Download 1. T F The resources that are available to meet society`s needs are

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The resources that are available to meet society’s needs are scarce .
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The marginal rate of substitution is the rate of exchange of pairs of
consumption goods or services to increase utility or satisfaction.
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Consumer equilibrium is consumption bundle that maximizes total utility
and is feasible as defined by the budget constraint.
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If Good X is the independent variable (horizontal axis) and Good Y is the
dependent variable (vertical axis), the slope of a budget constraint for
these two goods is -PY/PX if the prices of Good X and Good Y are PX and
PY, respectively.
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The Bell curve is the schedule that shows how many units of a good that
the consumer will purchase at different income levels, all other factors
constant.
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The law of diminishing marginal utility says marginal utility declines as
more of a good or service is consumed during a specified period of time.
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The budget constraint reflects the income available for consumption and
the prices that a consumer faces.
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Cross-price elasticity is a measure of the response of consumption of a
good or service to changes in the price of another good or service.
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A graph of the locus of consumption bundles that provide a consumer
given level of satisfaction is known as an indifference curve.
10.
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Microeconomics is branch of economics that focuses on the economic
actions of individuals or specific groups of individuals.
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Mega-economics is a branch of economics that focuses on the broad
aggregates, such as the growth of gross domestic product, the money
supply, the stability of prices, and the level of employment.
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Opportunity cost is the economic sacrifice of not doing something else or
foregoing another opportunity.
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Inferior goods are those goods for which consumption falls (rises) when
income increases (decreases).
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A shift in the demand curve caused generally by changes in the prices of
complements or substitutes, income, and tastes and preferences is known
as a change in demand.
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Own-price elasticity is a measure of the relative response of consumption
of a good or service to changes in price.own-price
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An indifference curve is derived from a utility function.
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Replacing a product with another because the price of the former has
declined or increased is known as the substitution effect.
quantity demanded
Income elasticity is a relative measure of the change in demand to a
change in income.
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Normal goods are goods for which consumption falls (rises) when income
increases (decreases).
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Consumption is at equilibrium when the marginal rate of substitution is
equal to the slope of the budget line
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A good is said to be both normal and a necessity if the income elasticity of
demand is greater than 1.0
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If the marginal utility for product A (MUA) is 100 and the marginal utility
for product B (MUB) is 117, it is impossible to achieve an equilibrium mix
of products A and B.
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A good is said to be both normal and a luxury if the income elasticity of
demand is greater than 1.0
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As the slope of a demand curve increases, it is a sign the demand for a
good or service is becoming more sensitive to price changes.
MULTIPLE CHOICE
26.
Which of the following is true?
a.
b.
c.
d.
27.
The resources that are available to meet society’s needs are:
a.
b.
c.
d.
28.
trading rate
opportunity rate
marginal rate of substitution
none of the above
Consumer equilibrium is consumption bundle that:
a.
b.
c.
d.
30.
plentiful
scarce
man-made and natural
none of the above
The rate of exchange of pairs of consumption goods or services to leave utility or
satisfaction unchanged is:
a.
b.
c.
d.
29.
If the cross-price elasticity of demand between two goods is negative, then the
two goods are complements
If the income elasticity of demand for a good is greater than 0, then the good is
labeled inferior
The law of demand states that as the price of a commodity rises, the change in
consumer surplus is negative
The law of diminishing marginal utility states that total utility always declines as
more of a good is consumed
maximizes total utility
minimizes costs
maximizes total utility and is feasible as defined by a budget constraint
none of the above
Schedule that shows how many units of a good that the consumer will purchase at
different income levels, all other factors constant.
a.
b.
c.
d.
bell curve
demand curve
indifference curve
none of the above
31.
The law of diminishing marginal utility says:
a.
b.
c.
d.
32.
The budget constraint reflects:
a.
b.
c.
d.
33.
incomes
the price of the good or the service
the price of another good or service
none of the above
A graph of the locus of consumption bundles that provide a consumer given level of
satisfaction is known as a(n):
a.
b.
c.
d.
35.
the income available for consumption
the prices for the goods a consumer may purchase
the marginal rate of substitution that will result in consumer equilibrium
all of the above
Cross-price elasticity is a measure of the response of consumption of a good or service to
changes in:
a.
b.
c.
d.
34.
less goods will be available to consume over time
marginal utility declines as more of a good or service is consumed during a period
of time
total utility will eventually hit a maximum
two of the above
utility curve
indifference curve
substitution curve
none of the above
Branch of economics that focuses on the economic actions of individuals or specific
groups of individuals.
a.
b.
c.
d.
microeconomics
production economics
demand economics
none of the above
36.
Economic term for the sacrifice of not doing something else is:
a.
b.
c.
d.
37.
Inferior goods are those goods for which consumption falls when:
a.
b.
c.
d.
39.
prices of other goods rise
incomes fall
incomes rise
none of the above
A shift in the demand curve is generally caused by changes in:
a.
b.
c.
d.
40.
cost of doing business
marginal cost
opportunity cost
none of the above
the prices of substitutes and complements
incomes
both of the above
none of the above
Measure of the relative response of consumption of a good or service to changes in its
price.
a.
b.
c.
d.
cross-price elasticity
own-price elasticity
income elasticity
none of the above
PROBLEMS
41.
Mickey’s Dairy Bar sells 12,500 Scramblers per week at a price of $10 each. The own
price elasticity for a Scrambler is estimated to be -0.75. If the price is raised to $12.00,
the number of Scramblers sold will be:
a.
b.
c.
d.
42.
Kipp’s sells 25,000 chicken sandwiches per month at a price of $6.00 each. The own
price elasticity for the sandwich is estimated to be -0.75. If the price is raised by $0.50,
the total revenue from the sale of chicken sandwiches will be:
a.
b.
c.
d.
43.
167,000
133,450
152,348
150,000
The income elasticity for rice was said to be -.324. If there is a 10 percent decrease in
income, the quantity of rice demanded will:
a.
b.
c.
d.
44.
14,375
10,625
10,000
None of the above
Rise 10 percent
Drop 3.24 percent
Rise 3.24 percent
Remain unchanged unless the price of rice changes
The cross-price elasticity for beef with respect to chicken is 0.0572. The cross-price
elasticity for chicken with respect to beef, however, is 0.2927. If the price of chicken
rises 20 percent, the percentage change in the demand for beef would be:
a.
b.
c.
d.
-1.144
-5.854
1.144
5.854
45.
For Graph 1, which represents a consumption problem, Curves A and B are:
a.
b.
c.
d.
46.
For Graph 1, which represents a consumption problem, Curves C and D are:
a.
b.
c.
d.
47.
$10
$5
$8
not enough information to tell
For Graph 1, which represents a consumption problem, what is the marginal rate of
substitution at point E of Curve B if $40 is available for buying pizza and tacos?
a.
b.
c.
d.
49.
indifference curves
production possibilities frontiers
budget constraints
iso-cost curves
For Graph 1, which represents a consumption problem, if $80 is the total amount that can
be spent on tacos and pizza and the price of pizza is $10, the price of a taco is:
a.
b.
c.
d.
48.
indifference curves
production possibilities frontiers
iso-quants
iso-cost curves
-0.80
-1.25
-0.50
not enough information to tell
For Graph 1, which represents a consumption problem, is it preferable to be at a point on:
a.
b.
c.
d.
Curve A
Curve B
Indifferent between Curve A or B
need more information
50.
For Graph 2, which represents a demand curve, the consumer surplus at a price of 16 is:
a.
b.
c.
d.
51.
For Graph 2, which represents a demand curve, a drop in the price from 16 to 10 will
cause the value of total consumer surplus to increase by:
a.
b.
c.
d.
52.
40
68
84
need more information
For Graph 2, which represents a demand curve, the own price elasticity (using the arc
approach) in the price range from 10 to 16 is:
a.
b.
c.
d.
53.
32
16
100
need more information
-2.00
1.86
-1.86
need more information
For Graph 2, which represents a demand curve, the total revenue corresponding to a price
of 10 is:
a.
b.
c.
d.
128
200
100
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