1.Which of the following statements is false?
a. The income effect of normal goods counters the substitution effect so the demand curve is upsloping.
b. The income effect and the substitution effect reinforce each other when there are price changes for a normal good.
c. The income effect represents the decrease in quantity demanded caused by the implicit change in income due to a fall in the price of an inferior good but not for a normal good.
d. The substitution effect represents the change in quantity demanded solely due to a change in the relative price of a good.
2. For a/an _______ good, an increase in income will lead to an increase in _______ .
a. inferior; consumption
b. normal; supply
c. normal; consumption
d. inferior; supply
3. Assume that the total utilities for the fifth and sixth units of a good consumed are 83 and 97, respectively. The marginal utility for the sixth unit is:
a. -14.
b. 14.
c. 83.
d. 97.
4. In this exhibit (Consumer Equilibrium 1), assume that the price of good X is $2 per unit and the price of good Y is $1 per unit, and you consume 3 units of good X and 3 units of good Y. To maximize utility, assuming that the goods are divisible, you would consume:
a. less of both X and Y.
b. more of both X and Y.
c. less of X and more of Y.
d. more of X and less of Y.
5. If the price of apples falls and the price of oranges remains constant:
a. apples are now relatively cheaper.
b. the fall in the price of apples made consumers richer.
c. the fall in the price of apples, ceteris paribus, makes the marginal utility of apples divided by their price exceed the marginal utility of oranges divided by their price.
d. all of the above statements are true.
6. The textbook states that the law of demand:
a. is nonsense.
b. is difficult to verify.
c. is confirmed by our real-world experience.
d. is not valid in theory.
7. An indifference curve shows combinations of two goods that yield:
a. equal prices.
b. equal money income.
c. equal satisfaction.
d. increasing prices.
8. A curve that represents combinations of two goods that yield equal levels of satisfaction is a/an:
a. indifference curve.
b. budget curve.
c. marginal utility curve.
d. price-consumption curve.
9. The marginal rate of substitution assumes that:
a. prices remain unchanged.
b. money income remains unchanged.
c. satisfaction remains unchanged.
d. the quantities of both goods remain unchanged.
10. If consumer income, preferences, and the prices of all other goods remain constant while the price of X varies, the amount purchased of X is defined by the:
a. demand curve.
b. price-consumption curve.
c. income-consumption curve.
d. price line.
11. At 36 units of labor, a firm finds that both average product of labor and marginal product of labor equal 42. We can conclude that the average product curve at 36 units of labor is:
a. upward-sloping.
b. downward-sloping.
c. vertical.
d. horizontal.
12. Diminishing marginal returns for the first four units of a variable input is exhibited by the marginal product sequence:
a. 50, 50, 50, 50.
b. 50, 40, 30, 20.
c. 50, 110, 180, 260.
d. 50, 100, 150, 200.
13. Fixed costs include:
a. op management salaries.
b. wage rates set by contract.
c. salaries of production workers.
d. costs of electricity used in production.
14. If the slope of the total product curve is decreasing, the slope of the total variable cost curve is:
a. increasing.
b. decreasing.
c. unchanged.
d. at its minimum value.
15. The marginal cost curve intersects the total variable cost curve at:
a. its lowest point.
b. its maximum.
c. its endpoint.
d. no point; the curves don’t intersect.
16. Average total cost is the ratio of:
a. total cost to the marginal cost.
b. total cost to the quantity of output.
c. total cost to the amount of variable input.
d. marginal cost to the amount of variable input.
17. If marginal cost is equal to average total cost, then:
a. average total cost is increasing.
b. average total cost is at its maximum.
c. average total cost is at its minimum.
d. marginal cost is increasing.
18. In this exhibit (A Firm’s Cost Curves) the curve labeled W represents the firm’s _______ curve.
a. average fixed cost
b. average total cost
c. average variable cost
d. total variable cost
19. When an increase in the firm’s output reduces its long-run average cost, it experiences:
a. economies of scale.
b. diseconomies of scale.
c. constant returns to scale.
d. variable returns to scale.
20. The slope of a long-run average cost curve exhibiting diseconomies of scale is:
a. zero.
b. infinite.
c. positive.
d. negative.