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92 Cards in this Set
- Front
- Back
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1. In general, economics is the study of
a) the allocation of scarce wants to unlimited resources. b) the allocation of workers between firms. c) the allocation of resources between the government and the private sector. d) the allocation of unlimited wants to scarce resources. |
d) the allocation of unlimited wants to scarce resources.
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2. Identifying the appropriate way to allocate an economy’s resources is an example of
a) a constrained optimization problem. b) a comparative statics problem. c) an equilibrium analysis. d) marginal analysis. |
a) a constrained optimization problem.
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3. Which of the following statements regarding exogenous and endogenous variables is correct?
a) Exogenous variables, because they are determined outside the model, tend to be mostly irrelevant to the model’s solution. b) Endogenous variables will always be determined within the model. c) Exogenous variables, because they are variable, typically change within the model as endogenous variables change. d) The values for the endogenous variables are impossible to predict since we can never be certain of the values for the exogenous variables. |
b) Endogenous variables will always be determined within the model.
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4. The definition of an exogenous variable is
a) a variable whose value is determined outside the model under study. b) a variable whose value is determined within the model under study. c) a variable whose value is determined through constrained optimization. d) a variable whose value is determined through comparative statics. |
a) a variable whose value is determined outside the model under study.
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5. The definition of an endogenous variable is
a) a variable whose value is determined outside the model under study. b) a variable whose value is determined within the model under study. c) a variable whose value is determined through constrained optimization. d) a variable whose value is determined through comparative statics. |
b) a variable whose value is determined within the model under study.
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6. An example of constrained optimization would be
a) a firm trying to maximize its profits subject to its budget constraint. b) a firm trying to minimize its cost subject to its production quota. c) a consumer trying to maximize her utility subject to her budget constraint. d) all of the above are examples of constrained optimization. |
d) all of the above are examples of constrained optimization.
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7. A builder builds a fence on a rectangular plot. He has F1 feet of fence and cannot afford to purchase more. However he can choose the dimensions of the plot, which will have a length of L1 feet and a width of W1 feet. He wants to choose the dimensions L1 and W1 that will maximize the area of the plot. He must also make sure that the total amount of fencing he uses (the perimeter of the plot) does not exceed F1 feet. Which one of the expressions below explains the constraint
a) 2L1+2W1 ≤ F1 b) L1+W1 ≥ F1 c) 2L1+2W = F d) L1+2W1 ≤ F1 |
a) 2L1+2W1 ≤ F1
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8. Which of the following is not typically found in a constrained optimization problem?
a) Resource constraint b) Endogenous variable c) Objective function d) Comparative statics constraint |
d) Comparative statics constraint
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9. Which of the following is an example of a constraint?
a) max AB b) L+W c) 2X+3Y ≤ 30 d) min AB |
c) 2X+3Y ≤ 30
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10. Which of the following is the best example of a firm’s objective function?
a) To maximize profits. b) To minimize costs. c) To engage in ethical behavior. d) Both a) and b) are correct. |
d) Both a) and b) are correct.
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11. Suppose the price of A is $3, the price of B is $5, the consumer’s income is $30, and the consumer’s level of satisfaction is measured by A+B. The consumer’s income constraint is
a) max 3A + 5B b) max A+B c) A+B ≤ 30 d) 3A+5B ≤ 30 |
d) 3A+5B ≤ 30
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12. Suppose the price of A is $3, the price of B is $5, the consumer’s income is $30, and the consumer’s level of satisfaction is measured by A+B. The consumer’s objective function is
a) max 3A+5B b) max A+B c) A+B ≤ 30 d) 3A+5B ≤ 30 |
b) max A+B
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13. Which of the following is the best example of an economic constraint affecting a firm?
a) Limited funds with which to purchase inputs. b) Limited time within which to complete a project. c) Limited technology with which to produce a product. d) All of the above are examples of constraints facing a firm. |
d) All of the above are examples of constraints facing a firm.
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14. An example of marginal reasoning would be
a) the addition to total beer sales from spending an additional dollar on radio advertising. b) the additional money spent by a firm to acquire raw materials. c) the addition to revenue from additional costs. d) the addition to costs from additional revenue. |
a) the addition to total beer sales from spending an additional dollar on radio advertising.
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15. What term in microeconomics tells us how a dependent variable changes as a result of adding one unit of an independent variable
a) Increment impact b) Rate of change c) Marginal d) Independent variable |
c) Marginal
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16. An equilibrium
a) is a state that will continue indefinitely as long as exogenous factors remain unchanged. b) typically occurs in economics at the point where quantity demanded in the market equals quantity supplied in the market. c) is a concept that is often meaningless because most markets never reach an equilibrium. d) Both a) and b) are true. |
d) Both a) and b) are true.
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17. Which of the following is not one of the three most important analytical tools in microeconomics?
a) Opportunity cost b) Equilibrium analysis c) Comparative statics d) Constrained optimization |
a) Opportunity cost
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19. Identify the truthfulness of the following statements:
I. Equilibrium analysis helps economists analyze the effect of an exogenous change on the market-clearing price. II. Comparative statics help economists analyze how a change in an exogenous variable affects the level of a related endogenous variable in an economic model. a) Both I and II are true. b) Both I and II are false. c) I is true; II is false. d) I is false; II is true. |
a) Both I and II are true.
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20. Comparative statics
a) examines how exogenous variables change as endogenous factors change. b) examines how endogenous variables change as exogenous factors change. c) presents a comparison of two separate industries at a single (static) point in time. d) is often rendered useless because exogenous variables can never be expected to remain constant for long. |
b) examines how endogenous variables change as exogenous factors change.
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21. If we were to build a model measuring the supply of corn, which of the following would be an example of an exogenous variable in the model?
a) The price of corn. b) The quantity supplied of corn. c) The quantity of rain. d) The price of BMW automobiles. |
c) The quantity of rain.
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22. Which of the following statements about positive analysis is correct?
a) Positive analysis prescribes the best solution to an economic problem. b) Positive analysis predicts how an economic system will change over time. c) While normative analysis can be wrong, since it is often based on someone’s opinion, positive analysis is always accurate. d) Since positive analysis is based on a model, and not the real world, it is mostly irrelevant. |
b) Positive analysis predicts how an economic system will change over time.
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23. Which of the following statements about normative analysis is correct?
a) Normative analysis, because it is based on opinion, rarely employs any positive analysis when prescribing a solution to a given problem. b) Normative analysis typically cannot be trusted because it is only someone’s opinion. c) Normative analysis ignores exogenous variables when making predictions. d) Normative analysis typically focuses on issues of social welfare. |
d) Normative analysis typically focuses on issues of social welfare.
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24. Which of the following represents an example of positive analysis?
a) How will the equilibrium price of corn be affected by a government subsidy? b) What is the best way to assist low-income families with affordable housing? c) Would taxes on emissions be the best way to reduce pollution? d) How can the government best distribute tax cut? |
a) How will the equilibrium price of corn be affected by a government subsidy?
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25. Which of the following represents an example of normative analysis?
a) How will the equilibrium price of coffee be affected by drought? b) How will a government subsidy affect the quantity demanded of public housing? c) What is the best method for allocating tax revenues? d) How will a tax cut affect a typical consumer’s disposable income? |
c) What is the best method for allocating tax revenues?
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1. Your text reports the results of a study that finds the price elasticity of demand for beer is -0.26. Based on this estimate, if the price of beer were to increase by a small amount, then total expenditures on beer will:
(a) rise (b) fall (c) remain unchanged (d) the change in total expenditures cannot be determined |
(a) rise
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2. Suppose that the cross-price elasticity of the price of good Y on the demand for good X is -0.80. This suggests that:
(a) goods X and Y are luxury goods (b) goods X and Y are inferior goods (c) goods X and Y are complements (d) goods X and Y are substitutes |
(c) goods X and Y are complements
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3. Suppose that the cross-price elasticity of the price of oranges on the demand for apples is 1.6. Then, if the price of oranges were to decrease by 2 percent,
(a) the quantity demanded of apples would increase by 3.2 percent (b) the quantity demanded of apples would decrease by 3.2 percent (c) the quantity demanded of apples would increase by 1.6 percent (d) the quantity demanded of apples would decrease by 1.6 percent |
(b) the quantity demanded of apples would decrease by 3.2 percent
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4. Suppose the monthly demand for a can of 3 tennis balls at a nearby tennis club can be expressed as Q = 150 – 30P. What is the price elasticity of demand at a price (P) of $3 per can?
(a) -1.5 (b) -0.6 (c) -600 (d) -30 |
(a) -1.5
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5. Suppose that the demand for lawn fertilizer can be expressed as QD = 5000 – 120P and that the supply of lawn fertilizer can be expressed as QS = 1000 + 80P where Q is measured in thousands of tons per year and P is measured in dollars per thousand tons. What is the price elasticity of demand when the market is in equilibrium?
(a) -20 (b) -1.08 (c) -0.92 (d) -120 |
(c) -0.92
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6. The demand for gasoline is more price elastic in the long run than in the short run because in the long run,
(a) consumers have greater ability to change the car they drive than they do in the short run. (b) consumers have less ability to change the car they drive than they do than in the short run. (c) consumers have a greater desire to drive big cars than they do in the short run. (d) consumers have an ability to change their driving habits but they do not in the short run. |
a) consumers have greater ability to change the car they drive than they do in the short run.
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7. Suppose that the market equilibrium price of corn is $1 per dozen ears and 4,000 dozen ears are sold each week. Assuming a linear demand curve for corn, if the price elasticity of demand for corn is –1, then the demand curve may be written as
(a) Q = 8000 – 4000P. (b) Q = 4001 – 1P. (c) Q = 5000 –1000P. (d) Q = 12000 – 8000P. |
(a) Q = 8000 – 4000P
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8. Suppose that the demand for lawn fertilizer can be expressed as: QD = 5000 – 120P and that the supply of lawn fertilizer can be expressed as: QS = 1000 + 80P where Q is measured in thousands of tons per year and P is measured in dollars per thousand tons. If demand increases 10%, by how much will price change?
(a) price increases 12.5%. (b) price increases by $7.50. (c) price increases by $1.23. (d) price will not increase. |
(a) price increases 12.5%.
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10. Suppose that the supply of apples can be represented by the following equation: Qs = 500P+100. Further suppose that the demand of apples can be represented by the following equation: Qd = 1,000-100P. Which of the following is the equilibrium price in the market for apples?
(a) 0.2. (b) 9/6. (c) 11/6. (d) 10. |
(b) 9/6.
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11. Suppose that the market for bicycles is initially in equilibrium. Further suppose that there is an increase in the price of bicycle helmets. Which of the following accurately describes the new equilibrium?
(a) The equilibrium price will rise; the equilibrium quantity will fall. (b) The equilibrium price will rise; the equilibrium quantity will rise. (c) The equilibrium price will fall; the equilibrium quantity will fall. (d) The equilibrium price will fall; the equilibrium quantity will rise. |
(c) The equilibrium price will fall; the equilibrium quantity will fall.
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12. Suppose that the market for peaches is initially in equilibrium. Further suppose that there is a decrease in the price of fertilizer. Which of the following accurately describes the new equilibrium?
(a) The equilibrium price will rise; the equilibrium quantity will fall. (b) The equilibrium price will rise; the equilibrium quantity will rise. (c) The equilibrium price will fall; the equilibrium quantity will fall. (d) The equilibrium price will fall; the equilibrium quantity will rise. |
(d) The equilibrium price will fall; the equilibrium quantity will rise.
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13. Suppose that the market for newspaper is initially in equilibrium. Further suppose that there is both an increase in the price of ink and a decrease in the price of magazines. Which of the following accurately describes the new equilibrium?
(a) The equilibrium price will rise; the equilibrium quantity is ambiguous. (b) The equilibrium price is ambiguous; the equilibrium quantity will fall. (c) The equilibrium price will fall; the equilibrium quantity is ambiguous. (d) The equilibrium price is ambiguous; the equilibrium quantity will rise |
(b) The equilibrium price is ambiguous; the equilibrium quantity will fall.
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14. Which of the following would cause an unambiguous increase in the equilibrium price in a market?
(a) An increase in supply and an increase in demand. (b) An increase in supply and a decrease in demand. (c) A decrease in supply and an increase in demand. (d) A decrease in supply and a decrease in demand. |
(c) A decrease in supply and an increase in demand.
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15. Identify the truthfulness of the following statements.
I. Demand tends to be more price inelastic when few substitutes for a product exist. II. Demand tends to be more price elastic when a consumer’s expenditure on the product is small. (a) Both I and II are true. (b) Both I and II are false. (c) I is true; II is false. (d) I is false; II is true. |
(c) I is true; II is false.
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20. Consider the demand curve Qd = 200P^-1 . The elasticity of demand along this demand curve
(a) is inelastic (b) is elastic (c) is unitary elastic (d) falls as the price falls |
(c) is unitary elastic
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21. The elasticity of demand for Colgate toothpaste is likely to be __________ the elasticity of demand for all toothpaste.
(a) more elastic than (b) less elastic than (c) the same as (d) less negative than |
(a) more elastic than
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22. An income elasticity of demand for milk of -0.5 could mean that
(a) as income rises by 50 percent, quantity demanded decreases by 25 percent. (b) as income rises by 50 percent, quantity demanded rises by 1 percent. (c) as income rises by 50 percent, quantity demanded decreases by 100 percent. (d) as income rises by 50 percent, quantity demanded rises by 10 percent. |
(a) as income rises by 50 percent, quantity demanded decreases by 25 percent.
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23. A cross-price elasticity of demand for product with respect to product of 0.64 means that
(a) as the price of decreases, the demand for increases. (b) as the price of increases, the demand for decreases. (c) as the price of decreases, the demand for decreases. (d) both a) and b) are true. |
(c) as the price of decreases, the demand for decreases.
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24. Suppose demand is given by Qd = 300-5P and supply is given by Qs = 10P. At the equilibrium price and quantity, the elasticity of demand is
(a) –50 (b) –0.50 (c) –10 (d) –0.10 |
(b) –0.50
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25. Which of the following explanations supports the statement that long-run supply curves are likely to be more elastic than short-run supply curves?
(a) Firms are able to adjust fixed inputs in the long-run but not in the short-run. (b) Firms are able to adjust variable inputs in the short-run. (c) Firms prefer to hire workers rather than capital. (d) Firms have more flexibility in the short-run. |
(a) Firms are able to adjust fixed inputs in the long-run but not in the short-run.
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18. Identify the truthfulness of the following statements:
I. Marginal analysis can explain why you would choose to eat Chinese food rather than pizza. II. Marginal analysis can explain the incremental impact of an increase in total cost when one more unit of output is produced. a) Both I and II are true. b) Both I and II are false. c) I is true; II is false. d) I is false; II is true. |
d) I is false; II is true.
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9. To identify a demand curve we must observe
(a) many years of data (b) shifts in the demand curve (c) shifts in the supply curve (d) many different markets simultaneously |
(c) shifts in the supply curve
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16. Along a linear demand curve, as price falls
(a) the elasticity of demand is constant (b) the elasticity of demand falls (c) the elasticity of demand increases (d) the elasticity is the same as the slope of the demand curve |
(b) the elasticity of demand falls
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17. Suppose we postulate a linear demand curve Qd=a-bP and observe, through supply shifts, two points on the demand curve. At point A, Pa=20 and Qda=5. At point B, Pb=5 and Qdb=15. The choke price for this demand curve is
(a) 18.33 (b) 27.5 (c) –8.33 (d) 0.67 |
(b) 27.5
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18. Consider the demand curve Qd=100-5P-7S. If the value of S falls, the demand curve will
(a) shift to the right (b) shift to the left (c) remain unchanged (d) rotate along the quantity axis |
(a) shift to the right
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19. Identify the truthfulness of the following statements:
I. Linear demand curves have constant slopes but varying price elasticities. II. One special case of a linear demand curve is a constant elasticity demand curve. (a) Both I and II are true. (b) Both I and II are false. (c) I is true; II is false. (d) I is false; II is true. |
(c) I is true; II is false.
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1. If a consumer is unable to compare two baskets, then this consumer’s preferences violate which of the following key assumptions?
a) Completeness. b) Transitivity. c) More is better. d) Both completeness and transitivity. |
a) Completeness.
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2. Assume that a consumer prefers watching the World Series to watching the Super Bowl and that this same consumer prefers watching the Super Bowl to watching the Stanley Cup championship game. Further assume that this same consumer states, “I would prefer to watch the Stanley Cup championship game to the World Series.” This consumer’s preferences violate which of the following key assumptions?
a) Completeness. b) Transitivity. c) More is better. d) Both completeness and transitivity. |
b) Transitivity.
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3. If a consumer would rather attend three symphony performances than four symphony performances, this consumer’s preferences violate which of the following key assumptions?
a) Completeness. b) Transitivity. c) More is better. d) Both completeness and transitivity. |
c) More is better.
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4. Identify the truthfulness of the following statements.
I. Ordinal utility gives us information about which basket the consumer prefers and the magnitude of the preference. II. Cardinal utility gives us information about which basket the consumer prefers but not about the intensity of those preferences. a) Both I and II are true. b) Both I and II are false. c) I is true; II is false. d) I is false; II is true. |
b) Both I and II are false.
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5. Sally likes her economics course twice as much as she likes her history class.
This is an example of a) ordinal preferences. b) cardinal preferences. c) transitivity. d) diminishing marginal utility. |
b) cardinal preferences.
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6. The assumption that preferences are transitive requires the consumer
a) to rank any two baskets. b) to say that basket C is preferred to basket A if basket B is preferred to basket A and basket C is preferred to basket B. c) to rank a basket with more units of all goods higher than a basket with fewer units of all goods. d) to have a diminishing marginal rate of substitution. |
b) to say that basket C is preferred to basket A if basket B is preferred to basket A and basket C is preferred to basket B.
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7. The assumption that more is preferred to less implies
a) transitivity. b) that if basket A lies to the northeast of basket B, then basket A is preferred to basket B. c) completeness. d) thickness. |
b) that if basket A lies to the northeast of basket B, then basket A is preferred to basket B.
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8. Which of the following statements is false?
a) Consumer preferences show how a consumer would rank any two baskets, given their relative prices. b) Consumer preferences show how a consumer would rank any two baskets, assuming the baskets were available at no cost to the consumer. c) A consumer’s individual tastes will determine how much satisfaction she derives from the consumption of various combinations of goods and services. d) Consumer preferences are but one part of the consumer’s ultimate purchasing decision. |
a) Consumer preferences show how a consumer would rank any two baskets, given their relative prices.
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9. Marginal utility
a) is the ratio of total utility to total consumption. b) is the rate at which total utility changes as the level of consumption rises. c) will always be equal to the product’s price. d) tells us nothing; we’re only concerned with total utility. |
b) is the rate at which total utility changes as the level of consumption rises.
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10. Which of the following statements is false?
a) Marginal utility may be negative. b) Marginal utility is the slope of total utility. c) If the more is better assumption is satisfied, total utility will increase as consumption increases. d) If the more is better assumption is satisfied, the marginal utility from consuming the second unit must be greater than the marginal utility from consuming the first unit. |
d) If the more is better assumption is satisfied, the marginal utility from consuming the second unit must be greater than the marginal utility from consuming the first unit.
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11. A _____________________ measures the level of satisfaction that a consumer receives from any basket of goods.
a) production function. b) transformation function. c) utility function. d) transitivity function. |
c) utility function.
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12. The principle of diminishing marginal utility implies
a) indifference curves are concave. b) indifference curves are convex. c) indifference curves are straight lines. d) as your consumption level increases, the marginal utility received from consumption of an additional unit increases. |
b) indifference curves are convex.
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13. Which of the following statements is false?
a) Total utility and marginal utility cannot be plotted on the same graph b) The marginal utility is the slope of the (total) utility function c) Marginal utility is not the slope of total utility d) The relationship between total and marginal functions holds for other measures in economics |
c) Marginal utility is not the slope of total utility
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14. Which of the following statements best explains the concept of diminishing marginal utility?
a) As I consume additional ice cream cones, each ice cream cone adds more to my total happiness than the previous one. b) I must consume ice cream cones until I have a stomach ache. c) As I consume additional ice cream cones, each ice cream cone adds less to my total happiness than the previous one. d) I must maximize my consumption of ice cream cones. |
c) As I consume additional ice cream cones, each ice cream cone adds less to my total happiness than the previous one.
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15. Which of the following statements is false?
a) If marginal utility is diminishing, then total utility is increasing but at a decreasing rate. b) If marginal utility is diminishing, then total utility is concave. c) If marginal utility is negative, then total utility is downward-sloping. d) If marginal utility is decreasing, then total utility is decreasing. |
d) If marginal utility is decreasing, then total utility is decreasing.
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17. Suppose that a consumer has the utility function U=3A+4B. The MRSb,a is
a) 1.33 b) 0.75 c) 1.00 since and are perfect substitutes d) cannot be determined since the values of and are unknown |
a) 1.33
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19. Suppose for a utility function that the marginal utility for good is given by MUx=2y/3x
a) The more is better assumption is not satisfied for x in this utility function. b) The more is better assumption is satisfied for x in this utility function. c) This shows a diminishing marginal rate of substitution of x for y. d) The assumption of a diminishing marginal rate of substitution is violated. |
b) The more is better assumption is satisfied for x in this utility function.
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20. Identify the truthfulness of the following statements.
I. Diminishing marginal utility and increasing total utility are incompatible with each other. II. When marginal utility is negative, total utility is decreasing. a) Both I and II are true. b) Both I and II are false. c) I is true; II is false. d) I is false; II is true. |
d) I is false; II is true.
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22. If indifference curves are upward sloping, this violates the assumption that preferences
a) are complete b) are transitive. c) require that more is better. d) Upward sloping indifference curves do not violate any of the assumptions about preferences. |
c) require that more is better.
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23. Suppose MRSx,y=3.
a) The consumer is willing to substitute 3 units of x for 1 unit of y to leave utility unchanged. b) The consumer is willing to substitute 3 units of y for 1 unit of x to leave utility unchanged. c) Regardless of prices, the consumer will consume only y. d) Regardless of prices, the consumer will consume only x. |
b) The consumer is willing to substitute 3 units of y for 1 unit of x to leave utility unchanged.
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24. Assume that two baskets A and B lie on the same indifference curve. Assume that basket A contains more of good Y than basket B but less of good X than basket B. As the consumer moves down and to the right (from basket A to basket B) along his indifference curve, total utility
a) increases. b) remains constant. c) decreases. d) is ambiguous. |
b) remains constant.
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25. If a consumer’s preferences are quasi-linear, then the consumer’s indifference curves will be
a) straight lines. b) “L-shaped.” c) concave to the origin. d) parallel. |
d) parallel.
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1) Which of the following best reflects an increase in quantity supplied rather than an increase in
supply? A) The producer of cellular phones experiences lowers costs of production. B) The government stops controlling the price of a product, allowing the price to increase. C) Unions negotiate higher wages D) More sellers enter the computer market. |
B) The government stops controlling the price of a product, allowing the price to increase.
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2) Which of the following could increase the price of a used car in the United States and also
increase the quantity sold? A) A new 8 percent federal excise tax placed on all new car purchases. B) An increase in wages for used car salespeople. C) A special rebate program on all new cars. D) ALL of the above. |
A) A new 8 percent federal excise tax placed on all new car purchases.
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3) Which of the following will increase the demand for a normal good?
A) A decrease in income. B) A decrease in the price of a substitute. C) An increase in the price of a complement. D) The price of the good is expected to increase in the future. |
D) The price of the good is expected to increase in the future.
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4) It is expected that the price of a bushel of wheat will increase in one month. This belief will
result in A) an increase in current supply of wheat. B) a decrease in current supply of wheat. C) a decrease in future supply of wheat. D) no change in current or future supply of wheat. |
B) a decrease in current supply of wheat.
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5) The demand for oranges will generally be more price inelastic
A) the higher their price. B) the more substitute fruits are available. C) the lower is the buyer’s income. D) the more the consumer’s health requires Vitamin C in the diet. |
D) the more the consumer’s health requires Vitamin C in the diet.
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6) Assume there are only two consumers of good Z in the market, Kipper and Tiger. While Kippers demand for good Z is Zk=-2P+25, Tiger’s demand for good Z is Zt=-P+15. When the price of good Z is $5, the quantity demanded of good Z in the market is
A) 20 B) 25 C) 55 D) more information is needed |
B) 25
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7) Consider the demand curve Qd=100P^-2. If the price is 1, the elasticity of demand is
A) –0.50 B) –2 C) –0.02 D) –200 |
B) -2
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8) Suppose an economic “good” is on the vertical axis and an economic “bad” is on the horizontal axis. Indifference curves consistent with this combination:
(a) are parallel to the horizontal axis. (b) are parallel to the vertical axis. (c) are convex to the origin. (d) are none of the above. |
(d) are none of the above.
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9) Suppose the price elasticity of demand for copper is -0.4. Assuming that the equilibrium price and quantity are P* = 75 cents per pound and Q* = 7.5 million metric tons per year. The linear demand curve consistent with the information is given by
A) Q = 10.5 – 0.04P B) P = 262.5 – 25 Q C) P = 1050 – 100 Q D) both A and B |
D) both A and B
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10) Unlike his father George W. might like broccoli. In fact suppose the First Family spends $12 per month on broccoli, regardless of the price of the broccoli. We can thus conclude that the Bush’s family’s demand for broccoli is
A) elastic B) inelastic C) unit elastic D) more information is needed to form a conclusion |
C) unit elastic
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11) Along a linear demand curve, as price falls
A) The elasticity of demand is constant. B) The elasticity of demand falls. C) The elasticity of demand increases. D) The elasticity is the same as the slope of the demand curve. |
B) The elasticity of demand falls.
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12) Suppose a person has preferences involving consumption now (CN) and consumption later (CL). Suppose those preferences can be expressed as U=(CN)^a(CL)^1-a 0<a<1. If a person prefers consumption now to consumption later then what is a?
(a) a>0.5 (b) a<0.25 (c) a<0.5 (d) a=0.25 |
(a) a>0.5
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13) Consider the demand curve . The choke price is Qd=100-5P
A) 100 B) –5 C) 20 D) –0.20 |
C) 20
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14) Demand is elastic when a price ____ results in total revenue ____.
A) rise, decreasing B) fall, decreasing C) rise, increasing D) fall; remaining constant |
A) rise, decreasing
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15) If there is an increase in the price of pork because of a disease that created a significant
decrease in the equilibrium quantity of chicken, which of the following could be true? A) The cross elasticity of demand between pork and chicken is positive 1.15. B) The demand curve for pork has shifted leftward. C) The demand curve for chicken has shifted to the leftward. D) The demand curves for chicken and pork have become more price inelastic. |
C) The demand curve for chicken has shifted to the leftward.
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16) A constant marginal rate of substitution between two goods implies that they are
(a) perfect complements. (b) perfect substitutes. (c) independent goods. (d) attainable. |
(b) perfect substitutes.
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17) Ivana derives utility from consuming caviar (C) and champagne (W). Her utility function is given as U=10C^0.5W^0.5. Out of the following quantities of caviar and champagne, which must Ivana purchase in order to achieve a utility level of 200?
(a) 20, 10 (b) 15, 15 (c) 10, 40 (d) 30, 15 |
(c) 10, 40
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18) Suppose Anna’s preferences over goods X1 and X2 are given by U(X1, X2) = X1 + X2. Which of the following utility functions can also be used to represent Anna’s preferences?
(a) U(X1, X2) = 5X1 + 5X2 (b) U(X1, X2) = X1X2 (c) U(X1, X2) = X10.5 + X2 (d) U(X1, X2) = 5X10.3 + 5X20.7 |
(a) U(X1, X2) = 5X1 + 5X2
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19) If MUx=5/4X^1/4Y^6 and MUy=6X^5/4Y^5 then MRSx,y is equal to
(a) 6 X/Y (b) 15Y/2X (c) 5Y/24X (d) 2X/15Y |
(c) 5Y/24X
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20) Lets assume that an individual prefers bundle 1 to 2, if bundle 1 contains more of one good than bundle 2, and if it does not contain less of the other good. Which of the following preference statements violate this assumption
(a) Bundle (12,35) is preferred to bundle (10,30) (b) Bundle (17,98) is preferred to bundle (17,97) (c) Bundle (10,9) is preferred to bundle (10,10) (d) Bundle (42,67) is preferred to bundle (42,60) |
(c) Bundle (10,9) is preferred to bundle (10,10)
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