Question 1

A decrease in income pivots the budget line around the bundle initially consumed.

Accepted Answer

A) True 
 B)False  False

Question 2

Eduardo spends his entire income on 9 sacks of acorns and 4 crates of butternuts. The price of acorns is 6 dollars per sack and his income is 90 dollars. He can just afford a commodity bundle with A sacks of acorns and B crates of butternuts that satisfies the budget equation

Accepted Answer

A)  6A + 13B = 92. 
B)  12A + 18B = 180. 
C)  8A + 9B = 90. 
D)  6A + 11B = 90. 
E)  None of the above. 
A)  6A + 13B = 92. 
B)  12A + 18B = 180. 
C)  8A + 9B = 90. 
D)  6A + 11B = 90. 
E)  None of the above. B

Question 3

Quincy lives on pretzels and seafood salads. The price of pretzels is 1 dollar per bag and the price of seafood salads is 2 dollars each. Quincy allows himself to spend no more than 14 dollars a day on food. He also restricts his consumption to 3,400 calories per day. There are 600 calories in a bag of pretzels and 200 calories in a seafood salad. If he spends his entire money budget each day and consumes no more calories than his calorie limit, he can consume up to

Accepted Answer

A)  2 bags of pretzels per day but no more. 
B)  5 seafood salads per day but no more. 
C)  4 bags of pretzels per day but no more. 
D)  5 bags of pretzels per day but no more. 
E)  None of the above. 
A)  2 bags of pretzels per day but no more. 
B)  5 seafood salads per day but no more. 
C)  4 bags of pretzels per day but no more. 
D)  5 bags of pretzels per day but no more. 
E)  None of the above. C

Question 4

If you could exactly afford either 5 units of x and 21 units of y, or 9 units of x and 5 units of y, then if you spent all of your income on y, how many units of y could you buy?

Accepted Answer

A)  57 
B)  14 
C)  25 
D)  41 
E)  None of the above. 
A)  57 
B)  14 
C)  25 
D)  41 
E)  None of the above.

Question 5

Harold lives on Doritos and seafood salads. The price of Doritos is 1 dollar per bag and the price of seafood salads is 2 dollars each. Harold allows himself to spend no more than 11 dollars a day on food. He also restricts his consumption to 6,500 calories per day. There are 1,500 calories in a bag of Doritos and 500 calories in a seafood salad. If he spends his entire money budget each day and consumes no more calories than his calorie limit, he can consume up to

Accepted Answer

A)  3 bags of Doritos per day but no more. 
B)  1 bag of Doritos per day but no more. 
C)  4 seafood salads per day but no more. 
D)  4 bags of Doritos per day but no more. 
E)  None of the above. 
A)  3 bags of Doritos per day but no more. 
B)  1 bag of Doritos per day but no more. 
C)  4 seafood salads per day but no more. 
D)  4 bags of Doritos per day but no more. 
E)  None of the above.

Question 6

If she spends all of her income on uglifruits and breadfruits, Maria can just afford 11 uglifruits and 4 breadfruits per day. She could also use her entire budget to buy 3 uglifruits and 8 breadfruits per day. The price of uglifruits is 6 pesos each. How much is Maria's income per day?

Accepted Answer

A)  115 pesos 
B)  105 pesos 
C)  114 pesos 
D)  119 pesos 
E)  None of the above. 
A)  115 pesos 
B)  105 pesos 
C)  114 pesos 
D)  119 pesos 
E)  None of the above.

Question 7

Your budget constraint for the two goods A and B is 8A + 4B = I, where I is your income. You are currently consuming more than 18 units of B. In order to get 3 more units of A, how many units of B would you have to give up?

Accepted Answer

A)  6 
B)  0.50 
C)  0.17 
D)  2 
E)  None of the above. 
A)  6 
B)  0.50 
C)  0.17 
D)  2 
E)  None of the above.

Question 8

In year 1, the price of good x was $4, the price of good y was $1, and income was $70. In year 2, the price of x was $9, the price of good y was $2, and income was $70. On a graph with x on the horizontal axis and y on the vertical, the new budget line is

Accepted Answer

A)  steeper than the old one and lies below it. 
B)  steeper than the old one and lies above it. 
C)  flatter than the old one and lies below it. 
D)  flatter than the old one and lies above it. 
E)  None of the above. 
A)  steeper than the old one and lies below it. 
B)  steeper than the old one and lies above it. 
C)  flatter than the old one and lies below it. 
D)  flatter than the old one and lies above it. 
E)  None of the above.

Question 9

If you spent your entire income, you could afford either 3 units of x and 9 units of y or 9 units of x and 3 units of y. If you spent your entire income on x, how many units of x could you buy?

Accepted Answer

A)  21 
B)  16 
C)  12 
D)  There is not enough information to determine the number of x. 
E)  None of the above. 
A)  21 
B)  16 
C)  12 
D)  There is not enough information to determine the number of x. 
E)  None of the above.

Question 10

This weekend, Martha has time to read 40 pages of economics and 30 pages of sociology. Alternatively, she could read 30 pages of economics and 50 pages of sociology. Which of these equations describes all combinations of pages of economics, E, and sociology, S, that she could read over the weekend?

Accepted Answer

A)  E + S = 70. 
B)  E/2+S=50 
C)  2E + S = 110. 
D)  E + S = 80. 
E)  All of the above. 
A)  E + S = 70. 
B)  E/2+S=50 
C)  2E + S = 110. 
D)  E + S = 80. 
E)  All of the above.

Question 11

This weekend, Martha has time to read 40 pages of economics and 30 pages of sociology. Alternatively, she could read 10 pages of economics and 90 pages of sociology. Which of these equations describes all combinations of pages of economics, E, and sociology, S, that she could read over the weekend?

Accepted Answer

A)  E/2+S=50 
B)  E + S = 100. 
C)  E + S = 70. 
D)  2E + S = 110. 
E)  All of the above. 
A)  E/2+S=50 
B)  E + S = 100. 
C)  E + S = 70. 
D)  2E + S = 110. 
E)  All of the above.

Question 12

Clara spends her entire budget and consumes 5 units of x and 13 units of y. The price of x is twice the price of y. Her income doubles and the price of y doubles, but the price of x stays the same. If she continues to buy 13 units of y, what is the largest number of units of x that she can afford?

Accepted Answer

A)  10 
B)  5 
C)  12 
D)  14 
E)  There is not enough information to say. 
A)  10 
B)  5 
C)  12 
D)  14 
E)  There is not enough information to say.

Question 13

Ed Moore and his family live in a city with many private schools and one public school. The Moores are thinking of sending their only child to private school because they would like a school that has more teachers and other resources per student than the local public school. The Moores must pay taxes to support local public schools whether or not their child goes to private school. There is such a variety of private schools that the Moores can get just about any level of inputs per student by choosing the appropriate private school. Tuition in the private schools equals expenditure per student. Draw a diagram to show the Moores' budget constraint. Put expenditures per student in the child's school on the horizontal axis and other goods on the vertical.

Accepted Answer

One point is (x, d), where x i

Question 14

A consumer prefers more to less of every good. Her income rises, and the price of one of the goods falls while other prices stay constant. These changes must have made her better off.

Accepted Answer

A) True 
 B)False

Question 15

Deadly Serious, II, studying for his M.B.A., consumes only two goods, Wheaties and pens. Each pen costs $1. Each box of Wheaties costs $2 but has a free pen inside. Pens can be discarded at no cost. If we draw Serious's budget set with pens plotted on the horizontal axis, then his budget set will be bounded by two line segments with slopes

Accepted Answer

A)  zero and -1. 
B)  zero and-2. 
C)  zero and -0.5. 
D)  zero and infinity. 
E)  zero and +2. 
A)  zero and -1. 
B)  zero and-2. 
C)  zero and -0.5. 
D)  zero and infinity. 
E)  zero and +2.

Question 16

Felicity is studying economics and political science. She can read 30 pages of political science per hour but only 5 pages of economics per hour. This week she has a 50-page assignment in economics and a 150-page assignment in political science. Because of sorority rush, she cannot devote more than 10 hours to studying these subjects this week. She realizes she cannot complete all of her assignments but is determined to complete at least 30 pages of her economics reading. Draw a graph with pages of economics on the horizontal axis and pages of political science on the vertical axis. On this graph, show the possibilities that are consistent with the constraints that Felicity has imposed on herself. (She is allowed to read ahead in either subject.) Label key points on your graph with their numerical values.

Accepted Answer

Anything in the tria

Question 17

Brenda likes hot dogs and Coca-Cola. Hot dogs cost $1 each and Cokes cost $.50 per bottle. There is a special promotion for Coke that will last for one month. If Brenda sends in the bottle tops from the Cokes she drinks during the next month, she will get a refund of $.20 for every bottlecap beyond the first 12 that she returns. For example, if she returns 25 bottle caps she will get back $2.60 = $.20(25 - 12). Brenda has $40 to spend on hot dogs and Coke during the next month. Draw her budget line with Coke on the horizontal axis and hot dogs on the vertical axis. Find the points where the budget line hits the axes and the point where it has a kink. At each of these three points write down the quantities of each good consumed.

Accepted Answer

The budget line runs from (0,

Question 18

Ads in a slick business magazine are read by 300 lawyers and 1,000 M.B.A.s. Ads in a consumer publication are read by 250 lawyers and 300 M.B.A.s. If Harry had $3,750 to spend on advertising, the price of ads in the business magazine were $500, and the price of ads in the consumer magazine were $250, then the combinations of M.B.A.s and lawyers whom he could reach with his advertising budget would be represented by the integer values along a line segment that runs between the two points

Accepted Answer

A)  (4, 500, 0) and (0, 9, 000). 
B)  (3, 750, 4, 500) and (2, 250, 7, 500). 
C)  (0, 4, 500) and (2, 250, 0). 
D)  (4, 500, 5, 250) and (2, 250, 9, 000). 
E)  (3, 000, 0) and (0, 7, 500). 
A)  (4, 500, 0) and (0, 9, 000). 
B)  (3, 750, 4, 500) and (2, 250, 7, 500). 
C)  (0, 4, 500) and (2, 250, 0). 
D)  (4, 500, 5, 250) and (2, 250, 9, 000). 
E)  (3, 000, 0) and (0, 7, 500).

Question 19

Edmund must pay $6 each for punk rock video cassettes, V. If Edmund is paid $24 per sack for accepting garbage, G, and if his relatives send him an allowance of $96, then his budget line is described by the equation

Accepted Answer

A)  6V = 24G. 
B)  6V + 24G = 96. 
C)  6V = 96 - G. 
D)  6V - 24G = 96. 
E)  None of the above. 
A)  6V = 24G. 
B)  6V + 24G = 96. 
C)  6V = 96 - G. 
D)  6V - 24G = 96. 
E)  None of the above.

Question 20

If all prices are doubled and money income is left the same, the budget set does not change because relative prices do not change.

Accepted Answer

A) True 
 B)False

Exam 1: Budget Constraint

A decrease in income pivots the budget line around the bundle initially consumed.

Eduardo spends his entire income on 9 sacks of acorns and 4 crates of butternuts. The price of acorns is 6 dollars per sack and his income is 90 dollars. He can just afford a commodity bundle with A sacks of acorns and B crates of butternuts that satisfies the budget equation

If you could exactly afford either 5 units of x and 21 units of y, or 9 units of x and 5 units of y, then if you spent all of your income on y, how many units of y could you buy?

If she spends all of her income on uglifruits and breadfruits, Maria can just afford 11 uglifruits and 4 breadfruits per day. She could also use her entire budget to buy 3 uglifruits and 8 breadfruits per day. The price of uglifruits is 6 pesos each. How much is Maria's income per day?

Your budget constraint for the two goods A and B is 8A + 4B = I, where I is your income. You are currently consuming more than 18 units of B. In order to get 3 more units of A, how many units of B would you have to give up?

In year 1, the price of good x was $4, the price of good y was $1, and income was $70. In year 2, the price of x was $9, the price of good y was $2, and income was $70. On a graph with x on the horizontal axis and y on the vertical, the new budget line is

If you spent your entire income, you could afford either 3 units of x and 9 units of y or 9 units of x and 3 units of y. If you spent your entire income on x, how many units of x could you buy?

This weekend, Martha has time to read 40 pages of economics and 30 pages of sociology. Alternatively, she could read 30 pages of economics and 50 pages of sociology. Which of these equations describes all combinations of pages of economics, E, and sociology, S, that she could read over the weekend?

This weekend, Martha has time to read 40 pages of economics and 30 pages of sociology. Alternatively, she could read 10 pages of economics and 90 pages of sociology. Which of these equations describes all combinations of pages of economics, E, and sociology, S, that she could read over the weekend?

Clara spends her entire budget and consumes 5 units of x and 13 units of y. The price of x is twice the price of y. Her income doubles and the price of y doubles, but the price of x stays the same. If she continues to buy 13 units of y, what is the largest number of units of x that she can afford?

A consumer prefers more to less of every good. Her income rises, and the price of one of the goods falls while other prices stay constant. These changes must have made her better off.

Edmund must pay $6 each for punk rock video cassettes, V. If Edmund is paid $24 per sack for accepting garbage, G, and if his relatives send him an allowance of $96, then his budget line is described by the equation

If all prices are doubled and money income is left the same, the budget set does not change because relative prices do not change.

A: Budget Constraint

Preferences

A: Preferences

Utility

A: Utility

Choice

A: Choice

Demand

A: Demand

Revealed Preference

A: Revealed Preference

Slutsky Equation

A: Slutsky Equation

Buying and Selling

A: Buying and Selling

Intertemporal Choice

A: Intertemporal Choice

Asset Markets

A: Asset Markets

Uncertainty

A: Uncertainty

Risky Assets

A: Risky Assets

Consumers Surplus

A: Consumers Surplus

Market Demand

A: Market Demand

Equilibrium

A: Equilibrium

Auctions

A: Auctions

Technology

A: Technology

Profit Maximization

A: Profit Maximization

Cost Minimization

A: Cost Minimization

Cost Curves

A: Cost Curves

Firm Supply

A: Firm Supply

Industry Supply

A: Industry Supply

Monopoly

A: Monopoly

Monopoly Behavior

A: Monopoly Behavior

Factor Markets

A: Factor Markets

Oligopoly

A: Oligopoly

Game Theory

A: Game Theory

Game Applications

A: Game Applications

Behavioral Economics

Exchange

A: Exchange

Production

A: Production

Welfare

A: Welfare

Externalities

A: Externalities

Information Technology

A: Information Technology