multiple choice

QUESTION 25 Assume that the price of gasoline falls. Conceptually, if we wish to isolate the substitution effect of the price change we must: A A. place the consumer on the original indifference curve with the new relative prices. A B. place the consumer on the original indifference curve with the original relative prices A C. place the consumer at a new indifference curve with new relative prices. A D. place the consumer at a new indifference curve with the original relative prices. QUESTION 26 For normal goods, the demand curve is: A A. always upward sloping. A B. always downward sloping. A C. downward sloping only ifthe substitution effect is larger than the income effect. A D. upward sloping only ifthe income effect is larger than the substitution effect. QUESTION 27 How do inferior goods differ from economic "bads\"? A A. Economic "bads\" are commodities for which less is preferred to more under all conditions whereas for inferior goods, demand falls only when income increases. A B. For economic "bads" marginal utility is positive but gradually diminishes whereas for inferior goods, utility is negative from the first unit of consumption. A C. The demand for economic "bads" falls at higher levels of income whereas the demand for inferior goods falls at higher prices. A D. Economic "bads\" are commodities for which demand falls as price falls whereas for inferior goods, quantity demanded falls as more is consumed. QUESTION 28 The equation ofthe supply curve is 05 = 3 + 3P and the equation 0d the demand curve is 00 = 15 - P. The equilibrium quantity is: A 4 . 12 . 'I1 3 C) C) . f D QUESTION 29 The price-consumption curve traces the optimal market baskets for: O A. different prices of the good. 0 B. different years. 0 C. different consumers. O D.different income levels. QUESTION 30 The substitution effect causes more consumption of a good at a lower price. When does this statement hold true? 0 A. This statement is sometimes true for inferior goods, but never for normal goods. 0 B. This statement is always true regardless of the type of good. 0 C. This statement is true only for Giffen goods. 0 D. This statement is always true for normal goods, but never for inferior goods. QUESTION 31 Which of the following is true at any point along a consumer's demand curve? 0 A. The consumer's income increases successively as one moves downward along the demand curve. 0 B. The consumer's optimality condition is satised. 0 C. The marginal rate of substitution is constant. 0 D. The consumer's preferences for different goods can be ranked. QUESTION 32 Which of the following is true of a consumer's demand curve? 0 A. The price elasticity of demand is generally greater than one. 0 B. The distance from the horizontal axis equals the marginal rate of substitution. 0 C. Tastes and preferences for the good change along the demand curve. 0 D. Consumer's income successively decreases up along the demand curve