Question 1

The Fisher index

Accepted Answer

A)  uses the arithmetic mean of the Paasche index and the Laspeyres index. 
B)  uses the standard deviation of the Paasche index and the Laspeyres index. 
C)  uses the geometric mean of the Paasche index and the Laspeyres index. 
D)  uses the harmonic mean of the Paasche index and the Laspeyres index. 
A)  uses the arithmetic mean of the Paasche index and the Laspeyres index. 
B)  uses the standard deviation of the Paasche index and the Laspeyres index. 
C)  uses the geometric mean of the Paasche index and the Laspeyres index. 
D)  uses the harmonic mean of the Paasche index and the Laspeyres index. C

Question 2

-When John's income was low,he could not afford to dine out and would respond to a pay raise by purchasing more frozen dinners.Now that his income is high,a pay raise causes him to dine out more often and buy fewer frozen dinners.Which graph in the above figure best represents John's Engel curve for dining out?

Accepted Answer

A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph D 
A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph D B

Question 3

If the Engel curve for a good is upward sloping,the demand curve for that good must be downward sloping.

Accepted Answer

A) True 
 B)False  True

Question 4

Suppose that the interest rate paid to savers increases.As a result,Tom wishes to save more.This suggests that,for Tom,

Accepted Answer

A)  the substitution effect is greater than the income effect. 
B)  the income effect is greater than the substitution effect. 
C)  utility maximization is not occurring. 
D)  future consumption is a luxury. 
A)  the substitution effect is greater than the income effect. 
B)  the income effect is greater than the substitution effect. 
C)  utility maximization is not occurring. 
D)  future consumption is a luxury.

Question 5

A tax cut that raises the after-tax wage rate will most likely result in more hours worked if

Accepted Answer

A)  tax rates were low already. 
B)  the relevant portion of the labor supply curve is upward sloping. 
C)  the relevant portion of the labor supply curve is downward sloping. 
D)  workers can be easily fooled. 
A)  tax rates were low already. 
B)  the relevant portion of the labor supply curve is upward sloping. 
C)  the relevant portion of the labor supply curve is downward sloping. 
D)  workers can be easily fooled.

Question 6

If workers are in the backward-bending section of their labor supply curves,than an increase in the income tax rate will

Accepted Answer

A)  increase the tax revenue and increase the number of hours worked. 
B)  increase the tax revenue and decrease the number of hours worked. 
C)  decrease the tax revenue and increase the number of hours worked. 
D)  decrease the tax revenue and decrease the number of hours worked. 
A)  increase the tax revenue and increase the number of hours worked. 
B)  increase the tax revenue and decrease the number of hours worked. 
C)  decrease the tax revenue and increase the number of hours worked. 
D)  decrease the tax revenue and decrease the number of hours worked.

Question 7

Sandy derives utility from consuming "all other goods," g,and clean air (measured by particulate matter removed per m3),a,as measured by the utility function U(g,a)= g0.6a0.4.The price of "all other goods" is $20 and the price of clean air (abatement)equals $10.Brian is the only other consumer in the market for clean air and demands 10 units of clean air.What is the market demand for clean air?

Accepted Answer

A)  Total market demand is 14 units of clean air. 
B)  Total market demand is 12 units of clean air. 
C)  Total market demand is 10 units of clean air. 
D)  Total market demand is 16 units of clean air. 
A)  Total market demand is 14 units of clean air. 
B)  Total market demand is 12 units of clean air. 
C)  Total market demand is 10 units of clean air. 
D)  Total market demand is 16 units of clean air.

Question 8

For an inferior good,if the income effect more than offsets the substitution effect,we call that good

Accepted Answer

A)  a Giffen good. 
B)  a normal good. 
C)  an inferior good. 
D)  a neutral good. 
A)  a Giffen good. 
B)  a normal good. 
C)  an inferior good. 
D)  a neutral good.

Question 9

Suppose a person's utility for leisure (L)and consumption (Y)can be expressed as U = Y + L0.5.Assuming a wage rate of $10 per hour,show what happens to the person's labor supply curve when the person wins a lottery prize of $100 per day.

Accepted Answer

Rearranging yields U = (Y^* + 10H)+ (24 -

Question 10

The Affordable Care Act is intended to reduce the price of health care.A decrease in the price of health care may

Accepted Answer

A)  increase the number of doctors office visits if office visits are considered an inferior good and the substitution effect dominates the income effect. 
B)  decrease the number of doctors office visits if office visits are considered an inferior good and the substitution effect dominates the income effect. 
C)  increase the number of doctors office visits if office visits are a normal good. 
D)  Both A and C. 
A)  increase the number of doctors office visits if office visits are considered an inferior good and the substitution effect dominates the income effect. 
B)  decrease the number of doctors office visits if office visits are considered an inferior good and the substitution effect dominates the income effect. 
C)  increase the number of doctors office visits if office visits are a normal good. 
D)  Both A and C.

Question 11

When income increases by 1%,the quantity demanded of a good decreases by 2%.What is the income elasticity of the good? Is the good normal or inferior? Why?

Accepted Answer

The income elasticit

Question 12

-When John's income was low,he could not afford to dine out and would respond to a pay raise by purchasing more frozen dinners.Now that his income is high,a pay raise causes him to dine out more often and buy fewer frozen dinners.Which graph in the above figure best represents John's Engel curve for frozen dinners?

Accepted Answer

A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph D 
A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph D

Question 13

Under which of the following conditions will there be no substitution bias in the CPI?

Accepted Answer

A)  Lower-priced goods increase in price by a greater percentage than do higher-priced goods. 
B)  Higher-price goods increase in price by a greater percentage than do lower-priced goods. 
C)  All goods change in price by the same amount. 
D)  All goods change in price by the same percentage. 
A)  Lower-priced goods increase in price by a greater percentage than do higher-priced goods. 
B)  Higher-price goods increase in price by a greater percentage than do lower-priced goods. 
C)  All goods change in price by the same amount. 
D)  All goods change in price by the same percentage.

Question 14

An individual's demand curve for a good can be derived by measuring the quantities selected as

Accepted Answer

A)  the price of the good changes. 
B)  the price of substitute goods changes. 
C)  income changes. 
D)  All of the above. 
A)  the price of the good changes. 
B)  the price of substitute goods changes. 
C)  income changes. 
D)  All of the above.

Question 15

When measuring the substitution effect,one uses the change along

Accepted Answer

A)  the old indifference curve. 
B)  the new indifference curve. 
C)  either the old or the new indifference curve. 
D)  the budget constraint. 
A)  the old indifference curve. 
B)  the new indifference curve. 
C)  either the old or the new indifference curve. 
D)  the budget constraint.

Question 16

Inflation over time necessarily makes consumers worse off.

Accepted Answer

A) True 
 B)False

Question 17

Empirical studies have found that the labor supply curves for most parts of the population are

Accepted Answer

A)  backward-bending. 
B)  upward-sloping. 
C)  downward-sloping. 
D)  nearly vertical. 
A)  backward-bending. 
B)  upward-sloping. 
C)  downward-sloping. 
D)  nearly vertical.

Question 18

As the price of a good rises,the consumer will experience

Accepted Answer

A)  a desire to consume a different bundle. 
B)  a decrease in utility. 
C)  a southern or western movement on the indifference map. 
D)  All of the above. 
A)  a desire to consume a different bundle. 
B)  a decrease in utility. 
C)  a southern or western movement on the indifference map. 
D)  All of the above.

Question 19

As the price of a Giffen good falls,the consumer will

Accepted Answer

A)  purchase more units. 
B)  purchase fewer units. 
C)  not change the amount purchased. 
D)  There is not enough information to answer this question. 
A)  purchase more units. 
B)  purchase fewer units. 
C)  not change the amount purchased. 
D)  There is not enough information to answer this question.

Question 20

If consumer income and prices increase by the same percentage,

Accepted Answer

A)  the consumer will buy more of both goods. 
B)  the consumer will buy more of both goods if they are both normal goods. 
C)  the consumer will buy less of both goods if they are both inferior goods. 
D)  the consumer's utility maximizing bundle stays the same. 
A)  the consumer will buy more of both goods. 
B)  the consumer will buy more of both goods if they are both normal goods. 
C)  the consumer will buy less of both goods if they are both inferior goods. 
D)  the consumer's utility maximizing bundle stays the same.

The Fisher index

If the Engel curve for a good is upward sloping,the demand curve for that good must be downward sloping.

Suppose that the interest rate paid to savers increases.As a result,Tom wishes to save more.This suggests that,for Tom,

A tax cut that raises the after-tax wage rate will most likely result in more hours worked if

If workers are in the backward-bending section of their labor supply curves,than an increase in the income tax rate will

For an inferior good,if the income effect more than offsets the substitution effect,we call that good

Suppose a person's utility for leisure (L)and consumption (Y)can be expressed as U = Y + L^0.5.Assuming a wage rate of $10 per hour,show what happens to the person's labor supply curve when the person wins a lottery prize of $100 per day.

The Affordable Care Act is intended to reduce the price of health care.A decrease in the price of health care may

When income increases by 1%,the quantity demanded of a good decreases by 2%.What is the income elasticity of the good? Is the good normal or inferior? Why?

Under which of the following conditions will there be no substitution bias in the CPI?

An individual's demand curve for a good can be derived by measuring the quantities selected as

When measuring the substitution effect,one uses the change along

Inflation over time necessarily makes consumers worse off.

Empirical studies have found that the labor supply curves for most parts of the population are

As the price of a good rises,the consumer will experience

As the price of a Giffen good falls,the consumer will

If consumer income and prices increase by the same percentage,

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 5: Applying Consumer Theory

The Fisher index

If the Engel curve for a good is upward sloping,the demand curve for that good must be downward sloping.

Suppose that the interest rate paid to savers increases.As a result,Tom wishes to save more.This suggests that,for Tom,

A tax cut that raises the after-tax wage rate will most likely result in more hours worked if

If workers are in the backward-bending section of their labor supply curves,than an increase in the income tax rate will

For an inferior good,if the income effect more than offsets the substitution effect,we call that good

Suppose a person's utility for leisure (L)and consumption (Y)can be expressed as U = Y + L0.5.Assuming a wage rate of $10 per hour,show what happens to the person's labor supply curve when the person wins a lottery prize of $100 per day.

The Affordable Care Act is intended to reduce the price of health care.A decrease in the price of health care may

When income increases by 1%,the quantity demanded of a good decreases by 2%.What is the income elasticity of the good? Is the good normal or inferior? Why?

Under which of the following conditions will there be no substitution bias in the CPI?

An individual's demand curve for a good can be derived by measuring the quantities selected as

When measuring the substitution effect,one uses the change along

Inflation over time necessarily makes consumers worse off.

Empirical studies have found that the labor supply curves for most parts of the population are

As the price of a good rises,the consumer will experience

As the price of a Giffen good falls,the consumer will

If consumer income and prices increase by the same percentage,

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Suppose a person's utility for leisure (L)and consumption (Y)can be expressed as U = Y + L^0.5.Assuming a wage rate of $10 per hour,show what happens to the person's labor supply curve when the person wins a lottery prize of $100 per day.