Question 1

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.

Question 2

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 3

The exponents of a Cobb-Douglas utility function,U = C$\alpha$M$\alpha$-1,represent:

Accepted Answer

A) the share of income devoted to that good. 
B) the rate at which a consumer can trade one good for the other. 
C) the quantity of each good that is demanded. 
D) the amount of utility each good provides. 
A) the share of income devoted to that good. 
B) the rate at which a consumer can trade one good for the other. 
C) the quantity of each good that is demanded. 
D) the amount of utility each good provides.

Question 4

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 5

Suppose you have quantity (Q)on the horizontal axis and price (P)on the vertical axis.After running an ordinary least squares regression you have the following results: Q = 100 - 0.02P.The slope of this equation is:

Accepted Answer

A) 100. 
B) 0.001. 
C) 50. 
D) 0.02. 
A) 100. 
B) 0.001. 
C) 50. 
D) 0.02.

Question 6

Suppose the government levies a tax on sugar at the rate of $0.50 per pound.Then the government returns the tax revenues to a family in the form of a cash grant equivalent to the average tax paid per family.If the family's cash refund just equals the total amount of tax they paid on sugar,which of the following statements would be true?

Accepted Answer

A) The family would consume less sugar and be better off. 
B) The family would consume the same amount of sugar and be worse off. 
C) The family would consume less sugar and be worse off. 
D) The family would consume less sugar but their well-being would remain unchanged. 
A) The family would consume less sugar and be better off. 
B) The family would consume the same amount of sugar and be worse off. 
C) The family would consume less sugar and be worse off. 
D) The family would consume less sugar but their well-being would remain unchanged.

Question 7

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.
b)What is Jack's optimal consumption choice? That is,how many ounces of coffee and cream would maximize his utility?
c)What will be the income and substitution effects of an increase in the price of cream to $4 per ounce?
d)Find Jack's demand curve for cream.Assume the price of coffee is still $2 and income is $12.

Accepted Answer

a) @#IMG-DLM&_TB1826_00 
AB is the budget line,wit

Question 8

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 9

Which of the following methods is not generally relied upon to estimate demand?

Accepted Answer

A) Experimentation such as lowering the price of a product 
B) Surveys by mail,telephone,or focus groups 
C) Regression analysis on existing data 
D) Comparison with competitors' sales 
A) Experimentation such as lowering the price of a product 
B) Surveys by mail,telephone,or focus groups 
C) Regression analysis on existing data 
D) Comparison with competitors' sales

Question 10

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.

Question 11

Let Jack's demand curve for coffee be given by P = 20 - Q,where P is price per cup and Q is quantity consumed per month.If Jack's monthly income is $2,500 and the price of a cup of coffee is $2,how much will consumer surplus fall if the coffee shop raises the price to $4 per cup?

Accepted Answer

@#IMG-DLM&  At $2 per cup,consumer surplus is area

Question 12

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 13

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

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 14

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 15

In the country of Aldeine,the market demand for Good A is derived from the individual demand curves of five consumers who consider A to be a Giffen good.Determine the shape of the market demand curve for A.How it is different from the market demand curve for normal goods.

Accepted Answer

The individual demand curves of consumer

Question 16

The _____ depicts the change in a consumer's real purchasing power brought about by a change in the price of a good.

Accepted Answer

A) marginal rate of substitution 
B) indifference curve 
C) budget line 
D) income effect 
A) marginal rate of substitution 
B) indifference curve 
C) budget line 
D) income effect

Question 17

Alex distributes his monthly income of $600 between two goods,movies and food.By spending his entire income on movies,he can enjoy a maximum of 20 movies.On the other hand,by spending his entire income on food he can consume a total of 60 units of food.Assume that food consumption is measured along the horizontal axis and the consumption of movies is measured on the vertical axis.Calculate the slope of Alex's budget line when the price of food increases to $20 while the price of movie remains unchanged.

Accepted Answer

A) -2/3 
B) - 1.5 
C) -2 
D) -3/4 
A) -2/3 
B) - 1.5 
C) -2 
D) -3/4

Question 18

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 19

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 20

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.

Limitations of using experimentation to estimate demand elasticities include:

For normal goods,the demand curve is:

The exponents of a Cobb-Douglas utility function,U = C^$\alpha$M^{$\alpha$ -1},represent:

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

Suppose you have quantity (Q)on the horizontal axis and price (P)on the vertical axis.After running an ordinary least squares regression you have the following results: Q = 100 - 0.02P.The slope of this equation is:

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

Which of the following methods is not generally relied upon to estimate demand?

The substitution effect is the change in consumption due to:

Let Jack's demand curve for coffee be given by P = 20 - Q,where P is price per cup and Q is quantity consumed per month.If Jack's monthly income is $2,500 and the price of a cup of coffee is $2,how much will consumer surplus fall if the coffee shop raises the price to $4 per cup?

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

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

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

In the country of Aldeine,the market demand for Good A is derived from the individual demand curves of five consumers who consider A to be a Giffen good.Determine the shape of the market demand curve for A.How it is different from the market demand curve for normal goods.

The _____ depicts the change in a consumer's real purchasing power brought about by a change in the price of a good.

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?

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

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

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

Limitations of using experimentation to estimate demand elasticities include:

For normal goods,the demand curve is:

The exponents of a Cobb-Douglas utility function,U = C α\alphaα M α\alphaα -1,represent:

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

Suppose you have quantity (Q)on the horizontal axis and price (P)on the vertical axis.After running an ordinary least squares regression you have the following results: Q = 100 - 0.02P.The slope of this equation is:

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

Which of the following methods is not generally relied upon to estimate demand?

The substitution effect is the change in consumption due to:

Let Jack's demand curve for coffee be given by P = 20 - Q,where P is price per cup and Q is quantity consumed per month.If Jack's monthly income is $2,500 and the price of a cup of coffee is $2,how much will consumer surplus fall if the coffee shop raises the price to $4 per cup?

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

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

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

In the country of Aldeine,the market demand for Good A is derived from the individual demand curves of five consumers who consider A to be a Giffen good.Determine the shape of the market demand curve for A.How it is different from the market demand curve for normal goods.

The _____ depicts the change in a consumer's real purchasing power brought about by a change in the price of a good.

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?

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

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

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 exponents of a Cobb-Douglas utility function,U = C^$\alpha$M^{$\alpha$ -1},represent:

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?