Multiple chiose Flashcards
(34 cards)
If two goods are both desirable and preferences are convex then
a) there must be a kink in the indifference curves.
b) indifference curves must be straight lines.
c) if two bundles are indifferent, then an average of the two bundles is worse than either one.
d) the marginal rate of substitution is constant along indifference curves.
e) None of the answers above are correct.
E
Clara’s utility function is U(x, y) = (x + 2)(y + 1). If her marginal rate of substitution is -4 and she is consuming 14 units of good x, how many units of good y must she be consuming? If two goods are both desirable and preferences are convex, then
a) 30
b) 68
c) 18
d) 63
e) 9
f) None of the answers above are correct.
d) 63
-4 = x+2/y+1 y+1 = 4(x+2) y= 63
When prices are ($2, $4), Ms. Consumer chooses the bundle (7, 9), and when prices are ($15, $3), she chooses the bundle (10, 3).
Is her behavior consistent with the weak axiom of revealed preference?
a) Yes.
b) No.
c) We would have to observe a third choice to be able to say.
d) We can’t tell because we are not told her income in the two cases.
e) None of the answers above are correct.
b)
Suppose that Agatha has $465 to spend on tickets for her trip. She intends to spend the entire amount $465 on tickets and prefers traveling first class to traveling second class. She needs to travel a total of 1,500 miles. Suppose that the price of first-class tickets is $0.40 per mile and the price of second-class tickets is $0.10 per mile. How many miles will she travel by second class?
a) 450
b) 600
c) 225
d) 550
e) 150
f) None of the answers above are correct.
a)
The inverse demand function for eggs is p = 84 - 9q, where q is the number of cases of eggs. The inverse supply is p = 7 + 2q. In the past, eggs were not taxed, but now a tax of 33 dollars per case has been introduced. What is the effect of the tax on the quantity of eggs supplied?
a) Quantity drops by 6 cases.
b) Quantity drops by 2 cases.
c) Quantity drops by 3 cases.
d) Quantity drops by 4 cases.
e) Quantity drops by 5 cases.
f) None of the answers above are correct.
c)
The production function Q = 50K0.25L0.25 exhibits
a) increasing returns to scale.
b) constant returns to scale.
c) decreasing returns to scale.
d) increasing, then diminishing returns to scale.
e) negative returns to scale.
f) None of the answers above are correct.
c)
A profit-maximizing competitive firm uses just one input, x. Its production function is q = 4x1/2. The price of output is $28 and the factor price is $7. The amount of the factor that the firm demands is
a) 8.
b) 16.
c) 60.
d) 64.
e) 78.
f) 96.
g) None of the answers above are correct.
Svar: d) 64
Suppose that Dent Carr’s long-run total cost of repairing s cars per week is c(s) = 3s2 + 75. If the price he receives for repairing a car is $18, then in the long run, how many cars will he fix per week if he maximizes profits?
a) 3.
b) 0.
c) 6.
d) 4,50
e) 9.
f) None of the answers above are correct.
b) 0
Lucy’s utility function is 2XL + G and Melvin’s utility function is XMG, where G is their expenditures on the public goods they share in their apartment and where XL and XM are their respective private consumption expenditures.
The total amount they have to spend on private goods and public goods is $33,000. They agree on a Pareto optimal pattern of expenditures in which the amount that is spent on Lucy’s private consumption is $9,000.
How much do they spent on public goods?
a) $4000.
b) $16000.
c) $12550.
d) $8550.
e) $8000.
f) There is not enough information here to be able to determine the answer.
b) 16000
In a market with the inverse demand curve P = 10 - Q, Brand X is a monopolist with no fixed costs and with a marginal cost of $2. If marginal cost rises to $4, by how much will the price of Brand X rise?
a) $2.
b) $1.
c) $3.
d) $0; the firm is already charging the monopoly price.
e) $6.
f) 9.
g) None of the answers above are correct.
b) 1
Clara spends her entire budget and consumes 5 units of x and 13 units of y. The price of x is twice the price of y. Her income doubles and the price of y doubles, but the price of x stays the same. If she continues to buy 13 units of y, what is the largest number of units of x that she can afford?
a) 10
b) 5
c) 12
d) 14
e) 21
f) None of the alternatives above are correct.
a) 10
If two goods are perfect complements:
a) there is a bliss point and the indifference curves surround this point.
b) consumers will only buy the cheaper of the two goods. c) indifference curves have a positive slope.
d) None of the alternatives above are correct.
d)
If a consumer maximizes her preferences subject to her budget by choosing a consumption bundle where the ratio of her marginal utilities of shelter and food, MUS/MUF, is greater than the ratio of the prices of shelter and food, pS/pF, then she must:
a) be consuming food but no shelter.
b) be consuming shelter but no food.
c) believe that shelter is a “bad.”
d) be consuming both food and shelter.
e) not be spending all of her income.
f) None of the alternatives above are correct.
b) consume shelter but no food
When the price of x rises, Marvin responds by changing his demand for x. The substitution effect is the part of this change that represents his change in demand
a) holding the prices of substitutes constant.
b) if he is allowed to substitute as much x for y as he wishes.
c) if his money income is held constant when the price of x changes.
d) if the prices of all other goods are held constant.
e) None of the alternatives above are correct.
e)
The inverse demand function for coffee is p = 50,000 - 2q, where q is the number of tons produced and p is the price per ton. Total revenue from coffee sales be maximized when the output level is
a) 25000 tons.
b) 15000 tons.
c) 21250 tons.
d) 17500 tons.
e) 12500 tons.
f) None of the alternatives above are correct.
e) 12 500
A firm has a production function f(x, y) = 1.80(x0.80 + y0.80)2 whenever x > 0 and y > 0. When the amounts of both inputs are positive, this firm has
a) decreasing returns to scale.
b) constant returns to scale.
c) increasing returns to scale if x+y > 1 and decreasing returns to scale otherwise.
d) increasing returns to scale.
e) increasing returns to scale if output is less than 1 and decreasing returns to scale if output is greater than 1.
f) None of the alternatives above are correct.
d) increasing return to scale
A company can rent one of two copying machines. The first costs $34 a month to rent and costs an additional 2 cents per copy to use. The second costs $107 a month to rent and an additional 1 cent per copy to use. How many copies would the company need to make per month in order for it to be worthwhile to rent the second machine? a) 7300
b) 13300
c) 12400
d) 6900
e) 5680
f) None of the alternatives above are correct.
a) 7300
The marginal cost curve of a firm is MC = 6y. Total variable costs to produce 10 units of output are
a) $120.
b) $300.
c) $80.
d) $400.
e) $26.
f) $534.
g) None of the alternatives above are correct.
b) 300
A monopolist enjoys a monopoly over the right to sell automobiles on a certain island. He imports automobiles from abroad at a cost of $10,000 each and sells them at the price that maximizes profits. One day, the island’s government annexes a neighboring island and extends the monopolist’s monopoly rights to this island. People on the annexed island have the same tastes and incomes and there are just as many people as on the first.
a) The monopolist doubles his price and his sales stay constant.
b) The monopolist keeps his price constant and his sales double.
c) The monopolist raises his price but does not necessarily double it.
d) The monopolist’s profits more than double.
e) None of the alternatives above are correct.
b)
In a pure exchange economy with two persons and two goods, one person always prefers more to less of both goods and one person likes one of the goods and hates the other so much that she would have to be paid to consume it. Both are initially endowed with positive amounts of both goods. The competitive equilibrium price of the good that one person hates
a) must be negative.
b) must be smaller than the price of the good both people like.
c) must be less than 1.
d) could be positive or negative, depending on details of tastes and technology.
e) must be positive.
f) None of the alternatives above are correct.
e) must be positive
Maria spends her entire budget and consumes 5 units of x and 6 units of y. The price of x is twice the price of y. Her income doubles and the price of y doubles, but the price of x stays the same. If she continues to buy 6 units of y, what is the largest number of units of x that she can afford?
a. 12
b. 10
c. 14
d. 5
e. There is not enough information to say
b 10
Josephine’s utility function is U(x; y) = y +5x^(.5).
She has one unit of x and two units of y. If her consumption of x is reduced to zero, how much y must she have in order to be exactly as well off as before?
a) 14 units
b) 9 units
c) 11 units
d) 7 units
e) none of the above
d) 7 units
Goods 1 and 2 are PERFECT COMPLEMENTS and a consumer always consumes them in the ratio of 2 units of Good 2 per unit of Good 1. If a consumer has income 120 and if the price of good 2 changes from 3 to 4, while the price of good 1 stays at 1, then the INCOME EFFECT of the price change
a) is 4 times as strong as the substitution effect.
b) does not change demand for good 1.
c) accounts for the entire change in demand.
d) is exactly twice as strong as the substitution effect.
e) is 3 times as strong as the substitution effect
c)
The production funcion is given by F(L) = 6L2/3. Suppose that the cost per unit of labour is 16 and the price of output is 8. How many units of labour will the firm hire?
a) 16
b) 8
c) 4
d) 24
e) 36
f) non of the above
b) 8
