Question 1

At the end points on a budget line, the consumer is not spending all of his budget, since one of the goods is not being purchased.

Accepted Answer

A) True 
 B)False

Question 2

The number of compact discs purchased by a consumer depends on the price of the discs as well as the prices of all other goods purchased.

Accepted Answer

A) True 
 B)False

Question 3

The Wall Street Journal reports that "hard times aid poultry companies as people eat cheaper fowl." In the language of economists, this means

Accepted Answer

A) chicken is an inferior good. 
B) chicken has a negative substitution effect. 
C) chicken has a positive substitution effect. 
D) people's tastes change during recessions. 
E) chicken has a positive income effect. 
A) chicken is an inferior good. 
B) chicken has a negative substitution effect. 
C) chicken has a positive substitution effect. 
D) people's tastes change during recessions. 
E) chicken has a positive income effect.

Question 4

-The slope of an indifference curve is called the

Accepted Answer

A) bliss gradient. 
B) happiness slope. 
C) average transformation rate. 
D) marginal rate of substitution. 
A) bliss gradient. 
B) happiness slope. 
C) average transformation rate. 
D) marginal rate of substitution.

Question 5

The slope of the budget line is the amount of one commodity that a consumer must give up in order to obtain an additional unit of the other commodity.

Accepted Answer

A) True 
 B)False

Question 6

The market demand curve

Accepted Answer

A) and the individual demand curve are synonymous. 
B) is calculated by multiplying the number of consumers by the individual demand curve. 
C) shows how the total quantity demanded of some good changes as price changes, other things held constant. 
D) can be calculated even if individual demand curves are unknown. 
A) and the individual demand curve are synonymous. 
B) is calculated by multiplying the number of consumers by the individual demand curve. 
C) shows how the total quantity demanded of some good changes as price changes, other things held constant. 
D) can be calculated even if individual demand curves are unknown.

Question 7

Figure 5-6  
-A budget line can show all but one of the following statements below.Which one does it not show?

Accepted Answer

A) The budget line shows the available choices to a household. 
B) It is a curve of constant expenditure. 
C) The slope of the budget line increases as the quantity of a good consumed increases. 
D) The budget line shows how much it costs to purchase a combination of two goods, for a set income and prices. 
A) The budget line shows the available choices to a household. 
B) It is a curve of constant expenditure. 
C) The slope of the budget line increases as the quantity of a good consumed increases. 
D) The budget line shows how much it costs to purchase a combination of two goods, for a set income and prices.

Question 8

-Figure 5-5 shows a consumer budget line for French fries and hamburgers.The household allocates a budget for these two goods.If the price of an order of french fries is $2, how much income is allocated to fries and burgers combined?

Accepted Answer

A) $2 
B) $4 
C) $10 
D) $20 
A) $2 
B) $4 
C) $10 
D) $20

Question 9

Why is gold very expensive, even though it is not essential to life, while water, which is essential to life, is inexpensive?

Accepted Answer

Because there is a lower supply of gold

Question 10

An inferior good is one that consumers buy in smaller quantities when incomes rise.

Accepted Answer

A) True 
 B)False

Question 11

The marginal rate of substitution represents the maximum amount of one commodity a consumer is willing to give up in exchange for one more unit of another commodity.

Accepted Answer

A) True 
 B)False

Question 12

Total utility

Accepted Answer

A) diminishes as the quantity consumed of a good increases. 
B) increases as long as more goods are acquired. 
C) increases as long as marginal utility increases. 
D) increases as long as marginal utility is positive. 
E) diminishes as consumption of some good rises. 
A) diminishes as the quantity consumed of a good increases. 
B) increases as long as more goods are acquired. 
C) increases as long as marginal utility increases. 
D) increases as long as marginal utility is positive. 
E) diminishes as consumption of some good rises.

Question 13

-In Figure 5-7, budget line B compared to A clearly shows that the

Accepted Answer

A) price of wine increased. 
B) price of beer decreased. 
C) price of beer increased. 
D) consumers' money income increased. 
A) price of wine increased. 
B) price of beer decreased. 
C) price of beer increased. 
D) consumers' money income increased.

Question 14

The law of diminishing marginal utility states that total utility will decrease at an increasing rate as additional units of a commodity are consumed.

Accepted Answer

A) True 
 B)False

Question 15

If a person receives a consumer's surplus from the purchase of a good, it must be that

Accepted Answer

A) the amount that the person paid minus the amount that this person values that good is greater than zero. 
B) the amount that the person values the good minus the amount that this person paid for that good is greater than zero. 
C) the value is negative because consumers have diminishing marginal utility. 
D) result is based solely on the supply of the good. 
A) the amount that the person paid minus the amount that this person values that good is greater than zero. 
B) the amount that the person values the good minus the amount that this person paid for that good is greater than zero. 
C) the value is negative because consumers have diminishing marginal utility. 
D) result is based solely on the supply of the good.

Question 16

The real cost of a decision is the opportunity cost measured in the commodities forgone.

Accepted Answer

A) True 
 B)False

Question 17

A decrease in the price of one good results in a parallel shift in the budget line.

Accepted Answer

A) True 
 B)False

Question 18

Total utility increases if one more unit of a product is purchased and marginal utility is positive.

Accepted Answer

A) True 
 B)False

Question 19

-Figure 5-5 shows a consumer budget line for french fries and hamburgers.The price of an order of fries is $2.This implies that the price of a burger is

Accepted Answer

A) $1. 
B) $2. 
C) $4. 
D) $8. 
A) $1. 
B) $2. 
C) $4. 
D) $8.

Question 20

Figure 5-16  
-In Figure 5-16, Adam is

Accepted Answer

A) better off at C than at D and able to afford either C or D. 
B) better off at D than at C but only able to afford C. 
C) equally well off at C and D and able to afford either C or D. 
D) equally well off at C and D but only able to afford C. 
A) better off at C than at D and able to afford either C or D. 
B) better off at D than at C but only able to afford C. 
C) equally well off at C and D and able to afford either C or D. 
D) equally well off at C and D but only able to afford C.

Exam 5: Consumer Choice: Individual and Market Demand

At the end points on a budget line, the consumer is not spending all of his budget, since one of the goods is not being purchased.

The number of compact discs purchased by a consumer depends on the price of the discs as well as the prices of all other goods purchased.

The Wall Street Journal reports that "hard times aid poultry companies as people eat cheaper fowl." In the language of economists, this means

-The slope of an indifference curve is called the

The slope of the budget line is the amount of one commodity that a consumer must give up in order to obtain an additional unit of the other commodity.

The market demand curve

Figure 5-6 -A budget line can show all but one of the following statements below.Which one does it not show?

-Figure 5-5 shows a consumer budget line for French fries and hamburgers.The household allocates a budget for these two goods.If the price of an order of french fries is $2, how much income is allocated to fries and burgers combined?

Why is gold very expensive, even though it is not essential to life, while water, which is essential to life, is inexpensive?

An inferior good is one that consumers buy in smaller quantities when incomes rise.

The marginal rate of substitution represents the maximum amount of one commodity a consumer is willing to give up in exchange for one more unit of another commodity.

Total utility

-In Figure 5-7, budget line B compared to A clearly shows that the

The law of diminishing marginal utility states that total utility will decrease at an increasing rate as additional units of a commodity are consumed.

If a person receives a consumer's surplus from the purchase of a good, it must be that

The real cost of a decision is the opportunity cost measured in the commodities forgone.

A decrease in the price of one good results in a parallel shift in the budget line.

Total utility increases if one more unit of a product is purchased and marginal utility is positive.

-Figure 5-5 shows a consumer budget line for french fries and hamburgers.The price of an order of fries is $2.This implies that the price of a burger is

Figure 5-16 -In Figure 5-16, Adam is

What Is Economics

The Economony: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Useconomy

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