Intermediate Micro Quiz Answers
Oscar consumes only two goods, X and Y. Assume that Oscar is not at a corner solution, but he is maximizing utility. Which of the following is NOT necessarily true?
Px/Py = money income.
The slope of an indifference curve reveals:
the marginal rate of substitution of one good for another good.
As we move downward along a demand curve for apples,
the marginal utility of apples decreases.
A consumer has $100 per day to spend on product A, which has a unit price of $7, and product B, which has a unit price of $15. What is the slope of the budget line if good A is on the horizontal axis and good B is on the vertical axis?
-7/15
Cole's Coal Company is the only employer in a remote and mountainous region of the country, so the firm is a monopsony buyer of labor in the market. If the local population declines and there are fewer qualified coal miners available, which one of the curves used to determine the monopsony outcome in this market shifts?
The average expenditure curve The marginal expenditure curve Both c) and d)
What is the value of the Lerner index under perfect competition?
0
Which of the following statements is not a correct characterization of a pure monopoly?
A monopolist can charge as high a price as it likes.
A consumer maximizes satisfaction at the point where his valuation of good X, measured as the amount of good Y he would willingly give up to obtain an additional unit of X, equals:
Px/Py
If the market for widgets is suddenly monopolized, we should expect:
a decrease in consumer surplus in the widget market.
The fact that Alice spends no money on travel:
any of the above are possible.
When the income-consumption curve has a positive slope throughout its entire length, we can conclude that
both goods are normal.
Recently, Skooterville has experienced a large growth in population. As a result, the market demand curve for housing in Skooterville:
has shifted to the right.
Compared to the equilibrium price and quantity sold in a competitive market, a pure monopolist will charge a ________ price and sell a ________ quantity.
higher; smaller
The principle of revealed preference would say that if Xavier chooses market basket A over market basket B then:
if A is more expensive than B, then Xavier must prefer A over B.
Unlike a firm buying a particular factor of production in a perfectly competitive market, a pure monopsonist
pays a price for the factor of production that depends on the number of units purchased.
The endpoints (horizontal and vertical intercepts) of the budget line:
represent the quantity of each good that could be purchased if all of the budget were allocated to that good.
The change in the quantity demanded of a good resulting from a change in relative price with the level of utility held constant is called the ________ effect.
substituition
Marginal utility measures:
the additional satisfaction from consuming one more unit of a good.
The difference between what a consumer is willing to pay for a unit of a good and what must be paid when actually buying it is called
consumer surplus.
The change in the price of one good has no effect on the quantity demanded of another good. These goods are:
none of the above.
Monopoly power results from the ability to
set price above marginal cost.
The price of lemonade is $0.50; the price of popcorn is $1.00. If Fred has maximized his utility by purchasing lemonade and popcorn, his marginal rate of substitution will be:
2 lemonades for each popcorn.
Which of the following is true concerning the income effect of a decrease in price?
It will lead to an increase in consumption only for a normal good.
n the personal computer market, some large manufacturers are able to buy computer components (e.g., disk drives, memory chips) at lower prices than smaller firms in the market. This outcome indicates that the large firms haver
a degree of monopsony power.
To find its profit-maximizing output level, a pure monopolist will
equate marginal revenue and marginal cost.
When the price of wood (which is an input in the production of furniture) falls, the consumer surplus associated with the consumption of furniture
increases
Assume that yogurt is a normal good. If the price of yogurt rises, then the substitution effect results in the person buying ________ of the good and the income effect results in the person buying ________ of the good.
less,less
The pure monopolist has no supply curve because
the quantity supplied at any particular price depends on the market demand curve.
Suppose that the prices of good A and good B were to suddenly double. If good A is plotted along the horizontal axis,
the slope of the budget line will not change.
The market demand for sirloin steak is probably more elastic than the market demand for all meat because
there are more substitutes for sirloin steak than for all meats.
