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E. The student’s demand for books is unit price elastic.
Use the following to answer question 11: 11. Consider the diagram above. The student changes his optimal consumption bundle from point A on indifference curve U1 to point B on indifference curve U2. The best explanation for the change is: A. As the price of FOOD decreased, the consumer consumed more FOOD; B. As the price of BOOKS increased, the consumer purchased relatively more of them; C. As the consumer’s nominal income increased, he or she purchased more of both goods; D. As the price of BOOKS decreased, the consumer purchased more of them and still had sufficient income left over to increase the purchase of FOOD as well; E. No true answer.
12. The slope of an indifference curve at any point is equal to: A. The slope of the budget constraint B. The ratio of the marginal utility of the good on the horizontal axis to that of the good on the vertical axis; C. The total value placed on the two goods listed on the axes; D. The marginal opportunity cost of obtaining an additional unit of either of the goods listed on the axes; E. The ratio of the marginal utility of the good on the vertical axis to that of the good on the horizontal axis.
13. The substitution effect for a good involves: A. As income decreases, people shift toward decrease in consumption of this good; B. As price increases, people adjust their consumption to consume more of the other goods; C. As price increases, people consume more of this good; D. As income decreases, people shift toward cheaper goods; E. As price decreases, people adjust their consumption to consume more of the good, but only if it is normal.
14. Define Marginal utility as: A. The addition utility a consumer gets from consuming an additional unit of a good; B. The utility a consumer gets from the first unit of a good consumed; C. The change in total utility resulting from a one unit change in quantity consumed; D. All of above; E. (A) and (C);
15. Suppose that a per unit tax is imposed on the suppliers of a good and its supply curve is upward sloping. If the price elasticity of demand for the good is zero, the tax will: A. Increase the equilibrium price of the good; B. Reduce the equilibrium price of the good; C. Reduce the equilibrium quantity of the good; D. Increase the equilibrium quantity of the good; E. Both (A) and (C). 16. It is known that the price elasticity of demand for good X in the market equilibrium is - 0,5, while the price elasticity of supply is 1. A per unit subsidy of $1 is introduced in this market. Then: A. Producers’ price will increase by 50 cents and consumers’ price will decrease by 50 cents; B. Producers will get 2/3 of the subsidy, consumers will get 1/3 of it; C. Producers will get 1/3 of the subsidy, consumers will get 2/3 of it; D. Both producers and consumers will get half of the subsidy; E. (A) and (D) are true. 17. Suppose that market demand for firm A’s product is described by the following schedule:
Price Quantity demanded $5.00 20 $4.00 40 $3.00 60 $2.00 90 $1.00 100
Judging by the information above, changing the price from $5.00 to $4.00 would make total revenue… A. Increase by $160 B. Increase by $100 C. Increase by $60 D. Decrease by $700 E. Decrease by $300
18. If an increase in the price of spicks increases the demand for spacks, then these two goods are: A. Inferior goods B. Substitutes C. Normal goods D. Complements E. Independent goods
19. The shape of a typical downward-sloping demand curve could be theoretically explained by: A. Substitution effect – the cheaper the good, the more other goods are replaced by it. B. Income effect – the lower the price of a good, the bigger the real income – which is spent on all goods, including this one. C. Diminishing marginal utility – the more of a good we consume, the lower the marginal utility of its last unit. D. Diminishing MRS – the more of a good we consume, the lower the amount of money (and other goods) we are ready to sacrifice for another unit of it. Date: 2015-12-17; view: 727
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