ECON EXAM 2

Suppose that Dave has $200 to spend per week and he buys only magazines and pizza. The price of a pizza is $10 and the price of a magazine is $5. If Dave buys 10 pizzas each week, what is the maximum number of magazines can he buy?

20

Given the budget equation 5M+10P=150, where M represents movies and P represents pizzas, the maximum number of movies that can be consumed is?

30

Ron spends $150 on movie tickets and pizza. The price of a pizza is $10 and a movie ticket is $7.50. If Ron buys 9 movie tickets how many pizzas can he afford?

8

Which of the following is NOT a potential impact of an effective price ceiling, such as rent ceiling?

A surplus

Which of the following statements is true about taxes?

Taxes decrease both consumer surplus and producer surplus while creating a deadweight loss

Marginal utility measures the

additional utility from an additional unit of consumption

Which of the following is a potential impact of an effective price ceiling, such as rent ceiling?

an increase in search and deadweight loss

When consumption of a good increases, marginal utility will

decrease

As the quantity of a good consumed increases, its marginal utility ____ and its total utility _____.

decreases, increases

An indifferent curve shows

different combinations of two goods among which the consumer is indifferent

The sellers pay the entire sales tax levied on a good when demand is perfectly ____ or supply is perfectly _____.

elastic, inelastic

When tax is imposed on a good or service, sellers respond to the price that

excludes the tax

Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose the price of a cookie rises. According to marginal utility theory, Teddy buys

fewer cookies

When a tax is imposed on a good or service, buyers respond only to the price that

includes the tax

The minimum wage

is a type of price floor, usually creates a surplus of labor

The amount of a tax paid by the buyers will be larger the

more inelastic the demand and the more elastic the supply

The change in ____ can be divided into the ____ to effect and the _____ effect.

price; substitution; income

Budget lines are drawn on a diagram with the

quantity of one good on the vertical axis and the quantity of another good on the horizontal axis

A consumer has maximized his or her utility by consuming

so that the ratio of marginal utility to price is the same for all goods consumed

The slope of an indifference curve is defined as being

the marginal rate of substitution

The marginal rate of substitution is

the rate at which the consumer will give up one good to get an additional unit of another good which remaining on the same indifference curve

A production quota is an _____ limit to the quantity of a goo that may be produced in a specified period

upper