Question 1

The demand function for good C is derived from the utility function,U = C$\alpha$M$\alpha$-1 depends upon:

Accepted Answer

A) the consumer's income and the prices of C and M. 
B) the consumer's income and the price of C. 
C) the consumer's income and the price of M. 
D) the prices of both C and M,but not income. 
A) the consumer's income and the prices of C and M. 
B) the consumer's income and the price of C. 
C) the consumer's income and the price of M. 
D) the prices of both C and M,but not income.

Question 2

How does the income effect from the decrease in the price of a good differ from the income effect resulting from an increase in one's income?

Accepted Answer

A) The former moves the consumer to a higher indifference curve but the latter does not. 
B) The latter moves the consumer to a higher indifference curve but the former does not. 
C) With the price change the consumer is on a higher indifference curve but on a lower slope relative to the increase in income. 
D) There is no difference between the two. 
A) The former moves the consumer to a higher indifference curve but the latter does not. 
B) The latter moves the consumer to a higher indifference curve but the former does not. 
C) With the price change the consumer is on a higher indifference curve but on a lower slope relative to the increase in income. 
D) There is no difference between the two.

Question 3

Which of the following is true of a Giffen good?

Accepted Answer

A) It is a special case of an inferior good where the income effect is greater than the substitution effect and runs counter to it. 
B) It is similar to an inferior good,though the income effect is positive and greater than the substitution effect. 
C) It is similar to an inferior good,though the income effect is not as large for the Giffen good as it is for the inferior good. 
D) It is mostly prevalent in developing economies. 
A) It is a special case of an inferior good where the income effect is greater than the substitution effect and runs counter to it. 
B) It is similar to an inferior good,though the income effect is positive and greater than the substitution effect. 
C) It is similar to an inferior good,though the income effect is not as large for the Giffen good as it is for the inferior good. 
D) It is mostly prevalent in developing economies.

Question 4

If the price-consumption curve is downward sloping,then a consumer's total expenditure on the good:

Accepted Answer

A) will become negative as price falls. 
B) will increase as price falls. 
C) will remain unaffected by changes in the price level. 
D) will reduce to zero as price falls. 
A) will become negative as price falls. 
B) will increase as price falls. 
C) will remain unaffected by changes in the price level. 
D) will reduce to zero as price falls.

Question 5

For the same fall in price,the increase in consumer surplus is greater if:

Accepted Answer

A) the good is a Giffen good rather than a normal good. 
B) the good is normal rather than an inferior good. 
C) the good is an inferior good rather than a normal good. 
D) the good is a Giffen good rather than an inferior good. 
A) the good is a Giffen good rather than a normal good. 
B) the good is normal rather than an inferior good. 
C) the good is an inferior good rather than a normal good. 
D) the good is a Giffen good rather than an inferior good.

Question 6

Assume that a market demand curve is constructed from twenty identical individual demand curves.Assume also that at a price of $10,the elasticity of individual demand is 0.5.Then,at this price,the elasticity of the market demand curve derived from these individual demand curves must be:

Accepted Answer

A) 5 
B) any value more than 5.0. 
C) any value less than 5.0. 
D) 0.5. 
A) 5 
B) any value more than 5.0. 
C) any value less than 5.0. 
D) 0.5.

Question 7

Suppose red onions are on the horizontal axis and white onions on the vertical axis.If both are perfect substitutes with two white onions worth one red onion,and the price of red onions falls from four to three times the price of white onions,the consumer:

Accepted Answer

A) decreases her consumption of white onions and increases her consumption of red onions. 
B) increases her consumption of white onions and decreases her consumption of white onions. 
C) moves to a higher indifference curve 
D) makes no change in his/her consumption of onions and experiences no income effect as a result of the price change. 
A) decreases her consumption of white onions and increases her consumption of red onions. 
B) increases her consumption of white onions and decreases her consumption of white onions. 
C) moves to a higher indifference curve 
D) makes no change in his/her consumption of onions and experiences no income effect as a result of the price change.

Question 8

Suppose coffee and cream are perfect,two-for-one complements and Jack spends his budget of $12 per day on these two goods.That is,assume that Jack likes one ounce of cream for every two ounces of coffee.The price of cream is $2 per ounce.The price of coffee is also $2 per ounce.(It's a fancy coffee shop. )
(
A)Graph Jack's budget line and at least two of his indifference curves.
Label the lines appropriately and identify the values of the intercepts.

Accepted Answer

We have F = 2C and F = -2C+6,f

Question 9

For normal goods,the demand curve is:

Accepted Answer

A) always upward sloping. 
B) always downward sloping. 
C) upward sloping only if the income effect is larger than the substitution effect. 
D) downward sloping only if the substitution effect is larger than the income effect. 
A) always upward sloping. 
B) always downward sloping. 
C) upward sloping only if the income effect is larger than the substitution effect. 
D) downward sloping only if the substitution effect is larger than the income effect.

Question 10

For the average consumer,the combination of an excise tax and a tax rebate:

Accepted Answer

A) increases consumption of the taxed good but lowers welfare. 
B) increases consumption of the taxed good and raises welfare. 
C) decreases consumption of the taxed good and lowers welfare. 
D) decreases consumption of the taxed good but raises welfare. 
A) increases consumption of the taxed good but lowers welfare. 
B) increases consumption of the taxed good and raises welfare. 
C) decreases consumption of the taxed good and lowers welfare. 
D) decreases consumption of the taxed good but raises welfare.

Question 11

Suppose the demand for lattes can be estimated using the equation QD=9 - P,if the price is $3 per latte,how much is the consumer surplus?

Accepted Answer

A) $9 
B) $12 
C) $15 
D) $18 
A) $9 
B) $12 
C) $15 
D) $18

Question 12

Which of the following describes the bandwagon effect?

Accepted Answer

A) Sarah bought a new diamond jewelry set to wear at her sister's wedding. 
B) Bob and Harris bought new running shoes from Nike after their friends at the health club started using them. 
C) Allen decided to quit drinking to save more money for his new car. 
D) Bill gifted his friend a home theater system at her wedding. 
A) Sarah bought a new diamond jewelry set to wear at her sister's wedding. 
B) Bob and Harris bought new running shoes from Nike after their friends at the health club started using them. 
C) Allen decided to quit drinking to save more money for his new car. 
D) Bill gifted his friend a home theater system at her wedding.

Question 13

Assume that the price of gasoline falls.Conceptually,if we wish to isolate the substitution effect of the price change we must:

Accepted Answer

A) place the consumer at a new indifference curve with new relative prices. 
B) place the consumer on the original indifference curve with the original relative prices. 
C) place the consumer on the original indifference curve with the new relative prices. 
D) place the consumer at a new indifference curve with the original relative prices. 
A) place the consumer at a new indifference curve with new relative prices. 
B) place the consumer on the original indifference curve with the original relative prices. 
C) place the consumer on the original indifference curve with the new relative prices. 
D) place the consumer at a new indifference curve with the original relative prices.

Question 14

Which of the following is true of a market demand curve?

Accepted Answer

A) The market demand curve will always slope upward when the good in question is a normal good. 
B) When the individual demand curves slope downward,the market demand curve also slopes downward. 
C) The vertical summation of the individual demand curves gives the market demand curve. 
D) The market demand curve is typically unaffected by the factors that affect an individual demand curve. 
A) The market demand curve will always slope upward when the good in question is a normal good. 
B) When the individual demand curves slope downward,the market demand curve also slopes downward. 
C) The vertical summation of the individual demand curves gives the market demand curve. 
D) The market demand curve is typically unaffected by the factors that affect an individual demand curve.

Question 15

A network effect exists when an individual consumer's demand for a good is affected by other individuals':

Accepted Answer

A) incomes. 
B) purchases. 
C) preferences. 
D) consumer surplus. 
A) incomes. 
B) purchases. 
C) preferences. 
D) consumer surplus.

Question 16

The substitution effect causes more consumption of a good at a lower price.When does this statement hold true?

Accepted Answer

A) This statement is true only for Giffen goods. 
B) This statement is sometimes true for inferior goods,but never for normal goods. 
C) This statement is always true for normal goods,but never for inferior goods. 
D) This statement is always true regardless of the type of good. 
A) This statement is true only for Giffen goods. 
B) This statement is sometimes true for inferior goods,but never for normal goods. 
C) This statement is always true for normal goods,but never for inferior goods. 
D) This statement is always true regardless of the type of good.

Question 17

Which of the following is a means of measuring consumer surplus?

Accepted Answer

A) Measuring the area above the supply curve and below the demand curve 
B) Measuring the area above the price and below the demand curve 
C) Measuring the horizontal distance between indifference curves 
D) Measuring the area between the price and the supply curve 
A) Measuring the area above the supply curve and below the demand curve 
B) Measuring the area above the price and below the demand curve 
C) Measuring the horizontal distance between indifference curves 
D) Measuring the area between the price and the supply curve

Question 18

The indifference curve approach to measuring consumer surplus will yield the same answer as the approach using areas under the demand curve if:

Accepted Answer

A) the substitution effect of a price change is zero. 
B) the substitution effect of a price change is larger than the income effect. 
C) the income effect of a price change is larger than the substitution effect. 
D) the income effect of a price change is zero. 
A) the substitution effect of a price change is zero. 
B) the substitution effect of a price change is larger than the income effect. 
C) the income effect of a price change is larger than the substitution effect. 
D) the income effect of a price change is zero.

Question 19

Assume that the excise tax rate on Good Y,an inferior good,is reduced.What would be the total effect of this tax reduction on an individual's consumption?

Accepted Answer

A) The individual's consumption will remain fixed. 
B) The individual's consumption of good Y can either increase or decrease. 
C) The individual's consumption will increase exponentially. 
D) The individual's consumption will increase at a constant rate. 
A) The individual's consumption will remain fixed. 
B) The individual's consumption of good Y can either increase or decrease. 
C) The individual's consumption will increase exponentially. 
D) The individual's consumption will increase at a constant rate.

Question 20

The income effect of a price change:

Accepted Answer

A) is always larger than the substitution effect in the inferior good case. 
B) produces a backward-bending income-consumption curve. 
C) reinforces the substitution effect in the normal good case. 
D) is always positive. 
A) is always larger than the substitution effect in the inferior good case. 
B) produces a backward-bending income-consumption curve. 
C) reinforces the substitution effect in the normal good case. 
D) is always positive.

The demand function for good C is derived from the utility function,U = C^$\alpha$M^$\alpha$^-1 depends upon:

How does the income effect from the decrease in the price of a good differ from the income effect resulting from an increase in one's income?

Which of the following is true of a Giffen good?

If the price-consumption curve is downward sloping,then a consumer's total expenditure on the good:

For the same fall in price,the increase in consumer surplus is greater if:

Assume that a market demand curve is constructed from twenty identical individual demand curves.Assume also that at a price of $10,the elasticity of individual demand is 0.5.Then,at this price,the elasticity of the market demand curve derived from these individual demand curves must be:

Suppose red onions are on the horizontal axis and white onions on the vertical axis.If both are perfect substitutes with two white onions worth one red onion,and the price of red onions falls from four to three times the price of white onions,the consumer:

For normal goods,the demand curve is:

For the average consumer,the combination of an excise tax and a tax rebate:

Suppose the demand for lattes can be estimated using the equation Q_D=9 - P,if the price is $3 per latte,how much is the consumer surplus?

Which of the following describes the bandwagon effect?

Assume that the price of gasoline falls.Conceptually,if we wish to isolate the substitution effect of the price change we must:

Which of the following is true of a market demand curve?

A network effect exists when an individual consumer's demand for a good is affected by other individuals':

The substitution effect causes more consumption of a good at a lower price.When does this statement hold true?

Which of the following is a means of measuring consumer surplus?

The indifference curve approach to measuring consumer surplus will yield the same answer as the approach using areas under the demand curve if:

Assume that the excise tax rate on Good Y,an inferior good,is reduced.What would be the total effect of this tax reduction on an individual's consumption?

The income effect of a price change:

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

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Exam 4: Individual and Market Demand

The demand function for good C is derived from the utility function,U = C α\alphaα M α\alphaα -1 depends upon:

How does the income effect from the decrease in the price of a good differ from the income effect resulting from an increase in one's income?

Which of the following is true of a Giffen good?

If the price-consumption curve is downward sloping,then a consumer's total expenditure on the good:

For the same fall in price,the increase in consumer surplus is greater if:

Assume that a market demand curve is constructed from twenty identical individual demand curves.Assume also that at a price of $10,the elasticity of individual demand is 0.5.Then,at this price,the elasticity of the market demand curve derived from these individual demand curves must be:

Suppose red onions are on the horizontal axis and white onions on the vertical axis.If both are perfect substitutes with two white onions worth one red onion,and the price of red onions falls from four to three times the price of white onions,the consumer:

For normal goods,the demand curve is:

For the average consumer,the combination of an excise tax and a tax rebate:

Suppose the demand for lattes can be estimated using the equation QD=9 - P,if the price is $3 per latte,how much is the consumer surplus?

Which of the following describes the bandwagon effect?

Assume that the price of gasoline falls.Conceptually,if we wish to isolate the substitution effect of the price change we must:

Which of the following is true of a market demand curve?

A network effect exists when an individual consumer's demand for a good is affected by other individuals':

The substitution effect causes more consumption of a good at a lower price.When does this statement hold true?

Which of the following is a means of measuring consumer surplus?

The indifference curve approach to measuring consumer surplus will yield the same answer as the approach using areas under the demand curve if:

Assume that the excise tax rate on Good Y,an inferior good,is reduced.What would be the total effect of this tax reduction on an individual's consumption?

The income effect of a price change:

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

The demand function for good C is derived from the utility function,U = C^$\alpha$M^$\alpha$^-1 depends upon:

Suppose the demand for lattes can be estimated using the equation Q_D=9 - P,if the price is $3 per latte,how much is the consumer surplus?