Econ Ch. 3,5,6

Rick eats only french fries and bur rgers at his office cafeteria. His weekly lunch budget is $48 Each burger costs $6 and each order of fries costs $3 deciding how much of each good to buy, Ric ck knows that 2 burgers and 4 orders of french fries will give him a utility of 8 At his utility-maximizing point Rick's utility is

32

The demand for a product is unit elastic At a price of $20, 10 units of a product are sold. If the price is increased to $40, then one would expect sales to equal:

5 units

How does the U S Bureau of Labor Statistics gather information with regard to the typical consumption choices of Americans?

Consumer Expenditure Survey

Aleah is an electrical engineer. Her wage increased from $30 per hour to $40 per hour. She can work up to 50 hours each week The table below shows har ublity from different levels of leisure and income If Aleah decreased her hours of work from 30 to 20 hours per week before her raise, the marginal unity loss from having less income is:

Correct O 23 O 56 O 19 O 100

The ___________ is the quantity where quantity demanded and quantity supplied are equal at a certain price.

Equilibrium quantity

_____________ refers to the total number of units that are purchased at that price.

Quantity demanded

Celia works as an articling student with a large law firm Her wage increased from $30 per hour to $40 per hour. She can work up to 50 hours each week The table below shows her utility from different levels of leisure and income. If Celia continues to work 50 hours per week after her raise, the raise will increase her utility by

O 3 Correct O 4 O 12 O 32

Todd is a cattle rancher. In June and July he spent his clothing budget on jeans and cowboy hats Each pair of jeans cost $50 and each hat cost $100 At Todd's purchased optimal is choice, his marginal utility from the last pair of jeans purchased is 200. This means that his marginal utility from the last cowboy hat purchased is:

O 550 O 500 O 450 Correct O 400

Bruce works for a large bank His wage increased from $30 per hour to $40 per hour. He can work up to 50 hours each week The table below shows his utlity from different levels of leisure and income. If Bruce decides to increase his weekly hours of work from 10 to 20 hours after his raise, the marginel loss from having less leisure is:

O 8 O 27 O 21 Correct O 15

Which of the following is most likely to cause variation in American household spending patterns?

O differing levels of family income O geographical location of households O each household's personal preferences Correct o each of the above will cause a variation

Refer to Figure 3-1. Using the graph below and beginning on D1, a shift to D2 would indicate a(n)

O increase in quantily demanded O decrease in quantity demanded Correct O increase in demand O decrease in demand

Refer to the below diagram Fig 6-1. In this instance

O the BC line is diagonal because the amount spent on both goods is less or equal to incomo O the consumer will tind thvat every point along the 13 line is outside the budgot constraint O the consumer will find the highest utility ***** x and y just touch the 12 line Correct o all of the above and the consumer can choose any point on or below the budget constraint line BC

Refer to the budget line diagram Fig 6-2, below. At point U, ________.

P1/P2 = MU1/MU2

In terms of microecononic analysis, what is the function of "utils"?

a measurement of utility

After widespread press reports about the dangers of contracting "mad cow disease" by consuning beef from Canada, the likely economic effect on the US demand curve for beef from Canada is:

a shift of the demand curve for beef to the left

A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that

cross-price elasticity of demand for iced tea is -2

Refer to the diagram Fig 6-3 below What is the significance of the point at the top of the backward bending of the supply curve marked L3?

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

Marginal utility can

be positive, negative, or zero

Any given demand or supply curve is based on the ceteris paribus assumption that

all else is held equal

The term "ceteris parbus" means that

all variables except those specified are constant

Refer to Figure 3-2. A change from Point A to Point B represents a(n)

decrease in quantity demanded

When demand is inelastic

demand curves appear to be fairly flat

Supply is said to be ___________ when the quantity supplied is very responsive to changes in price.

elastic

When economists are sketching examples of a demand or supply curve that is close to horizontal, they refer to that demand or supply curve as _____________.

elastic

Youth smoking seems to be more __________ than adult smoking-that is, the quantity of youth smoking will fall by a greater percentage than the quantity of adult smoking in response to a given percentage increase in price.

elastic

If the supply curve for a product is vertical, then the elasticity of supply is

equal to zero

The ___________ is the only price where quantity demanded is equal to quantity supplied.

equilibrium price

If the supply curve for housing is perfectly inelastic, then a reduction in demand wll cause the equilibnum price to

fall and the equilibrium quantity to stay the same.

An inferior good is a product

for which demand decreases as income increases

A perfectly elastic supply curve is:

horizontal

The longer the time period considered, the more the elasticity of supply tends to

increase

The demand schedule for a good:

indicates the quantities that will be purchased at alternative market prices.

The key assumption that accompanies the use of numbers for measuring utility is that

individuals choose based on their preferences

Demand is said to be ___________ when the quantity demanded is not very responsive to changes in price.

inelastic

When economists are sketching examples of demand and supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as _______.

inelastic

Refer to Figure 5-1. Graph B represents a demand curve that is relatively __________. Total revenue _________ as the price decreases from $10 to $5.

inelastic ; decreases

Saving money is a(n) __________, because it involves less consumption in the present, but the ability to consume more in the future.

intertemporal choice

The ___________ budget constraint shows the tradeoff between present and future consumption.

intertemporal choice

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the __________________.

law of demand

A 10 percent increase in income leads to a 15 % decrease in the quantity of macaron ' and cheese demanded but no change in the price of macaroni an cheese. From this information, we can assume

macaroni is an infenior good and price elasticty of supply is infinite

The step-by step process of finding the choice with highest total utility involves a comparison of the

marginal utility gained and lost from different choices along the budget constraint.

Refer to Figure 5-1. With reference to Graph B, at a price of $5, total revenue equals:

o $150 o $ 250 o $300 Correct o $200

According to the lew of supply

there is a direct relationship between price and the quantity supplied

When quantity demanded decreases in response to a change in price

there is a movement up along the demand curve

The typical pattern revealed in a budget constraint model shows that as the quantity consumed rises

total utility rises, but marginal utility falls

Demand is said to be _____________ when the quantity demanded changes at the same proportion as the price

unit elastic

But nearly all supply curves share a basic similarity they slope _____________.

up from left to right

A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied, conversely, ospecialy good weather would shift the _________________.

supply curve to the right

Refer to Figure 5-1 With reference to Graph Al at a price of $5, total revenue equals:

o s200 o $ 400 Correct o $ 500 o $1,000

Jay and Jen are married with two children. They are preparing a household budget for the coming year. Based on statistical information for American households, approximately what portion of this family's annual consumption will most likely be budgeted for food and vehicle expenses?

one - third

Approximately what portion of annual consumption is typically spent by American households on shelter?

one-thrd

The elasticity of demand is defined as the percentage change in quantily demanded divided by the percentage change in _____.

price

The downward slope of the demand curve again illustrates the pattern that as ________ rises, ___________ decreases.

price, quantity demanded

A supply curve is a graphical flustration of the relationship between prce, shown on the vertical axis, and ________ shown on the honzontal axis.

quantity

A demand curve shows the relationship between price and on a graph.

quantity demanded

The theoretical model of the intertemporal budget constraint for the U S economy as a whole suggests that the most common pattern seems to be that:

the quantity of savings does n't adjust much to changes in the rate of return

__________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.

Price floors

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.

diminishing marginal utblity

Which of the following occurs simultaneously with an income effect?

substitution effect

Economists are able to determine total utility by

summing up the marginal utilities of each unit consumed

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that

Goods X and Y are complement goods

The elasticity of supply is defined as the ________ change in quantity supplied divided by the ___________ change in price.

Percentage; marginal

If new manufacturers enter the computer industry, then (ceteris paribus)

The supply curve shifts to the right

If the demand curve for a life-saving modicino is pertectly inelastic, thon a reduction in supply will cause the equilibrium price to

rise and the equilitbtium quantity to stay the same

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.

substitution effect