ECN 3030

If Mary prefers bananas to plums and plums to peaches, but is indifferent between bananas and oranges, she a) prefers oranges to peaches. b) prefers plums to oranges. c) is indifferent between oranges and plums. d) is indifferent between oranges and peaches.

a)

If the own-price elasticity of demand for a good is -0.6 and quantity demanded decreases by 30%, price must have... a) increased by 50%. b) decreased by 0.6%. c) increased by 20%. d) decreased by 18%.

a)

Seasonal or cyclical variation in a time-series model... a) is regular in nature but can be accounted for by dummy variables. b) exhibits irregular variation that can be accounted for by dummy variables. c) is irregular in nature and need not be accounted for by dummy variables. d) None of these options are correct.

a)

Suppose that 2 units of X and 8 units of Y give a consumer the same satisfaction as 4 units of X and 2 units of Y. Then a) both "the consumer is willing to give up 3 units of Y to obtain 1 more unit of X" and "the marginal rate of substitution of Y for X is 3". b) the consumer is willing to give up 3 units of Y to obtain 1 more unit of X. c) both "the consumer is willing to give up 1 unit of Y to obtain 3 more units of X" and "the marginal rate of substitution of Y for X is 3". d) the consumer is willing to give up 1 unit of Y to obtain 3 more units of X. e) the marginal rate of substitution of Y for X is 3.

a)

The estimated demand for a good is Q = 3,600 - 12P + 0.6M - 2.5PR where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. If the price of the good decreases by $10, all else constant, the quantity demanded will ________ by ________ units. a) increase; 120 units b) increase; 250 units c) decrease; 1.2 units d) increase; 12 units

a)

The rate at which a consumer is able to substitute one good for another is determined by the a) ratio of the prices of the goods. b) consumer's preferences. c) marginal rate of substitution. d) indifference map.

a)

Which of the following would tend to INCREASE the elasticity of demand for good X? a) the percentage of a consumer's income spent on good X increases. b) a new discovery allows firms to produce X at a much lower cost. c) All of these options are correct d) a new product, Y, which can be used as a complement of X, is introduced.

a)

All other things equal, the demand for good X will be more elastic than the demand for good Y when... a)consumers have more time to adjust to a change in the price of good Y than they have time to adjust to a change in the price of good X. b) good X has more substitutes than good Y. c) All of these options are correct. d) good X accounts for a smaller percentage of a typical consumer's budget than good Y.

b)

Busch Gardens recently announced that it will increase the entrance fees at its theme parks in order to increase park revenues. Busch Gardens must believe that... a) the demand for theme park attractions is elastic. b) the percentage increase in fees will be greater than the percentage decrease in the number of theme park visitors. c) theme park goers are very responsive to price changes. d) demand is unitary elastic, and thus the number of visitors will NOT decrease.

b)

If the price elasticity of tablet computers is -1.5 and price decreases 20%, what happens to the quantity of tablet computers demanded? a) quantity decreases by 13% b) quantity increases by 30% c) quantity decreases by 1.5% d) quantity increases by 7.5%

b)

The estimated demand for a good is Q = 3,600 - 12P + 0.6M - 2.5PR where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. The good is a) an inferior good because the coefficient on M is less than one (1). b) a normal good because the coefficient on M is positive. c) a normal good because the coefficient on P is negative. d) an inferior good because the coefficient on PR is negative.

b)

The estimated demand for a good is Q = 3,600 - 12P + 0.6M - 2.5PR where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. This good and good R are a) substitutes because the coefficient on PR is negative. b) complements because the coefficient on PR is negative. c) substitutes because the coefficient on M is positive. d) complements because the coefficient on M is positive.

b)

The rate at which a consumer is willing to substitute one good for another is measured by the a) consumer's real income. b) indifference map. c) slope of the line tangent to the indifference curve. d) slope of the budget line.

c)

Along an indifference curve a) the price ratio is constant. b) the MRS is constant. c) the ratio of the marginal utilities is constant. d) consumer utility is constant

d)

Demand is (more elastic / less elastic) in the short run than in the long run a) (more elastic) because goods account for a larger percentage of the consumer's budget in the short run than in the long run. b) (less elastic) because goods account for a smaller percentage of the consumer's budget in the short run than in the long run. c) (more elastic) because consumers have less time to adapt to a price change in the short run than in the long run. d) (less elastic) because consumers have less time to adapt to a price change in the short run than in the long run.

d)

For a linear demand function, Q = a + bP + cM + dPR, the cross-price elasticity is... a) -d b) d c) -d(Q/P) d) d(PR /Q) e) d(Q/PR)

d)

If E1 is the demand elasticity for a product after a price change has been in effect one day, E2 is the demand elasticity for that product after one week, and E3 is demand elasticity for that product after one month, a) |E1| > |E2| > |E3|. b) |E2| > |E3| > |E1|. c) |E3| > |E1| > |E2|. d) |E3| > |E2| > |E1|.

d)

Marginal utility is the a) relative value of two goods when a utility-maximizing decision has been made. b) utility obtained from the consumption of all but the last unit of a good. c) change in the amount of a good consumed that increases total utility by one unit. d) change in total utility that results from increasing the amount of a good consumed by one unit.

d)

Which of the following assumptions is (are) NOT made in consumer behavior theory? a) None of these options are correct. b) Consumers can rank all bundles of goods. c) Consumers have complete information. d) Consumers can measure the utility they get from all bundles of goods.

d)

Total revenue increased for a firm operating in the elastic range of its demand curve. Which of the following statements is correct? a) The firm must have raised price. b) The firm must have lowered price. c) Quantity demanded must have increased. d) both "The firm must have raised price" and "Quantity demanded must have increased". e) both "The firm must have lowered price" and "Quantity demanded must have increased".

e)