Question 1

With only two goods,if the income effect is in the same direction as the substitution effect then the good is

Accepted Answer

A) normal 
B) inferior but not Giffen 
C) Giffen 
D) There is not enough information to answer. 
A) normal 
B) inferior but not Giffen 
C) Giffen 
D) There is not enough information to answer. A

Question 2

Suppose a person's utility is only a function of their consumption of diet soda and they do not care which brand,Diet Coke (DC)or Diet Pepsi (DP)they consume.Suppose further that .If PDC rises but it remains less than PDP then the consumption of DC

Accepted Answer

A) Falls from a positive amount to zero 
B) Falls from a positive amount to another positive amount. 
C) rises. 
D) stays at zero. 
A) Falls from a positive amount to zero 
B) Falls from a positive amount to another positive amount. 
C) rises. 
D) stays at zero. B

Question 3

Consider the two statements: Which of the following is true?
I.X is an inferior good.
II.X exhibits Giffen's Paradox.

Accepted Answer

A) I implies II,but II does not necessarily imply I. 
B) II implies I,but I does not necessarily imply II. 
C) I and II are statements of the same phenomenon. 
A) I implies II,but II does not necessarily imply I. 
B) II implies I,but I does not necessarily imply II. 
C) I and II are statements of the same phenomenon. B

Question 4

Suppose demand can be written as $\mathrm { P } = 5$ .The elasticity of demand is

Accepted Answer

A) increasing as price rises. 
B) decreasing as price rises. 
C) constant regardless of prices and perfectly elastic. 
D) constant regardless of prices and unit elastic. 
A) increasing as price rises. 
B) decreasing as price rises. 
C) constant regardless of prices and perfectly elastic. 
D) constant regardless of prices and unit elastic.

Question 5

Which of the following will not cause a demand curve to shift position?

Accepted Answer

A) A doubling of the good's price. 
B) A doubling of the price of a closely substitutable good. 
C) A doubling of income. 
D) A shift in preferences. 
E) A doubling of both the price of X and the price of Y. 
A) A doubling of the good's price. 
B) A doubling of the price of a closely substitutable good. 
C) A doubling of income. 
D) A shift in preferences. 
E) A doubling of both the price of X and the price of Y.

Question 6

If goods X and Y are complements,then the cross price elasticity of demand between them will be

Accepted Answer

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

Question 7

Two goods,X and Y,are called complements if

Accepted Answer

A) an increase in PX causes more Y to be bought. 
B) an increase in PX causes less Y to be bought. 
C) an increase in PY causes less Y to be bought. 
D) an increase in income causes more of both X and Y to be bought. 
A) an increase in PX causes more Y to be bought. 
B) an increase in PX causes less Y to be bought. 
C) an increase in PY causes less Y to be bought. 
D) an increase in income causes more of both X and Y to be bought.

Question 8

Suppose $U = \min ( X , Y )$ and the price of X is 1,the price of Y is 1 and income is $12.If the price of X increases to 2,the income effect (in terms of units of X bought)is

Accepted Answer

A) 2 
B) -1 
C) 0 
D) -2 
A) 2 
B) -1 
C) 0 
D) -2

Question 9

Suppose a person's utility is only a function of their consumption of diet soda and they do not care which brand,Diet Coke (DC)or Diet Pepsi (DP)they consume.Suppose further that $\mathrm { P } _ { \mathrm { DC } }  \mathrm { P } _ { \mathrm { DP } }$ then the consumption of DC

Accepted Answer

A) Falls from a positive amount to zero 
B) Falls from a positive amount to another positive amount. 
C) rises. 
D) stays at zero. 
A) Falls from a positive amount to zero 
B) Falls from a positive amount to another positive amount. 
C) rises. 
D) stays at zero.

Question 10

The relationship between changes in income and purchase of a good indicates

Accepted Answer

A) whether the good is a luxury or necessity. 
B) whether the good is normal or inferior. 
C) whether the good is a complement or substitute. 
D) Both a and b 
A) whether the good is a luxury or necessity. 
B) whether the good is normal or inferior. 
C) whether the good is a complement or substitute. 
D) Both a and b

Question 11

If a good is normal and its price decreases,

Accepted Answer

A) the income effect will be positive and the substitution effect will be positive. 
B) the income effect will be negative and the substitution effect will be negative. 
C) the income effect will be positive and the substitution effect will be negative. 
D) the income effect will be negative and the substitution effect will be positive. 
A) the income effect will be positive and the substitution effect will be positive. 
B) the income effect will be negative and the substitution effect will be negative. 
C) the income effect will be positive and the substitution effect will be negative. 
D) the income effect will be negative and the substitution effect will be positive.

Question 12

Suppose you were to believe that "money illusion" exists that is as prices and incomes both rise proportionally,people buy more.Which of the following characteristics of demand does that cause you to doubt?

Accepted Answer

A) demand functions are downward sloping 
B) demand has a positive vertical intercept 
C) demand has a positive horizontal intercept. 
D) demand functions are homogeneous of degree zero. 
A) demand functions are downward sloping 
B) demand has a positive vertical intercept 
C) demand has a positive horizontal intercept. 
D) demand functions are homogeneous of degree zero.

Question 13

If a good is normal and its price increases,

Accepted Answer

A) the income effect will be positive and the substitution effect will be positive. 
B) the income effect will be negative and the substitution effect will be negative. 
C) the income effect will be positive and the substitution effect will be negative. 
D) the income effect will be negative and the substitution effect will be positive. 
A) the income effect will be positive and the substitution effect will be positive. 
B) the income effect will be negative and the substitution effect will be negative. 
C) the income effect will be positive and the substitution effect will be negative. 
D) the income effect will be negative and the substitution effect will be positive.

Question 14

If income doubles and the quantity demanded of good X more than doubles,then good X can be described as a

Accepted Answer

A) substitute good. 
B) complement good. 
C) necessity. 
D) luxury. 
A) substitute good. 
B) complement good. 
C) necessity. 
D) luxury.

Question 15

If the demand for a product is elastic,then a rise in price will

Accepted Answer

A) cause total spending on the good to increase. 
B) cause total spending on the good to decrease. 
C) keep total spending the same,but reduce the quantity demanded. 
D) keep total spending the same,but increase the quantity demanded. 
A) cause total spending on the good to increase. 
B) cause total spending on the good to decrease. 
C) keep total spending the same,but reduce the quantity demanded. 
D) keep total spending the same,but increase the quantity demanded.

Question 16

With only two goods,if the income effect is in the opposite direction as the substitution effect but the income effect dominates then the good is

Accepted Answer

A) normal 
B) inferior but not Giffen 
C) Giffen 
D) There is not enough information to answer. 
A) normal 
B) inferior but not Giffen 
C) Giffen 
D) There is not enough information to answer.

Question 17

A decrease in demand is represented by

Accepted Answer

A) a shift outward of the entire demand curve. 
B) a shift inward of the entire demand curve. 
C) a movement along the demand curve in a southeasterly direction. 
D) a movement along the demand curve in a northwesterly direction. 
A) a shift outward of the entire demand curve. 
B) a shift inward of the entire demand curve. 
C) a movement along the demand curve in a southeasterly direction. 
D) a movement along the demand curve in a northwesterly direction.

Question 18

If a good is inferior and its price increases,

Accepted Answer

A) the income effect will be positive and the substitution effect will be positive. 
B) the income effect will be negative and the substitution effect will be negative. 
C) the income effect will be positive and the substitution effect will be negative. 
D) the income effect will be negative and the substitution effect will be positive. 
A) the income effect will be positive and the substitution effect will be positive. 
B) the income effect will be negative and the substitution effect will be negative. 
C) the income effect will be positive and the substitution effect will be negative. 
D) the income effect will be negative and the substitution effect will be positive.

Question 19

If demand is elastic,a decrease in quantity will cause the total spending $( P \times Q )$ to

Accepted Answer

A) rise. 
B) fall. 
C) remain unchanged. 
D) change in a way that cannot be determined. 
A) rise. 
B) fall. 
C) remain unchanged. 
D) change in a way that cannot be determined.

Question 20

The lump sum principle suggests that the tax that reduces utility the least is

Accepted Answer

A) a tax on income 
B) a tax on a good with many substitutes 
C) an equal tax per-unit on all goods 
D) a tax on a good with only a few substitutes 
A) a tax on income 
B) a tax on a good with many substitutes 
C) an equal tax per-unit on all goods 
D) a tax on a good with only a few substitutes

With only two goods,if the income effect is in the same direction as the substitution effect then the good is

Suppose a person's utility is only a function of their consumption of diet soda and they do not care which brand,Diet Coke (DC)or Diet Pepsi (DP)they consume.Suppose further that .If PDC rises but it remains less than PDP then the consumption of DC

Consider the two statements: Which of the following is true? I.X is an inferior good. II.X exhibits Giffen's Paradox.

Suppose demand can be written as $\mathrm { P } = 5$ .The elasticity of demand is

Which of the following will not cause a demand curve to shift position?

If goods X and Y are complements,then the cross price elasticity of demand between them will be

Two goods,X and Y,are called complements if

Suppose $U = \min ( X , Y )$ and the price of X is 1,the price of Y is 1 and income is $12.If the price of X increases to 2,the income effect (in terms of units of X bought)is

The relationship between changes in income and purchase of a good indicates

If a good is normal and its price decreases,

Suppose you were to believe that "money illusion" exists that is as prices and incomes both rise proportionally,people buy more.Which of the following characteristics of demand does that cause you to doubt?

If a good is normal and its price increases,

If income doubles and the quantity demanded of good X more than doubles,then good X can be described as a

If the demand for a product is elastic,then a rise in price will

With only two goods,if the income effect is in the opposite direction as the substitution effect but the income effect dominates then the good is

A decrease in demand is represented by

If a good is inferior and its price increases,

If demand is elastic,a decrease in quantity will cause the total spending $( P \times Q )$ to

The lump sum principle suggests that the tax that reduces utility the least is

Economic Models

Utility and Choice

Uncertainty

Game Theory

Production

Costs

Profit Maximization and Supply

Perfect Competition in a Single Market

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Pricing in Input Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Exam 3: Demand Curves

With only two goods,if the income effect is in the same direction as the substitution effect then the good is

Suppose a person's utility is only a function of their consumption of diet soda and they do not care which brand,Diet Coke (DC)or Diet Pepsi (DP)they consume.Suppose further that .If PDC rises but it remains less than PDP then the consumption of DC

Consider the two statements: Which of the following is true? I.X is an inferior good. II.X exhibits Giffen's Paradox.

Suppose demand can be written as P=5\mathrm { P } = 5P=5 .The elasticity of demand is

Which of the following will not cause a demand curve to shift position?

If goods X and Y are complements,then the cross price elasticity of demand between them will be

Two goods,X and Y,are called complements if

Suppose U=min⁡(X,Y)U = \min ( X , Y )U=min(X,Y) and the price of X is 1,the price of Y is 1 and income is $12.If the price of X increases to 2,the income effect (in terms of units of X bought)is

The relationship between changes in income and purchase of a good indicates

If a good is normal and its price decreases,

Suppose you were to believe that "money illusion" exists that is as prices and incomes both rise proportionally,people buy more.Which of the following characteristics of demand does that cause you to doubt?

If a good is normal and its price increases,

If income doubles and the quantity demanded of good X more than doubles,then good X can be described as a

If the demand for a product is elastic,then a rise in price will

With only two goods,if the income effect is in the opposite direction as the substitution effect but the income effect dominates then the good is

A decrease in demand is represented by

If a good is inferior and its price increases,

If demand is elastic,a decrease in quantity will cause the total spending (P×Q)( P \times Q )(P×Q) to

The lump sum principle suggests that the tax that reduces utility the least is

Economic Models

Utility and Choice

Uncertainty

Game Theory

Production

Costs

Profit Maximization and Supply

Perfect Competition in a Single Market

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Pricing in Input Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Suppose demand can be written as $\mathrm { P } = 5$ .The elasticity of demand is

Suppose $U = \min ( X , Y )$ and the price of X is 1,the price of Y is 1 and income is $12.If the price of X increases to 2,the income effect (in terms of units of X bought)is

If demand is elastic,a decrease in quantity will cause the total spending $( P \times Q )$ to