Past exam multichoice questions Flashcards
Suppose that at current consumption levels an individualís marginal utility of consuming an
extra hot dog is 10 whereas the marginal utility of consuming an extra soft drink is 2. Then the
MRS (of soft drinks for hot dogs) - that is, the number of hot dogs the individual is willing to
give up to get one more soft drink is
1/5
If people like their goods in fixed proportions, the two goods are
perfect complements.
Suppose a teenager likes both rap music R and country music (C) with a set of preferences so
that U = C1/2 R1/2. Which point (C, R) makes the teen happiest?
9,9
If bundles of goods A and B lie on the same indifference curve, one can assume the individual
enjoys bundle A and B equally
The X-intercept of the budget constraint represents
- How much of good Y can be purchased if no good X is purchased and all income is spent.
- How much of good X can be purchased if no good Y is purchased and all income is spent.
The point of tangency between a consumerís budget constraint and his or her indifference
curve represents
constrained utility maximization for the consumer
In our model in class, the benefit to an individual from saving is measured by the
increase in future consumption thereby generated.
The Y-intercept of Y = 3X + 8 is
8
If the Y-intercept of a linear function increases while the slope remains unchanged
The graph must shift up.
The lump-sum principle suggests that the tax that reduces utility the least is
a tax on income
If a good is normal and its price increases, the
income effect will be negative and the substitution effect will be negative.
Two goods, X and Y, are called complements if an
An increase in the price of X causes less Y to be bought.
Which of the following statements is incorrect?
1. A partial equilibrium analysis studies the determination of price and output in a single market.
2. A general equilibrium analysis studies the determination of price and output in more than one
market simultaneously.
3. A partial equilibrium analysis ignores either consumers or producers in the analysis and looks
only at one-half of the market.
4. A general equilibrium analysis would be useful to study two goods that are linked in some way,
such as complementary or substitutable goods.
- A partial equilibrium analysis ignores either consumers or producers in the analysis and looks
only at one-half of the market.
An Edgeworth box shows
exchange efficiency
Two individuals, Fred and Barney, consume two goods, X and Y. Fred initially have 1 unit of X
and 3 units of Y. Barney initially has 5 units of X and 5 units of Y. Also, for Fred the MRS =
3X/Y and for Barney the MRS = X/Y. Does this initial allocation of X and Y represent an
efficient allocation?
Yes.
