1) Two goods are perfect substitutes in consumption when they always have A) ind
ID: 1130403 • Letter: 1
Question
1) Two goods are perfect substitutes in consumption when they always have
A) indifference curves with slopes of -1.
B) indifference curves with slopes of 1.
C) indifference curves with constant negative slopes
D) indifference curves with constant positive slopes
E) indifference curves with changing slopes
2) The consumer is in equilibrium when
A) MRT = MRS.
B) / = / .
C) the budget line is tangent to the indifference curve at the bundle chosen.
D) All of the above.
E) None of the above.
3) Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q. The marginal cost of the 5th T-shirt is
A) 2.
B) 10.
C) 12.
D) 50.
E) 60.
4) In the above diagram, a leftward shift of the supply curve will lead to a(n) (PICTURE ATTACHED)
A) increase in equilibrium price.
B) excess demand at $8.
C) decrease in equilibrium quantity.
D) All of the above.
E) B and C only 3
5) The above diagram shows the market for oranges given current market supply and demand conditions. The government passes the law declaring current equilibrium price to be the “fair” price, and legally imposing “price ceiling” on the price of oranges. Next, suppose that the only change is that demand for oranges goes up. Such change in market conditions would lead to ________ equilibrium price and _______excess demand. Finally, quantity transacted in this market will________.
A) lower; no; increase.
B) higher; positive; increase.
C) higher; no; decrease.
D) higher; positive; remain unchanged.
E) lower; no; remain unchanged.
6) Suppose that in the above diagram the price ceiling is $7. Note that in the above diagram both supply and demand curves are straight lines. In this case, the consumer surplus is equal to ____ , the producers’ surplus is equal to ______ .
A) 200; 40
B) 80; 40
C) 120; 40
D) 120; 80
E) 200; 80
The function exhibits constant returns to scale
II. The function exhibits diminishing marginal productivities to all inputs
III. The function has a constant marginal rate of technical substitution Which of these statements are true?
A) All of them
B) None of them
C) I and II but not III
D) I and III but not II
E) II and III but not I 4
8) Stanley consumes only white and red wines and his utility function can be described by U(R,W) = R^0.40 X W^0.60 where R is the number of bottles of red wine and W is the number of bottles of white wine that he consumes per month. Suppose that his income is ______ and the price of a bottle of red wine $20 and the price of a bottle of white wine is $15. In this case, Stanley will purchase _____ bottles of red wine and _____ bottles of white wine per month. Next, suppose that the price of white wine goes down to _____ per bottle. After the price change, Stanley consumes 40 bottles of white wine.
A) 500; 10; 20; 12
B) 800; 16; 32; 12
C) 800; 32; 16; 12
D) 500; 20; 10; 7.5
E) None of the above
9) Peter consumes goods X and Y. The price of good X is Px and the price of good Y is Py, Peter’s income is I. If both prices increase by 50%, and Peter’s income decreases by 50% then the
A) slope of the budget constraint will increase
B) slope of the budget constraint will decrease.
C) budget constraint will be unchanged.
D) budget constraint will shift outward in a parallel fashion.
E) budget constraint will shift inward in a parallel fashion.
10) Suppose the inverse market demand curve is p = 100 - 5Q. At a price (p) of 20, consumers’ surplus equals
A) 500.
B) 250.
C) 640.
D) 1280.
E) 0.
14 10 40 60 70 140 QExplanation / Answer
1 B If goods are substitute then IC will have constant slope
2 C This is basic requirement.
3 A
4 A It would increase price.
5 C
6 B 80 and 40
7 B neither is correct.
8 D
9 E Because effectively his income come down.
10 E
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