QUESTION 1

Consider two goods, squash racquets and gym passes. If the price of gym passes increases and, as a consequence, the demand curve for racquets shifts to the left, then

A. squash racquetsand gym passes are complements.

B. squash racquetsand gym passes are inferior goods.

C. squash racquetsand gym passes are substitutes.

D. squash racquetsand gym passes are unrelated.

QUESTION 2

The cross-price elasticity of demand between substitutes

A. is positive.

B. is zero.

C. is negative if the price elasticity of each good is inelastic, but positive if the price elasticity of each good is elastic.

D. is negative.

QUESTION 3

After graduation from college, you might have an increase in your income from a new job. If, as a result, you decide that you will play golf moreand basketball less, then for you playing basketball would be considered:

a. a normal good.

b. a substitute good.

c. a complementary good.

d. an inferior good.

QUESTION 4

When the actual price for football tickets is above the equilibrium price we would expect to see

A. a stadium with only a handful of empty seats

B. a full stadium and many people outside the arena trying to find a ticket.

C. a stadium with many empty seats.

1 points

QUESTION 5

A typical indifference curve is:

a. downward sloping and has a slope that is the negative of the marginal utility of the horizontal axis good divided by the marginal utility of the good measured on the vertical axis.

b. upward sloping and has a slope that is the negative of the marginal utility of the horizontal axis good divided by the marginal utility of the good measured on the vertical axis.

c. downward sloping and has a slope that is the negative of the total utility of the horizontal axis good divided by the total utility of the good measured on the vertical axis.

d. downward sloping and has a slope that is the total cost of the horizontal axis good divided by the total cost of the good measured on the vertical axis.

1 points

QUESTION 6

An indifference curve map illustrates ________ levels of utility, while each indifference curve in the map indicates consumption bundles that yield the ________ level of utility for an individual.

a. different; same

b. same; different

c. same; same

d. different; different

1 points

QUESTION 7

An indifference curve shows

a. the combinations of the two products among which the consumer is indifferent.

b. the maximum combinations of the two products available to the consumer, given the consumer's income.

c. the minimum combination of the two products available, given the consumer's income.

d. how the total satisfaction the consumer derives from consuming alternative market baskets changes as we move along the curve.

1 points

QUESTION 8

At any point on an indifference curve, the slope indicates

a. the relative price ratio of the two goods.

b. the way the consumer' s budget is allocated between the two goods.

c. the marginal rate of substitution between the two goods.

d. how the total satisfaction of the consumer changes with different market baskets.

1 points

QUESTION 9

Higher indifference curves represent:

a, less utility than lower indifference curves.

b. more utility than lower indifference curves.

c. the same level of utility as lower indifference curves.

d. unknown levels of utility compared to lower indifference curves.

1 points

QUESTION 10

Marginal utility of a good refers to

A. the amount total utility rises when consumption of the good increases by one unit.

B. the point where the consumer's total utility is at a maximum.

C. the change in the amount of the good consumed that increases total utility by one unit.

D. the diminishing amount of utility the consumer receives as consumption of the good increases.

1 points

QUESTION 11

The composite good is measured by

a. total outlays on all other goods.

b. adding up the quantities of all other goods.

c. adding up the prices of all other goods.

d. income.

1 points

QUESTION 12

Consider a budget line drawn with the composite good on the vertical axis and basketball tickets on the horizontal axis. The consumer's weekly income is $1000, and the price of a basketball ticket is $100. Suppose the consumer's income falls to $750.00, but the prices of the composite good and basketball tickets remain unchanged. The change in income produces a

a. parallel shift inward of the indifference curves.

b. new budget line which is steeper than the original one.

c. parallel shift inward of the budget line.

d. new budget line which is flatter than the original one.

1 points

QUESTION 13

If the vertical axis measures daily gym passes which cost $10 per unit and the horizontal axis measures rounds of golf which cost $100 a unit, the slope of the budget line is

A. -0.1

B. -5

C.-0.5

D. -10

1 points

QUESTION 14

Suppose there are two goods, X and Y, with X measured on the horizontal axis and Y measured on the vertical axis. Which of the following statements about a budget line relating the two goods is correct?

a. The budget line shows all the possible combinations of X and Y a consumer can buy, given the income and prices assumed.

b. The budget line shows all the possible combinations of X and Y a consumer can buy, given the income and prices assumed and zero savings.

c. The budget line shows some combinations of X and Y a consumer can buy, given the income and prices assumed and zero savings.

d. The budget line shows all the possible combinations of X and Y a consumer will buy, given the income and prices assumed and zero savings.

1 points

QUESTION 15

Consider a budget line drawn with the composite good on the vertical axis and basketball tickets on the horizontal axis. The consumer's weekly income is $1000, and the price of a basketball ticket is $100. If the price of a basketball ticket increases to 150

A. the budget line will pivot inward toward the origin along the X axis, with the slope changing from minus 150 to minus 100.

B. the entire budget line will shift inward toward the origin, with its slope changing from minus 100 to minus 150.

C. the budget line will pivot inward toward the origin along the X axis, with its slope changing from minus 100 to minus 150.

D. the budget line will pivot inward toward the origin along the Y axis, with the slope changing from minus 100 to minus 150.

1 points

QUESTION 16

A point lying inside the budget line indicates

A. the maximum combination of the goods the consumer can purchase.

B. that one of the goods is an economic bad.

C. the consumer is not spending all of his or her income.

D. an unattainable market basket for the consumer.

1 points

QUESTION 17

A consumer attains equilibrium by _____.

A. consuming all goods to the point where the marginal utility of each are equal

B. allocating income such that the marginal utility of the last dollar spent on each good is the same

C. allocating income such that the total amount spent on each good is equal

D. consuming all goods to the point where the total utility of each are equal

1 points

QUESTION 18

Assume that going to the gym is an normal good. Which of the following best describes the income and substitution effects as the price of daily gym passes rises?

A.

Both the substitution and income effects would cause the consumer to purchase more gym passes .

B.

The substitution effect leads the consumer to buy more gym passes while the income effect would cause the consumer to purchase fewer.

C.

The substitution effect causes the consumer to buy fewer gym passes while the income effect causes the consumer to purchase more.

D.

Both the income and substitution effects would cause the consumer to purchase fewer gym passes.

1 points

QUESTION 19

Assume that the price of golf rounds falls. Conceptually, if we wish to isolate the substitution effect of the price change we must:

A.

place the consumer on the original indifference curve with the original relative prices.

B.

place the consumer at a new indifference curve with new relative prices.

C.

place the consumer on the original indifference curve with the new relative prices.

D.

place the consumer at a new indifference curve with the original relative prices.

1 points

QUESTION 20

Suppose daily gym passes are on the horizontal axis and golf rounds on the vertical axis. Your monthly budget allowance is $1000 and the price of daily gym passes is $10 each and golf rounds $100 each. If at your present consumption of gym passes and golf rounds, you exhaust your monthly allowance and your marginal rate of substitution of gym passes for golf rounds is 0.5 (you would be willing to give up one golf round for 2 gym passes), to maximize utility you should:

A.

continue consuming the same quantity of golf rounds but consume more gym passes.

B.

continue consuming the same quantity of both gym passes and golf rounds .

C.

consume more gym passes and fewer golf rounds.

D.

consume fewer gym passes and more golf rounds .

1 points

QUESTION 21

The consumer's optimal consumption bundle is at the point where:

A. the slope of the indifference curve equals the slope of the budget line.

B. the marginal utility of each good is maximized.

C. the indifference curve intersects the budget line.

D. the ratio of the total utilities of the goods equals the ratio of the prices of the goods.

1 points

QUESTION 22

A consumer currently purchases daily gym passes at a price such that her net benefit is positive. After she learns more about the health benefits of exercising, her preferences change and she now values the daily gym passes more than before.

If the market price remains unchanged, which of the following statements about her consumer surplus would be true?

A.

Her consumer surplus could increase or decrease depending on her demand elasticity.

B.

Her consumer surplus would increase.

C.

Her consumer surplus would also remain the same.

D.

Her consumer surplus would decrease.

1 points

QUESTION 23

In any given week, a consumer is willing to pay a maximum of $25 for the first gym pass, $20 for the second gym pass , $15 for the third gym pass , $10 for the fourth gym pass , $5 for the fifth gym pass and nothing for the sixth gym pass . If the price per gym pass is $10, calculate the net benefit to the consumer.

A.

$50

B.

$0

C.

$30

D.

$40

1 points

QUESTION 24

A market demand curve for a commodity may be obtained by:

A. adding the quantities along individual demand curves for given prices.

B. dividing the total price paid by the consumers by the number of consumers.

C. dividing the total quantity demanded by all consumers by the price level.

D. adding the prices along individual demand curves for given quantities.

1 points

QUESTION 25

The price-consumption curve traces the optimal market baskets for:

A. different prices of the good.

B. different consumers.

C. different years.

D. different income levels.

1 points

QUESTION 26

Which of the following is a means of measuring consumer surplus?

A. Measuring the horizontal distance between indifference curves

B. Measuring the area above the price and below the demand curve

C. Measuring the area between the price and the supply curve

D. Measuring the area above the supply curve and below the demand curve

1 points

QUESTION 27

Which of the following is true at any point along a consumer's demand curve?

A. The consumer's optimality condition is satisfied.

B. The consumer's preferences for different goods can be ranked.

C. The marginal rate of substitution is constant.

D. The consumer's income increases successively as one moves downward along the demand curve.

1 points

QUESTION 28

Abdul spends all of his income on food ( F) and shelter ( S). His budget line is given by the equation 5 F + 20 S = 100. Which of the following consumption bundles is part of his consumption possibilities?

8 units of F and 3 units of S

14 units of F and 2 units of S

0 units of F and 6 units of S

20 units of F and 15 units of S

1 points

QUESTION 29

According to the substitution effect, which of the following best describes why a decrease in the price of LED light bulbs leads to an increase in the quantity of LED light bulbs demanded?

Buyers have more real income.

Buyers always purchase fewer substitute goods for LED light bulbs.

Buyers tend to purchase more of the now less expensive LED light bulbs.

Buyers tend to purchase more complementary goods to LED light bulbs.

1 points

QUESTION 30

An individual gets 5 units of utility from one slice of pizza and 9 units of utility from two slices of pizza. The principle of diminishing marginal utility implies that the total utility from three slices of pizza will be:

exactly 12 units of utility.

less than 13 units of utility.

less than 9 units of utility.

more than 14 units of utility.