Terms in this set (40)
Suppose the utility function for a firm manager is U = π + bQ, where Q is output, π is profit, and b is a positive constant. How would the firm's output compare with what it would be if the manager's objective was to maximize profit?
It would be greater than the profit-maximizing output.
Suppose a consumer with an income of $100 is faced with Px = 1 and Py = 1/2. What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)?
The difference between a price decrease and an increase in income is that
An increase in income does not affect the slope of the budget line, while a decrease in price does change the slope.
Joe prefers a three-pack of soda to a six-pack. What properties does this preference violate?
More is better
Which of the following is true?
D. None of the statements is correct.
If the price of good X is $10 and the price of good Y is $5, how much of good X will the consumer purchase if her income is $15?
Cannot tell based on the above information.
Individuals who purchase services and goods for the purpose of consumption are:
What is/are the important things that must be developed when characterizing consumer behavior?
D. Consumer preferences and consumer opportunities
The possible goods and services a consumer can afford to consume represents the:
A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of:
The affordable bundle that yields the greatest satisfaction to the consumer is:
the equilibrium consumption bundle.
The absolute value of the slope of the indifference curve is called the:
marginal rate of substitution.
An increase in the price of good X will have what effect on the budget line on a normal X-Y graph?
C. A decrease in the horizontal intercept
The property that implies that indifference curves are convex to the origin is:
diminishing marginal rate of substitution.
Which of the following cases violates the property of transitivity?
A>B, B>C, C>A
The property that rules out indifference curves that cross is:
The idea that a consumer is limited to selecting a bundle of goods that is affordable is captured by the:
The combinations of goods X and Y that are affordable to the consumer are defined by the:
D. budget set.
What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and Px = $5, Py = $10, X = 20, and M = 500?
The upper boundary of the budget set is the:
Given that income is $200 and the price of good Y is $40, what is the vertical intercept of the budget line?
Given that income is $500 and PX = $20 and PY = $5, what is the market rate of substitution between goods X and Y?
If a consumer's income decreases, what will happen to the budget line?
It will shift inward.
If the price of good X increases, what will happen to the budget line?
B. It will become steeper.
At the point of consumer equilibrium, the slope of the budget line is equal to the:
marginal rate of substitution.
After a price decrease for good X, the new consumer equilibrium level of good X will be
C. indeterminate without more information.
Which of the following pairs of goods is probably NOT an example of substitutes?
Hamburgers and ketchup
If you are in the business of selling chicken and the price of chicken and the price of beef both were to drop dramatically, what should you do with your inventory level of chicken?
Increase the inventory.
If an increase in income causes a decrease in the consumption of good Y, we know that good Y is:
an inferior good.
Which of the following is most likely NOT an example of a normal good?
What are the advantages to a firm of selling gift certificates?
Reduced strain on the refund department and greater quantity sold if your good is an inferior good.
How does a decrease in the price of good X affect the market rate of substitution between goods X and Y?
The substitution effect isolates the change in the consumption of a good caused by:
C. the change in the market rate of substitution.
A price increase causes a consumer's "real" income to:
If you wish to open a store and you do not like risk, it would be wise to sell:
a mix of normal and inferior goods.
If you were running an advertising campaign for designer men's suits, you should target families with:
If a worker receives a fixed payment of $100 plus $10 for every hour she works, what is the maximum total earnings the worker can receive if she is restricted to a maximum of 12 hours of work per day?
The total earnings of a worker are represented by E = 100 + $10(24 - L), where E is earnings and L is the number of hours of leisure. How much will the worker earn if he takes 14 hours of leisure per day?
The total earnings of a worker are represented by E = 100 + $10(24 - L), where E is earnings and L is the number of hours of leisure. How many hours of leisure are consumed if this worker's total earnings are $160?
A worker's total earnings for one day is $100. He received a $20 fixed payment and consumes 14 hours of leisure. What is the hourly wage rate?