ECON 2000-Chapter 6

Which of the following occurs simultaneously with an income effect? a. substitution effect b. Giffen good effect c. preferences effect d. backward-bending supply curve

a. substitution effect

Which of the following is most likely to cause variation in American household spending patterns? a. geographical location of households b. differing levels of family income c. each household's personal preferences d. all will cause variation

d. all will cause variation

Marginal utility can: a. be positive or negative, but not zero b. increase positively, but not negatively c. decrease, but not become negative d. be positive, negative, or zero

d. be positive, negative, or zero

The term _____________ describes a situation where a ________________ causes a reduction in the buying power of income, even though actual income has not changed. a. intertemporal budget; lower price b. substitution effect; lower price c. intertemporal budget; higher price d. income effect; higher price

d. income effect; higher price

A decrease in consumer preference for a product, other things being equal, will cause: a. a decrease in supply. b. market demand to shift to the right. c. quantity demanded is not a price function. d. market demand to shift to the left.

d. market demand to shift to the left.

Kim has $24 per week in her entertainment budget. She splits her time between going to the movies and yoga classes. Each movie costs $8 while each yoga class costs $3. The total utility from each of these activities is set out in the table below. What is Kim's total utility maximizing point? a. 0 movies, 8 yoga classes b. 1 movie, 5 yoga classes c. 3 movies, 0 yoga classes d. 2 movies, 2 yoga classes

b. 1 movie, 5 yoga classes

The term ___________________ is used to describe the common pattern whereby each marginal unit of a consumed good provides less of an addition to utility than the previous unit. a. marginal utility pattern b. diminishing marginal utility c. marginal income utility d. decreasing marginal utility

b. diminishing marginal utility

An inferior good is a product: a. for which there is no demand. b. for which demand decreases as income increases. c. that has an upward sloping demand curve. d. for which demand increases as income increases.

b. for which demand decreases as income increases.

The term _________________ refers to the additional utility provided by one additional unit of consumption. a. Giffen utility b. marginal utility c. utility d. added utility

b. marginal utility

The ________________ arises when a price changes because consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price. a. preferences effect b. substitution effect c. backward-bending supply curve d. income effect

b. substitution effect

What is the significance of the point at the top of the backward bending of the supply curve marked L3? a. as wages increase over this range, the quantity of hours worked changes very little. b. as wages increase of this range, the quantity of hours worked is more inelastic. c. as wages increase over this range, the quantity of hours worked actually decreases. d. as wages increase over this range, the quantity of hours worked also increases.

c. as wages increase over this range, the quantity of hours worked actually decreases.

What is the significance of the point marked L1 at the bottom upward-sloping portion of the individual labor supply (2) curve? a. as wages increase over this range, the quantity of hours worked actually decreases. b. as wages increase of this range, the quantity of hours worked is inelastic. c. as wages increase over this range, the quantity of hours worked also increases d. as wages increase over this range, the quantity of hours worked changes very little.

c. as wages increase over this range, the quantity of hours worked also increases

Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found? a. the demand curves are flatter reducing quantity b. the quantities demanded change so total utility rises c. the marginal utility per dollar is the same for both goods d. the marginal utility per dollar is controlled by trade-offs

c. the marginal utility per dollar is the same for both goods