Question 1

When you lose a concert ticket, this occurrence causes ______ effect.

Accepted Answer

A)  an income effect 
B)  a substitution effect 
C)  both income and substitution effects 
D)  neither income nor substitution effects 
A)  an income effect 
B)  a substitution effect 
C)  both income and substitution effects 
D)  neither income nor substitution effects

Question 2

Increasing marginal utility means that one's first apple in a sitting is ______ one's second apple in the same sitting.

Accepted Answer

A)  worse than 
B)  better than 
C)  incomparable with 
D)  equally good as 
A)  worse than 
B)  better than 
C)  incomparable with 
D)  equally good as

Question 3

Figure: Kiwi and Nuts   Refer to figure. Which statement is TRUE for this figure?

Accepted Answer

A)  Indifference curve U1 provides higher utility than indifference curve U2. 
B)  Bundle A is preferred to bundle B. 
C)  Bundle C is preferred to bundle D. 
D)  Bundle D is preferred to bundle A. 
A)  Indifference curve U1 provides higher utility than indifference curve U2. 
B)  Bundle A is preferred to bundle B. 
C)  Bundle C is preferred to bundle D. 
D)  Bundle D is preferred to bundle A.

Question 4

If the price of cantaloupe increases, the marginal utility per dollar of cantaloupe:

Accepted Answer

A)  decreases, so the consumer buys fewer cantaloupes, and the demand curve for cantaloupes slopes downward. 
B)  increases, so the consumer buys more cantaloupes, and the demand curve for cantaloupes slopes downward. 
C)  increases, so the consumer buys fewer cantaloupes, and the demand curve for cantaloupes slopes downward. 
D)  decreases, so the consumer buys fewer cantaloupes, and the demand curve for cantaloupes slopes upward. 
A)  decreases, so the consumer buys fewer cantaloupes, and the demand curve for cantaloupes slopes downward. 
B)  increases, so the consumer buys more cantaloupes, and the demand curve for cantaloupes slopes downward. 
C)  increases, so the consumer buys fewer cantaloupes, and the demand curve for cantaloupes slopes downward. 
D)  decreases, so the consumer buys fewer cantaloupes, and the demand curve for cantaloupes slopes upward.

Question 5

As wages rise, will labor supply increase or decrease? Discuss and explain each possible scenario.

Accepted Answer

If wages rise, labor supply MAY increase

Question 6

Use the following to answer questions:
Figure: Music and Movie Downloads  
-(Figure: Music and Movie Downloads) Refer to the figure. What is the relative price of music downloads to movie downloads?

Accepted Answer

A)  3 
B)  1/3 
C)  5 
D)  4 
A)  3 
B)  1/3 
C)  5 
D)  4

Question 7

A worker might respond to a lower wage by working less.

Accepted Answer

A) True 
 B)False

Question 8

Increasing marginal utility means that marginal utility ______ as consumption ______.

Accepted Answer

A)  decreases; decreases 
B)  decreases; increases 
C)  increases; decreases 
D)  increases; increases 
A)  decreases; decreases 
B)  decreases; increases 
C)  increases; decreases 
D)  increases; increases

Question 9

As indifference curves move northeast or away from the origin, bundles of goods along indifference curves yield:

Accepted Answer

A)  lower utility. 
B)  the same utility. 
C)  higher utility. 
D)  utility that is sometimes higher, sometimes the same, and sometimes lower. 
A)  lower utility. 
B)  the same utility. 
C)  higher utility. 
D)  utility that is sometimes higher, sometimes the same, and sometimes lower.

Question 10

Countries in Western Europe tend to have more generous unemployment benefits for their workers than we do in the United States. All else equal, workers in Western Europe should:

Accepted Answer

A)  work more hours on average. 
B)  work fewer hours on average. 
C)  have higher wages. 
D)  have lower tax rates. 
A)  work more hours on average. 
B)  work fewer hours on average. 
C)  have higher wages. 
D)  have lower tax rates.

Question 11

To shop at places such as Costco, one does not have to pay a membership fee.

Accepted Answer

A) True 
 B)False

Question 12

As wages rise, will labor supply increase or decrease? Explain all possible scenarios.

Accepted Answer

If wages rise, labor supply MAY increase

Question 13

What does a single indifference curve represent?

Accepted Answer

A)  a bundle of goods 
B)  a budget 
C)  a level of utility 
D)  decreasing marginal utility 
A)  a bundle of goods 
B)  a budget 
C)  a level of utility 
D)  decreasing marginal utility

Question 14

Figure: Leisure 1   Refer to the figure. According to this figure, which statement is TRUE?

Accepted Answer

A)  The labor supply curve is downward sloping. 
B)  The labor supply curve is upward sloping. 
C)  The income effect denominates the substitution effect. 
D)  The worker earns $6.00 an hour. 
A)  The labor supply curve is downward sloping. 
B)  The labor supply curve is upward sloping. 
C)  The income effect denominates the substitution effect. 
D)  The worker earns $6.00 an hour.

Question 15

An increase in the price of a good leads to:

Accepted Answer

A)  an increase in the marginal utility per dollar of that good, and thus an increase in the quantity purchased. 
B)  an increase in the marginal utility per dollar of that good, and a decrease in the quantity purchased. 
C)  a decrease in the marginal utility per dollar of that good, and an increase in the quantity purchased. 
D)  a decrease in the marginal utility per dollar of that good, and thus a decrease in the quantity purchased. 
A)  an increase in the marginal utility per dollar of that good, and thus an increase in the quantity purchased. 
B)  an increase in the marginal utility per dollar of that good, and a decrease in the quantity purchased. 
C)  a decrease in the marginal utility per dollar of that good, and an increase in the quantity purchased. 
D)  a decrease in the marginal utility per dollar of that good, and thus a decrease in the quantity purchased.

Question 16

Use the following to answer questions:
Figure: Labor Supply and Welfare  
-(Figure: Labor Supply and Welfare) Refer to the figure. The presence of the welfare program causes this person to:

Accepted Answer

A)  reduce hours of work from 12 to 0. 
B)  increase hours of work from 0 to 12. 
C)  reduce hours of work from 12 to 9. 
D)  reduce hours of work from 8 to 3. 
A)  reduce hours of work from 12 to 0. 
B)  increase hours of work from 0 to 12. 
C)  reduce hours of work from 12 to 9. 
D)  reduce hours of work from 8 to 3.

Question 17

A partner at a major law firm spent $90 for a ticket to the Rockstar Energy Mayhem Festival, featuring Disturbed, Godsmack, and Megadeth and then lost it. Should he buy another $90 ticket?

Accepted Answer

A)  Yes, there is no substitution effect and the income effect is trivial given his wealth. 
B)  Yes, there is a positive substitution effect and the income effect is large given his wealth. 
C)  No, there is some substitution effect and the income effect is trivial given his wealth. 
D)  No, there is a positive substitution effect and the income effect is large given his wealth. 
A)  Yes, there is no substitution effect and the income effect is trivial given his wealth. 
B)  Yes, there is a positive substitution effect and the income effect is large given his wealth. 
C)  No, there is some substitution effect and the income effect is trivial given his wealth. 
D)  No, there is a positive substitution effect and the income effect is large given his wealth.

Question 18

Consumers maximize their utility when:

Accepted Answer

A)  the total benefits are greater than total costs. 
B)  the marginal utility per dollar is equal across all goods consumed and all income is spent. 
C)  they consume the good on which they place the highest overall value. 
D)  they diversify their consumption across goods. 
A)  the total benefits are greater than total costs. 
B)  the marginal utility per dollar is equal across all goods consumed and all income is spent. 
C)  they consume the good on which they place the highest overall value. 
D)  they diversify their consumption across goods.

Question 19

Figure: Music and Movie Downloads 3   Refer to the figure. What is the marginal rate of substitution (MRS) between bundle A and bundle B in this figure?

Accepted Answer

A)  The MRS is 4.5; the consumer is willing to trade 4.5 movie downloads for 1 music download. 
B)  The MRS is 3; the consumer is willing to give up 3 movie downloads for an additional music download. 
C)  The MRS is 1.5; the consumer will buy 1.5 times as many music downloads as movie downloads. 
D)  The MRS is 1; the consumer faces a one-to-one tradeoff. 
A)  The MRS is 4.5; the consumer is willing to trade 4.5 movie downloads for 1 music download. 
B)  The MRS is 3; the consumer is willing to give up 3 movie downloads for an additional music download. 
C)  The MRS is 1.5; the consumer will buy 1.5 times as many music downloads as movie downloads. 
D)  The MRS is 1; the consumer faces a one-to-one tradeoff.

Question 20

Table: Take-out and Coffee
 
Refer to the table. The table shows the marginal utility a consumer receives from purchasing take-out food and lattés each week. The price of a take-out meal is $15, and the price of a latté is $5. What is the utility-maximizing bundle of take-out and lattés for a consumer who has a weekly income of $45 (all of which will be spent on take-out and lattés)? What will be the bundle if income increases to $75?

Accepted Answer

If income were $45, the optimal consumpt

Exam 25: Consumer Choice

When you lose a concert ticket, this occurrence causes ______ effect.

Increasing marginal utility means that one's first apple in a sitting is ______ one's second apple in the same sitting.

Figure: Kiwi and Nuts Refer to figure. Which statement is TRUE for this figure?

If the price of cantaloupe increases, the marginal utility per dollar of cantaloupe:

As wages rise, will labor supply increase or decrease? Discuss and explain each possible scenario.

Use the following to answer questions: Figure: Music and Movie Downloads -(Figure: Music and Movie Downloads) Refer to the figure. What is the relative price of music downloads to movie downloads?

A worker might respond to a lower wage by working less.

Increasing marginal utility means that marginal utility ______ as consumption ______.

As indifference curves move northeast or away from the origin, bundles of goods along indifference curves yield:

Countries in Western Europe tend to have more generous unemployment benefits for their workers than we do in the United States. All else equal, workers in Western Europe should:

To shop at places such as Costco, one does not have to pay a membership fee.

As wages rise, will labor supply increase or decrease? Explain all possible scenarios.

What does a single indifference curve represent?

Figure: Leisure 1 Refer to the figure. According to this figure, which statement is TRUE?

An increase in the price of a good leads to:

Use the following to answer questions: Figure: Labor Supply and Welfare -(Figure: Labor Supply and Welfare) Refer to the figure. The presence of the welfare program causes this person to:

A partner at a major law firm spent $90 for a ticket to the Rockstar Energy Mayhem Festival, featuring Disturbed, Godsmack, and Megadeth and then lost it. Should he buy another $90 ticket?

Consumers maximize their utility when:

Figure: Music and Movie Downloads 3 Refer to the figure. What is the marginal rate of substitution (MRS) between bundle A and bundle B in this figure?

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Filters

Increasing marginal utility means that marginal utility as consumption .