Question 1

The rate at which a consumer is willing to substitute one good for another, while still maintaining a given level of satisfaction is called the

Accepted Answer

A) market rate of substitution. 
B) average rate of substitution. 
C) marginal rate of substitution. 
D) budget constraint. 
A) market rate of substitution. 
B) average rate of substitution. 
C) marginal rate of substitution. 
D) budget constraint.

Question 2

PXX + PYY = M is called

Accepted Answer

A) an indifference curve. 
B) an opportunity set. 
C) a budget set. 
D) a budget line. 
A) an indifference curve. 
B) an opportunity set. 
C) a budget set. 
D) a budget line.

Question 3

What is/are the important things that must be developed when characterizing consumer behavior?

Accepted Answer

A) Individual goals of the firm. 
B) Consumer opportunities. 
C) Individual goals of the firm and consumer opportunities. 
D) Consumer preferences and consumer opportunities. 
A) Individual goals of the firm. 
B) Consumer opportunities. 
C) Individual goals of the firm and consumer opportunities. 
D) Consumer preferences and consumer opportunities.

Question 4

If bundles A, B and C lie on the same indifference curve, then

Accepted Answer

A) A≻B≻C. 
B) B≻C≻A. 
C) A∽B≻C. 
D) A∽B∽C. 
A) A≻B≻C. 
B) B≻C≻A. 
C) A∽B≻C. 
D) A∽B∽C.

Question 5

If a consumer is given a $10 gift certificate, good only for items in store X and all items in store X are normal goods, then the consumer desires to consume

Accepted Answer

A) more goods in store X. 
B) less goods in store X. 
C) the same amount of goods in store X. 
D) none of the statements associated with this question are correct. 
A) more goods in store X. 
B) less goods in store X. 
C) the same amount of goods in store X. 
D) none of the statements associated with this question are correct.

Question 6

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and Px = $10, Py = $20, X = 0, and M = 400?

Accepted Answer

A) 10. 
B) 20. 
C) 5. 
D) 0. 
A) 10. 
B) 20. 
C) 5. 
D) 0.

Question 7

If widgets and gidgets are complements and both are normal goods, then a decrease in the demand for widgets will result from

Accepted Answer

A) an increase in the price of widgets. 
B) a decrease in income. 
C) a decrease in the price of gidgets. 
D) an increase in the price of widgets and a decrease in income. 
A) an increase in the price of widgets. 
B) a decrease in income. 
C) a decrease in the price of gidgets. 
D) an increase in the price of widgets and a decrease in income.

Question 8

Joe consumes 10 units of food and 12 units of clothing.If food is an inferior good, will Joe be indifferent between receiving a $12 gift certificate at a clothing store and receiving $12 in cash? Explain and show graphically.

Accepted Answer

Yes, Joe would be indifferent between re

Question 9

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure.What is the maximum this worker can earn in three (3) days?

Accepted Answer

A) $519. 
B) $417. 
C) $228. 
D) $684. 
A) $519. 
B) $417. 
C) $228. 
D) $684.

Question 10

The substitution effect isolates the change in the consumption of a good caused by:

Accepted Answer

A) the lower "real" income. 
B) the change in consumer preferences. 
C) the change in the market rate of substitution. 
D) none of the statements associated with this question are correct. 
A) the lower "real" income. 
B) the change in consumer preferences. 
C) the change in the market rate of substitution. 
D) none of the statements associated with this question are correct.

Question 11

At a very basic level, food and shelter constitute the two most important goods needed to sustain human life.Accordingly, assume that a poor person must allocate his income solely between food and shelter.
a.Show that if shelter is an inferior good, food must be a normal good.
b.If food is a normal good, is shelter necessarily an inferior good? Explain, and show your answer graphically.

Accepted Answer

a.Let the quantities of food and shelter

Question 12

Suppose that consumers' preferences are well behaved in that properties 4-1 - 4-4 are satisfied.Furthermore, assume that both X and Y are inferior goods and the price of good Y increases.Then the substitution effect will lead consumers to consume

Accepted Answer

A) more of good X and more of good Y. 
B) less of good X and more of good Y. 
C) less of good X and less of good Y. 
D) more of good X and less of good Y. 
A) more of good X and more of good Y. 
B) less of good X and more of good Y. 
C) less of good X and less of good Y. 
D) more of good X and less of good Y.

Question 13

The income effect isolates the change in the consumption of a good caused by the change in:

Accepted Answer

A) "real" income. 
B) relative prices of two goods. 
C) consumer preferences. 
D) none of the statements associated with this question are correct. 
A) "real" income. 
B) relative prices of two goods. 
C) consumer preferences. 
D) none of the statements associated with this question are correct.

Question 14

Given that income is $200 and the price of good Y is $40.What is the vertical intercept of the budget line?

Accepted Answer

A) 8,000. 
B) 20. 
C) 1/5. 
D) 5. 
A) 8,000. 
B) 20. 
C) 1/5. 
D) 5.

Question 15

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and he can use 24 hours per day.What are the maximum total earnings the worker can earn in a day?

Accepted Answer

A) $492. 
B) $392. 
C) $192. 
D) $292. 
A) $492. 
B) $392. 
C) $192. 
D) $292.

Question 16

Suppose a consumer with an income of $100 who is faced with Px = 1 and Py = 1/2.What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)?

Accepted Answer

A) 0.50. 
B) -1.0. 
C) -2.0. 
D) -4.0. 
A) 0.50. 
B) -1.0. 
C) -2.0. 
D) -4.0.

Question 17

Suppose a worker is paid according to the following pay scheme: For every unit produced, the worker gets $8.Assume a worker can produce three units per hour.
a.Express the worker's earnings as a function of hours worked.
b.Graph the equation for earnings.
c.Graphically depict equilibrium, and show the earnings and hours worked by the employee.
d.Do you think that from the firm's point of view, this scheme is better, worse, or the same as paying the worker a wage of $24 per hour? Explain carefully.

Accepted Answer

a.Earnings are $24 t

Question 18

Suppose a consumer derives satisfaction from consuming two types of hamburgers, X and Y.
a.Graph the budget line of the consumer under the assumption that he is offered a "buy two, get one free" deal for burger X (limit one free burger).
b.Graph the budget constraint under the assumption that the producer of burger Y also offers a "buy two, get one free" deal (limit one free burger).
c.Explain in words why each of the above budget constraints looks as it does.
C.After the third one, the deal becomes ineffective for you.Hence, CD has the same slope as AB does.
   Figure 4-13a Figure 4-13b

Accepted Answer

a.In Figure 4-13a, ABCD is the budget li

Question 19

The total earnings of a worker are represented by E = 150 + $12(24 - L), where E is earnings and L is the number of hours of leisure.How much will the worker earn if he takes 16 hours of leisure per day?

Accepted Answer

A) $96. 
B) $246. 
C) $278. 
D) $342. 
A) $96. 
B) $246. 
C) $278. 
D) $342.

Question 20

The upper boundary of the budget set is the:

Accepted Answer

A) indifference curve. 
B) origin. 
C) budget line. 
D) vertical intercept. 
A) indifference curve. 
B) origin. 
C) budget line. 
D) vertical intercept.

The rate at which a consumer is willing to substitute one good for another, while still maintaining a given level of satisfaction is called the

P_XX + P_YY = M is called

What is/are the important things that must be developed when characterizing consumer behavior?

If bundles A, B and C lie on the same indifference curve, then

If a consumer is given a $10 gift certificate, good only for items in store X and all items in store X are normal goods, then the consumer desires to consume

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and P_x = $10, P_y = $20, X = 0, and M = 400?

If widgets and gidgets are complements and both are normal goods, then a decrease in the demand for widgets will result from

Joe consumes 10 units of food and 12 units of clothing.If food is an inferior good, will Joe be indifferent between receiving a $12 gift certificate at a clothing store and receiving $12 in cash? Explain and show graphically.

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure.What is the maximum this worker can earn in three (3) days?

The substitution effect isolates the change in the consumption of a good caused by:

Suppose that consumers' preferences are well behaved in that properties 4-1 - 4-4 are satisfied.Furthermore, assume that both X and Y are inferior goods and the price of good Y increases.Then the substitution effect will lead consumers to consume

The income effect isolates the change in the consumption of a good caused by the change in:

Given that income is $200 and the price of good Y is $40.What is the vertical intercept of the budget line?

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and he can use 24 hours per day.What are the maximum total earnings the worker can earn in a day?

Suppose a consumer with an income of $100 who is faced with P_x = 1 and P_y = 1/2.What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)?

The total earnings of a worker are represented by E = 150 + $12(24 - L), where E is earnings and L is the number of hours of leisure.How much will the worker earn if he takes 16 hours of leisure per day?

The upper boundary of the budget set is the:

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

Exam 4: The Theory of Individual Behavior

The rate at which a consumer is willing to substitute one good for another, while still maintaining a given level of satisfaction is called the

PXX + PYY = M is called

What is/are the important things that must be developed when characterizing consumer behavior?

If bundles A, B and C lie on the same indifference curve, then

If a consumer is given a $10 gift certificate, good only for items in store X and all items in store X are normal goods, then the consumer desires to consume

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and Px = $10, Py = $20, X = 0, and M = 400?

If widgets and gidgets are complements and both are normal goods, then a decrease in the demand for widgets will result from

Joe consumes 10 units of food and 12 units of clothing.If food is an inferior good, will Joe be indifferent between receiving a $12 gift certificate at a clothing store and receiving $12 in cash? Explain and show graphically.

Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure.What is the maximum this worker can earn in three (3) days?

The substitution effect isolates the change in the consumption of a good caused by:

Suppose that consumers' preferences are well behaved in that properties 4-1 - 4-4 are satisfied.Furthermore, assume that both X and Y are inferior goods and the price of good Y increases.Then the substitution effect will lead consumers to consume

The income effect isolates the change in the consumption of a good caused by the change in:

Given that income is $200 and the price of good Y is $40.What is the vertical intercept of the budget line?

Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per day, and he can use 24 hours per day.What are the maximum total earnings the worker can earn in a day?

Suppose a consumer with an income of $100 who is faced with Px = 1 and Py = 1/2.What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)?

The total earnings of a worker are represented by E = 150 + $12(24 - L), where E is earnings and L is the number of hours of leisure.How much will the worker earn if he takes 16 hours of leisure per day?

The upper boundary of the budget set is the:

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

P_XX + P_YY = M is called

What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and P_x = $10, P_y = $20, X = 0, and M = 400?

Suppose a consumer with an income of $100 who is faced with P_x = 1 and P_y = 1/2.What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)?