Question 1

Which of the following statements is true?

Accepted Answer

A)  A consumer's buying decisions do not indicate anything about her tastes and preferences. 
B)  A consumer's demand for a good determines the price of the good in a perfectly competitive market. 
C)  The relative prices of goods do not affect a consumer's buying decision. 
D)  A consumer in a perfectly competitive market buys only a tiny fraction of the total amount produced. 
A)  A consumer's buying decisions do not indicate anything about her tastes and preferences. 
B)  A consumer's demand for a good determines the price of the good in a perfectly competitive market. 
C)  The relative prices of goods do not affect a consumer's buying decision. 
D)  A consumer in a perfectly competitive market buys only a tiny fraction of the total amount produced.

Question 2

Which of the following statements correctly differentiates between consumer surplus and net benefits?

Accepted Answer

A)  Consumer surplus at different levels of consumption can be calculated mathematically, whereas net benefits at different levels of consumption cannot be estimated. 
B)  Consumer surplus at different levels of consumption cannot be estimated, whereas net benefits at different levels of consumption can be calculated mathematically. 
C)  Consumer surplus measures the difference between the willingness to pay for a good and the price paid for the good, whereas net benefits measure the overall satisfaction gained from the consumption of a good. 
D)  Consumer surplus measures the overall satisfaction gained from the consumption of a good, whereas net benefits measure the difference between the willingness to pay for a good and the price paid for the good. 
A)  Consumer surplus at different levels of consumption can be calculated mathematically, whereas net benefits at different levels of consumption cannot be estimated. 
B)  Consumer surplus at different levels of consumption cannot be estimated, whereas net benefits at different levels of consumption can be calculated mathematically. 
C)  Consumer surplus measures the difference between the willingness to pay for a good and the price paid for the good, whereas net benefits measure the overall satisfaction gained from the consumption of a good. 
D)  Consumer surplus measures the overall satisfaction gained from the consumption of a good, whereas net benefits measure the difference between the willingness to pay for a good and the price paid for the good.

Question 3

A change in the slope of a consumer's budget constraint indicates a change in the ________.

Accepted Answer

A)  price of either good purchased by the consumer 
B)  consumer's income 
C)  level of consumer satisfaction obtained from the consumption of both goods 
D)  consumer's tastes and preferences 
A)  price of either good purchased by the consumer 
B)  consumer's income 
C)  level of consumer satisfaction obtained from the consumption of both goods 
D)  consumer's tastes and preferences

Question 4

When the price of milk is $3 per bottle,Steve consumes 20 bottles of milk.When the price increases to $6,Steve's consumption falls to 15 bottles.Therefore,Steve's arc elasticity of demand for milk is ________.

Accepted Answer

A)  −0.25 
B)  −0.43 
C)  −0.50 
D)  −0.75 
A)  −0.25 
B)  −0.43 
C)  −0.50 
D)  −0.75

Question 5

Willingness to pay is the ________ for a unit of good.For a trade to take place,the willingness
To pay must be ________.

Accepted Answer

A)  lowest price that a buyer is willing to pay; lower than the price of the good. 
B)  lowest price that a buyer is willing to pay; higher than the price of the good. 
C)  highest price that a buyer is willing to pay; lower than the price of the good. 
D)  highest price that a buyer is willing to pay; higher than the price of the good. 
A)  lowest price that a buyer is willing to pay; lower than the price of the good. 
B)  lowest price that a buyer is willing to pay; higher than the price of the good. 
C)  highest price that a buyer is willing to pay; lower than the price of the good. 
D)  highest price that a buyer is willing to pay; higher than the price of the good.

Question 6

The following figure shows a consumer's budget constraint for jeans and sweaters.
  
-Refer to the figure above.Suppose B₂ is the original budget constraint of a consumer.A change in the budget constraint from B₂ to B₃ indicates ________.

Accepted Answer

A)  a decrease in the price of jeans 
B)  a decrease in the price of sweaters 
C)  an increase in the consumer's income 
D)  a decrease in the consumer's income 
A)  a decrease in the price of jeans 
B)  a decrease in the price of sweaters 
C)  an increase in the consumer's income 
D)  a decrease in the consumer's income

Question 7

Sam has determined that his demand for the new energy drink Brawndo is characterized by the following schedule:
 
If the market price of Brawndo is $4 per can,Sam's total willingness to pay for the 6 cans he purchases is ________.

Accepted Answer

A)  $42 
B)  $39 
C)  $18 
D)  $15 
A)  $42 
B)  $39 
C)  $18 
D)  $15

Question 8

Scenario: The following table shows the marginal benefit that a consumer derives by consuming different quantities of juice and milk.
  
-Refer to the table above.If the income of the consumer is $24,the optimal choice of the consumer will include ________.

Accepted Answer

A)  1 quart of juice and 1 quart of milk 
B)  3 quarts of juice and 4 quarts of milk 
C)  4 quarts of juice and 4 quarts of milk 
D)  4 quarts of juice and 5 quarts of milk 
A)  1 quart of juice and 1 quart of milk 
B)  3 quarts of juice and 4 quarts of milk 
C)  4 quarts of juice and 4 quarts of milk 
D)  4 quarts of juice and 5 quarts of milk

Question 9

Which of the following statements correctly differentiates between the slope of a demand curve and the price elasticity of demand along a linear demand curve?

Accepted Answer

A)  The price elasticity of demand for a good is the same at different points on the demand curve, whereas the slope of the demand curve varies depending on the point where it is measured. 
B)  The price elasticity of demand for a good varies along the demand curve, whereas the slope of the demand curve remains the same at different points on the curve. 
C)  The price elasticity of demand is a unit-free measure, whereas the slope of a demand curve is measured in dollars. 
D)  The price elasticity of demand is measured in dollars, whereas the slope of a demand curve is a unit-free measure. 
A)  The price elasticity of demand for a good is the same at different points on the demand curve, whereas the slope of the demand curve varies depending on the point where it is measured. 
B)  The price elasticity of demand for a good varies along the demand curve, whereas the slope of the demand curve remains the same at different points on the curve. 
C)  The price elasticity of demand is a unit-free measure, whereas the slope of a demand curve is measured in dollars. 
D)  The price elasticity of demand is measured in dollars, whereas the slope of a demand curve is a unit-free measure.

Question 10

Now suppose your income returns to its original level,$300,the price of sweaters remains constant at $20,but the price of jeans falls from $60 per pair to $30 per pair,so your new budget constraint is $30j + $20s = $300.This rotation of your budget constraint is shown in the graph below.
 
As a result of the decrease in the price of jeans from $60 per pair to $30 per pair,the opportunity cost of a pair of jeans ________.

Accepted Answer

A)  remains unchanged at 3 sweaters 
B)  falls to 2 sweaters 
C)  falls to 1.5 sweaters 
D)  falls to sweaters   
A)  remains unchanged at 3 sweaters 
B)  falls to 2 sweaters 
C)  falls to 1.5 sweaters 
D)  falls to sweaters

Question 11

As a result in this decrease in your income from $300 to $240,the opportunity cost of a pair of jeans ________.

Accepted Answer

A)  remains unchanged at 3 sweaters 
B)  falls to 2 sweaters 
C)  falls to 1 sweater 
D)  falls to  $ \frac{1}{3} $sweaters 
A)  remains unchanged at 3 sweaters 
B)  falls to 2 sweaters 
C)  falls to 1 sweater 
D)  falls to  $ \frac{1}{3} $sweaters

Question 12

How does a decrease in the price of one good affect a consumer's budget constraint? How is the effect different from a decrease in the consumer's income?

Accepted Answer

A decrease in the price of one good caus

Question 13

Which of the following is true of a good with a perfectly elastic demand?

Accepted Answer

A)  For a given price change, the percentage change in quantity demanded of the good will be less than the percentage change in price. 
B)  The demand curve for the good initially slopes upward, reaches its maximum, and then slopes downward. 
C)  Even the smallest increase in the price of the good will cause consumers to stop consuming it completely. 
D)  The quantity demanded of the good is completely unaffected by a price change. 
A)  For a given price change, the percentage change in quantity demanded of the good will be less than the percentage change in price. 
B)  The demand curve for the good initially slopes upward, reaches its maximum, and then slopes downward. 
C)  Even the smallest increase in the price of the good will cause consumers to stop consuming it completely. 
D)  The quantity demanded of the good is completely unaffected by a price change.

Question 14

Using an example of a bundle of two goods,graphically illustrate the substitution effect and the income effect if the price of any one good falls.

Accepted Answer

Suppose a consumer spends her income on

Question 15

Which of the following is NOT a determining factor of consumers' purchase decisions?

Accepted Answer

A)  Consumers' tastes and preferences 
B)  The market price of the finished goods 
C)  The cost of factor inputs 
D)  Consumers' income 
A)  Consumers' tastes and preferences 
B)  The market price of the finished goods 
C)  The cost of factor inputs 
D)  Consumers' income

Question 16

The following figure displays John's budget constraint when he spends his income on tables and chairs.
  
-Refer to the figure above.Which of the following statements is true?

Accepted Answer

A)  The opportunity cost of buying one chair is 5 tables. 
B)  The price of tables is more than the price of chairs. 
C)  The opportunity cost of buying tables increases as more tables are bought. 
D)  The opportunity cost of buying one table is 7 chairs. 
A)  The opportunity cost of buying one chair is 5 tables. 
B)  The price of tables is more than the price of chairs. 
C)  The opportunity cost of buying tables increases as more tables are bought. 
D)  The opportunity cost of buying one table is 7 chairs.

Question 17

The following figure shows the indifference curves (IC) and the budget constraint (BC) of a consumer who needs to decide between the number of trousers and shirts he should purchase.
  
-Refer to the figure above.In comparison to the bundles on IC₁,the bundles on IC₃ ________.

Accepted Answer

A)  give the same level of utility and are affordable 
B)  give the same level of utility but are not affordable 
C)  give a higher level of utility and are affordable 
D)  give a higher level of utility but are not affordable 
A)  give the same level of utility and are affordable 
B)  give the same level of utility but are not affordable 
C)  give a higher level of utility and are affordable 
D)  give a higher level of utility but are not affordable

Question 18

The set of all possible bundles of goods and services that can be purchased with a consumer's income is referred to as a ________.

Accepted Answer

A)  demand set 
B)  supply set 
C)  budget set 
D)  universal set 
A)  demand set 
B)  supply set 
C)  budget set 
D)  universal set

Question 19

Sandra consumes two goods: tea and coffee.Her demand for tea is inelastic,while her demand for coffee is elastic.If there is an increase in the price of both tea and coffee,________.

Accepted Answer

A)  Sandra's expenditure on both tea and coffee will increase 
B)  Sandra's expenditure on both tea and coffee will decrease 
C)  Sandra's expenditure on tea will increase and her expenditure on coffee will decrease 
D)  Sandra's expenditure on coffee will increase and her expenditure on tea will decrease 
A)  Sandra's expenditure on both tea and coffee will increase 
B)  Sandra's expenditure on both tea and coffee will decrease 
C)  Sandra's expenditure on tea will increase and her expenditure on coffee will decrease 
D)  Sandra's expenditure on coffee will increase and her expenditure on tea will decrease

Question 20

The following figure illustrates the market demand curve for wine.
  
-Refer to the figure above.What is the loss in the market-wide consumer surplus when the price of wine changes from $9 per bottle to $18 per bottle?

Accepted Answer

A)  $144,000 
B)  $30,000 
C)  $57,000 
D)  $0 
A)  $144,000 
B)  $30,000 
C)  $57,000 
D)  $0

Which of the following statements is true?

Which of the following statements correctly differentiates between consumer surplus and net benefits?

A change in the slope of a consumer's budget constraint indicates a change in the ________.

When the price of milk is $3 per bottle,Steve consumes 20 bottles of milk.When the price increases to $6,Steve's consumption falls to 15 bottles.Therefore,Steve's arc elasticity of demand for milk is ________.

Willingness to pay is the for a unit of good.For a trade to take place,the willingness To pay must be .

The following figure shows a consumer's budget constraint for jeans and sweaters. -Refer to the figure above.Suppose B₂ is the original budget constraint of a consumer.A change in the budget constraint from B₂ to B₃ indicates ________.

Sam has determined that his demand for the new energy drink Brawndo is characterized by the following schedule: If the market price of Brawndo is $4 per can,Sam's total willingness to pay for the 6 cans he purchases is ________.

Scenario: The following table shows the marginal benefit that a consumer derives by consuming different quantities of juice and milk. -Refer to the table above.If the income of the consumer is $24,the optimal choice of the consumer will include ________.

Which of the following statements correctly differentiates between the slope of a demand curve and the price elasticity of demand along a linear demand curve?

As a result in this decrease in your income from $300 to $240,the opportunity cost of a pair of jeans ________.

How does a decrease in the price of one good affect a consumer's budget constraint? How is the effect different from a decrease in the consumer's income?

Which of the following is true of a good with a perfectly elastic demand?

Using an example of a bundle of two goods,graphically illustrate the substitution effect and the income effect if the price of any one good falls.

Which of the following is NOT a determining factor of consumers' purchase decisions?

The following figure displays John's budget constraint when he spends his income on tables and chairs. -Refer to the figure above.Which of the following statements is true?

The following figure shows the indifference curves (IC) and the budget constraint (BC) of a consumer who needs to decide between the number of trousers and shirts he should purchase. -Refer to the figure above.In comparison to the bundles on IC₁,the bundles on IC₃ ________.

The set of all possible bundles of goods and services that can be purchased with a consumer's income is referred to as a ________.

Sandra consumes two goods: tea and coffee.Her demand for tea is inelastic,while her demand for coffee is elastic.If there is an increase in the price of both tea and coffee,________.

The following figure illustrates the market demand curve for wine. -Refer to the figure above.What is the loss in the market-wide consumer surplus when the price of wine changes from $9 per bottle to $18 per bottle?

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Sellers and Incentives

Perfect Competition and the Invisible Hand

Trade

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Monopoly

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

Filters

Exam 5: Consumers and Incentives

Which of the following statements is true?

Which of the following statements correctly differentiates between consumer surplus and net benefits?

A change in the slope of a consumer's budget constraint indicates a change in the ________.

When the price of milk is $3 per bottle,Steve consumes 20 bottles of milk.When the price increases to $6,Steve's consumption falls to 15 bottles.Therefore,Steve's arc elasticity of demand for milk is ________.

Willingness to pay is the ________ for a unit of good.For a trade to take place,the willingness To pay must be ________.

The following figure shows a consumer's budget constraint for jeans and sweaters. -Refer to the figure above.Suppose B₂ is the original budget constraint of a consumer.A change in the budget constraint from B₂ to B₃ indicates ________.

Sam has determined that his demand for the new energy drink Brawndo is characterized by the following schedule: If the market price of Brawndo is $4 per can,Sam's total willingness to pay for the 6 cans he purchases is ________.

Scenario: The following table shows the marginal benefit that a consumer derives by consuming different quantities of juice and milk. -Refer to the table above.If the income of the consumer is $24,the optimal choice of the consumer will include ________.

Which of the following statements correctly differentiates between the slope of a demand curve and the price elasticity of demand along a linear demand curve?

As a result in this decrease in your income from $300 to $240,the opportunity cost of a pair of jeans ________.

How does a decrease in the price of one good affect a consumer's budget constraint? How is the effect different from a decrease in the consumer's income?

Which of the following is true of a good with a perfectly elastic demand?

Using an example of a bundle of two goods,graphically illustrate the substitution effect and the income effect if the price of any one good falls.

Which of the following is NOT a determining factor of consumers' purchase decisions?

The following figure displays John's budget constraint when he spends his income on tables and chairs. -Refer to the figure above.Which of the following statements is true?

The following figure shows the indifference curves (IC) and the budget constraint (BC) of a consumer who needs to decide between the number of trousers and shirts he should purchase. -Refer to the figure above.In comparison to the bundles on IC₁,the bundles on IC₃ ________.

The set of all possible bundles of goods and services that can be purchased with a consumer's income is referred to as a ________.

Sandra consumes two goods: tea and coffee.Her demand for tea is inelastic,while her demand for coffee is elastic.If there is an increase in the price of both tea and coffee,________.

The following figure illustrates the market demand curve for wine. -Refer to the figure above.What is the loss in the market-wide consumer surplus when the price of wine changes from $9 per bottle to $18 per bottle?

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Sellers and Incentives

Perfect Competition and the Invisible Hand

Trade

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Monopoly

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

Filters

Willingness to pay is the for a unit of good.For a trade to take place,the willingness To pay must be .