Question;Name;True/False;30%;Indicate;whether the statement is true or false.;1. Total utility can be objectively measured in;numbers that indicate usefulness or benefit to the consumer.;2. As a rule, the more of a commodity a consumer;acquires, the smaller will be her total utility from that good.;3. An optimal purchase is one that maximizes;total utility.;4. If the marginal net utility of beer is a;positive number, the consumer should buy more beer in order to maximize;utility.;5. Consumer surplus is the difference between;the worth of a commodity to the consumer and the price the consumer pays for;the commodity.;6. The resolution of Adam Smith's diamond-water;puzzle is based on the distinction between marginal and total utility.;7. Scarcity raises both price and marginal;utility but generally reduces total utility.;8. Quantity demanded is not only affected by;price but by variables such as income and the prices of other goods.;9. The market demand curve is the horizontal;summation of all individual demand curves.;10. A change in the price of one good results in;a rotation of the budget line, so that it is steeper or flatter.;11. A decrease in the price of one good results;in a parallel shift in the budget line.;12. The budget line and the indifference curve;are geometric devices used to provide a closer look at consumer choice.;13. An increase in income shifts indifference;curves outward.;14. A consumer will consume the combination of;goods at the point of tangency between the budget line and the indifference;curve.;15. A consumer will consume the combination of;goods at the crossing point of a budget line and indifference curve.;16. A vertical demand curve has an elasticity of;demand equal to zero.;17. A horizontal demand curve is perfectly;elastic because a change in price will not induce a change in quantity;demanded.;18. A horizontal demand curve is perfectly elastic;because a change in price will induce an infinite change in quantity demanded.;19. A straight-line demand schedule has the same;elasticity throughout its length.;20. The unit-elastic demand curve is a;rectangular hyperbola.;21. If price goes up 20 percent and quantity;demanded declines by 10 percent, total revenue will rise.;22. If a demand curve is unit elastic, then P;times Q will remain constant when P changes.;23. A demand curve with unit elasticity can never;touch either the vertical or horizontal axes.;24. A price increase will always cause a firm's;revenue to fall, because they will sell less of the good.;25. Necessities such as food and shelter have;inelastic demand.;26. If there are many close substitutes available;for a good, its elasticity of demand will be higher.;27. Since an individual spends a small share of;her income on salt, the elasticity of demand is likely to be low.;28. Cross-elasticity of demand could be used to;measure the responsiveness of the quantity demanded of swimming pools to a;change in the price of picnic tables.;29. Demand curves often do not remain stationary;they shift because of changes in other variables.;30. A decrease in the price of a good will cause;a movement along the demand schedule to a higher quantity demanded.;Multiple;Choice 30%;Identify the;choice that best completes the statement or answers the question.;31. Lana spent $5 to see a movie. We know;a.;the movie was worth 500;utils.;b.;Lana's total utility;from movies was $5.;c.;the movie was worth;at least $5 worth of other goods.;d.;the movie increased;marginal utility.;32. High price and low total utility indicate;a.;low marginal utility.;b.;large quantities are;sold.;c.;high marginal;utility.;d.;a high price/marginal;utility ratio.;33. For most goods and most people, marginal;utility probably;a.;continues to increase;as larger quantities are purchased.;b.;plummets after the;first few units but soon begins to rise.;c.;declines as;consumption increases.;d.;is negative after the;first unit of a good is purchased.;e.;is positive and;rising for most goods.;34. Elaine values the utility of her first cup of;coffee at $1, a second cup, $.75, and a third cup, $.50. If Elaine drinks three;cups of coffee for breakfast, her total utility is equal to;a.;$.50, the value of;her last cup of coffee.;b.;$1.00, the value of;her first cup of coffee.;c.;marginal utility.;d.;$2.25.;e.;$1.50.;35. As a general rule, consumers have;a.;limited income.;b.;unlimited desires for;goods.;c.;many choices of goods;facing them.;d.;All of the above are;correct.;e.;None of the above are;correct.;36. Marginal utility has a negative slope. This;is because of the;a.;optimal purchase;rule.;b.;law of increasing;costs.;c.;law of diminishing;marginal utility.;d.;marginal rate of;substitution.;37. Which of the following scenarios could be an;example of increasing marginal utility?;a.;A father buying three;game CDs for his son.;b.;A shopkeeper selling;the tenth unit of hamburger.;c.;A philatelist buying;an additional stamp for collection.;d.;A consumer buying an;additional unit of apple.;38. Gwen's decision to buy a new television instead;of a bicycle for the same price;a.;means that;opportunity cost is zero since both cost the same amount.;b.;would not have;involved trade-off and opportunity cost if Gwen had decided to put the money;in a bank CD instead.;c.;would not imply a;trade-off because of scarcity if Gwen were a multimillionaire.;d.;means that the;opportunity cost to Gwen is the bicycle that she has given up.;39. Suppose that Joan, the only consumer of pork;has a downward-sloping demand curve for pork and faces an upward-sloping supply;curve. If her demand curve shifts out because she develops a craving for pork;then at the new equilibrium (everything else equal);a.;the price of pork;relative to other goods will be higher than before.;b.;Joan's marginal;utility from every unit of pork she eats will be higher than before.;c.;Joan's real income;will be lower than before.;d.;All of the above are;correct.;40. For a(n) ____, if incomes rise and prices do;not change, quantity demanded will increase.;a.;normal good;b.;inferior good;c.;Giffen good;d.;substitute good;41. The Wall Street Journal reports that;hard times aid poultry companies as people eat cheaper fowl." In the;language of economists, this means;a.;chicken is an;inferior good.;b.;chicken has a;negative substitution effect.;c.;chicken has a;positive substitution effect.;d.;people's tastes;change during recessions.;e.;chicken has a;positive income effect.;Figure 5-6;42. In Figure 5-6, a shift in the budget line;from AC to AB indicates;a.;the price of wine;coolers has risen.;b.;income has increased.;c.;the price of beer has;fallen.;d.;the price of wine;coolers has fallen.;e.;All of the above are;correct.;43. Which of the following observations is not;true of a budget line?;a.;It indicates what;choices are available to the consumer.;b.;It is a curve of;constant expenditure.;c.;Its slope reports the;market terms on which the consumer can trade one good for another.;d.;It helps examine the;consumer?s preferences.;44. Which of the following is characteristic of;indifference curves?;a.;They are negatively;sloped.;b.;They never intersect.;c.;They are convex;toward the origin.;d.;All of the above are correct.;Figure 5-11;45. In Figure 5-11, a consumer is initially at;point A. There is a price change and she moves to B. It follows that;a.;the demand for beer;follows the law of demand.;b.;the demand for beer;does not follow the law of demand.;c.;wine is an inferior;good.;d.;the consumer is;confused.;46. For a consumer to maximize utility, he will;choose the;a.;point where the slope;of the budget line equals the slope of the indifference curve.;b.;any point where the;budget line and indifference curve intersect.;c.;point where he gets;the most of the good he prefers most.;d.;point where the;marginal rate of substitution is greatest.;e.;the point where;marginal utility is zero for both goods;Figure 5-17;47. Which of the following statements about;Figure 5-17 must be correct?;a.;The consumer pays a;higher dollar price per unit for good Y at A than at D.;b.;The consumer pays the;same dollar price per unit for good Y at A and at B.;c.;The consumer pays a higher;dollar price per unit for good X at D than at A.;d.;The consumer pays a;higher dollar price per unit for good X at A than at C.;Figure 5-19;48. In Figure 5-19, the consumer experiences at;point C;a.;greater total utility;than at point D.;b.;greater total utility;than at point E.;c.;less total utility;than at point D.;d.;total utility equal;to that experienced at point D.;49. The price elasticity of a vertical demand;curve is always;a.;infinitely large.;b.;zero.;c.;one.;d.;increasing as price;increases.;50. Total expenditure by a buyer is equal to the;a.;slope at any point;along the demand curve.;b.;price times quantity;demanded at any point along the demand curve.;c.;elasticity times;price at any point along the demand curve.;d.;elasticity times;quantity demanded at any point along the demand curve.;51. To avoid an increase in the local property;tax, Sullivan County, New York, proposed a 2 percent hotel tax, which;presumably would be passed on to tourists. The hotel industry argued that the;tax would hurt hotel business. They are really arguing that;a.;tourist and;convention demand is inelastic, so hotel bookings will decline.;b.;tourist and;convention demand is very elastic, so hotel bookings will decline.;c.;they would prefer a;property tax increase instead.;d.;it is unfair to tax;people who do not live in the area.;52. Suppose that the supply of insulin is;perfectly elastic and the demand for insulin perfectly inelastic. Then the real;burden of an excise tax on insulin will be;a.;split equally between;buyers and sellers.;b.;borne entirely by;sellers.;c.;borne entirely by;buyers.;d.;borne by sellers on;units sold up to the initial equilibrium quantity and by buyers on all;additional units.;53. Would a profit-maximizing firm sell where;demand is inelastic?;a.;No, this would not;follow the rule of MC = MR.;b.;No, the firm could;not profitably raise price.;c.;Yes, the firm could;profitably lower price to attract sales.;d.;Yes, in this case;there are few substitutes for the good.;54. The price elasticity of demand for widgets at;any particular price is determined by;a.;whether widgets are;luxuries or necessities.;b.;how much of their;budgets consumers spend on widgets.;c.;whether there are any;good substitutes for widgets.;d.;All of the above are;correct.;55. A 10 percent increase in the cost of;restaurant meals, which are a luxury, will most likely;a.;increase the purchase;of meals by 10 percent.;b.;increase the purchase;of meals by less than 10 percent.;c.;decrease the purchase;of meals by more than 10 percent.;d.;decrease the purchase;of meals by less than 10 percent.;56. The price elasticity of new automobile;purchases is about 1.2. This implies that an increase of $1,000 on a $10,000;automobile will;a.;reduce the number of;autos sold by 1.2 percent.;b.;increase the consumer;expenditures on autos by 1.2 percent.;c.;reduce the number of;autos sold by 12 percent.;d.;increase consumer;expenditures on autos by 12 percent.;57. A study of New York City (NYC) tax rates;concluded that taxes on the nonmanufacturing sector should be higher since that;sector has fewer alternatives. Manufacturers are more mobile and may move to;avoid higher taxes. This means that;a.;nonmanufacturing;firms have a more elastic demand for NYC locations.;b.;manufacturing firms;have an inelastic demand for the NYC locations.;c.;nonmanufacturing;firms have relatively inelastic demand for the NYC locations.;d.;nonmanufacturing;demand for NYC locations is perfectly elastic.;58. The elasticity measure which has been;employed by the courts to assess the degree of market competition is;a.;price elasticity of;demand.;b.;income elasticity of;demand.;c.;cross elasticity of;demand.;d.;inverse elasticity of;demand.;59. The definition of cross elasticity of demand;for two products X and Y is;a.;percentage change in;quantity of X demanded/percentage change in quantity of Y demanded.;b.;percentage change in;price of Y/percentage change in quantity of X demanded.;c.;percentage change in;price of Y/percentage change in price of X.;d.;percentage change in;quantity of X demanded/percentage change in price of Y.;60. If the demand for gasoline becomes more;elastic over time;a.;the demand curve will;shift out.;b.;the demand curve will;become flatter.;c.;other things being;equal, the equilibrium price of gasoline must fall.;d.;other things being;equal, the equilibrium quantity of gasoline must fall.
Paper#55441 | Written in 18-Jul-2015Price : $62