre's Theorem. 
C) Lagrangian Theorem and Fundamental Theorem of Calculus. 
D) Envelope Theorem and Young's Theorem. 
A) Taylor's Theorem and Fundamental Theorem of Calculus. 
B) Cauchy's Theorem and DeMonre's Theorem. 
C) Lagrangian Theorem and Fundamental Theorem of Calculus. 
D) Envelope Theorem and Young's Theorem.

Question 17

In the Slutsky equation for $\partial x _ { i } / \partial p _ { j }$ ,the income effect is given by

Accepted Answer

A) $x _ { i } \partial x _ { i } / \partial I$ . 
B) $x _ { j } \partial x _ { i } / \partial I$ . 
C) $x _ { i } \partial x _ { j } / \partial I$ . 
D) $x _ { j } \partial x _ { j } / \partial I$ . 
A) $x _ { i } \partial x _ { i } / \partial I$ . 
B) $x _ { j } \partial x _ { i } / \partial I$ . 
C) $x _ { i } \partial x _ { j } / \partial I$ . 
D) $x _ { j } \partial x _ { j } / \partial I$ .

Question 18

The attributes model of consumer choice explains the possibility that an individual does not purchase a particular good,z by assuming

Accepted Answer

A) the person's preferences do not favor z. 
B) linear combinations of other goods dominate z. 
C) that MUz / pz is less than the marginal utility of income. 
D) z is inferior. 
A) the person's preferences do not favor z. 
B) linear combinations of other goods dominate z. 
C) that MUz / pz is less than the marginal utility of income. 
D) z is inferior.

If goods x and y are complements,then the cross price elasticity of demand between them will be

Quasi-concavity of utility functions insures that with only two goods,these goods must be

If the demand for x is given by $x = k p _ { x } ^ { - 1.2 } p _ { y } ^ { 0.5 } I ^ { 0.7 }$ ,which of parameter values hold?

The primary additional insight provided by expanding the theory of choice from two to three goods is that a pair of goods may now be

"Hicks' Second Law of Demand" states that "most" goods must be

A generalization of Engel's Law is given by

If a rise in the price x causes less y to be demanded,

With only two goods,x and y,if x and y are gross substitutes,a rise in p_x must necessarily

Homogeneity of the demand function is shown by:

For the "Composite Commodity Theorem" to hold,all goods in the composite must

With the Cobb-Douglas utility function $U ( x , y ) = \sqrt { x y }$ ,x and y are

For the Cobb-Douglas utility function with two goods,the sum of the own price elasticities of demand must be

The elasticity of the compensated demand curve $\left( e _ { x , p _ { \lambda } } \right)$ can be computed as

Two goods are Hicksian (net)substitutes if a rise in the price of one causes a(n)

Symmetry of net substitution effects is one of the principal conclusions of the theory of utility maximization.Which two mathematical theorems are used to prove this symmetry?

In the Slutsky equation for $\partial x _ { i } / \partial p _ { j }$ ,the income effect is given by

The attributes model of consumer choice explains the possibility that an individual does not purchase a particular good,z by assuming

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Uncertainty and Information

Strategy and Game Theory

Production Functions

Cost Functions

Profit Maximization

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

Exam 4: Demand Relationships Among Goods

If goods x and y are complements,then the cross price elasticity of demand between them will be

Quasi-concavity of utility functions insures that with only two goods,these goods must be

If the demand for x is given by x=kpx−1.2py0.5I0.7x = k p _ { x } ^ { - 1.2 } p _ { y } ^ { 0.5 } I ^ { 0.7 }x=kpx−1.2​py0.5​I0.7 ,which of parameter values hold?

The primary additional insight provided by expanding the theory of choice from two to three goods is that a pair of goods may now be

"Hicks' Second Law of Demand" states that "most" goods must be

A generalization of Engel's Law is given by

If a rise in the price x causes less y to be demanded,

With only two goods,x and y,if x and y are gross substitutes,a rise in px must necessarily

Homogeneity of the demand function is shown by:

For the "Composite Commodity Theorem" to hold,all goods in the composite must

With the Cobb-Douglas utility function U(x,y)=xyU ( x , y ) = \sqrt { x y }U(x,y)=xy​ ,x and y are

For the Cobb-Douglas utility function with two goods,the sum of the own price elasticities of demand must be

The elasticity of the compensated demand curve (ex,pλ)\left( e _ { x , p _ { \lambda } } \right)(ex,pλ​​) can be computed as

Two goods are Hicksian (net)substitutes if a rise in the price of one causes a(n)

Symmetry of net substitution effects is one of the principal conclusions of the theory of utility maximization.Which two mathematical theorems are used to prove this symmetry?

In the Slutsky equation for ∂xi/∂pj\partial x _ { i } / \partial p _ { j }∂xi​/∂pj​ ,the income effect is given by

The attributes model of consumer choice explains the possibility that an individual does not purchase a particular good,z by assuming

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Uncertainty and Information

Strategy and Game Theory

Production Functions

Cost Functions

Profit Maximization

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

If the demand for x is given by $x = k p _ { x } ^ { - 1.2 } p _ { y } ^ { 0.5 } I ^ { 0.7 }$ ,which of parameter values hold?

With only two goods,x and y,if x and y are gross substitutes,a rise in p_x must necessarily

With the Cobb-Douglas utility function $U ( x , y ) = \sqrt { x y }$ ,x and y are

The elasticity of the compensated demand curve $\left( e _ { x , p _ { \lambda } } \right)$ can be computed as

In the Slutsky equation for $\partial x _ { i } / \partial p _ { j }$ ,the income effect is given by