Question 1

If Jill's MRS of popcorn for candy is 2 (popcorn is on the horizontal axis), Jill would willingly give up:

2, but no more than 2, units of popcorn for an additional unit of candy.

2, but no more than 2, units of candy for an additional unit of popcorn.

1, but no more than 1, unit of candy for an additional 2 units of popcorn.

2, but no more than 2, units of popcorn for an additional 2 units of candy.

Question 2

Assume that a firm spends $500 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis).If the wage rate is $20 per hour and the rental cost of capital is $25 per hour, theslope of the isocost curvewill be:

500

25/500

-4/5

25/20 or 1.25

Question 3

The change in the quantity demanded of a good resulting from a change in relative price with the level of satisfaction held constant is called the ________ effect.

Giffen

real price

income

substitution

Question 4

When firms participate in group health insurance for all employees, it:

raises rates for everyone, because it brings unhealthy people into the pool.

raises rates for unhealthy people.

may lower rates for all people to the extent that it keeps healthy people in the pool.

prevents unhealthy people from "selecting out," to the detriment of healthy people.

increases the amount of information available to insurers about the population.