Question 1.

QUESTION 1

Suppose that the quantity supplied of pizza exceeds the quantity demanded for pizza. We would expect that:

the price of pizza will increase.

the price of pizza will decrease.

the supply will decrease to meet the demand.

the demand will increase to meet the supply.

QUESTION 2

Suppose that the population of a country decreases. Assuming that people in that country enjoy eating steak, we would predict that the equilibrium quantity of steak will ________ and the equilibrium price of steak will ________ in that country.

increase; increase

increase; decrease

decrease; increase

decrease; decrease

QUESTION 3

Suppose that the equilibrium rent for apartments in San Francisco is $1200 per month. If the City of San Francisco legislates that apartment owners cannot charge rent higher than $1000, then the apartment market in San Francisco will experience:

an equilibrium.

a shortage.

an excess supply.

an increase in supply.

QUESTION 4

Suppose that ramen noodles are an inferior good. When income increases, the equilibrium quantity of ramen noodles will ________ and the equilibrium price of ramen noodles will ________.

rise; rise

rise; fall

fall; rise

fall; fall

QUESTION 5

Suppose that consumers expect that the price of a product will increase in the future. The result is that:

the current demand for the product increases.

the current demand for the product decreases.

the current supply of the product increases.

the current supply of the product decreases.

QUESTION 6

Rent control is an example of the government imposing:

a price ceiling.

an equilibrium price.

a price floor.

a minimum supply price.

QUESTION 7

Peaches and cream are complements. When the price of peaches falls, the equilibrium quantity of cream will ________ and the equilibrium price of cream will ________.

rise; rise

rise; fall

fall; rise

fall; fall

QUESTION 8

Judy demands more peanuts as her income increases. From this, we can conclude that, for Judy:

peanuts are a normal good.

peanuts are an inferior good.

peanuts are a complementary good.

peanuts are a substitute good.

QUESTION 9

If the price of crude oil (an input to the production of gasoline) increases, then we will expect to see:

a movement along the supply curve for gasoline upwards.

a movement along the supply curve for gasoline downwards.

a shift in the supply of gasoline to the left.

a shift in the supply of gasoline to the right.

QUESTION 10

If the government imposes a price floor that is below the equilibrium price, then the market will experience:

an equilibrium.

a shortage.

an excess supply.

no scarcity.

Question 2.

1. In microeconomics the term utility references the:

i. relative scarcity of a good or service

ii. usefulness of a good or service

iii. satisfaction derived from consumption of a good or service

iv. slope of a consumers demand curve for a good or service

i

ii

iii

iv

ii and iii

iii and iv

Question 22 pts

The consumer choice models describes how an individual allocate his/her income over goods and services in order to maximize utility. One component of the consumer choice model is the individuals utility function. From the utility function alone, which of the following can be determined?

i. the utility maximizing bundle of goods and services a consumer will choose to purchase

ii. the utility derived from all bundles of goods and services

iii. the bundles of goods and services that yield the same level of utility

i

ii

iii

i and ii

ii and iii

i, ii, and iii

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Question 32 pts

Punk-rocker Pete is feeling insecure about his long-term relationship with economist Elaine. At the conclusion of a recent date, he tells Elaine, "I feel that I derive much more utility from this relationship than you." Elaine tells him that his claim is ridiculous because:

Elaine knows she has spent more income on Pete than Pete has spent on her over the course of their relationship

Elaine knows Pete has spent more income on her than she has spent on him over the course of their relationship

Elaine knows that utility is subjective and therefore it is not meaningful to make inter-personal utility comparisons

Pete knows he has spent more income on Elaine than Elaine has spent on him over the course of their relationship

Pete knows Elaine has spent more income on him than he has spent on her over the course of their relationship

both Elaine and Pete know they have spent the same amount of income on each other over the course of their relationship

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Question 42 pts

Marginal utility is the:

total utility from consuming a bundle of goods divided by the quantity of units consumed

change in total utility from consuming each additional unit of a good

change in total utility realized by consuming each additional unit of a good divided by the price of the good

sensitivity of consumer purchases of a good to changes in its price

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Question 52 pts

Which of the following is statements is correct?

there is no relationship between marginal utility and total utility

if marginal utility is diminishing but positive as consumption increases, then total utility will increase

total utility is equal to the change in marginal utility from consuming each additional unit of a good

if marginal utility is diminishing as consumption increases, total utility will also be diminishing

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Question 62 pts

The law of diminishing marginal utility states that:

the demand for a good will rise as price is lowered, holding all other factors constant

the quantity of a good demanded will rise as price is lowered, holding all other factors constant

as more and more units of a good are consumed, utility will decline beyond a point

in order to maximize utility, consumers will allocate their income such that marginal utility per dollar is equal across the goods purchased

none of the above options are correct

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Question 72 pts

Pete likes pie. If he consumes 1 piece of pie, he obtains 8 units of utility, if he consumes 2 pieces he obtains 12 units of utility, and if he consumes 3 pieces he obtains 15 units of utility. It follows that:

total utility is increasing at an increasing rate and marginal utility is increasing

total utility is increasing at an increasing rate and marginal utility is decreasing

total utility is increasing at an increasing rate and marginal utility is constant

total utility is increasing at a decreasing rate and marginal utility is increasing

total utility is increasing at a decreasing rate and marginal utility is decreasing

total utility is increasing at a decreasing rate and marginal utility is constant

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Question 82 pts

Suppose an individuals preferences are described by the Cobb-Douglass utility function U = X0.5Y0.5and consider the following three combinations (or bundles) of X and Y: Bundle A (3,4); Bundle B (6,1); Bundle C (2,5). Given the individuals preferences, the bundles ranked from least-preferred to most-preferred are:

Bundle A, Bundle B, Bundle C

Bundle A, Bundle C, Bundle B

Bundle B, Bundle A, Bundle C

Bundle B, Bundle C, Bundle A

Bundle C, Bundle A, Bundle B

Bundle C, Bundle B, Bundle A

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Question 92 pts

Suppose a consumers utility function is U = X0.5Y0.5. It follows that the indifference function associated with the bundle X = 8 and Y = 8 or (8, 8) is:

Y = 2/X

Y = 4/X

Y = 8/X

Y = 16/X

Y = 32/X

Y = 64/X

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Question 102 pts

If an indifference curve relating X and Y slopes downward, then it may be concluded that:

i. both X and Y are bads

ii. both X and Y are goods

iii. X is a good and Y is a bad or X is a bad and Y is a good

i

ii

iii

i or ii

ii or iii

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Question 112 pts

Consider an individual whose preferences are described by the utility function is U = X0.5Y0.5. If she consumes 2 units of X and 6 units of Y, then some level of utility will be experienced. If the individual instead consumes 4 units of X, how much of good Y must she consume in order to attain the level of utility associated with 2 units of X and 6 units of Y?

Y = 1

Y = 2

Y = 3

Y = 4

Y = 5

Y = 6

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Question 122 pts

Any bundle of goods located outside (versus inside) of a consumers budget constraint:

i. will yield more utility than any bundle located inside the budget constraint

ii. will yield more utility than any bundle located on the budget constraint

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

iv. is unobtainable, given the consumer's income

i

ii

iii

iv

i and iii

i and iv

ii and iii

ii and iv

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Question 132 pts

If a consumers income is $300, the price of good X is PX = $6, and the price of good Y is PY = $3, then the algebraic expression for the consumers budget constraint is:

Y = 50 - 0.5X

Y = 100 - 0.5X

Y = 300 - 0.5X

Y = 50 - 2X

Y = 100 - 2X

Y = 300 - 2X

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Question 142 pts

Suppose a consumer has an income of $15 that is spent on two goods: X and Y. The price of good X is $3.00 and the price of good Y is $1.00. Which of the following combinations (or bundles) of X and Y lie on the individuals budget constraint?

4X and 4Y

5X and 4Y

3X and 6Y

3X and 8Y

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Question 152 pts

If the consumer is a utility maximizer in allocating income over goods and services, then income will be allocated such that:

the marginal utilities of the goods and services purchased are equal

marginal utility per dollar is equal over the goods and services purchased

the prices of the goods of the goods and services purchased are equal

an equal proportion of income is spent on each of the goods and services purchased.

Budget surplus Budget deficit Balanced budget Government debt Answer Bank when government spending and taxes are equal when the government receives more in taxes than it spends in a given time period the total accumulated amount that the government has borrowed and not yet paid back over time when the federal poverement spends more than it collects in taxes in a piven time period