Intermediate Microeconomics Final Exam
Which of the following statements would most economists agree with? Multiple Choice Rent controls hurt everyone. Rent controls hurt poor people and help the rich. Rent controls decrease overall societal welfare. Rent control allow for a more equitable distribution of resources.
Rent controls decrease overall societal welfare.
The graph of the budget line below has dollars on the vertical axis and food on the horizontal axis. Which statement is false? Multiple Choice The vertical intercept represents all money available for purchasing. The distance OA shows the amount of money spent on OD amount of food. If the amount of money available is known in this graph, then the absolute and relative price of food is known also. The horizontal intercept represents all the food the consumer could purchase with the budget available.
The distance OA shows the amount of money spent on OD amount of food.
Say you own a Mexican restaurant that produces, among other things, Mexican burritos. The marginal product of your last worker was 5. If the marginal rate of technical substitution between capital and labor is 0.5, then marginal product of capital is Multiple Choice 5. We can't say with the information given. 1. 10.
10
If the consumer's budget constraint is given by 10F + 5S = 100 where F is food and S is shelter, what is the opportunity cost of food in terms of shelter? Multiple Choice 5 2 15 10
2
Let supply be given by P = 5Q and demand by P = 30 - 5Q. Suppose we now place a tax of 10 per unit of output on the seller. The new equilibrium price is Multiple Choice 2. 5. 15. 20.
20
Please refer to the following diagram. In the diagram if the supply curve is S, the equilibrium price is Multiple Choice 4. 3. 2. 0.
3
If I get 10 units of pleasure from my first ice cream cone and 2 less units than before from each succeeding cone, I will buy ________ cones and gain ________ units of consumer surplus if the price of a cone = to 5 units of pleasure. Multiple Choice 4; 28 6; 30 2; 18 3; 9
3; 9
Suppose the first hour of study today will allow you to answer 10 correct questions in tomorrow's exam. After the first hour, the marginal benefit of each additional hour of study is reduced by 2 (meaning if you study 2 hours today your total number of correct responses tomorrow will be 18 and if you study 3 hours it will be 24 and so on). If the costs of studying each additional hour are zero, how many hours you should study? Multiple Choice 18 10 6 0
6
If the demand function for apples is P = 20 -Q, how much consumer surplus does the consumer gain when the price of the apples equals 8? Multiple Choice 144 72 80 36
72
The oligopoly model in which each firm assumes that rivals will continue to produce at their current output levels is called the: A. Cournot model B. Bertrand model C. Stackelberg model D. Chamberlin model
A. Cournot Model
In the Cournot model, A. each firm takes the quantities produced by its rivals as given. B. each firm takes the prices charged by its rivals as given. C. one firm plays a leadership role and its rivals merely follow. D. prices are higher and quantities are slightly less than we would see if the firms colluded.
A. Each firm takes the quantities produced by its rivals as given
Cournot duopolists face a market demand curve given by P = 90 - Q where Q is total market demand. Each firm can produce output at a constant marginal cost of 30 per unit. If the duopolists behave as a shared monopoly, the equilibrium price and total quantity of output will be A. Q = 30, P = 60. B. Q = 60, P = 30. C. Q = 40, P = 50. D. Q = 45, P = 45.
A. Q = 30, P = 60.
Which of the following markets can most accurately be described as monopolistically competitive? A. Toothpaste B. Milk C. Electricity D. Apples
A. Toothpaste
If a monopolistically competitive firm is making positive economic profits, we would expect A. entry of other firms. B. the firm to continue making the positive economic profits. C. the firm to expand market share and the industry to move toward an oligopoly structure. D. the firm to hire more labor.
A. entry of other firms
Suppose that firms are located in a circle on an island. You are given transportation costs, fixed costs, variable costs, and demand (assume that customers are spread evenly along the circle). As the number of customers increase, A. the number of firms will rise in the long run. B. the number of firms will fall in the long run. C. the number of firms will stay the same in the long run. D. It is impossible to tell from the information given
A. the number of firms will rise in the long run.
Suppose that firms are located in a circle on an island. You are given transportation costs, fixed costs, variable costs, and demand (assume that customers are spread evenly along the circle). As transportation costs on the island rise, A. the number of firms will rise in the long run. B. the number of firms will fall in the long run. C. the number of firms will stay the same in the long run. D. It is impossible to tell from the information given.
A. the number of firms will rise in the long run.
Suppose that firms are located in a circle on an island. You are given transportation costs, fixed costs, variable costs, and demand (assume that customers are spread evenly along the circle). If the distance around the island is 50 miles and there are two restaurants equally spaced on the island and each of 100 people are equally spaced around the island and eat a meal a day at a restaurant, what will be the average distance traveled to and from restaurants in a day's time? A. 25 miles B. 50 miles C. 12.5 miles D. 125 miles
C. 12.5 miles
The strategy for the shared monopoly is A. to sell a marginally higher quantity of goods than the rival. B. to sell at a marginally lower price than the rival. C. collusion. D. to take account of the effect of its own behavior on the rival firm's quantity choice.
C. Collusion
The basic idea of the theory of contestable markets is that when the cost of entry and exit is very low, the threat of entry can be sufficient to produce an allocation similar to the one we see under A. monopoly. B. monopolistic competition. C. perfect competition. D. oligopoly.
C. Perfect competition
When you go to a baseball game your ticket specifies your seat and section of the stadium where the seat is located. Assuming the seats all cost nearly the same to install and maintain, what pricing strategy would you expect the team officials to adopt if a full stadium with a maximum of satisfied customers and at least normal profit is the goal? A. Price all seats at cost, which includes normal profit. B. Price above cost for the seats with the best view and price at cost for the rest even if this means the stadium is not full. At least total cost with normal profit will be achieved. C. Price above cost for seats with the best view and below cost for less desirable seats so the gain from those willing to pay more for the best seats offsets the loss on the cheap seats. D. Price all seats above cost so if there are empty seats, at least total costs can hopefully be covered.
C. Price above cost for seats with the best view and below cost for less desirable seats so the gain from those willing to pay more for the best seats offsets the loss on the cheap seats.
Cournot duopolists face a market demand curve given by P = 90 - Q where Q is total market demand. Each firm can produce output at a constant marginal cost of 30 per unit. The equilibrium price and quantity for the total market will be A. Q = 30, P = 60. B. Q = 60, P = 30. C. Q = 40, P = 50. D. Q = 45, P = 45.
C. Q = 40, P = 50.
The basic problem of a shared monopoly from the point of view of those involved is that A. profits are lower than in the other oligopoly models. B. the shared output is too high for the high price to be maintained. C. collusive agreements are difficult to sustain. D. revenue is lower than in the other oligopoly models.
C. collusive agreements are difficult to sustain.
Suppose there are two firms in a market: firm A and firm B. Further, assume that they produce a homogenous product at a constant marginal cost of $10. In the Bertrand model solution, firm A will charge a price A. greater than firm B. B. smaller than firm B. C. equal to $10. D. greater than $10.
C. equal to $10.
Excess capacity for a firm in an oligopoly situation A. cannot contribute to long run profit for a firm. B. encourages competitors to enter the market and build at optimal capacity. C. is a deterrent to entry in the market by potential competitors. D. will be temporary if the planning was done right.
C. is a deterrent to entry in the market by potential competitors
In the Stackelberg model, A. each firm takes the quantities produced by its rivals as given. B. each firm takes the prices charged by its rivals as given. C. one firm plays a leadership role and its rivals merely react to the leader's quantity. D. prices are higher and quantities are slightly less than we would see if the firms colluded to achieve the monopoly outcome.
C. one firm plays the leadership role and its rivals merely react to the leaders quantity
Suppose that firms are located in a circle on an island. You are given transportation costs, fixed costs, variable costs, and demand (assume that customers are spread evenly along the circle). As the firm's variable costs rise, A. the number of firms will rise in the long run. B. the number of firms will fall in the long run. C. the number of firms will stay the same in the long run. D. It is impossible to tell from the information given.
C. the number of firms will stay the same in the long run.
Prices in the Bertrand model are A. the same as prices under a shared monopoly. B. slightly higher than prices would be under a shared monopoly. C. the same as prices would be in the perfectly competitive case. D. slightly higher than prices would be in the perfectly competitive case.
C. the same as prices would be in the perfectly competitive case.
Oligopoly is a market structure in which A. firms are price takers. B. there exist many firms, each producing a product that is a close, but imperfect, substitute for the products of other firms. C. there are only a few sellers. D. there is only one seller.
C. there are only a few sellers
The variety that monopolistic competition provides is paid primarily by A. the producer whose ability to pass on costs is limited by his demand curve. B. all consumers whether they desire variety or not. C. those customers who desire the variety. D. no one because variety costs no more to produce than uniform products cost to produce.
C. those customers who desire the variety.
A new technology is announced which allows manufacturers to produce widgets for less. Widgets are a key input in the production of whatchamacallits. What would we expect to happen to the market for whatchamacallits? Multiple Choice The demand curve would shift left. The supply curve would shift left. The demand curve would shift right. The supply curve would shift right.
The supply curve would shift right.
Suppose your income rises and the price of good Y rises also. That means that your demand curve for good X shifted right. Multiple Choice This statement is always true. This statement will always be true if good Y is a substitute for good X. This statement will always be true if good X is a normal good. This statement will always be true if good Y is a substitute for X and X is a normal good.
This statement will always be true if good Y is a substitute for X and X is a normal good.
If $100 today is worth $150 to you in the future, then you exhibit Multiple Choice a positive time preference. a negative time preference. a neutral time preference. a negative marginal rate of substitution.
a positive time preference.
The indifference curves for nickels and dimes will be Multiple Choice L-shaped. a straight line with positive slope. a straight line with negative slope.
a straight line with negative slope.
Diminishing marginal rate of substitution implies that the marginal rate of substitution Multiple Choice falls as one travels down (eastward) on an indifference curve. rises as one travels down (eastward) on an indifference curve. stays the same as one travels down (eastward) on a typical indifference curve. falls as one move to higher (northeast) in the indifference curve map.
falls as one travels down (eastward) on an indifference curve.
Say the market for cereal is initially in equilibrium when all the major newspaper published the findings from study that say that eating 2 cups of cereal each day significantly reduces the risk for a heart attack. Other things equal, the publication of these findings will Multiple Choice decrease the market quantity of cereal. decrease the market price of cereal. increase the supply of cereal. increase the quantity supplied of cereal.
increase the quantity supplied of cereal.
If income rises Multiple Choice the demand curve will shift right. the demand curve will shift left. the demand curve will stay the same since only price effects it. one cannot tell which way demand shifts with the information given.
one cannot tell which way demand shifts with the information given.
The short run is defined as that period of time during which Multiple Choice one or more inputs cannot be freely varied. all inputs are variable. all inputs are fixed. labor is counted as a fixed input.
one or more inputs cannot be freely varied.
A horizontal demand curve is Multiple Choice perfectly elastic. perfectly inelastic. unit elastic. has elasticity of zero
perfectly elastic.
The budget constraint shown below is consistent with a pricing strategy that involves a Multiple Choice price reduction of X for large quantities purchased. price increase of X for large quantities. constant price of X for all quantities purchased. price change of X and a nominal income increase for the consumer.
price increase of X for large quantities.
If there is a technological advance that lowers the cost of producing x-ray machines, then we can say that the Multiple Choice quantity demanded for those machines will increase. demand for those machines will shift right. quantity supplied of those machines will go up. quantity supplied of those machines will decrease.
quantity demanded for those machines will increase.
If the current price of pizzas is above the equilibrium price of pizzas then Multiple Choice sellers of pizzas have an incentive to increase the price. sellers of pizzas have an incentive to decrease the price. buyers of pizzas have an incentive to buy more. buyers of pizzas have an incentive to buy less.
sellers of pizzas have an incentive to decrease the price.
Please refer to the following diagram If the supply curve is S, at a price of $2 there will be a Multiple Choice surplus of 1. surplus of 2. shortage of 1. shortage of 2.
shortage of 2.
Please refer to the following diagram. If the supply curve is S, at a price of $4 there will be a Multiple Choice surplus of 1. surplus of 2. shortage of 1. shortage of 2.
surplus of 2.
If the price-consumption curve of shelter is downward sloping, then Multiple Choice the amount of money spent on shelter increases as its price falls. the amount of money spent on shelter decreases as its price falls. the amount of money spent on shelter stays the same as its price falls. it is impossible to tell whether the total expenditure on shelter has changed.
the amount of money spent on shelter increases as its price falls.
When the marginal product curve lies below the average product curve, Multiple Choice the average product curve must be falling. the total product curve must be falling. the average product curve must be rising. the marginal product curve must be rising
the average product curve must be falling.
Say you are the owner of a pizza place. You know that when you produce 10 pizzas, the average product of each of your workers is 10, and the marginal product of your last worker is 15. From this information you know that Multiple Choice the marginal product is increasing. the average product is increasing. the average product is decreasing. the marginal product is decreasing.
the average product is increasing.
Unbridled self-interest fails to coordinate resource flows most effectively in which of the following cases? Multiple Choice the production of bread the building of a tornado warning siren the production of cars the production of haircuts
the building of a tornado warning siren
If the price of gasoline rises dramatically, Multiple Choice the quantity demanded for cars will decrease. the demand for commuter train rides will decrease. the demand for cars will decrease. the quantity of commuter train rides demanded will increase.
the demand for cars will decrease.
If the Surgeon General announces that colas cause cancer then we would expect Multiple Choice the demand for cola will shift right. the demand for cola will shift left. the demand for cola will stay the same. one cannot tell.
the demand for cola will shift left.
If a 20-unit tax is placed on a seller, then Multiple Choice the seller will bear all of the tax burden. the buyer will bear all of the tax burden. both parties will share the tax burden equally. the distribution of the tax burden cannot be determined from the information given.
the distribution of the tax burden cannot be determined from the information given.
The horizontal intercept of the intertemporal budget constraint is referred to as Multiple Choice the present value of lifetime income. the current value of future income. the future value of lifetime income. the future value of present income.
the present value of lifetime income.
According to the rational choice model, cash grants are preferred to food stamps because Multiple Choice they enhance consumer choice cash grants allow consumers to reach lower indifference curves. food is the most essential commodity. food would be cheaper to buy with cash.
they enhance consumer choice
Upon what is your current consumption dependent according to Milton Friedman? Multiple Choice The income you earn today. The income you expect to earn later in life. The present value of your lifetime income. The future value of your present income
The present value of your lifetime income.
You are considering renting a car for the weekend. It costs $300 for the car plus $0.20 per mile (including gas). If you decide to take a detour that adds 50 miles in addition to the 350 miles of your trip that was already planned, what is the cost of the detour? $70 $370 $300 $10
$10
If the opportunity cost of a unit of current consumption is exactly 1 unit of future consumption then you must sacrifice $10 of current consumption to finance Multiple Choice $9 of future consumption. $10 of future consumption. $11 of future consumption. $1 of future consumption.
$10 of future consumption.
Suppose the demand for cigarettes was P = 200 - 10Q, and the supply for cigarettes was P = 10Q. The market equilibrium price in this market would be Multiple Choice $200. $50. $100. $10.
$100
ou are considering renting a car for the weekend. It costs $400 for the car plus $0.40 per mile (including gas). Suppose you have already rented the car for the week and then add a 300-mile addition to your trip. Now what is the cost of the journey? Multiple Choice $120 $520 $0 $200
$120
Here are the costs of going to college: tuition $5,000; books $200; housing $1,000; food $1,000; lost income from work $10,000. Studying and work are equally desirable in your mind. Suppose that you could live at home at no cost to you if you worked, but must live on campus if you go to school. What is the total opportunity cost to you of going to school rather than working? (Food costs the same at school or home.) Multiple Choice $16,200 $7,200 $5,200 $15,200
$16,200
You decide to go skiing this weekend. It costs $50 for transportation, $50 for lodging, $30 for ski lift tickets and you could have earned $100 as a waiter. What is the total cost of the ski weekend? Multiple Choice $230 $130 $100 $80
$230
You are considering renting a car for the weekend. It costs $200 for the car plus $0.20 per mile (including gas). If you decide to go on a 300 mile voyage what is the total cost of the rental? Multiple Choice $200 $60 $260 $0
$260
Suppose that two firms are producers of spring water, which can be obtained at zero cost. The market demand curve for their combined output is p = 100 - Q where p is the price and Q is the amount of spring water sold by both together. If the two producers act in accord with the Cournot model, their combined output will be A. 33.33. B. 66.66. C. 50. D. 0.
B. 66.66
In the Bertrand model, A. each firm takes the quantities produced by its rivals as given. B. each firm takes the prices charged by its rivals as given. C. one firm plays a leadership role and its rivals merely follow. D. prices are higher and quantities are slightly less than we would see if the firms colluded to achieve the monopoly outcome.
B. Each firm takes the prices charged by its rivals as given
Bertrand duopolists face a market demand curve given by P = 90 - Q where Q is total market demand. Each firm can produce output at a constant marginal cost of 30 per unit. The equilibrium price and quantity for the total market will be A. Q = 30, P = 60. B. Q = 60, P = 30. C. Q = 40, P = 50. D. Q = 45, P = 45.
B. Q = 60, P = 30.
Which of the following is an application of the Hoteling model of monopolistic competition? A. Politicians tend toward positions more extreme than what they actually believe B. Stores of similar types tend to cluster C. Efficiency requires that stores are spread equidistant from each other in a given space D. As space increases between firms, each firm produces less
B. Stores of similar types tend to cluster
Which of the duopoly models has the lowest overall combined profit level? A. The Cournot model B. The Bertrand model C. The Stackelberg Leader-Follower model D. The shared monopoly mode
B. The betrand model
In the long run, a monopolistically competitive firm acting according to the Chamberlin model A. will operate at the minimum point of the average cost curve. B. will not operate at the minimum point of the average cost curve. C. will earn positive economic profits. D. will operate at the minimum point of the marginal cost curve.
B. Will not operate at the minimum point of. the average cost curve
When marginal cost is constant and zero, the interdependence between Cournot duopolists causes A. price to be 1/3 higher and quantity to be 1/3 lower than the corresponding values in the monopoly case. B. price to be 1/3 lower and quantity to be 1/3 higher than the corresponding values in the monopoly case. C. prices and quantities to be the same as they would be in the monopoly case. D. prices and quantities to be the same as they would be in the perfectly competitive case.
B. price to be 1/3 lower and quantity to be 1/3 higher than the corresponding values in the
The model of monopolistic competition differs from the model of perfect competition in which of the following assumptions? A. Free entry and exit B. Product homogeneity C. Large number of firms D. Perfect information
B. product homogeneity
Suppose that firms are located in a circle on an island. You are given transportation costs, fixed costs, variable costs, and demand (assume that customers are spread evenly along the circle). As the firm's fixed costs increase, A. the number of firms will rise in the long run. B. the number of firms will fall in the long run. C. the number of firms will stay the same in the long run. D. It is impossible to tell from the information given.
B. the number of firms will fall in the long run.
The strategy for the Bertrand model is A. to sell a marginally higher quantity of goods than the rival. B. to sell at a marginally lower price than the rival but not below marginal cost. C. collusion. D. to take account of the effect of its own behavior on the rival firm's quantity choice.
B. to sell at a marginally lower price than the rival but not below marginal cost.
Which statement is true about advertising? A. If you are a tomato grower you will make more profit by advertising widely. B. If John Kenneth Galbraith's "revised sequence" is correct, advertising is a waste of money. C. It is best to spend advertising money on the products with the lowest quality and lowest consumer demand. D. Advertising is most useful if it is spent on new products of good quality.
D. Advertising is most useful if it is spent on new products of good quality.
Stackelberg Leader-Follower duopolists face a market demand curve given by P = 90 - Q where Q is total market demand. Each firm can produce output at a constant marginal cost of 30 per unit. The equilibrium price and quantity for the total market will be A. Q = 30, P = 60. B. Q = 60, P = 30. C. Q = 40, P = 50. D. Q = 45, P = 45.
D. Q = 45, P = 45.
The Chamberlin model has been criticized for all but which one of the following reasons? A. The concept of an industry group is ambiguous in the model. B. The model adds little to the perfect competition conclusions. C. Consumers are not as willing to switch from one product another for slight price changes. D. The model predicts no long-run profits but does not account for entry and exit in markets.
D. The model predicts no long-run profits but does not account for entry and exit in markets.
Which of the duopoly models has the highest overall combined profit level? A. The Cournot model B. The Bertrand model C. The Stackelberg Leader-Follower model D. The shared monopoly model
D. The shared monopoly model
The strategy for the Stackelberg Leader is A. to sell a marginally higher quantity of goods than the rival. B. to sell at a marginally lower price than the rival. C. collusion. D. to take account of the effect of its own behavior on the rival firm's quantity choice.
D. to take account of the effect of its own behavior on the rival firm's quantity choice.
Suppose that firms are located in a circle on an island. You are given transportation costs, fixed costs, variable costs, and demand (assume that customers are spread evenly along the circle). In an example of a restaurant located on an island, if the number of people on the island doubled, the number of restaurants A. would stay the same. B. would double. C. would halve. D. would increase by a factor of square root of 2.
D. would increase by a factor of square root of 2.
Which of the following statements could be considered a normative statement? Multiple Choice Food stamps are a good way to help low-income people to afford food. Food stamps allow low-income people to buy more food. Most low-income people use Food Stamps to buy food. A large portion of the government budget is used to provide Food Stamps to low-income people.
Food stamps are a good way to help low-income people to afford food.
As the supply curve becomes steeper, the proportion of a sales tax paid by the seller Multiple Choice increases. decreases. stays the same. gets closer to zero.
Increases
What will happen to a typical isoquant if robots become increasingly good at doing manual and mental labor? Multiple Choice Isoquants will become much steeper. Isoquants will not change but movement will occur upward on the curve. Isoquants will become much flatter. Isoquants will become a negatively sloped straight line.
Isoquants will become much flatter.
If the number of suppliers in the microcomputer industry increases, what would we expect to happen? Multiple Choice The number of microcomputers sold will fall. The price of microcomputers will rise. The supply curve will shift left. Movement along the demand curve will occur.
Movement along the demand curve will occur.
A war in the Middle East causes the price of oil to rise. What would we expect to happen to the demand for automobile tires? Multiple Choice The demand for automobile tires will shift right. The demand for automobile tires will shift left. The demand for automobile tires will stay the same. One cannot tell what will happen with the information given.
The demand for automobile tires will shift left.
The typical short run production function assumes Multiple Choice that the amount of the input that complements labor stays constant. all labor is of the same quality and exerts the same effort. both increasing and diminishing returns. All of these choices are correct.
all of these choices are correct
Other things equal, which of the following goods would have the most inelastic price elasticity of demand? Multiple Choice a t-shirt from The Gap (a famous American retail store) all red t-shirt sold in the U.S all shirts, of any color, sold in the U.S a red t-shirt from Macy's (a large department store)
all shirts, of any color, sold in the U.S
In a market economy price serves to Multiple Choice allocate goods. distribute resources more fairly. increase sellers profits. value goods in dollar terms.
allocate goods.
An increase in the price of one good will cause Multiple Choice an inward rotation of the budget curve. an outward rotation of the budget curve. a parallel shift in the budget curve. an inside shift of the budget curve.
an inward rotation of the budget curve.
An increase in income with no changes in the price of either good will cause Multiple Choice an inward shift of the budget curve. an outward shift of the budget curve. no change in the budget curve. an inward rotation of the budget curve.
an outward shift of the budget curve.
Geometrically, the marginal product Multiple Choice is the slope of the line joining the origin to the corresponding point on the total product curve. at any point is the slope of the total product curve at that point. is that point at which the total product curve exhibits diminishing returns. is the slope of the average product curve.
at any point is the slope of the total product curve at that point.
If two perfect complements, a keyboard and a computer, are being considered and the price of the keyboard only is increased, then the substitution effect of the price change will Multiple Choice be negative because keyboards are inferior goods. be positive because the consumer feels poorer. be 0 because it is impractical to have more keyboards and fewer computers. be negative because keyboards and computers are perfect substitutes.
be 0 because it is impractical to have more keyboards and fewer computers.
Kate has a home business that consists of only herself and her computer. If she were to analyze her operations in the form of a long run production function her isoquants would Multiple Choice be straight lines with a negative slope. be L shaped. be concave from above. be straight lines with a positive slope.
be L-shaped
In a diagram, consumer surplus is always represented by the area Multiple Choice between the upper demand curve and its intersection with the supply curve. between the upper demand curve and the price. below the demand curve. above the demand curve.
between the upper demand curve and the price.
Which of the following goods are likely to have a positive cross-price elasticity? Multiple Choice butter and margarine tires and automobiles Pepsi and pizza peanut butter and jelly
butter and margarine
Which of the following goods is likely to have the lowest elasticity of demand? Multiple Choice milk diamonds furniture automobiles
milk
If you are at an all-you-can-eat buffet dinner and you are considering whether to eat another dessert, you, as a rational consumer should decide to eat the desert if it brings you any pleasure at all if it brings you more pleasure than the price you paid for the meal. if it brings you as much pleasure as the desert costs if it is ordered a la carte. no matter what because you want to get more for your money.
if it brings you any pleasure at all
The price in the market has fallen and so has the quantity. This could be happening because Multiple Choice technology is rapidly advancing. factor prices are falling. income has fallen for a normal good. factor prices are rising.
income has fallen for a normal good.
For demand function P = 24 - 6Q, demand Multiple Choice is unit elastic at price 16. is unit elastic at price 12. is unit elastic at price 9. has unitary elasticity at all points on the function.
is unit elastic at price 12.
Say Anna chooses between partying and studying. Supposed her indifference curves satisfied all the assumptions about consumer theory, but she also liked studying a lot more than partying. If the price of studying increased, then Anna would consume Multiple Choice more studying and less partying. less studying and more partying. the same as before. no partying at all, in order to consumer more studying.
less studying and more partying.
What assumptions are necessary to prevent indifference curves from crossing? Multiple Choice transitivity completeness more is better transitivity and more is better
transitivity and more is better
Differences in time preferences depend on Multiple Choice uncertainty regarding the future. social preference. differences in the relative size of expected future incomes. the time.
uncertainty regarding the future.
If the benefits of X = $50 and the price of X = $50, then Multiple Choice $100 is the reservation price. you will be indifferent between buying X and keeping your money. $0 is the reservation price. you should buy X.
you will be indifferent between buying X and keeping your money.
The formula for elasticity is given by Multiple Choice ΔQ/Q/ΔP/P. (Q/P)(slope). (P/Q)(slope). (Q/P)(1/slope).
ΔQ/Q/ΔP/P.
