Quiz 4 - Ch 5

Jonathan works at a convenience store and makes note of changes to sales after the price of liquid soap unexpectedly increases by 15 percent. He notices that the sale of shampoo decreases by 3 percent and the sale of lotion increases by 10 percent. The​ cross-price elasticity of demand between liquid soap and shampoo is negative ______. ​(Round your answer to one decimal place and enter a​ "-" if your answer is​ negative.) Based on the​ cross-price elasticity of​ demand, we can infer that liquid soap and lotion are ___________.

-0.2 Substitutes

Andy consumes two​ goods, books and video games. His income is ​$40​, the price of a video game is ​$8​, and the price of a book is ​$4. Suppose Andy​'s parents give him ​$24 for his birthday. ​ 1.) Using the triangle drawing​ tool, show Andy​'s budget set on the top graph to the right. Label your triangle​ 'BS1'. https://imgur.com/undefined Carefully follow the instructions above and only draw the required object. Now suppose Andy​'s parents had given him three video games for his birthday instead of giving him ​$24. Andy is a very polite young man and would never return a gift that his parents had given him for cash or to him parents. ​1.) Using the multipoint curve drawing​ tool, show the budget constraint that Andy now faces on the graph to the right. Label your curve​ 'BS2'. (Hint: The budget constraint is simply a subset of the budget​ set; graphically, it is the outer edge of the budget set that separates affordable bundles from unaffordable​ bundles.) https://imgur.com/qtZu1Yv Carefully follow the instructions above and only draw the required object. Based on your preceding​ answers, which of the following is​ possible? ​(Check all that apply​.) A. He could be indifferent between a gift of ​$24 and a gift of three video games. B. Andy could prefer a gift of ​$24 to a gift of three video games. C. He could prefer a gift of three video games to a gift of ​$24.

https://imgur.com/undefined https://imgur.com/qtZu1Yv A. He could be indifferent between a gift of ​$24 and a gift of three video games. B. Andy could prefer a gift of ​$24 to a gift of three video games. https://imgur.com/a/xuuRrVs

How does a​ consumer's budget set differ from his budget​ constraint? A. A budget set refers to all of the possible bundles of goods and services a consumer can​ purchase, while a budget constraint is limited to the bundles he can purchase using all of his income. B. A budget constraint refers to all of the possible bundles of goods and services a consumer can​ purchase, while a budget set is limited to the bundles he can purchase using all of his income. C. A budget set is simply the collection of the many budget constraints a consumer faces at different points in time. D. There is no difference at all—the terms​ "set" and​ "constraint" are interchangeable. For a consumer with a given level of​ income, the combinations of goods for the budget set will be __________ than for the budget constraint.

A. A budget set refers to all of the possible bundles of goods and services a consumer can​ purchase, while a budget constraint is limited to the bundles he can purchase using all of his income. Higher

Charley spends all of his income on soft drinks and pizza. Suppose he is currently buying these products in amounts such that his marginal benefit from an additional soft drink is $160 and his marginal benefit from an additional slice of pizza is $70. If the price of a soft drink is $4 and the price of a slice of pizza is $5​, is Charley maximizing his total​ benefits? A. ​No, he should shift consumption toward soft drinks and away from pizza to maximize total benefits. B. ​No, he should increase his consumption of both goods. C. ​No, he should shift consumption toward pizza and away from soft drinks to maximize total benefits. D. ​Yes, there is no other consumption choice that will make his total benefits greater.

A. ​No, he should shift consumption toward soft drinks and away from pizza to maximize total benefits.

John earns ​$4,800 per month. He spends all of his money on two​ goods, A and B. The price of good A is ​$240​, and the price of good B is ​$400. Identify the intercepts of​ John's budget constraint if good A is plotted on the x​-axis and good B is plotted on the y​-axis. A. 8 units of good A on the x​-axis and 20 units of good B on the y​-axis B. 20 units of good A on the x​-axis and 12 units of good B on the y​-axis C. 10 units of good A on the x​-axis and 8 units of good B on the y​-axis D. 18 units of good A on the x​-axis and 45 units of good B on the y​-axis The slope of​ John's budget constraint is negative __________. ​(Round your response to two decimal places. Use a negative sign if you are entering a negative number.​) Ria has an income of​ $1,200. She consumes two types of​ goods, shoes and handbags. Suppose the price of a pair of shoes is​ $400, and the price of a handbag is​ $200. What is the opportunity cost of each​ good? A. The opportunity cost of a pair of shoes is 4​ handbags, and the opportunity cost of a handbag is 1 pair of shoes. B. The opportunity cost of a pair of shoes is 4​ handbags, and the opportunity cost of a handbag is 2 pairs of shoes. C. The opportunity cost of a pair of shoes is 2​ handbags, and the opportunity cost of a handbag is 1 pair of shoes. D. The opportunity cost of a pair of shoes is 2​ handbags, and the opportunity cost of a handbag is​ 1/2 pair of shoes.

B. 20 units of good A on the x​-axis and 12 units of good B on the y​-axis -0.60 D. The opportunity cost of a pair of shoes is 2​ handbags, and the opportunity cost of a handbag is​ 1/2 pair of shoes.

On the graph​ shown, consumer surplus would be the​ area: https://imgur.com/tSB7rOS A. above the market demand curve. B. below the market demand curve and above the market price. C. below the market demand curve. D. above the market demand curve and below the market price.

B. below the market demand curve and above the market price.

According to​ economists, the process of optimal decision making by consumers typically yields total benefits well above the amount paid for the goods. These​ market-created benefits are referred to as ___________​, and using the graph to the​ right, are represented by area ___. https://imgur.com/dBENxWt Suppose now that the market price rises. According to the​ graph, the excess of total benefits over the total amount spent by consumers will ___________.

Consumer surplus B Decrease

A gift shop sells ceramic figurines for​ $80 and crystal vases for​ $100. At these​ prices, the gift shop sells 12 ceramic figurines and 8 crystal vases per day. If the price of ceramic figurines falls to​ $64 and the price of crystal vases falls to​ $25, the quantity demanded of ceramin figurines and crystal vases will increase to 18 units and 12 units per​ day, respectively. If the gift shop wants to increase​ revenue, which of the following actions should be​ taken? A. Increase the price of both ceramin figurines and crystal vases. B. Decrease the price of ceramic figurines and increase the price of crystal vases. Your answer is correct. C. Increase the price of ceramic figurines and decrease the price of crystal vases. D. Decrease the price of both ceramic figurines and crystal vases. For a normal​ good, the income elasticity of demand ___________. An inferior good is one in which demand is ___________ function of income. Using the information​ below, compute the income elasticity of demand​ (using the arc elasticity​ method) to determine which of the following is a luxury good. https://imgur.com/CfSQ4YO The luxury good is __________.

Must be positive A decreasing Good B

Each​ school-week night John can play video​ games, talk on the​ phone, or watch a movie. He has a total of five hours to spend on one of these three things. Using the​ information, fill out the marginal benefit columns below. https://imgur.com/YTf7pBa Suppose John plans to play video games for 2 hours and talk on the phone for the other 3 hours. Given this​ information, John's total benefit from the plan will be ______. Suppose John plays video games for 4 hours. For the last​ hour, he decides to watch a movie over talking on the phone. His total benefit will __________ because the marginal benefit from watching a movie for 1 hour is __________ the marginal benefit from talking on the phone for 1 hour. ​John's total benefit will be maximum if he plays video games for ___ ​hour(s), talks on the phone for ___ ​hour(s), and watches a movie for ___ hour(s).

https://imgur.com/L0PAqG9 52 Be lower Less than 1 2 2 https://imgur.com/a/j1KXtzG

Suppose you need to buy shoes for your upcoming vacation. The table below summarizes your quantity demanded of shoes at various prices. Using this​ information, graph your demand curve for shoes. https://imgur.com/A169lwn 1.) Using the point drawing tool​, plot each​ price/quantity combination for shoes. ​2.) Using the line drawing tool​, draw your demand curve for shoes. Label your curve appropriately. Carefully follow the instructions above and only draw the required objects. Based on your​ graph, the demand curve is ___________​, because as price​ decreases, quantity demanded ____________.

https://imgur.com/g1xQjGI Downward-sloping Increases https://imgur.com/a/t9KoxDi

Nick buys 2 light bulbs at a price of​ $4.50. The quantity of light bulbs demanded increases or decreases by 1 for every decrease​ and/or increase in the price by​ $1.50. Show the following demand curve with the help of a graph. ​ 1.) Using the multipoint curve drawing tool​, plot the demand curve for light bulbs for quantities from 0 to 5. Label your curve​ 'DD'. https://imgur.com/sy31u1c Carefully follow the instructions above and only draw the required object. Richa wants to purchase 6 fluorescent light bulbs at a price of​ $30 per bulb. When the price of fluorescent light bulbs rises to​ $36, she purchases 5 bulbs. Which of the following could be the reason for​ Richa's change in the quantity​ purchased? A. Fluorescent light bulbs gives less utility than before the price rise. B. Richa is irrational. C. Demand and price are directly related. D. The opportunity cost of fluorescent light bulbs increases. Which of the following is not a possible reason for a change in the demand curve of Zee decorative light​ fixture, from DD to​ DD'? https://imgur.com/RwS95jF A. The change in color and attractiveness of Zee decorative light fixture. B. The change in the rate of income tax. C. The change in the price of Lex decorative light fixture. D. The change in the rate of sales tax.

https://imgur.com/sy31u1c D. The opportunity cost of fluorescent light bulbs increases. https://imgur.com/RwS95jF D. The change in the rate of sales tax.