Smartbook questions (Ch1,ch2,ch3,ch4

When the issue is the extent to which an action should be performed, the appropriate question is

"should I do another unit of this activity?"

A convenient way to avoid making bad decisions by ignoring foregone opportunities is to frame the question, "should I do x?" as

"should I do x or y?"

In a diagram with good Y on the vertical axis and good X on the horizontal, if the best affordable bundle is at a point of tangency, then

MRS = PX/PY

The marginal rate of substitution for X with Y (MRSXY) equals

MUX/MUY

If the absolute value of the price elasticity of demand exceeds 1.0, then we know that total expenditure will _______ following a price increase.

decrease

If the vertical and horizontal intercepts of a consumer's budget line decrease, we know that she has experienced a/an

decrease in income

if the vertical and horizontal intercepts of a consumer's budget line decrease, we know that she has experienced a

decrease in income

The set of consumption bundles that a consumer views as equally attractive is known as an

indifference curve

The entire set of a consumer's indifference curves is called the consumer's indifference

map

The rate at which the consumer is willing to exchange, or "trade off," one good for another is the _______ rate of substitution.

marginal

In considering whether to wash your car (i.e., activity x), suppose the maximum you would pay to have someone wash it, B(x), is $6 and the minimum you would have to receive to wash it yourself, C(x), is $7. As a result, you ____ wash your car.

will not

For a pair of goods that are perfect complements, the substitution effect is

zero.

If C(x) denotes the costs of doing activity x and B(x) denotes the benefits, the decision rule says do x if

B(x) > C(x).

Consider a diagram with good A measured on the vertical axis and good B measured on the horizontal axis. If the budget line is expressed mathematically, the slope of the equation is given by ___.

- PB/PA

Consider a diagram with good A measured on the vertical axis and good B measured on the horizontal axis. If the PA = $4 and PB = $8, then the slope of the equation is given by

-2

Which of the following typically causes a demand curve to shift as opposed to a movement along the demand curve?

-Changes in prices of substitutes -Changes in tastes -Changes in income

In a diagram with meals on the vertical axis and jeans on the horizontal, if the consumer is willing to give up 1.5 meals for an additional pair of jeans, her marginal rate of substitution is

1.5

In a diagram with wine measured vertically and cheese measured horizontally, if the slope of a tangent to an indifference curve has slope = -2, then the consumer's marginal rate of substitution is

2

n a diagram with good Y on the vertical axis and good X on the horizontal, if the marginal rate of substitution at a given point on an indifference curve has the value 5, then the loss of a single unit of X requires, for the maintenance of constant satisfaction, that the consumer acquire _____ unit(s) of good Y.

5

The assumption about consumer behavior known as preference ordering means that a consumer can make which of the following statements about two bundles, A and B?

A is preferred to B. B is preferred to A. A and B are equally attractive.

When will a buyer typically wish to purchase more of a product?

At a lower price, all else equal.

What does a demand curve show the relationship between?

Between each possible price and the amount of a product that a potential buyer would wish to purchase.

a change in the price of the product

Between each possible price and the amount of a product that a potential buyer would wish to purchase.

Suppose a consumer has a $200 income to use during the next seven days. Which one of the following bundles is not part of her set of affordable bundles?

Bundle A, which costs $240.

Suppose the indifference curves comprising Ted's indifference map are much less convex than those for Charley. From this we can conclude that variety is more highly valued by

Charley

Which of the following statements best summarizes the relationship between external factors and a demand curve?

External factors are assumed to be held constant along a demand curve.

which of the following statements best summarizes the relationship between external factors and a demand curve?

External factors are assumed to be held constant along a demand curve.

True or false: An increase in the number of farmers growing corn will tend to increase the demand for corn.

False

Suppose a consumer desires only two goods, recreation and food. Letting PR be the price per unit of recreation, PF the price per unit of food, R the units of recreation purchased, F the units of food purchased, and M the consumer's income, then his budget constraint is

PRR + PFF = M

Which of the following is not held constant along a demand curve?

Price

Which of the following will tend to cause only a change in the quantity demanded and not a shift of the demand curve?

a change in the price of the product

For economists, it is not necessary that economic actors actually undertake the calculations assumed necessary for decision making; rather, it is necessary only that they ____ they had actually made those calculations.

act as if

The consumption bundles for which the required expenditure at given prices is less than or equal to the consumer's income is called the ________ set

affordable

The set of consumption bundles that either exhaust the consumer's income or are less than the consumer's income are referred to as

affordable/feasable set

For consumers whose indifference curves have the conventional convex shape, the substitution effect of a price increase will ______ reduce consumption of the good whose price increased.

always

The marginal cost of an activity is the increase in total cost that results from carrying out _____ of the activity

an extra unit

For indifference maps having a tangency point with the budget constraint, the best affordable bundle will always be ___ the point of tangency.

at

In the case where the consumer has multiple goods to consider, indifference curves fitting a two-good framework can

be constructed by defining a composite good.

When a consumer selects from among the affordable bundles the one she ranks highest, she determines her _____ affordable bundle in a given budge

best

The tangency point between a consumer's budget constraint and her highest indifference curve gives her

best affordable bundle

In a diagram with video games on the vertical axis and textbooks on the horizontal, if games and books are equally priced while the consumer's MRS is 2, then she will be better off if she buys more _____ and fewer ____

books,games

The set of all bundles that exactly exhaust the consumer's income at given prices is called the ______ constraint.

budget

A consumer determines her best affordable bundle by combining her indifference map with her

budget constraint.

The collection of goods that an individual consumes over a given time period (hour, day, month, etc.) is called a consumption

bundle

If a bundle lies inside the budget constraint, it _______ be the best affordable bundle

cannot possibly

information that reveals the intensity of a consumer's preferences rather than simply the order of preferences is said to be

cardinal

A factor that may simultaneously affect supply in the short run as a weather event and in the long run through expectations is

climate change.

n a diagram with clothes on the vertical axis and jewelry on the horizontal, if a consumer's MRS is everywhere less than the slope of her budget constraint, she maximizes her satisfaction by only buying

clothes

Suppose the price of good H falls by 9 percent and, as a consequence, the quantity demanded of good M rises by 4 percent, it can be stated that the two goods are _______.

complements

If an individual's preference ordering enables her to rank all possible bundles she faces, it is said to be

complete

When there are more than two goods, an indifference map can still be displayed in the XY plane simply by letting good Y be an amalgam of all goods other than good X. This amalgam is called the _________ good.

composite

A graphical display of marginal benefit and marginal cost is convenient to employ when the level of an activity varies

continuously.

Suppose an individual is indifferent between two bundles A and B, yet prefers to either of them a bundle that contains half of A and half of B. In this case we say the individual's preferences are

convex.

suppose an individual is indifferent between two bundles A and B, yet prefers to either of them a bundle that contains half of A and half of B. In this case we say the individual's preferences are

convex.

the affordable bundles located at the intercepts of the consumer's budget line are called

corner solutions

The amount suppliers are willing to offer at any price depends primarily on their

costs of production.

Suppose a consumer's budget line retains its vertical intercept while its horizontal intercept increases. From this it can be deduced that the price of the horizontally measured good has

decreased

In a diagram with good Y measured vertically and good X measured horizontally, if the tangents attached to an indifference curve get flatter as we move southeasterly along an indifference curve, then the marginal rate of substitution is

decreasing

According to preference ordering, a consumer can rank all alternatives potentially available to her in order of

desirability.

The point-slope interpretation of price elasticity indicates that at every point along a linear market demand curve, the price elasticity is

different.

If a consumer's income and the prices she pays for the two goods she buys all increase by 50%, the position of her budget line

does not change

An individual ends up using his resources inefficiently when he ____ sunk costs.

doesn't ignore

Income is the money a consumer receives

during some interval of time.

In a diagram with cheese on the vertical axis and wine on the horizontal, if wine's price is triple the price of cheese, then the consumer is maximizing satisfaction if his MRS

equals 3.0

A benefit that is bestowed upon people who are not directly involved in an activity is called a(n)

external benefit.

Two goods are said to be perfect substitutes when a consumer is willing to swap one for the other at a _____ rate

fixed

The consumer's income as well as the goods she consumes are measured as

flows.

Whether total expenditure rises or falls after a price decrease boils down to whether the expenditure ____ from additional sales exceeds the expenditure ____ from lower prices.

gain; loss

Suppose a consumer is enjoying goods X and Y in amounts such that the MUX is high and the MUY is low. This tells us that her marginal rate of substitution for X with Y (MRSXY) is relatively

high

The procedure of announcing a price and adding the individual quantities demanded by the several consumers is called _______ summation.

horizontal

Most people in the real world fit ____ into the "homo economicus" caricature.

imperfectly

For a pair of goods that are perfect complements, the total effect of a price change coincides with the

income effect

If a consumer's budget line shifts away from the origin with no change in slope, the consumer has experienced a/an

increase in income

If suppliers of a product expect its price to be lower in the future, today's supply is likely to

increase.

Suppose that the total expenditure on good X rises after the price of X is increased. From this we can conclude that the demand for good X is

inelastic.

Because the slope of a line depends on the units used to measure price and quantity, it is _______ to elasticity as a way of measuring responsiveness to changes in price.

inferior

Cardinal information tells us something about the _______ of a consumer's preferences.

intensity

The more-is-better property is violated if indifference curves from the same indifference map

intersect

If a person prefers bundle H to bundle J and bundle J to bundle K, but also prefers bundle K to bundle H, his preferences are said to be ___________.

intransitive

According to the point-slope interpretation of price elasticity, at every point along a linear market demand curve, the price elasticity will be _______ related to the demand curve's slope.

inversely

If a consumer's MRS is everywhere greater, or less, than the slope of his budget constraint, satisfaction

is maximized at a corner.

The consumer's budget line identifies all of the consumption bundles that

just exhaust her income.

In practice, the consumption bundle for any particular individual includes a/an _________ number of goods.

large

Suppose a consumer is enjoying goods X and Y in amounts such that her marginal rate of substitution for X with Y has a high value. This tells us that relative to her MUX, her MUY is

low

If the Engel curve for a good is positively sloped but flatter than an intercepting ray (from the origin), then the good in question is a ______.

luxury

The benefit of doing activity x, denoted as B(x), is the _____ dollar amount you would be willing to pay to do x.

maximum

When it comes to predicting and explaining events, the track record of economists is better in the area of

microeconomics.

According to the rational choice model developed in the text, a cash grant to a poor person has the same effect on her satisfaction as the grant of food stamps if she would have, with the cash, spent _____ on food than the value of the food stamps.

more

When a consumer prefers one bundle to another because the first has more of every good than the second, her behavior would be described as being consistent with the __________ principle

more is better

According to the transitivity property of preference orderings, if you prefer bundle X to bundle Y and bundle Y to bundle Z, then you

must prefer bundle X to bundle Z.

According to the rational choice model developed in the text, a cash grant to a poor person in place of food stamps will make this person

no worse off and possibly better off.

Any question that asks what "should be?" or what "ought to be?" is a ____ question.

normative

If the demand for a good is unit elastic and its price is reduced, the total expenditure on the good will

not change

Normative questions are those that involve

one's values and opinions.

For a pair of goods that are perfect substitutes, small price changes will likely induce consumers to switch from consuming all of one good to consuming

only the other good.

Ordinal information about a consumer's preferences allows us to determine

only whether one alternative is better or worse than another.

If doing activity x means not being able to do activity y, then the value of doing y (had you done it) is an _____ cost of doing x.

opportunity

The price-consumption curve (PCC) for good X is the set of ______ bundles traced on an indifference map as the price of X varies.

optimal

When the marginal benefit and marginal cost of an activity are shown graphically, the intersection of the two curves (one showing MB and one showing MC) defines the ______________ level of activity

optimal, efficient, correct, best, appropriate, or optimum

The assumption that a consumer can rank, in order of preference (possibly with ties), all potentially available alternatives is known as preference

ordering

Economic analysis prepares one to primarily answer ____ questions.

positive

When the market demand curve is linear, the point-slope interpretation of price elasticity shows that price elasticity is never

positive.

In a diagram with meat on the vertical axis and potatoes on the horizontal, if the consumer's indifference curves are relatively steep throughout, then she would likely be classified as a ________ lover

potato

If a good is a necessity, then its Engel curve will be _____ that an intercepting ray (from the origin).

steeper

When a consumption bundle contains more of every good than a second bundle, the "more-is-better principle" tells us that a consumer will

prefer the first bundle to the second.

An indifference map (i.e., a family of indifference curves) is a convenient way to graphically represent a consumer's

prefernces

In general, bundles that lie on an indifference curve are all ________ those bundles that lie below it.

preferred to

According to the point-slope method of calculating the price elasticity of demand, the price elasticity of demand may be interpreted as the _______ of the ratio of price to quantity and the reciprocal of the slope of the demand curve.

product

In the formula used to compute the price elasticity of demand from actual demand data, the numerator contains the _______ change in _______.

proportional; quantity

The process of horizontal summation entails the addition of ______ rather than ______.

quantities; prices

When it is said that "not incurring a cost is a benefit" or that "not getting a benefit is the same as a cost," we are implying that costs and benefits are

reciprocal.

The slope of a budget constraint only tells us about ______ prices, nothing about prices in ______ terms.

relative; absolute

The price at which a person would be indifferent between doing activity x and not doing it is referred to as the _____ price of activity x.

reservation

Goods that are perfect complements have indifference curves that are ______ in shape.

right-angled

The descriptor "homo economicus" describes an individual motivated by

self-interest alone.

If a consumer's income doubles while the prices she pays for the two goods she buys all increase by 50%, the position of her budget line

shifts outward in a parallel fashion.

The opportunity cost of any activity is the _____ that must be sacrificed to do the activity.

single, most-highly valued alternative

A downward sloping marginal benefit curve tells us that each additional unit of the activity yields an ever-_____ benefit

smaller

The bundles constituting the budget constraint is a _______ set than the bundles making up the budget triangle

smaller

Even when economic models breakdown and fail to correctly predict human behavior, they ____ provide insights into how goals may be more efficiently achieved.

still have value since they can

If a consumer's family of indifference curves appears as a set of negatively sloped but linear parallel lines, it can be deduced that the consumer views the two goods as perfect

substitutes

If the cross-price elasticity of demand between two goods is positive, we can state that the two goods are

substitutes.

The ______ effect of an increase in the price of seafood is its reduced attractiveness relative to substitute foods.

substitution

Costs that are beyond recovery at the moment a decision is made are known as

sunk costs

The price-consumption curve (PCC) for good X is derived by allowing the price of X to vary and then tracing a line through the _______ generated between the consumer's indifference map her various budget lines.

tangencies

if a consumer's income decreases, her budget line will shift

toward the origin with no change in slope.

If you prefer bundle A to bundle B and bundle B to bundle C, then you must prefer bundle A to bundle C according to the

transitive

The affordable set of bundles make up what is known as the budget

triangle

If the cross-price elasticity of demand between a pair of goods is approximately zero, we can state with confidence that the two goods are

unrelated.

The more-is-better property is violated if indifference curves are

upward/positive

The cost of doing activity x, denoted as C(x), is the _____ of the resources you must give up in order to do x.

value

If an individual faces a convex indifference curve for two goods, she is more likely to prefer ______ rather than ______ of the two goods.

variety; extremes