Question 1

For a normal good,the

Accepted Answer

A) income effect is greater than 1.0 
B) income effect is negative 
C) substitution effect is zero 
D) income effect and the substitution effect work in the same direction 
E) demand curve is horizontal 
A) income effect is greater than 1.0 
B) income effect is negative 
C) substitution effect is zero 
D) income effect and the substitution effect work in the same direction 
E) demand curve is horizontal

Question 2

If the price of an inferior good increases,the substitution effect encourages the consumer to purchase less of it while the income effect encourages him to purchase more of it.

Accepted Answer

A) True 
 B)False

Question 3

The net change in quantity demanded of a good following a price change

Accepted Answer

A) is equivalent to the substitution effect 
B) is equivalent to the income effect 
C) must decrease as marginal utility rises 
D) is negative only when the income effect is negative 
E) reflects both the substitution and income effects 
A) is equivalent to the substitution effect 
B) is equivalent to the income effect 
C) must decrease as marginal utility rises 
D) is negative only when the income effect is negative 
E) reflects both the substitution and income effects

Question 4

-Figure 6-7 shows the marginal utilities Kate receives from buying hamburgers and frozen pizzas,assuming she buys only these two goods.Each hamburger sells for $5 and each pizza sells for $4.What is her marginal utility per dollar spent on the second pizza?

Accepted Answer

A) 16 
B) 6 
C) 3 
D) 20 
E) 4 
A) 16 
B) 6 
C) 3 
D) 20 
E) 4

Question 5

-Suppose that a consumer used to be at point S on budget line BB' in Figure 6-5,and is now at point R on line AA'.Which of the following is true?

Accepted Answer

A) The price of X rose. 
B) The price of X fell. 
C) The consumer's income fell. 
D) The utility level at point R is higher than at point S. 
E) The substitution effect is positive. 
A) The price of X rose. 
B) The price of X fell. 
C) The consumer's income fell. 
D) The utility level at point R is higher than at point S. 
E) The substitution effect is positive.

Question 6

Behavioral economics

Accepted Answer

A) helps explain why economic decision makers maximize either utility or profit 
B) assumes that people behave "as if" they are maximizing something. 
C) is a subfield of economics,but one that is rejected by most economists 
D) explains why irrational behavior is better than typically "rational" behavior. 
E) points out that some human behavior is not consistent with any type of maximization 
A) helps explain why economic decision makers maximize either utility or profit 
B) assumes that people behave "as if" they are maximizing something. 
C) is a subfield of economics,but one that is rejected by most economists 
D) explains why irrational behavior is better than typically "rational" behavior. 
E) points out that some human behavior is not consistent with any type of maximization

Question 7

The substitution effect of a(n)

Accepted Answer

A) price increase works to reduce the quantity of the good demanded 
B) price increase works to increase the quantity of the good demanded 
C) price decrease works to reduce the quantity of the good demanded 
D) income increase works to reduce the quantity of the good demanded 
E) income decrease works to reduce the quantity of the good demanded 
A) price increase works to reduce the quantity of the good demanded 
B) price increase works to increase the quantity of the good demanded 
C) price decrease works to reduce the quantity of the good demanded 
D) income increase works to reduce the quantity of the good demanded 
E) income decrease works to reduce the quantity of the good demanded

Question 8

-Figure 6-7 shows the marginal utilities Kate receives from buying hamburgers and frozen pizzas,assuming she buys only these two goods.Each hamburger sells for $5 and each pizza sells for $4.If Kate has $27 to spend how many hamburgers and frozen pizzas should she buy?

Accepted Answer

A) 1 hamburger and 5-1/2 pizzas 
B) 2 hamburgers and 1-1/4 pizzas 
C) 3 hamburgers and 3 pizzas 
D) 4 hamburgers and 1-3/4 pizzas 
E) 5 hamburgers and 1/2 pizza 
A) 1 hamburger and 5-1/2 pizzas 
B) 2 hamburgers and 1-1/4 pizzas 
C) 3 hamburgers and 3 pizzas 
D) 4 hamburgers and 1-3/4 pizzas 
E) 5 hamburgers and 1/2 pizza

Question 9

The market demand curve is

Accepted Answer

A) any individual consumer's demand curve multiplied by the number of consumers in the market 
B) a relationship between total income and total quantity demanded 
C) the horizontal sum of the individual demand curves of all consumers in the market 
D) the vertical sum of the individual demand curves of all consumers in the market 
E) the sum of the prices paid at each quantity demanded 
A) any individual consumer's demand curve multiplied by the number of consumers in the market 
B) a relationship between total income and total quantity demanded 
C) the horizontal sum of the individual demand curves of all consumers in the market 
D) the vertical sum of the individual demand curves of all consumers in the market 
E) the sum of the prices paid at each quantity demanded

Question 10

If food is measured on the horizontal axis of a budget line diagram,and clothing is measured on the vertical axis,an increase in

Accepted Answer

A) the price of food will decrease the slope (e.g. ,-9 instead of -6)of the budget line 
B) the price of food will increase the slope of the budget line 
C) income will decrease the slope of the budget line 
D) income will increase the slope of the budget line 
E) the price of clothing will decrease the slope of the budget line 
A) the price of food will decrease the slope (e.g. ,-9 instead of -6)of the budget line 
B) the price of food will increase the slope of the budget line 
C) income will decrease the slope of the budget line 
D) income will increase the slope of the budget line 
E) the price of clothing will decrease the slope of the budget line

Question 11

A family on a trip budgets $800 for restaurant meals and fast food.The price of a fast-food meal is $20 and the family can afford 16 restaurant meals if they don't buy any fast food.How many fast-food meals would the family gain if they gave up one restaurant meal?

Accepted Answer

A) 1 
B) 0.4 
C) 2 
D) 2.5 
E) 5 
A) 1 
B) 0.4 
C) 2 
D) 2.5 
E) 5

Question 12

If macaroni and cheese is an inferior good,then

Accepted Answer

A) the income effect and the substitution effect work in opposite directions 
B) as the budget line shifts to the right,consumers demand more macaroni and cheese 
C) when the price of macaroni and cheese rises,the quantity demanded also rises 
D) the quantity demanded rises as purchasing power rises 
E) individuals will not consume macaroni and cheese 
A) the income effect and the substitution effect work in opposite directions 
B) as the budget line shifts to the right,consumers demand more macaroni and cheese 
C) when the price of macaroni and cheese rises,the quantity demanded also rises 
D) the quantity demanded rises as purchasing power rises 
E) individuals will not consume macaroni and cheese

Question 13

Suppose that the price of a pizza is $10 and that the price of a blouse is $30.At her present level of consumption,Magda's ratio of marginal utility of pizza to marginal utility of blouses is 1/4.To maximize total utility,she should

Accepted Answer

A) buy more pizzas and fewer blouses 
B) buy fewer pizzas and more blouses 
C) continue to buy the same quantities of pizza and blouses 
D) spend more time consuming pizza 
E) spend more time buying blouses 
A) buy more pizzas and fewer blouses 
B) buy fewer pizzas and more blouses 
C) continue to buy the same quantities of pizza and blouses 
D) spend more time consuming pizza 
E) spend more time buying blouses

Question 14

Marginal utility

Accepted Answer

A) increases as more of a good is consumed 
B) increases as the total utility of consuming a good increases 
C) is the same as the utility of consuming a good 
D) is the same as the utility of consuming an additional unit of a good 
E) is the same for all units of a good,but varies from one consumer to another 
A) increases as more of a good is consumed 
B) increases as the total utility of consuming a good increases 
C) is the same as the utility of consuming a good 
D) is the same as the utility of consuming an additional unit of a good 
E) is the same for all units of a good,but varies from one consumer to another

Question 15

If the price of good X (measured on the horizontal axis of a budget line diagram)increases at the same time that the price of good Y (measured on the vertical axis)decreases,the budget line

Accepted Answer

A) will become flatter 
B) will become steeper 
C) could become either steeper or flatter,depending on the sizes of the price changes 
D) will rotate about its original point of intersection with the horizontal axis 
E) will shift outward,but not in a parallel fashion 
A) will become flatter 
B) will become steeper 
C) could become either steeper or flatter,depending on the sizes of the price changes 
D) will rotate about its original point of intersection with the horizontal axis 
E) will shift outward,but not in a parallel fashion

Question 16

Beginning at the vertical axis intercept,as a consumer moves down the budget line,she will find that

Accepted Answer

A) the marginal utility per dollar spent on the vertical axis good decreases 
B) the marginal utility per dollar spent on the vertical axis good increases 
C) the marginal utility per dollar spent on the horizontal axis good increases 
D) the marginal utilities per dollar spent on both goods increase 
E) the marginal utilities per dollar spent on both goods remain constant along that particular budget line 
A) the marginal utility per dollar spent on the vertical axis good decreases 
B) the marginal utility per dollar spent on the vertical axis good increases 
C) the marginal utility per dollar spent on the horizontal axis good increases 
D) the marginal utilities per dollar spent on both goods increase 
E) the marginal utilities per dollar spent on both goods remain constant along that particular budget line

Question 17

The substitution effect of a decrease in the price of an inferior good encourages the consumer to purchase more of the good while the income effect encourages the consumer to purchase less of it.

Accepted Answer

A) True 
 B)False

Question 18

Marginal utility is the extra utility a consumer derives from consuming an extra unit of a good.

Accepted Answer

A) True 
 B)False

Question 19

Roger spends all of his money on racquetballs and food.What would happen to Roger's budget line if his income increased by 10 percent,holding prices constant?

Accepted Answer

A) It would shift inward. 
B) It would rotate about the axis for food. 
C) It would rotate about the axis for racquetballs. 
D) Nothing would happen to the budget line,because the relative prices for food and racquetballs have not changed. 
E) It would shift outward. 
A) It would shift inward. 
B) It would rotate about the axis for food. 
C) It would rotate about the axis for racquetballs. 
D) Nothing would happen to the budget line,because the relative prices for food and racquetballs have not changed. 
E) It would shift outward.

Question 20

Behavioral economics

Accepted Answer

A) is a subfield of psychology that has partially replaced traditional economic analysis 
B) is a subfield of economics that explains how people behavior 
C) is a subfield of economics that incorporates insights from psychology and sociology 
D) provides support for the traditional economic theory of rational utility maximization 
E) predicts that demand curves slope upward 
A) is a subfield of psychology that has partially replaced traditional economic analysis 
B) is a subfield of economics that explains how people behavior 
C) is a subfield of economics that incorporates insights from psychology and sociology 
D) provides support for the traditional economic theory of rational utility maximization 
E) predicts that demand curves slope upward

For a normal good,the

If the price of an inferior good increases,the substitution effect encourages the consumer to purchase less of it while the income effect encourages him to purchase more of it.

The net change in quantity demanded of a good following a price change

-Figure 6-7 shows the marginal utilities Kate receives from buying hamburgers and frozen pizzas,assuming she buys only these two goods.Each hamburger sells for $5 and each pizza sells for $4.What is her marginal utility per dollar spent on the second pizza?

-Suppose that a consumer used to be at point S on budget line BB' in Figure 6-5,and is now at point R on line AA'.Which of the following is true?

Behavioral economics

The substitution effect of a(n)

-Figure 6-7 shows the marginal utilities Kate receives from buying hamburgers and frozen pizzas,assuming she buys only these two goods.Each hamburger sells for $5 and each pizza sells for $4.If Kate has $27 to spend how many hamburgers and frozen pizzas should she buy?

The market demand curve is

If food is measured on the horizontal axis of a budget line diagram,and clothing is measured on the vertical axis,an increase in

A family on a trip budgets $800 for restaurant meals and fast food.The price of a fast-food meal is $20 and the family can afford 16 restaurant meals if they don't buy any fast food.How many fast-food meals would the family gain if they gave up one restaurant meal?

If macaroni and cheese is an inferior good,then

Suppose that the price of a pizza is $10 and that the price of a blouse is $30.At her present level of consumption,Magda's ratio of marginal utility of pizza to marginal utility of blouses is 1/4.To maximize total utility,she should

Marginal utility

If the price of good X (measured on the horizontal axis of a budget line diagram)increases at the same time that the price of good Y (measured on the vertical axis)decreases,the budget line

Beginning at the vertical axis intercept,as a consumer moves down the budget line,she will find that

The substitution effect of a decrease in the price of an inferior good encourages the consumer to purchase more of the good while the income effect encourages the consumer to purchase less of it.

Marginal utility is the extra utility a consumer derives from consuming an extra unit of a good.

Roger spends all of his money on racquetballs and food.What would happen to Roger's budget line if his income increased by 10 percent,holding prices constant?

Behavioral economics

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Production and Cost

How Firms Make Decisions: Profit Maximization

Perfect Competition

B:Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

Filters

Exam 6: Consumer Choice

For a normal good,the

If the price of an inferior good increases,the substitution effect encourages the consumer to purchase less of it while the income effect encourages him to purchase more of it.

The net change in quantity demanded of a good following a price change

-Figure 6-7 shows the marginal utilities Kate receives from buying hamburgers and frozen pizzas,assuming she buys only these two goods.Each hamburger sells for $5 and each pizza sells for $4.What is her marginal utility per dollar spent on the second pizza?

-Suppose that a consumer used to be at point S on budget line BB' in Figure 6-5,and is now at point R on line AA'.Which of the following is true?

Behavioral economics

The substitution effect of a(n)

-Figure 6-7 shows the marginal utilities Kate receives from buying hamburgers and frozen pizzas,assuming she buys only these two goods.Each hamburger sells for $5 and each pizza sells for $4.If Kate has $27 to spend how many hamburgers and frozen pizzas should she buy?

The market demand curve is

If food is measured on the horizontal axis of a budget line diagram,and clothing is measured on the vertical axis,an increase in

A family on a trip budgets $800 for restaurant meals and fast food.The price of a fast-food meal is $20 and the family can afford 16 restaurant meals if they don't buy any fast food.How many fast-food meals would the family gain if they gave up one restaurant meal?

If macaroni and cheese is an inferior good,then

Suppose that the price of a pizza is $10 and that the price of a blouse is $30.At her present level of consumption,Magda's ratio of marginal utility of pizza to marginal utility of blouses is 1/4.To maximize total utility,she should

Marginal utility

If the price of good X (measured on the horizontal axis of a budget line diagram)increases at the same time that the price of good Y (measured on the vertical axis)decreases,the budget line

Beginning at the vertical axis intercept,as a consumer moves down the budget line,she will find that

The substitution effect of a decrease in the price of an inferior good encourages the consumer to purchase more of the good while the income effect encourages the consumer to purchase less of it.

Marginal utility is the extra utility a consumer derives from consuming an extra unit of a good.

Roger spends all of his money on racquetballs and food.What would happen to Roger's budget line if his income increased by 10 percent,holding prices constant?

Behavioral economics

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Production and Cost

How Firms Make Decisions: Profit Maximization

Perfect Competition

B:Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

Filters