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Each day a precocious pre-schooler eats lunch at school using the $1 lunch allowance given by his parents.He only likes Twinkies (T)and orange slices (S),which provide him utility according to the utility function Each day a precocious pre-schooler eats lunch at school using the $1 lunch allowance given by his parents.He only likes Twinkies (T)and orange slices (S),which provide him utility according to the utility function . ( A)Derive the demand functions for S and T.Let represent income, the price of Twinkies,and \eta = \frac { d Q } { d P } \cdot \frac { P } { Q } the price of slices. . ( A)Derive the demand functions for S and T.Let Each day a precocious pre-schooler eats lunch at school using the $1 lunch allowance given by his parents.He only likes Twinkies (T)and orange slices (S),which provide him utility according to the utility function . ( A)Derive the demand functions for S and T.Let represent income, the price of Twinkies,and \eta = \frac { d Q } { d P } \cdot \frac { P } { Q } the price of slices. represent income, Each day a precocious pre-schooler eats lunch at school using the $1 lunch allowance given by his parents.He only likes Twinkies (T)and orange slices (S),which provide him utility according to the utility function . ( A)Derive the demand functions for S and T.Let represent income, the price of Twinkies,and \eta = \frac { d Q } { d P } \cdot \frac { P } { Q } the price of slices. the price of Twinkies,and η=dQdP⋅PQ\eta = \frac { d Q } { d P } \cdot \frac { P } { Q } the price of slices.

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Note that blured image does not appear in the demand...

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Which of the following is most likely to cause a snob effect?


A) A jet ski
B) A fax machine
C) An original Van Gogh painting
D) An Apple iPhone

E) A) and B)
F) A) and C)

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Consumer surplus can be depicted as the vertical distance between indifference curves,provided:


A) the substitution effect is positive.
B) the substitution effect is zero.
C) the income effect is positive.
D) the income effect is zero.

E) B) and C)
F) None of the above

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Which of the following is true at any point along a consumer's demand curve?


A) The consumer's preferences for different goods can be ranked.
B) The consumer's optimality condition is satisfied.
C) The consumer's income increases successively as one moves downward along the demand curve.
D) The marginal rate of substitution is constant.

E) All of the above
F) A) and B)

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The individual demand curve for a commodity is given by the equation P = X - Q/2,where X is the choke price (price at which quantity demanded is zero).Derive the consumer surplus when the price of the commodity is $5 and X = 10.Using the same demand equation,determine how the consumer surplus will change if price falls to $3 per unit.

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When the choke price is 10 and price is ...

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The combination of an excise tax and a tax rebate of equal size:


A) always raises consumer welfare.
B) necessarily harms the consumer.
C) keeps the consumer surplus unchanged.
D) does not lead to any deadweight loss.

E) B) and C)
F) B) and D)

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Which of the following must be true for a Giffen good?


A) The good must be inferior and the income effect must be larger than the substitution effect.
B) The good must be inferior and the substitution effect must be larger than the income effect.
C) Both the income and the substitution effect of a price rise will be positive.
D) Both the income and the substitution effect of a price rise will be negative.

E) B) and C)
F) A) and C)

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If the price-consumption curve is horizontal,then demand elasticity:


A) must be negative.
B) must be between 0 and 0.5.
C) is greater than 1.
D) is equal to 1.

E) B) and C)
F) A) and D)

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Assume that a market demand curve is constructed from one hundred identical individual demand curves.Assume also that at a price of $4,the elasticity of individual demand is 0.6.Then the elasticity of the market demand curve derived from these individual demand curves must be:


A) 0.6.
B) any value more than 0.6.
C) any value less than 0.6.
D) 60.

E) B) and C)
F) All of the above

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A case where a consumer buys less of a good when its price falls:


A) cannot occur if the indifference curves are convex to the origin.
B) is an example of a Giffen good and will produce an upward-sloping market demand curve.
C) gives rise to a positively sloped price-consumption curve.
D) refers to an inferior good with a substitution effect that dominates the income effect.

E) None of the above
F) B) and C)

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The substitution effect of a price decrease:


A) allows the consumer to obtain a higher level of well being.
B) reflects an increase in real income.
C) is a movement along the indifference curve to consume more of the lower priced good and less of the higher priced good.
D) is a shift of the indifference curve indicating higher consumption of both the goods.

E) C) and D)
F) A) and D)

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With respect to the ordinary least-squares technique of estimating an equation, "best fitting" means that the estimated equation line will:


A) be as straight as possible.
B) pass through the minimum number of the observed data points as possible.
C) be as close as possible to the observed data points.
D) maximize the sum of the distances between the estimated line and observed data points.

E) B) and D)
F) C) and D)

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Which of the following statements is true?


A) Some inferior goods are normal goods.
B) Some Giffen goods are inferior goods but all inferior goods are Giffen goods.
C) All Giffen goods are inferior goods but all inferior goods are not Giffen goods.
D) Some normal goods are inferior goods.

E) A) and D)
F) All of the above

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Suppose there are 20 identical consumers in a market,each with demand curve given by P = 100 - 4Qi,where P is price per unit and Qi is the number of units demanded by the ith consumer.What is the equation for the market demand curve?

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Market demand is the horizontal summatio...

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If the price-consumption curve for X is upward-sloping,we can say that:


A) the price elasticity of demand for X is greater than one.
B) the price elasticity of demand for X is less than one.
C) X is an inferior good.
D) the price elasticity of demand for X is equal to one.

E) None of the above
F) B) and D)

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Alex distributes his monthly income of $600 between two goods,movies and food.By spending his entire income on movies,he can enjoy a maximum of 20 movies.On the other hand,by spending his entire income on food he can consume a total of 60 units of food.Assuming that food consumption is measured along the horizontal axis and the consumption of movies is measured on the vertical axis,derive the slope of Alex's budget line.


A) -1
B) -0.5
C) -3
D) -1/3

E) C) and D)
F) B) and C)

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Assume that the quantity of steak is plotted on the horizontal axis and all other goods are plotted on the vertical axis.For the range in which the price-consumption curve is downward sloping,the price elasticity of demand for steak:


A) is elastic.
B) is inelastic.
C) is unit-elastic.
D) cannot be determined without additional information.

E) A) and B)
F) B) and C)

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A demand curve will have a positive slope when:


A) the good is an inferior good.
B) the income effect of a price change outweighs the substitution effect.
C) there are no substitutes for the good.
D) the good can be consumed only with some other good.

E) C) and D)
F) B) and C)

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A consumer is willing to pay a maximum of $5 for the first pretzel,$4 for the second pretzel,$3 for the third pretzel,$2 for the fourth pretzel,$1 for the fifth pretzel and nothing for the sixth pretzel.If the price per unit of pretzel is $2,calculate the net benefit to the consumer.


A) $6
B) $14
C) $5
D) $8

E) B) and C)
F) All of the above

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The _____ depicts the change in a consumer's real purchasing power brought about by a change in the price of a good.


A) marginal rate of substitution
B) indifference curve
C) budget line
D) income effect

E) A) and D)
F) None of the above

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