chapter 5

Assume that a combination of 10 bottles of wine and 2 cartons of milk lies on a consumer's budget constraint. If the price of one bottle of wine is $10, and one carton of milk is $1, what is the consumer's income?

$102

John is ready to pay $5 for an extra loaf of bread. Due to an ongoing discount in the store, he gets a loaf for $2. John's consumer surplus from the purchase is ________.

$3

The general rule for benefit maximization suggests that in personal equilibrium:

the ratio of marginal benefit to price should be identical across all goods

When the price of milk is $3 per bottle, Steve purchases 20 bottles of milk. When the price increases to $6, Steve's consumption falls to 15 bottles. Steve's elasticity of demand for milk is:

-.25

Assume that a consumer can spend $20 on two goods, pens and pencils. If the price of one pen is $5 and the price of one pencil is $2, which of the following combinations of the two goods represents a point on the consumers budget constraint?

2 pens and 5 pencils

Sharon consumes 10 chocolates when the price of one chocolate is $2. If her elasticity of demand for chocolates is -1, she consumes ________ chocolates when the price increases to $4.

5

A​ consumer's budget constraint refers to the collection of all possible bundles that​ _____

Exactly exhausted a consumer's entire budget.

Given that burgers and fries are complementary​ goods, if the price of fries decreases the demand for both goods will rise.

It is somewhat inaccurate. The decrease in the price of fries will increase the quantity demanded (not the demand) for fries. It will, however, as the statement claims, increase the demand for burgers.

An optimizing consumer has to choose between two goods Good A priced at PAand Good B priced at PB. Given that MBA is the marginal benefit from consuming Good A and MBB is the marginal benefit from consuming Good B, the consumer's well-being will be maximized at the point where:

MBA/PA = MBB/PB

Charley spends all of his income on soft drinks and pizza. Suppose he is currently buying these products in amounts such that his marginal benefit from an additional soft drink is $70 and his marginal benefit from an additional slice of pizza is $130. If the price of a soft drink is $3 and the price of a slice of pizza is $5, is Charley maximizing his total​ benefits?

No, he should shift consumption toward pizza and away from soft drinks to maximize total benefits.

Charley spends all of his income on soft drinks and pizza. Suppose he is currently buying these products in amounts such that his marginal benefit from an additional soft drink is $170 and his marginal benefit from an additional slice of pizza is $30. If the price of a soft drink is $4 and the price of a slice of pizza is $4, is Charley maximizing his total​ benefits?

No, he should shift consumption toward soft drinks and away from pizza to maximize total benefits.

Which of the following are necessary ingredients to the​ buyer's problem?

Prices of goods and services, Amount of money the consumer has to spend, Consumer's tastes and preferences.

Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil?

a two fold increase in the price of pens and a three fold increase in the price of pencils

If a consumer purchases any combination of goods and services on his ________, he will exhaust his income completely.

budget constraint

A buyer is said to be a price taker if she

can purchase any amount of a good at a fixed price provided she has the money to pay for it.

Which of the following is NOT a direct determining factor of consumers' purchase decisions?

cost of factor inputs

A good is said to have a relatively elastic demand if the value of price elasticity is:

greater than 1

At all the points above the midpoint on a linear demand curve, the value of price elasticity of demand is:

greater than one.

The demand curve shows​ ___________.

how the quantity demanded responds to changes in the price of the good

Willingness to pay:

is the highest price that a buyer is willing and able to pay for a unit of good.

If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to:

pivot leftward along the vertical axis

If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumer's budget constraint:

pivots leftward without a change in the intercept on the horizontal axis

The percentage change in the quantity demanded of a good due to a percentage change in its price is referred to as the:

price elasticity of demand

Utility measures​ ____

the happiness or satisfaction that comes from consuming a good

While making a purchase decision using marginal thinking, a buyer should buy the good that yields the:

the highest marginal benefit per dollar spent

Negative values of the price elasticity of demand of a good can be attributed to:

the law of demand

The price elasticity of demand for a good is likely to be less elastic​

the lower the budget share spent on the good, the shorter the available time during which consumers can adjust, the smaller the number of close substitutes for the good

Suppose the prices of a pair of jeans, a shirt, and a tie are $30, $20, and $10 respectively. Which of the following statements is true in this context?

the opportunity cost of buying a shirt is 2 ties

The slope of a budget constraint represents:

the opportunity cost of one good in terms of another

If a good has a price elasticity of demand equal to 0, _____

the quantity demanded is completely unaffected by a change in its price