Question 1

Homogeneous products are distinguishable from each other.

Accepted Answer

A) True 
 B)False

Question 2

The law of diminishing marginal utility implies that marginal utility never becomes negative.

Accepted Answer

A) True 
 B)False

Question 3

As you move down an indifference curve, the absolute value of the slope

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  initially decreases and then increases. 
A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  initially decreases and then increases.

Question 4

Refer to the information provided in Table 6.4 below to answer the question(s) that follow.
Table 6.4
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Number of } \
\text { Donuts per Day }
\end{array} & \text { Total Utility } & \text { Marginal Utility } \
\hline 1 & 80 & \
\hline 2 & 150 & \
\hline 3 & 200 & \
\hline 4 & 230 & \
\hline 5 & & 10 \
\hline \begin{array} { c } 
\text { Number of } \
\text { Burritos per Day }
\end{array} & \text { Total Utility } & \text { Marginal Utility } \
\hline 1 & 60 & \
\hline 2 & 108 & \
\hline 3 & 144 & \
\hline 4 & 168 & \
\hline 5 & & 12 \
\hline
\end{array}$$
-Refer to Table 6.4. If the price of a donut is $2, the price of a burrito is $4, and Luigi has $12 of income, Luigi's utility-maximizing combination of donuts and burritos per day is

Accepted Answer

A)  1 donut and 2 burritos. 
B)  4 donuts and 1 burrito. 
C)  2 donuts and 1.5 burritos. 
D)  indeterminate from this information. 
A)  1 donut and 2 burritos. 
B)  4 donuts and 1 burrito. 
C)  2 donuts and 1.5 burritos. 
D)  indeterminate from this information.

Question 5

A car's real cost is its opportunity cost. Opportunity cost is determined by

Accepted Answer

A)  the price of the car. 
B)  relative prices. 
C)  wealth. 
D)  the prices of the goods that are compliments to a car. 
A)  the price of the car. 
B)  relative prices. 
C)  wealth. 
D)  the prices of the goods that are compliments to a car.

Question 6

Refer to the information provided in Figure 6.5 below to answer the question(s) that follow.   Figure 6.5
-Refer to Figure 6.5. Molly's budget constraint is CD. Molly's income is $75, the price of a DVD is $3 and the price of a CD is $5. At point D, she is buying ________ DVDs and ________ CDs.

Accepted Answer

A)  0; 15 
B)  25; 0 
C)  25; 15 
D)  50; 30 
A)  0; 15 
B)  25; 0 
C)  25; 15 
D)  50; 30

Question 7

Refer to the information provided in Figure 6.2 below to answer the question(s) that follow.   Figure 6.2
-Refer to Figure 6.2. Assume Mr. Lingle's budget constraint is AC. If the price of a gardenburger is $7.50, the price of a beer is

Accepted Answer

A)  $3.75. 
B)  $4.00. 
C)  $7.50. 
D)  $15.00. 
A)  $3.75. 
B)  $4.00. 
C)  $7.50. 
D)  $15.00.

Question 8

Refer to the information provided in Figure 6.4 below to answer the question(s) that follow.   Figure 6.4
-Refer to Figure 6.4. Billʹs budget constraint is AC. If the black bean price increases, Billʹs budget constraint will

Accepted Answer

A)  swivel toward 0D. 
B)  swivel toward AB. 
C)  remain at AC. 
D)  swivel toward AD. 
A)  swivel toward 0D. 
B)  swivel toward AB. 
C)  remain at AC. 
D)  swivel toward AD.

Question 9

A negative marginal utility implies negative total utility.

Accepted Answer

A) True 
 B)False

Question 10

Refer to the information provided in Figure 6.2 below to answer the question(s) that follow.   Figure 6.2
-Refer to Figure 6.2. Mr. Lingleʹs budget constraint is AC. Point D is

Accepted Answer

A)  an available option and Mr. Lingle exactly spends all of his income. 
B)  an available option and Mr. Lingle does not spend all of his income. 
C)  in Mr. Lingle's opportunity set but is not on his budget constraint. 
D)  not available because it represents a combination of gardenburgers and beer that Mr. Lingle cannot purchase with his current income. 
A)  an available option and Mr. Lingle exactly spends all of his income. 
B)  an available option and Mr. Lingle does not spend all of his income. 
C)  in Mr. Lingle's opportunity set but is not on his budget constraint. 
D)  not available because it represents a combination of gardenburgers and beer that Mr. Lingle cannot purchase with his current income.

Question 11

Refer to the information provided in Figure 6.4 below to answer the question(s) that follow.   Figure 6.4
-Refer to Figure 6.4. Bill's budget constraint is AC. If the bell peppers price increases, Bill's budget constraint will

Accepted Answer

A)  swivel toward AB. 
B)  remain at AC. 
C)  swivel toward AD. 
D)  The budget constraint is not depicted on the diagram. 
A)  swivel toward AB. 
B)  remain at AC. 
C)  swivel toward AD. 
D)  The budget constraint is not depicted on the diagram.

Question 12

Assuming that leisure is a normal good, if an individual's labor supply curve is upward sloping, then the

Accepted Answer

A)  income effect outweighs the substitution effect at higher wages. 
B)  substitution effect outweighs the income effect at higher wages. 
C)  income effect and the substitution effects are equal. 
D)  income effect is zero. 
A)  income effect outweighs the substitution effect at higher wages. 
B)  substitution effect outweighs the income effect at higher wages. 
C)  income effect and the substitution effects are equal. 
D)  income effect is zero.

Question 13

Sanjay is consuming X and Y so that he is spending his entire income and MUx/Px = 8 and MUy/Py = 14. To maximize utility, he should consume

Accepted Answer

A)  the same amount of X and Y since he is already maximizing utility. 
B)  less of both X and Y. 
C)  more X and less Y. 
D)  less X and more Y. 
A)  the same amount of X and Y since he is already maximizing utility. 
B)  less of both X and Y. 
C)  more X and less Y. 
D)  less X and more Y.

Question 14

Ellie is spending her entire income on goods X and Y. Her marginal utility from the last unit of X is 100 and the marginal utility from the last unit of Y that she consumes is 50. Ellie's utility is only maximized if

Accepted Answer

A)  the prices of X and Y are the same. 
B)  the price of good X is twice that of good Y. 
C)  the price of good Y is twice that of good X. 
D)  We cannot determine whether Ellie is maximizing her utility. 
A)  the prices of X and Y are the same. 
B)  the price of good X is twice that of good Y. 
C)  the price of good Y is twice that of good X. 
D)  We cannot determine whether Ellie is maximizing her utility.

Question 15

Carlos can buy either sushi or eggrolls. If the prices of sushi and eggrolls triple and so does Carlos's money income, we can deduce that Carlos's budget constraint will

Accepted Answer

A)  shift in but remain parallel to the old one. 
B)  shift out but remain parallel to the old one. 
C)  swivel in so that the slope of the budget constraint is tripled. 
D)  remain unchanged. 
A)  shift in but remain parallel to the old one. 
B)  shift out but remain parallel to the old one. 
C)  swivel in so that the slope of the budget constraint is tripled. 
D)  remain unchanged.

Question 16

Refer to the information provided in Figure 6.2 below to answer the question(s) that follow.   Figure 6.2
-Refer to Figure 6.2. Assume Mr. Lingle's budget is AC. At which point does Mr. Lingle spend exactly his income?

Accepted Answer

A)  A. 
B)  D. 
C)  E. 
D)  The answer cannot be determined with the given information. 
A)  A. 
B)  D. 
C)  E. 
D)  The answer cannot be determined with the given information.

Question 17

Price decreases cause no change in a household's choice set.

Accepted Answer

A) True 
 B)False

Question 18

If a household's income is cut in half, its budget constraint will

Accepted Answer

A)  shift out parallel to the old one. 
B)  pivot at the Y-intercept. 
C)  shift in parallel to the old one. 
D)  be unaffected. 
A)  shift out parallel to the old one. 
B)  pivot at the Y-intercept. 
C)  shift in parallel to the old one. 
D)  be unaffected.

Question 19

Refer to the information provided in Figure 6.15 below to answer the question that follows.   Figure 6.15
-Refer to Figure 6.15. If the price of a hot dog is $4, Jason's income is

Accepted Answer

A)  $50. 
B)  $400. 
C)  $600. 
D)  indeterminate because the price of sandwiches is not given. 
A)  $50. 
B)  $400. 
C)  $600. 
D)  indeterminate because the price of sandwiches is not given.

Question 20

For normal goods, the income and substitution effects work in the same direction.

Accepted Answer

A) True 
 B)False

Exam 6: Household Behavior and Consumer Choice

Homogeneous products are distinguishable from each other.

The law of diminishing marginal utility implies that marginal utility never becomes negative.

As you move down an indifference curve, the absolute value of the slope

A car's real cost is its opportunity cost. Opportunity cost is determined by

Refer to the information provided in Figure 6.5 below to answer the question(s) that follow. Figure 6.5 -Refer to Figure 6.5. Molly's budget constraint is CD. Molly's income is $75, the price of a DVD is $3 and the price of a CD is $5. At point D, she is buying ________ DVDs and ________ CDs.

Refer to the information provided in Figure 6.2 below to answer the question(s) that follow. Figure 6.2 -Refer to Figure 6.2. Assume Mr. Lingle's budget constraint is AC. If the price of a gardenburger is $7.50, the price of a beer is

Refer to the information provided in Figure 6.4 below to answer the question(s) that follow. Figure 6.4 -Refer to Figure 6.4. Billʹs budget constraint is AC. If the black bean price increases, Billʹs budget constraint will

A negative marginal utility implies negative total utility.

Refer to the information provided in Figure 6.2 below to answer the question(s) that follow. Figure 6.2 -Refer to Figure 6.2. Mr. Lingleʹs budget constraint is AC. Point D is

Refer to the information provided in Figure 6.4 below to answer the question(s) that follow. Figure 6.4 -Refer to Figure 6.4. Bill's budget constraint is AC. If the bell peppers price increases, Bill's budget constraint will

Assuming that leisure is a normal good, if an individual's labor supply curve is upward sloping, then the

Sanjay is consuming X and Y so that he is spending his entire income and MUx/Px = 8 and MUy/Py = 14. To maximize utility, he should consume

Ellie is spending her entire income on goods X and Y. Her marginal utility from the last unit of X is 100 and the marginal utility from the last unit of Y that she consumes is 50. Ellie's utility is only maximized if

Carlos can buy either sushi or eggrolls. If the prices of sushi and eggrolls triple and so does Carlos's money income, we can deduce that Carlos's budget constraint will

Refer to the information provided in Figure 6.2 below to answer the question(s) that follow. Figure 6.2 -Refer to Figure 6.2. Assume Mr. Lingle's budget is AC. At which point does Mr. Lingle spend exactly his income?

Price decreases cause no change in a household's choice set.

If a household's income is cut in half, its budget constraint will

Refer to the information provided in Figure 6.15 below to answer the question that follows. Figure 6.15 -Refer to Figure 6.15. If the price of a hot dog is $4, Jason's income is

For normal goods, the income and substitution effects work in the same direction.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Refer to the information provided in Figure 6.5 below to answer the question(s) that follow. Figure 6.5 -Refer to Figure 6.5. Molly's budget constraint is CD. Molly's income is $75, the price of a DVD is $3 and the price of a CD is $5. At point D, she is buying DVDs and CDs.

Sanjay is consuming X and Y so that he is spending his entire income and MU_x/P_x = 8 and MU_y/P_y = 14. To maximize utility, he should consume