Question 1

The price elasticity of demand for a linear demand curve follows the pattern (moving from high prices to low prices)

Accepted Answer

A)  elastic, unit elastic, inelastic. 
B)  unit elastic, inelastic, elastic. 
C)  inelastic, unit elastic, elastic. 
D)  elastic, inelastic, unit elastic. 
A)  elastic, unit elastic, inelastic. 
B)  unit elastic, inelastic, elastic. 
C)  inelastic, unit elastic, elastic. 
D)  elastic, inelastic, unit elastic. A

Question 2

Suppose demand can be written as P = 5.The elasticity of demand is)

Accepted Answer

A)  increasing as price rises. 
B)  decreasing as price rises. 
C)  constant regardless of prices and perfectly elastic. 
D)  constant regardless of prices and unit elastic. 
A)  increasing as price rises. 
B)  decreasing as price rises. 
C)  constant regardless of prices and perfectly elastic. 
D)  constant regardless of prices and unit elastic. C

Question 3

In Homogenia everyone is the same.Demand for apples is P = A - Bq for each of its 1 million citizens.Market demand for apples in Homogenia is given by the equation

Accepted Answer

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

Question 4

If goods X and Y are complements,then the cross price elasticity of demand between them will be

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  infinity. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  infinity.

Question 5

Suppose you were to believe that "money illusion" exists that is as prices and incomes both rise proportionally,people buy more.Which of the following characteristics of demand does that cause you to doubt?

Accepted Answer

A)  demand functions are downward sloping 
B)  demand has a positive vertical intercept 
C)  demand has a positive horizontal intercept. 
D)  demand functions are homogeneous of degree zero. 
A)  demand functions are downward sloping 
B)  demand has a positive vertical intercept 
C)  demand has a positive horizontal intercept. 
D)  demand functions are homogeneous of degree zero.

Question 6

If an individual buys only two goods and these must be used in a fixed relationship with one another (e.g.,coffee and cream for a coffee drinker who never varies the amount of cream used in each cup),then

Accepted Answer

A)  there is no substitution effect from a change in the price of coffee. 
B)  there is no income effect from a change in the price of coffee. 
C)  Giffen's Paradox must occur if both coffee and cream are inferior goods. 
D)  an increase in income will not affect cream purchases. 
A)  there is no substitution effect from a change in the price of coffee. 
B)  there is no income effect from a change in the price of coffee. 
C)  Giffen's Paradox must occur if both coffee and cream are inferior goods. 
D)  an increase in income will not affect cream purchases.

Question 7

With only two goods,if the income effect is in the opposite direction as the substitution effect but the substitution effect dominates then the good is

Accepted Answer

A)  normal 
B)  inferior but not Giffen 
C)  Giffen 
D)  There is not enough information to answer. 
A)  normal 
B)  inferior but not Giffen 
C)  Giffen 
D)  There is not enough information to answer.

Question 8

If the income elasticity of demand is 2,the good is

Accepted Answer

A)  a luxury. 
B)  a normal good (but not a luxury). 
C)  an inferior good. 
D)  a Giffen good. 
A)  a luxury. 
B)  a normal good (but not a luxury). 
C)  an inferior good. 
D)  a Giffen good.

Question 9

An increase in quantity demanded is represented by

Accepted Answer

A)  a shift outward of the entire demand curve. 
B)  a shift inward of the entire demand curve. 
C)  a movement along the demand curve in a southeasterly direction in response to a decline in the good's price. 
D)  a movement along the demand curve in a northwesterly direction in response to a decline in the good's price. 
A)  a shift outward of the entire demand curve. 
B)  a shift inward of the entire demand curve. 
C)  a movement along the demand curve in a southeasterly direction in response to a decline in the good's price. 
D)  a movement along the demand curve in a northwesterly direction in response to a decline in the good's price.

Question 10

The lump sum principle suggests that the tax that reduces utility the least is

Accepted Answer

A)  a tax on income 
B)  a tax on a good with many substitutes 
C)  an equal tax per-unit on all goods 
D)  a tax on a good with only a few substitutes 
A)  a tax on income 
B)  a tax on a good with many substitutes 
C)  an equal tax per-unit on all goods 
D)  a tax on a good with only a few substitutes

Question 11

If there are only two goods and these are consumed in fixed proportions,the price elasticities of demand for these two goods will sum to

Accepted Answer

A)  0.0 
B)  -0.5 
C)  -1.0 
D)  a number between 0 and -1. 
A)  0.0 
B)  -0.5 
C)  -1.0 
D)  a number between 0 and -1.

Question 12

Suppose the "poor" and "rich" have identical demand functions for good X but only differ in income (I).  
 
  At a given price of X,the price elasticity of their individual demand curves is such that

Accepted Answer

A)  the rich person's demand is more elastic than the poor person's. 
B)  the poor person's demand is more elastic than the rich person's. 
C)  the poor person's demand is as elastic as the rich person's. 
D)  the rich person's demand is as elastic as the poor person's. 
A)  the rich person's demand is more elastic than the poor person's. 
B)  the poor person's demand is more elastic than the rich person's. 
C)  the poor person's demand is as elastic as the rich person's. 
D)  the rich person's demand is as elastic as the poor person's.

Question 13

If a good is normal and its price decreases,

Accepted Answer

A)  the income effect will be positive and the substitution effect will be positive. 
B)  the income effect will be negative and the substitution effect will be negative. 
C)  the income effect will be positive and the substitution effect will be negative. 
D)  the income effect will be negative and the substitution effect will be positive. 
A)  the income effect will be positive and the substitution effect will be positive. 
B)  the income effect will be negative and the substitution effect will be negative. 
C)  the income effect will be positive and the substitution effect will be negative. 
D)  the income effect will be negative and the substitution effect will be positive.

Question 14

Demand functions are "homogeneous of degree zero in all prices and income." This means

Accepted Answer

A)  a proportional increase in all prices and income will leave quantities demanded unchanged. 
B)  a doubling of all prices will not alter consumption decisions. 
C)  prices directly enter individuals' utility functions. 
D)  an increase in income will cause all quantities demanded to increase proportionately. 
A)  a proportional increase in all prices and income will leave quantities demanded unchanged. 
B)  a doubling of all prices will not alter consumption decisions. 
C)  prices directly enter individuals' utility functions. 
D)  an increase in income will cause all quantities demanded to increase proportionately.

Question 15

With only two goods,if the income effect is in the same direction as the substitution effect then the good is

Accepted Answer

A)  normal 
B)  inferior but not Giffen 
C)  Giffen 
D)  There is not enough information to answer. 
A)  normal 
B)  inferior but not Giffen 
C)  Giffen 
D)  There is not enough information to answer.

Question 16

If the income elasticity of demand is 0.5,the good is

Accepted Answer

A)  a luxury. 
B)  a normal good (but not a luxury). 
C)  an inferior good. 
D)  a Giffen good. 
A)  a luxury. 
B)  a normal good (but not a luxury). 
C)  an inferior good. 
D)  a Giffen good.

Question 17

If a good is inferior and its price increases,

Accepted Answer

A)  the income effect will be positive and the substitution effect will be positive. 
B)  the income effect will be negative and the substitution effect will be negative. 
C)  the income effect will be positive and the substitution effect will be negative. 
D)  the income effect will be negative and the substitution effect will be positive. 
A)  the income effect will be positive and the substitution effect will be positive. 
B)  the income effect will be negative and the substitution effect will be negative. 
C)  the income effect will be positive and the substitution effect will be negative. 
D)  the income effect will be negative and the substitution effect will be positive.

Question 18

If a good is inferior and its price decreases,

Accepted Answer

A)  the income effect will be positive and the substitution effect will be positive. 
B)  the income effect will be negative and the substitution effect will be negative. 
C)  the income effect will be positive and the substitution effect will be negative. 
D)  the income effect will be negative and the substitution effect will be positive. 
A)  the income effect will be positive and the substitution effect will be positive. 
B)  the income effect will be negative and the substitution effect will be negative. 
C)  the income effect will be positive and the substitution effect will be negative. 
D)  the income effect will be negative and the substitution effect will be positive.

Question 19

An increase in the price of good X will be accompanied by

Accepted Answer

A)  a shift in the market demand curve for good X. 
B)  a shift in the market demand curve for good Y (a substitute for good X). 
C)  a movement along the market demand curve for good X. 
D)  Both b and c. 
A)  a shift in the market demand curve for good X. 
B)  a shift in the market demand curve for good Y (a substitute for good X). 
C)  a movement along the market demand curve for good X. 
D)  Both b and c.

Question 20

If a consumer purchases only two goods (X and Y )and the demand for X is elastic,then a rise in the price of X

Accepted Answer

A)  will cause total spending on good Y to rise. 
B)  will cause total spending on good Y to fall. 
C)  will cause total spending on good Y to remain unchanged. 
D)  will have an indeterminate effect on total spending on good Y. 
A)  will cause total spending on good Y to rise. 
B)  will cause total spending on good Y to fall. 
C)  will cause total spending on good Y to remain unchanged. 
D)  will have an indeterminate effect on total spending on good Y.

The price elasticity of demand for a linear demand curve follows the pattern (moving from high prices to low prices)

Suppose demand can be written as P = 5.The elasticity of demand is)

In Homogenia everyone is the same.Demand for apples is P = A - Bq for each of its 1 million citizens.Market demand for apples in Homogenia is given by the equation

If goods X and Y are complements,then the cross price elasticity of demand between them will be

Suppose you were to believe that "money illusion" exists that is as prices and incomes both rise proportionally,people buy more.Which of the following characteristics of demand does that cause you to doubt?

If an individual buys only two goods and these must be used in a fixed relationship with one another (e.g.,coffee and cream for a coffee drinker who never varies the amount of cream used in each cup),then

With only two goods,if the income effect is in the opposite direction as the substitution effect but the substitution effect dominates then the good is

If the income elasticity of demand is 2,the good is

An increase in quantity demanded is represented by

The lump sum principle suggests that the tax that reduces utility the least is

If there are only two goods and these are consumed in fixed proportions,the price elasticities of demand for these two goods will sum to

Suppose the "poor" and "rich" have identical demand functions for good X but only differ in income (I). At a given price of X,the price elasticity of their individual demand curves is such that

If a good is normal and its price decreases,

Demand functions are "homogeneous of degree zero in all prices and income." This means

With only two goods,if the income effect is in the same direction as the substitution effect then the good is

If the income elasticity of demand is 0.5,the good is

If a good is inferior and its price increases,

If a good is inferior and its price decreases,

An increase in the price of good X will be accompanied by

If a consumer purchases only two goods (X and Y )and the demand for X is elastic,then a rise in the price of X

Economic Models

Utility and Choice

Uncertainty

Game Theory

Production

Costs

Profit Maximization and Supply

Perfect Competition in a Single Market

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Pricing in Input Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

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Exam 3: Individual Demand Curves

The price elasticity of demand for a linear demand curve follows the pattern (moving from high prices to low prices)

Suppose demand can be written as P = 5.The elasticity of demand is)

In Homogenia everyone is the same.Demand for apples is P = A - Bq for each of its 1 million citizens.Market demand for apples in Homogenia is given by the equation

If goods X and Y are complements,then the cross price elasticity of demand between them will be

Suppose you were to believe that "money illusion" exists that is as prices and incomes both rise proportionally,people buy more.Which of the following characteristics of demand does that cause you to doubt?

If an individual buys only two goods and these must be used in a fixed relationship with one another (e.g.,coffee and cream for a coffee drinker who never varies the amount of cream used in each cup),then

With only two goods,if the income effect is in the opposite direction as the substitution effect but the substitution effect dominates then the good is

If the income elasticity of demand is 2,the good is

An increase in quantity demanded is represented by

The lump sum principle suggests that the tax that reduces utility the least is

If there are only two goods and these are consumed in fixed proportions,the price elasticities of demand for these two goods will sum to

Suppose the "poor" and "rich" have identical demand functions for good X but only differ in income (I). At a given price of X,the price elasticity of their individual demand curves is such that

If a good is normal and its price decreases,

Demand functions are "homogeneous of degree zero in all prices and income." This means

With only two goods,if the income effect is in the same direction as the substitution effect then the good is

If the income elasticity of demand is 0.5,the good is

If a good is inferior and its price increases,

If a good is inferior and its price decreases,

An increase in the price of good X will be accompanied by

If a consumer purchases only two goods (X and Y )and the demand for X is elastic,then a rise in the price of X

Economic Models

Utility and Choice

Uncertainty

Game Theory

Production

Costs

Profit Maximization and Supply

Perfect Competition in a Single Market

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Pricing in Input Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters