Question 1

Assume that as the price of good X rises,the demand for good Z shifts outward.On the basis of this information we can conclude that:

Accepted Answer

A) good Z is inferior. 
B) goods X and Z are complements. 
C) goods X and Z are substitutes. 
D) good X is an input used in the production of Z. 
A) good Z is inferior. 
B) goods X and Z are complements. 
C) goods X and Z are substitutes. 
D) good X is an input used in the production of Z.

Question 2

If the price-consumption curve for X is entirely downward sloping,it implies:

Accepted Answer

A) the price elasticity of demand for X is greater than one. 
B) the price elasticity of demand for X is less than one. 
C) X is an inferior good. 
D) the price elasticity of demand for X is equal to one. 
A) the price elasticity of demand for X is greater than one. 
B) the price elasticity of demand for X is less than one. 
C) X is an inferior good. 
D) the price elasticity of demand for X is equal to one.

Question 3

A market demand curve for a commodity may be obtained by:

Accepted Answer

A) dividing the total quantity demanded by all consumers by the price level. 
B) dividing the total price paid by the consumers by the number of consumers. 
C) adding the prices along individual demand curves for given quantities. 
D) adding the quantities along individual demand curves for given prices. 
A) dividing the total quantity demanded by all consumers by the price level. 
B) dividing the total price paid by the consumers by the number of consumers. 
C) adding the prices along individual demand curves for given quantities. 
D) adding the quantities along individual demand curves for given prices.

Question 4

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 5

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.

Question 6

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 7

Assume that the quantity of film is plotted on the horizontal axis and all other goods plotted on the vertical axis.For the range in which the price-consumption curve is upward sloping,the price elasticity of demand for film:

Accepted Answer

A) is elastic. 
B) is inelastic. 
C) is unit-elastic. 
D) cannot be determined without additional information. 
A) is elastic. 
B) is inelastic. 
C) is unit-elastic. 
D) cannot be determined without additional information.

Question 8

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 9

The individual demand curve for a commodity is given by the equation P = X - Q/2,where X is the choke price (price at which quantity demanded is zero).Derive the consumer surplus when the price of the commodity is $5 and X = 10.Using the same demand equation,determine how the consumer surplus will change if price falls to $3 per unit.

Accepted Answer

When the choke price is 10 and price is

Question 10

Mariana has a preference for exquisite handcrafted jade ornaments imported from Japan.She displays her possessions at social gatherings and feels proud when her friends compliment her on the same.When approached by her friends for the source of these ornaments she indirectly refuses to reveal it by diverting the conversation to other things.She feels that once her friends start purchasing similar ornaments the exclusivity of her collection will be lost.Explain Mariana's behavior within the context of the demand theory.

Accepted Answer

Mariana's behavior can be explained in t

Question 11

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 12

Suppose there are 20 identical consumers in a market,each with demand curve given by P = 100 - 4Qi,where P is price per unit and Qi is the number of units demanded by the ith consumer.What is the equation for the market demand curve?

Accepted Answer

Market demand is the horizontal summatio

Question 13

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 14

For two goods which are perfect complements,the substitution effect of a price decrease is:

Accepted Answer

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

Question 15

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 16

A demand curve will have a positive slope when:

Accepted Answer

A) the good is an inferior good. 
B) the income effect of a price change outweighs the substitution effect. 
C) there are no substitutes for the good. 
D) the good can be consumed only with some other good. 
A) the good is an inferior good. 
B) the income effect of a price change outweighs the substitution effect. 
C) there are no substitutes for the good. 
D) the good can be consumed only with some other good.

Question 17

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 18

Which of the following is true of inferior goods?

Accepted Answer

A) They are typically cheaper compared to other goods. 
B) They usually do not have complements. 
C) They are narrowly defined goods facing higher-quality substitutes. 
D) They are broadly defined goods facing higher-quality substitutes. 
A) They are typically cheaper compared to other goods. 
B) They usually do not have complements. 
C) They are narrowly defined goods facing higher-quality substitutes. 
D) They are broadly defined goods facing higher-quality substitutes.

Question 19

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 20

Which of the following statements provides the best example of consumer surplus?

Accepted Answer

A) "Drinking that bottle of soda increased my happiness by $10." 
B) "John gave me $5 for the watermelon even though it cost me only $2." 
C) "I paid $20 for this shirt for which I would have paid up to $40." 
D) "I refuse to pay $30 for their steak dinner;it's highly overpriced." 
A) "Drinking that bottle of soda increased my happiness by $10." 
B) "John gave me $5 for the watermelon even though it cost me only $2." 
C) "I paid $20 for this shirt for which I would have paid up to $40." 
D) "I refuse to pay $30 for their steak dinner;it's highly overpriced."

Assume that as the price of good X rises,the demand for good Z shifts outward.On the basis of this information we can conclude that:

If the price-consumption curve for X is entirely downward sloping,it implies:

A market demand curve for a commodity may be obtained by:

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

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

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.

Assume that the quantity of film is plotted on the horizontal axis and all other goods plotted on the vertical axis.For the range in which the price-consumption curve is upward sloping,the price elasticity of demand for film:

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

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:

Suppose there are 20 identical consumers in a market,each with demand curve given by P = 100 - 4Q_i,where P is price per unit and Q_i is the number of units demanded by the i^th consumer.What is the equation for the market demand curve?

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

For two goods which are perfect complements,the substitution effect of a price decrease is:

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

A demand curve will have a positive slope when:

Which of the following describes the bandwagon effect?

Which of the following is true of inferior goods?

Which of the following is true of a Giffen good?

Which of the following statements provides the best example of consumer surplus?

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

Assume that as the price of good X rises,the demand for good Z shifts outward.On the basis of this information we can conclude that:

If the price-consumption curve for X is entirely downward sloping,it implies:

A market demand curve for a commodity may be obtained by:

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

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

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.

Assume that the quantity of film is plotted on the horizontal axis and all other goods plotted on the vertical axis.For the range in which the price-consumption curve is upward sloping,the price elasticity of demand for film:

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

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:

Suppose there are 20 identical consumers in a market,each with demand curve given by P = 100 - 4Qi,where P is price per unit and Qi is the number of units demanded by the ith consumer.What is the equation for the market demand curve?

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

For two goods which are perfect complements,the substitution effect of a price decrease is:

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

A demand curve will have a positive slope when:

Which of the following describes the bandwagon effect?

Which of the following is true of inferior goods?

Which of the following is true of a Giffen good?

Which of the following statements provides the best example of consumer surplus?

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

Suppose there are 20 identical consumers in a market,each with demand curve given by P = 100 - 4Q_i,where P is price per unit and Q_i is the number of units demanded by the i^th consumer.What is the equation for the market demand curve?