Sandy derives utility from consuming “all other goods,” g, and clean air (measured by particulate matter removed per m3), a, as measured by the utility function U(g,a) = g0.6a0.4. The price of “all other goods” is $20 and the price of clean air (abatement) equals $10. Brian is the only other consumer in the market […]
Date: September 9th, 2020
Suppose the quantity of x is measured on the horizontal axis. If the income consumption curve is vertical, then the income elasticity of demand for x is A) 0. B) 1. C) -1. D) There is not enough information to determine the income elasticity of demand for x. ANSWER A
Date: September 9th, 2020
A movement upward along an upward sloping Engel curve corresponds to A) upward sloping indifference curves. B) crossing indifference curves. C) a rotation in the budget constraint. D) a parallel shift in the budget constraint. ANSWER D
Date: September 9th, 2020
An inferior good exhibits A) a negative income elasticity. B) a downward sloping Engel curve. C) a decline in the quantity demanded as income rises. D) All of the above. ANSWER D
Date: September 9th, 2020
If consumer income and prices increase by the same percentage, A) the consumer will buy more of both goods. B) the consumer will buy more of both goods if they are both normal goods. C) the consumer will buy less of both goods if they are both inferior goods. D) the consumer’s utility maximizing bundle […]
Date: September 9th, 2020
Ten individuals have $100 and identical preferences for picnics, p, and kayak trips, k, where U(p, k) = k0.5p0.5. The price of picnics is $5 and the price per kayak trip is $ 10. What is the shortage/surplus in the market when the supply of picnics totals 120? A) There is a surplus of 20. […]
Date: September 9th, 2020
If the price-consumption curve is upward sloping when the price of the good measured on the horizontal axis changes, then the demand curve for that good will be upward sloping. Indicate whether the statement is true or false ANSWER False. An upward-sloping price-consumption curve indicates that as the price of the good falls, more […]
Date: September 9th, 2020
A demand curve for a Giffen good would be A) upward sloping. B) downward sloping. C) horizontal. D) vertical. ANSWER A
Date: September 9th, 2020
Researchers have found that tax increases may have a small effect in the quantity purchased because A) individuals might forget about the tax (salience). B) individuals are rational. C) individuals are credit constrained. D) individuals do not care about prices. ANSWER A
Date: September 9th, 2020
Lisa consumes only pizzas and burritos. In equilibrium, her marginal utility of pizza is 20 and her marginal utility of a burrito is 10. The price of a pizza is $4. What is the price of a burrito? What will be an ideal response? ANSWER In equilibrium, the ratio of the marginal utility of […]
Date: September 9th, 2020
