The following are multiple choice questions. (11-30)

11. Mia can either bake 10 mango tarts or clean 2 cars in one hour. If Mia decides to do both these jobs within the same hour, what would be her opportunity cost of cleaning one additional car? (Assume that Mia faces constant opportunity cost.)

a. 2 mango tarts

b. 4 mango tarts

c. 5 mango tarts

d. 10 mango tarts

12.The opportunity cost of a good is always constant if the production possibility frontier is:

a. a downward-sloping straight line.

b. concave to the origin.

c. convex to the origin.

d. negatively sloped

13. Which of the following is an example of a normative statement?

a. Students who miss more classes tend to earn lower grades.

b. Students should make better use of their time by attending every class.

c. The increasing price of textbooks has caused students to purchase fewer texts.

d. Tuition fees have risen faster than the rate of inflation.

14 The relative price of a good:

a. is always measured in current dollars.

b. is a measure of the relative share of the consumer's income devoted to its purchase.

c. reflects its price compared to prices of other goods.

d. is equal to the average price of the good over the last five years.

15. Consider two goods, X and Y. If the price of Y increases and, as a consequence, the demand curve for X shifts to the left, then:

a. X and Y are complements.

b. X and Y are substitutes.

c. X and Y are unrelated.

d. X and Y are inferior goods.

16. Which of the following statements is NOT true about a demand curve?

a. The demand curve shows the maximum price consumers will pay for various quantities of a product.

b. Movements along a demand curve reflect changes in consumers' tastes.

c. The demand curve shows the quantities consumers will purchase at various prices.

d. Movements along a demand curve reflect consumers' response to price changes.

17, Along a linear demand curve, price elasticity of demand:

a. increases as price falls.

b. is independent of price.

c. decreases as price falls.

d. remains unchanged.

18. An excess supply for a product indicates that the price is:

a. below the equilibrium price.

b. above the equilibrium price.

c. equal to the unit cost of production.

d. exactly at the choke price.

19. If both supply and demand for a good increase at the same time, which of the following must also increase?

a. The equilibrium price

b. The use of substitutes

c. The price of substitute goods

d. The equilibrium quantity

20. Corn farmers in a country are colluding to reduce the market supply of corn. This will successfully raise the farmers' incomes only if the demand for corn is:

a. elastic.

b. inelastic.

c. unit elastic.

d. infinitely-elastic.

21. Which of the following will lead to a corner solution?

a. The consumer has a fixed amount of income

b. The first unit of one good is not worth its cost

c. The consumer has L-shaped indifference curves

d. The proportion of income spent on both goods is the same

22. John will eat peanut butter and jelly sandwiches only when they are made with exactly two ounces of peanut butter and one ounce of jelly. If peanut butter is on the horizontal axis (PB) and jelly on the vertical axis (J), John's indifference curve for peanut butter and jelly is:

a. L-shaped, beginning at 2PB and 1J.

b. convex to the origin with a slope of -1/2.

c. a parallel straight line with a slope of -2.

d. concave to the origin with a slope of -2.

23. If the prices of two goods, X and Y, increase by 50 percent and the consumer's income rises by 100 percent:

a. the slope of the consumer's budget line will change, becoming flatter to indicate that X and Y are now relatively less expensive.

b. the consumer's budget line will remain unchanged as the price and income effects will cancel each other out.

c. the consumer's budget line will shift out from the origin and its slope will also change, reflecting the lower prices for X and Y.

d. the consumer's budget line will shift out from the origin, with its slope unchanged.

24. Suppose initially that the price of X is $5, the price of Y is $10, and the consumer's income is $100. If Y is measured on the vertical axis, X is measured on the horizontal axis, and the price of Y increases to $20:

a. the entire budget line will shift inward toward the origin, with its slope changing from -1/2 to -1/4.

b. the budget line will pivot inward toward the origin along the X axis, with its slope changing from -1/2 to -1/4.

c. the budget line will pivot inward toward the origin along the Y axis, with the slope changing from -1/2 to -1/4.

d. the budget line will pivot inward toward the origin along the Y axis, with the slope changing from -1/4 to -1/2.

25. Compared to the marginal rate of substitution at the original optimal consumption point, the marginal rate of substitution at the new optimal consumption point is lower if:

a. the consumer's income increased.

b. the price fell.

c. the price rose.

d. the consumer's income decreased.

26. Which of the following must be true for a Giffen good?

a. The good must be inferior and the substitution effect must be larger than the income effect.

b. The good must be inferior and the income effect must be larger than the substitution effect.

c. Both the income and the substitution effect of a price rise will be positive.

d. Both the income and the substitution effect of a price rise will be negative

27. X is on the horizontal axis and Y on the vertical axis. If you are consuming at an optimal point on an indifference curve such that the slope at that point was -4, which of the following best describes your consumption bundle?

a. Your marginal utility of X is 20 and for Y it is 20.

b. Your marginal utility of X is 5 and for Y it is 20.

c. Your marginal utility of X is 20 and for Y it is 5.

d. Your marginal utility of X is 4 and for Y it is 4.

28. In case of a normal good, the income and substitution effects:

a. always work together and both tend to make the demand curve downward sloping.

b. always work in the opposite direction to one another.

c. just offset each other.

d. work together, both tending to make the demand curve upward sloping.

29. Which of the following is likely to occur if a consumer's income declines with no change in the price level?

a. The consumer will shift to a lower indifference curve.

b. The consumer will consume fewer amounts of the inferior good.

c. The consumer's real income will increase.

d. The income effect on consumption will be zero.

30. The _____ depicts the change in a consumer's real purchasing power brought about by a change in the price of a good.

a. marginal rate of substitution

b. indifference curve

c. budget line

d. income effect