If Fred’s marginal utility of pizza equals 10 and his marginal utility of salad equals 2, then A) he would give up 5 pizzas to get the next salad. B) he would give up 5 salads to get the next pizza. C) he will eat five times as much pizza as salad. D) he will […]
Date: September 9th, 2020
Measuring “y” on the vertical axis and “x” on the horizontal axis, convexity of indifference curves implies that the MRS of “y” for “x” A) is decreasing as “x” increases. B) is increasing as “x” increases. C) is constant as “x” increases. D) cannot be calculated for large levels of “x”. ANSWER A
Date: September 9th, 2020
Lisa views pizzas and burritos as goods. If she prefers a bundle of 4 burritos and 4 pizzas to a bundle of 4 burritos and 5 pizzas, which property of consumer preference is violated? What change in the assumptions could lead a rational consumer to prefer the first bundle? What will be an ideal response? […]
Date: September 9th, 2020
If Fred’s marginal rate of substitution of salad for pizza equals 5, then A) he would give up 5 pizzas to get the next salad. B) he would give up 5 salads to get the next pizza. C) he will eat five times as much pizza as salad. D) he will eat five times as […]
Date: September 9th, 2020
Diminishing marginal rate of substitution can be seen when indifference curves A) cross. B) are convex. C) are downward sloping. D) become flatter as we move down and to the right. ANSWER D
Date: September 9th, 2020
Utility is the set of numerical values that A) yields an absolute level of pleasure from a bundle of goods. B) reflects the relative ranking of various bundles of goods. C) describes how much more a consumer prefers one bundle to another. D) yields a cardinal ranking of bundles. ANSWER B
Date: September 9th, 2020
Explain why a tax increase on cigarettes in one state might not lead to a substantial price increase for all consumers in that state. What will be an ideal response? ANSWER Smuggling of non-taxed cigarettes and on-line buying where taxes don’t apply by some consumers may prevent a price increase for these consumers.
Date: September 9th, 2020
Suppose that a specific tax of $3 is imposed on producers of bread. The bread market supply is Qs = 10 + 0.5P and the bread market demand is Qd = 100-P. What is the change in the equilibrium quantity of bread induced by the tax incidence? A) Equilibrium quantity decreased by three units. B) […]
Date: September 9th, 2020
Suppose that an ad valorem tax of 10% is imposed on consumers of butter. The bread market supply is Qs = 10 + P and the bread market demand is Qd = 220-P. What is the consumers’ tax burden? A) Consumers’ tax burden is $3. B) Consumers’ tax burden is $10 C) Consumers’ tax burden […]
Date: September 9th, 2020
Suppose that an ad valorem tax of 10% is imposed on producers of butter. The bread market supply is Qs = 10 + P and the bread market demand is Qd = 220-P. What is the producers’ tax burden? A) Producers’ tax burden is $8. B) Producers’ tax burden is $10 C) Producers’ tax burden […]
Date: September 9th, 2020
