Question 1

Which of the following is likely to occur if a consumer's income declines with no change in the price level?

Accepted Answer

A) The consumer will shift to a lower indifference curve. 
B) The consumer will consume fewer amounts of the inferior good. 
C) The consumer's real income will increase. 
D) The income effect on consumption will be zero. 
A) The consumer will shift to a lower indifference curve. 
B) The consumer will consume fewer amounts of the inferior good. 
C) The consumer's real income will increase. 
D) The income effect on consumption will be zero. A

Question 2

The substitution effect is the change in consumption due to:

Accepted Answer

A) a change in relative prices. 
B) a change in income. 
C) a change in utility. 
D) a change in the availability of complements. 
A) a change in relative prices. 
B) a change in income. 
C) a change in utility. 
D) a change in the availability of complements. A

Question 3

Limitations of using experimentation to estimate demand elasticities include:

Accepted Answer

A) difficulty in determining which product's elasticity to estimate. 
B) difficulty in isolating the impact of price from all other factors affecting demand. 
C) difficulty in getting customers to buy the product whose elasticity is being estimated. 
D) difficulty in being able to filter out valid facts from the information set. 
A) difficulty in determining which product's elasticity to estimate. 
B) difficulty in isolating the impact of price from all other factors affecting demand. 
C) difficulty in getting customers to buy the product whose elasticity is being estimated. 
D) difficulty in being able to filter out valid facts from the information set. B

Question 4

The estimated demand function for ice cream cones,   ,is based on a sample of 50 children.If the price of an ice cream cone increases by $1,by how much does the quantity demanded of ice cream cones change on average?

Accepted Answer

A) Quantity demanded increases by 5.3 
B) Quantity demanded decreases by 5.3 
C) Quantity demanded decreases by 2.4 
D) Quantity demanded increases by 2.4 
A) Quantity demanded increases by 5.3 
B) Quantity demanded decreases by 5.3 
C) Quantity demanded decreases by 2.4 
D) Quantity demanded increases by 2.4

Question 5

Use the following chart to complete this exercise.Q represents the quantity demanded and P represents the price level. $$\begin{array} { | c | c | } 
\hline \mathrm { Q } & \mathrm { P } \
\hline 48 & \$ 0.05 \
\hline 46 & \$ 0.10 \
\hline 41 & \$ 0.15 \
\hline 40 & \$ 0.20 \
\hline 33 & \$ 0.25 \
\hline 26 & \$ 0.30 \
\hline 24 & \$ 0.35 \
\hline 17 & \$ 0.40 \
\hline 9 & \$ 0.45 \
\hline 4 & \$ 0.50 \
\hline
\end{array}$$ 
A)Graph the data using a spreadsheet such as Microsoft Excel or Apple Numbers.

Accepted Answer

Using the coefficient for P in our regre

Question 6

Positive network effects are often viewed as a two-edged sword for firms because they:

Accepted Answer

A) increase the probability of higher market share,but make it easier to raise prices. 
B) increase the probability of lower market share,while making it easier to raise prices. 
C) increase the probability of higher market share,but limit the ability to raise prices. 
D) decrease the probability of higher market share,but make it easier to raise prices. 
A) increase the probability of higher market share,but make it easier to raise prices. 
B) increase the probability of lower market share,while making it easier to raise prices. 
C) increase the probability of higher market share,but limit the ability to raise prices. 
D) decrease the probability of higher market share,but make it easier to raise prices.

Question 7

Which of the following is true of a consumer's demand curve?

Accepted Answer

A) Consumer's income successively decreases up along the demand curve. 
B) Tastes and preferences for the good change along the demand curve. 
C) The distance from the horizontal axis equals the marginal rate of substitution. 
D) The price elasticity of demand is generally greater than one. 
A) Consumer's income successively decreases up along the demand curve. 
B) Tastes and preferences for the good change along the demand curve. 
C) The distance from the horizontal axis equals the marginal rate of substitution. 
D) The price elasticity of demand is generally greater than one.

Question 8

U = C$\alpha$M$\alpha$-1 is an example of a:

Accepted Answer

A) Cobb-Douglas production function. 
B) Cobb-Douglas utility function. 
C) quadratic utility function. 
D) quadratic production function. 
A) Cobb-Douglas production function. 
B) Cobb-Douglas utility function. 
C) quadratic utility function. 
D) quadratic production function.

Question 9

Suppose we measure good X on the horizontal axis and other goods on the vertical axis.When the price-consumption curve for good X is:

Accepted Answer

A) upward-sloping,total expenditure on the good is increasing as the price falls. 
B) downward-sloping,total expenditure on other goods is increasing as the price falls. 
C) upward-sloping,total expenditure on the good is decreasing as the price falls. 
D) upward-sloping,total expenditure on other goods is decreasing as the price falls. 
A) upward-sloping,total expenditure on the good is increasing as the price falls. 
B) downward-sloping,total expenditure on other goods is increasing as the price falls. 
C) upward-sloping,total expenditure on the good is decreasing as the price falls. 
D) upward-sloping,total expenditure on other goods is decreasing as the price falls.

Question 10

From which of the following can we derive a consumer's demand curve for a commodity?

Accepted Answer

A) Isoquants 
B) Price-consumption curve 
C) Production-possibility frontier 
D) Contract curve 
A) Isoquants 
B) Price-consumption curve 
C) Production-possibility frontier 
D) Contract curve

Question 11

At the price of $3,consumers A,B,C,and D demand 10 units,12 units,14 units,and 8 units of commodity A respectively.Calculate the market demand for commodity A at $3 assuming that A,B,C,and D are the only four consumers of this product.

Accepted Answer

A) 44 units 
B) 12 units 
C) 960 units 
D) 36 units 
A) 44 units 
B) 12 units 
C) 960 units 
D) 36 units

Question 12

At every point on a demand curve,the height of the demand curve indicates:

Accepted Answer

A) the total benefit of the good to the consumer. 
B) the minimum price the consumer is willing to pay for the good. 
C) the consumer's utility level. 
D) the marginal rate of substitution. 
A) the total benefit of the good to the consumer. 
B) the minimum price the consumer is willing to pay for the good. 
C) the consumer's utility level. 
D) the marginal rate of substitution.

Question 13

The difference between an inferior good and a Giffen good is that:

Accepted Answer

A) the substitution effect of a price increase raises consumption for a Giffen good but decreases consumption of an inferior good. 
B) the income effect is larger than the substitution effect for a Giffen good but is smaller than the substitution effect for the inferior good. 
C) the income effect is smaller than the substitution effect for a Giffen good but is larger than the substitution effect for the inferior good. 
D) a Giffen good is a special case of a normal good and is therefore quite different from an inferior good. 
A) the substitution effect of a price increase raises consumption for a Giffen good but decreases consumption of an inferior good. 
B) the income effect is larger than the substitution effect for a Giffen good but is smaller than the substitution effect for the inferior good. 
C) the income effect is smaller than the substitution effect for a Giffen good but is larger than the substitution effect for the inferior good. 
D) a Giffen good is a special case of a normal good and is therefore quite different from an inferior good.

Question 14

The bandwagon effect causes the market demand to become:

Accepted Answer

A) relatively more elastic. 
B) relatively less elastic. 
C) perfectly inelastic. 
D) unit elastic. 
A) relatively more elastic. 
B) relatively less elastic. 
C) perfectly inelastic. 
D) unit elastic.

Question 15

When the substitution effect of a price change that is positive is greater than the income effect that is negative:

Accepted Answer

A) the good is an inferior good. 
B) the good is a Giffen good. 
C) the good is a normal good. 
D) the good has no substitute. 
A) the good is an inferior good. 
B) the good is a Giffen good. 
C) the good is a normal good. 
D) the good has no substitute.

Question 16

Ceteris paribus,when the price of a normal good increases,consumer surplus:

Accepted Answer

A) decreases. 
B) increases. 
C) does not change. 
D) may increase,decrease,or remain the same. 
A) decreases. 
B) increases. 
C) does not change. 
D) may increase,decrease,or remain the same.

Question 17

If there are only two goods,coffee and donuts,and coffee is an inferior good for a consumer,then:

Accepted Answer

A) the consumer does not value an extra unit of coffee in terms of donuts. 
B) a price increase for coffee leads to a higher level of well-being. 
C) donuts cannot be an inferior good. 
D) donuts can be an inferior good but not a Giffen good. 
A) the consumer does not value an extra unit of coffee in terms of donuts. 
B) a price increase for coffee leads to a higher level of well-being. 
C) donuts cannot be an inferior good. 
D) donuts can be an inferior good but not a Giffen good.

Question 18

(
A)Draw a diagram of an individual's consumption decision between xylophones (put it on the x-axis)and yo-yo's (put it on the y-axis).Now assume the price of Yo-yo decreases.Graphically decompose the total change in demand into the income and substitution effects such that yo-yo's are inferior but not a Giffen good.
Explain the movements between your initial consumption bundle (call it point
A),the intermediate bundle (point
B),and the final consumption bundle (point
C).

Accepted Answer

Because the demand for xylophones increa

Question 19

Assume that peanut butter is an inferior good.Which of the following best describes the income and substitution effects as the price of peanut butter rises?

Accepted Answer

A) The substitution effect leads the consumer to buy more peanut butter while the income effect would cause the consumer to purchase less. 
B) Both the income and substitution effects would cause the consumer to purchase less peanut butter,although the substitution effect is larger. 
C) Both the substitution and income effects would cause the consumer to purchase more peanut butter. 
D) The substitution effect causes the consumer to buy less peanut butter while the income effect causes the consumer to purchase more. 
A) The substitution effect leads the consumer to buy more peanut butter while the income effect would cause the consumer to purchase less. 
B) Both the income and substitution effects would cause the consumer to purchase less peanut butter,although the substitution effect is larger. 
C) Both the substitution and income effects would cause the consumer to purchase more peanut butter. 
D) The substitution effect causes the consumer to buy less peanut butter while the income effect causes the consumer to purchase more.

Question 20

In case of a normal good,the income and substitution effects:

Accepted Answer

A) always work together and both tend to make the demand curve downward sloping. 
B) always work in the opposite direction to one another. 
C) just offset each other. 
D) work together,both tending to make the demand curve upward sloping. 
A) always work together and both tend to make the demand curve downward sloping. 
B) always work in the opposite direction to one another. 
C) just offset each other. 
D) work together,both tending to make the demand curve upward sloping.

Which of the following is likely to occur if a consumer's income declines with no change in the price level?

The substitution effect is the change in consumption due to:

Limitations of using experimentation to estimate demand elasticities include:

The estimated demand function for ice cream cones, ,is based on a sample of 50 children.If the price of an ice cream cone increases by $1,by how much does the quantity demanded of ice cream cones change on average?

Use the following chart to complete this exercise.Q represents the quantity demanded and P represents the price level. 48 \ 0.05 46 \ 0.10 41 \ 0.15 40 \ 0.20 33 \ 0.25 26 \ 0.30 24 \ 0.35 17 \ 0.40 9 \ 0.45 4 \ 0.50 A)Graph the data using a spreadsheet such as Microsoft Excel or Apple Numbers.

Positive network effects are often viewed as a two-edged sword for firms because they:

Which of the following is true of a consumer's demand curve?

U = C^$\alpha$M^$\alpha$^-1 is an example of a:

Suppose we measure good X on the horizontal axis and other goods on the vertical axis.When the price-consumption curve for good X is:

From which of the following can we derive a consumer's demand curve for a commodity?

At the price of $3,consumers A,B,C,and D demand 10 units,12 units,14 units,and 8 units of commodity A respectively.Calculate the market demand for commodity A at $3 assuming that A,B,C,and D are the only four consumers of this product.

At every point on a demand curve,the height of the demand curve indicates:

The difference between an inferior good and a Giffen good is that:

The bandwagon effect causes the market demand to become:

When the substitution effect of a price change that is positive is greater than the income effect that is negative:

Ceteris paribus,when the price of a normal good increases,consumer surplus:

If there are only two goods,coffee and donuts,and coffee is an inferior good for a consumer,then:

Assume that peanut butter is an inferior good.Which of the following best describes the income and substitution effects as the price of peanut butter rises?

In case of a normal good,the income and substitution effects:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 4: Individual and Market Demand

Which of the following is likely to occur if a consumer's income declines with no change in the price level?

The substitution effect is the change in consumption due to:

Limitations of using experimentation to estimate demand elasticities include:

The estimated demand function for ice cream cones, ,is based on a sample of 50 children.If the price of an ice cream cone increases by $1,by how much does the quantity demanded of ice cream cones change on average?

Use the following chart to complete this exercise.Q represents the quantity demanded and P represents the price level. 48 \ 0.05 46 \ 0.10 41 \ 0.15 40 \ 0.20 33 \ 0.25 26 \ 0.30 24 \ 0.35 17 \ 0.40 9 \ 0.45 4 \ 0.50 A)Graph the data using a spreadsheet such as Microsoft Excel or Apple Numbers.

Positive network effects are often viewed as a two-edged sword for firms because they:

Which of the following is true of a consumer's demand curve?

U = C α\alphaα M α\alphaα -1 is an example of a:

Suppose we measure good X on the horizontal axis and other goods on the vertical axis.When the price-consumption curve for good X is:

From which of the following can we derive a consumer's demand curve for a commodity?

At the price of $3,consumers A,B,C,and D demand 10 units,12 units,14 units,and 8 units of commodity A respectively.Calculate the market demand for commodity A at $3 assuming that A,B,C,and D are the only four consumers of this product.

At every point on a demand curve,the height of the demand curve indicates:

The difference between an inferior good and a Giffen good is that:

The bandwagon effect causes the market demand to become:

When the substitution effect of a price change that is positive is greater than the income effect that is negative:

Ceteris paribus,when the price of a normal good increases,consumer surplus:

If there are only two goods,coffee and donuts,and coffee is an inferior good for a consumer,then:

Assume that peanut butter is an inferior good.Which of the following best describes the income and substitution effects as the price of peanut butter rises?

In case of a normal good,the income and substitution effects:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

U = C^$\alpha$M^$\alpha$^-1 is an example of a: