Question 1

An increase in income (all else equal)will ALWAYS lead to a parallel shift of the budget line.

Accepted Answer

A) True 
 B)False

Question 2

The Slutsky equation shows that,holding the total effect constant,the income effect will be larger for goods that

Accepted Answer

A)  have a smaller substitution effect. 
B)  make up a larger percentage of a household's budget. 
C)  have perfectly inelastic demand curves. 
D)  All of the above. 
A)  have a smaller substitution effect. 
B)  make up a larger percentage of a household's budget. 
C)  have perfectly inelastic demand curves. 
D)  All of the above.

Question 3

Using the CPI to compensate workers for inflation is appropriate because,in the face of a change in relative prices,people should be allowed to purchase the same bundle as they did before the price changes.

Accepted Answer

A) True 
 B)False

Question 4

-The above figure shows Larry's indifference map and budget lines for ham and pork.Which of the following statements is TRUE?

Accepted Answer

A)  Larry's Engel curve for pork will be upward sloping. 
B)  Larry's Engel curve for pork will be downward sloping. 
C)  Larry's Engel curve for pork will be backward bending. 
D)  Larry's Engel curve for pork cannot be derived from the information provided. 
A)  Larry's Engel curve for pork will be upward sloping. 
B)  Larry's Engel curve for pork will be downward sloping. 
C)  Larry's Engel curve for pork will be backward bending. 
D)  Larry's Engel curve for pork cannot be derived from the information provided.

Question 5

What is one way to adjust the CPI for substitution bias?

Accepted Answer

A)  Use the Paasche index. 
B)  Use the Laspeyres index. 
C)  Multiply the Paasche Index and the Laspeyres index. 
D)  Take the geometric mean of the Paasche index and the Laspeyres index. 
A)  Use the Paasche index. 
B)  Use the Laspeyres index. 
C)  Multiply the Paasche Index and the Laspeyres index. 
D)  Take the geometric mean of the Paasche index and the Laspeyres index.

Question 6

Draw budget constraints,indifference curves,and the income consumption curve for a good that has an income elasticity that is perfectly inelastic.

Accepted Answer

@#IMG-DLM& See the a

Question 7

What is the slope of the price consumption curve for two goods,x and y,when preferences are measured by the utility function U(x,y)= x0.5y0.5,the price of good y is $10,income equals $100,and the price of good x increases from $5 to $10?

Accepted Answer

A)  Slope equals zero. 
B)  Slope is infinite. 
C)  Slope is -   
D)  Slope is   
A)  Slope equals zero. 
B)  Slope is infinite. 
C)  Slope is -   
D)  Slope is

Question 8

If a person supplies more hours of labor in response to a wage increase,then

Accepted Answer

A)  the substitution effect is greater than the income effect. 
B)  the income effect is greater than the substitution effect. 
C)  the income effect equals the substitution effect. 
D)  the person is not maximizing utility. 
A)  the substitution effect is greater than the income effect. 
B)  the income effect is greater than the substitution effect. 
C)  the income effect equals the substitution effect. 
D)  the person is not maximizing utility.

Question 9

The amount of money one would have to take from a consumer to harm her by as much as the price increase is called

Accepted Answer

A)  compensating variation. 
B)  structured settlement. 
C)  equivalent variation. 
D)  consumer surplus. 
A)  compensating variation. 
B)  structured settlement. 
C)  equivalent variation. 
D)  consumer surplus.

Question 10

Many manufacturers sell products labeled as having imperfections at a discount at their factory outlets but do not ship these imperfect goods to regular retail outlets.Why?

Accepted Answer

There is some substitutability between t

Question 11

-The above figure shows Bobby's indifference map for juice and snacks.It also shows three budget lines resulting from different prices for snacks.Juice and snacks are

Accepted Answer

A)  complement goods. 
B)  substitute goods. 
C)  unrelated goods. 
D)  capital goods. 
A)  complement goods. 
B)  substitute goods. 
C)  unrelated goods. 
D)  capital goods.

Question 12

Suppose a graph is drawn to show a consumer's preferences for football tickets and basketball tickets.The quantity of football tickets is measured on the horizontal axis.If the price-consumption curve is horizontal when the price of football tickets changes,then

Accepted Answer

A)  football tickets are an inferior good. 
B)  the demand for football tickets is perfectly elastic. 
C)  the demand for football tickets is unit elastic. 
D)  the demand curve for football tickets will be horizontal. 
A)  football tickets are an inferior good. 
B)  the demand for football tickets is perfectly elastic. 
C)  the demand for football tickets is unit elastic. 
D)  the demand curve for football tickets will be horizontal.

Question 13

Suppose that the interest rate paid to savers increases.As a result,Tom wishes to save less.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 14

Employing a fixed-weight index like the Consumer Price Index to adjust a person's salary in response to inflation will overcompensate this person because doing so will allow this person to

Accepted Answer

A)  buy the same bundle of goods as he did before the inflation. 
B)  achieve a higher level of utility than he did before the inflation. 
C)  achieve the same level of utility as before the inflation. 
D)  buy more of all goods. 
A)  buy the same bundle of goods as he did before the inflation. 
B)  achieve a higher level of utility than he did before the inflation. 
C)  achieve the same level of utility as before the inflation. 
D)  buy more of all goods.

Question 15

-When John was in college and his income was low,he drank "Red Ribbon" beer.As his income increased,he purchased better-quality beer and less "Red Ribbon." Which graph in the above figure best represents John's Engel curve for "Red Ribbon" beer?

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 16

Ten individuals have $100 and identical preferences for picnics,p,and kayak trips,k,where U(p,k)= k0.5p0.5.The price of picnics is $5 and the price per kayak trip is $ 10.What is the shortage/surplus in the market when the supply of picnics totals 120?

Accepted Answer

A)  There is a surplus of 20. 
B)  There is a shortage of 20. 
C)  The market is in equilibrium. Therefore, there is no surplus/shortage. 
D)  There is not enough information to answer this question. 
A)  There is a surplus of 20. 
B)  There is a shortage of 20. 
C)  The market is in equilibrium. Therefore, there is no surplus/shortage. 
D)  There is not enough information to answer this question.

Question 17

Explain what the slope of the income consumption curve shows about the income elasticity of demand.

Accepted Answer

A positive slope of the income consumpti

Question 18

A percentage increase in the overall price level is called

Accepted Answer

A)  cost of living. 
B)  inflation. 
C)  Paasche index. 
D)  Fischer index. 
A)  cost of living. 
B)  inflation. 
C)  Paasche index. 
D)  Fischer index.

Question 19

Using a Paasche index to calculate the Consumer Price Index (CPI)

Accepted Answer

A)  weights quantities with current prices. 
B)  weights prices with base-year quantities. 
C)  weights quantities with base-year prices. 
D)  weights prices with current year quantities. 
A)  weights quantities with current prices. 
B)  weights prices with base-year quantities. 
C)  weights quantities with base-year prices. 
D)  weights prices with current year quantities.

Question 20

Both Sally and Sam receive a 10% raise in a single year.Sally increases her demand for ground beef whereas Sam decreases his demand for ground beef.

Accepted Answer

A)  This is impossible. 
B)  This is only possible if Sally considers ground beef an inferior good, and Sam views it as a normal good. 
C)  This is only possible if Sally has lower income than Sam. 
D)  This is only possible if Sally considers ground beef a normal good and Sam views it as an inferior good. 
A)  This is impossible. 
B)  This is only possible if Sally considers ground beef an inferior good, and Sam views it as a normal good. 
C)  This is only possible if Sally has lower income than Sam. 
D)  This is only possible if Sally considers ground beef a normal good and Sam views it as an inferior good.

An increase in income (all else equal)will ALWAYS lead to a parallel shift of the budget line.

The Slutsky equation shows that,holding the total effect constant,the income effect will be larger for goods that

Using the CPI to compensate workers for inflation is appropriate because,in the face of a change in relative prices,people should be allowed to purchase the same bundle as they did before the price changes.

-The above figure shows Larry's indifference map and budget lines for ham and pork.Which of the following statements is TRUE?

What is one way to adjust the CPI for substitution bias?

Draw budget constraints,indifference curves,and the income consumption curve for a good that has an income elasticity that is perfectly inelastic.

What is the slope of the price consumption curve for two goods,x and y,when preferences are measured by the utility function U(x,y)= x^0.5y^0.5,the price of good y is $10,income equals $100,and the price of good x increases from $5 to $10?

If a person supplies more hours of labor in response to a wage increase,then

The amount of money one would have to take from a consumer to harm her by as much as the price increase is called

Many manufacturers sell products labeled as having imperfections at a discount at their factory outlets but do not ship these imperfect goods to regular retail outlets.Why?

-The above figure shows Bobby's indifference map for juice and snacks.It also shows three budget lines resulting from different prices for snacks.Juice and snacks are

Suppose a graph is drawn to show a consumer's preferences for football tickets and basketball tickets.The quantity of football tickets is measured on the horizontal axis.If the price-consumption curve is horizontal when the price of football tickets changes,then

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

Employing a fixed-weight index like the Consumer Price Index to adjust a person's salary in response to inflation will overcompensate this person because doing so will allow this person to

-When John was in college and his income was low,he drank "Red Ribbon" beer.As his income increased,he purchased better-quality beer and less "Red Ribbon." Which graph in the above figure best represents John's Engel curve for "Red Ribbon" beer?

Ten individuals have $100 and identical preferences for picnics,p,and kayak trips,k,where U(p,k)= k^0.5p^0.5.The price of picnics is $5 and the price per kayak trip is $ 10.What is the shortage/surplus in the market when the supply of picnics totals 120?

Explain what the slope of the income consumption curve shows about the income elasticity of demand.

A percentage increase in the overall price level is called

Using a Paasche index to calculate the Consumer Price Index (CPI)

Both Sally and Sam receive a 10% raise in a single year.Sally increases her demand for ground beef whereas Sam decreases his demand for ground beef.

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

An increase in income (all else equal)will ALWAYS lead to a parallel shift of the budget line.

The Slutsky equation shows that,holding the total effect constant,the income effect will be larger for goods that

Using the CPI to compensate workers for inflation is appropriate because,in the face of a change in relative prices,people should be allowed to purchase the same bundle as they did before the price changes.

-The above figure shows Larry's indifference map and budget lines for ham and pork.Which of the following statements is TRUE?

What is one way to adjust the CPI for substitution bias?

Draw budget constraints,indifference curves,and the income consumption curve for a good that has an income elasticity that is perfectly inelastic.

What is the slope of the price consumption curve for two goods,x and y,when preferences are measured by the utility function U(x,y)= x0.5y0.5,the price of good y is $10,income equals $100,and the price of good x increases from $5 to $10?

If a person supplies more hours of labor in response to a wage increase,then

The amount of money one would have to take from a consumer to harm her by as much as the price increase is called

Many manufacturers sell products labeled as having imperfections at a discount at their factory outlets but do not ship these imperfect goods to regular retail outlets.Why?

-The above figure shows Bobby's indifference map for juice and snacks.It also shows three budget lines resulting from different prices for snacks.Juice and snacks are

Suppose a graph is drawn to show a consumer's preferences for football tickets and basketball tickets.The quantity of football tickets is measured on the horizontal axis.If the price-consumption curve is horizontal when the price of football tickets changes,then

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

Employing a fixed-weight index like the Consumer Price Index to adjust a person's salary in response to inflation will overcompensate this person because doing so will allow this person to

-When John was in college and his income was low,he drank "Red Ribbon" beer.As his income increased,he purchased better-quality beer and less "Red Ribbon." Which graph in the above figure best represents John's Engel curve for "Red Ribbon" beer?

Ten individuals have $100 and identical preferences for picnics,p,and kayak trips,k,where U(p,k)= k0.5p0.5.The price of picnics is $5 and the price per kayak trip is $ 10.What is the shortage/surplus in the market when the supply of picnics totals 120?

Explain what the slope of the income consumption curve shows about the income elasticity of demand.

A percentage increase in the overall price level is called

Using a Paasche index to calculate the Consumer Price Index (CPI)

Both Sally and Sam receive a 10% raise in a single year.Sally increases her demand for ground beef whereas Sam decreases his demand for ground beef.

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

What is the slope of the price consumption curve for two goods,x and y,when preferences are measured by the utility function U(x,y)= x^0.5y^0.5,the price of good y is $10,income equals $100,and the price of good x increases from $5 to $10?

Ten individuals have $100 and identical preferences for picnics,p,and kayak trips,k,where U(p,k)= k^0.5p^0.5.The price of picnics is $5 and the price per kayak trip is $ 10.What is the shortage/surplus in the market when the supply of picnics totals 120?