Question 1

Suppose we measure good X on the horizontal axis and other goods on the vertical axis.When the price-consumption curve for good X is:

Accepted Answer

A)  upward-sloping,total expenditure on the good is increasing as the price falls.
B)  downward-sloping,total expenditure on other goods is increasing as the price falls.
C)  upward-sloping,total expenditure on the good is decreasing as the price falls.
D)  upward-sloping,total expenditure on other goods is decreasing as the price falls.

Question 2

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

Accepted Answer

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

Question 3

At every point on a demand curve,the height of the demand curve indicates:

Accepted Answer

A)  the total benefit of the good to the consumer.
B)  the minimum price the consumer is willing to pay for the good.
C)  the consumer's utility level.
D)  the marginal rate of substitution.

Question 4

Which of the following describes the bandwagon effect?

Accepted Answer

A)  Sarah bought a new diamond jewelry set to wear at her sister's wedding.
B)  Bob and Harris bought new running shoes from Nike after their friends at the health club started using them.
C)  Allen decided to quit drinking to save more money for his new car.
D)  Bill gifted his friend a home theater system at her wedding.

Question 5

Mariana has a preference for exquisite handcrafted jade ornaments imported from Japan.She displays her possessions at social gatherings and feels proud when her friends compliment her on the same.When approached by her friends for the source of these ornaments she indirectly refuses to reveal it by diverting the conversation to other things.She feels that once her friends start purchasing similar ornaments the exclusivity of her collection will be lost.Explain Mariana's behavior within the context of the demand theory.

Accepted Answer

Mariana's behavior can be explained in t...

Question 6

Which of the following is true of a market demand curve?

Accepted Answer

A)  The market demand curve will always slope upward when the good in question is a normal good.
B)  When the individual demand curves slope downward,the market demand curve also slopes downward.
C)  The vertical summation of the individual demand curves gives the market demand curve.
D)  The market demand curve is typically unaffected by the factors that affect an individual demand curve.

Question 7

In case of a normal good,the income and substitution effects:

Accepted Answer

A)  always work together and both tend to make the demand curve downward sloping.
B)  always work in the opposite direction to one another.
C)  just offset each other.
D)  work together,both tending to make the demand curve upward sloping.

Question 8

At the price of $3,consumers A,B,C,and D demand 10 units,12 units,14 units,and 8 units of commodity A respectively.Calculate the market demand for commodity A at $3 assuming that A,B,C,and D are the only four consumers of this product.

Accepted Answer

A)  44 units
B)  12 units
C)  960 units
D)  36 units

Question 9

Which of the following is true of a Giffen good?

Accepted Answer

A)  It is a special case of an inferior good where the income effect is greater than the substitution effect and runs counter to it.
B)  It is similar to an inferior good,though the income effect is positive and greater than the substitution effect.
C)  It is similar to an inferior good,though the income effect is not as large for the Giffen good as it is for the inferior good.
D)  It is mostly prevalent in developing economies.

Question 10

Assume that as the price of good X rises,the demand for good Z shifts outward.On the basis of this information we can conclude that:

Accepted Answer

A)  good Z is inferior.
B)  goods X and Z are complements.
C)  goods X and Z are substitutes.
D)  good X is an input used in the production of Z.

Question 11

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?

Accepted Answer

Market demand is the horizontal summatio...

Question 12

A demand curve will have a positive slope when:

Accepted Answer

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.

Question 13

A market demand curve for a commodity may be obtained by:

Accepted Answer

A)  dividing the total quantity demanded by all consumers by the price level.
B)  dividing the total price paid by the consumers by the number of consumers.
C)  adding the prices along individual demand curves for given quantities.
D)  adding the quantities along individual demand curves for given prices.

Question 14

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.

Accepted Answer

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

Question 15

If the price-consumption curve for X is entirely downward sloping,it implies:

Accepted Answer

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.

Question 16

Positive network effects are often viewed as a two-edged sword for firms because they:

Accepted Answer

A)  increase the probability of higher market share,but make it easier to raise prices.
B)  increase the probability of lower market share,while making it easier to raise prices.
C)  increase the probability of higher market share,but limit the ability to raise prices.
D)  decrease the probability of higher market share,but make it easier to raise prices.

Question 17

Which of the following is true of inferior goods?

Accepted Answer

A)  They are typically cheaper compared to other goods.
B)  They usually do not have complements.
C)  They are narrowly defined goods facing higher-quality substitutes.
D)  They are broadly defined goods facing higher-quality substitutes.

Question 18

For two goods which are perfect complements,the substitution effect of a price decrease is:

Accepted Answer

A)  positive.
B)  negative.
C)  zero.
D)  one.

Question 19

Which of the following statements provides the best example of consumer surplus?

Accepted Answer

A)  "Drinking that bottle of soda increased my happiness by $10."
B)  "John gave me $5 for the watermelon even though it cost me only $2."
C)  "I paid $20 for this shirt for which I would have paid up to $40."
D)  "I refuse to pay $30 for their steak dinner;it's highly overpriced."

Question 20

For the average consumer,the combination of an excise tax and a tax rebate:

Accepted Answer

A)  increases consumption of the taxed good but lowers welfare.
B)  increases consumption of the taxed good and raises welfare.
C)  decreases consumption of the taxed good and lowers welfare.
D)  decreases consumption of the taxed good but raises welfare.

Exam 4: Individual and Market Demand

Correct Answer
verified
Mariana's behavior can be explained in t...
View Answer

For the average consumer,the combination of an excise tax and a tax rebate:

Correct Answer
verified

Positive network effects are often viewed as a two-edged sword for firms because they:

Correct Answer
verified

If the price-consumption curve for X is entirely downward sloping,it implies:

Correct Answer
verified

Suppose we measure good X on the horizontal axis and other goods on the vertical axis.When the price-consumption curve for good X is:

Correct Answer
verified

At every point on a demand curve,the height of the demand curve indicates:

Correct Answer
verified

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

Correct Answer
verified
Market demand is the horizontal summatio...
View Answer

Assume that as the price of good X rises,the demand for good Z shifts outward.On the basis of this information we can conclude that:

Correct Answer
verified

A market demand curve for a commodity may be obtained by:

Correct Answer
verified

For two goods which are perfect complements,the substitution effect of a price decrease is:

Correct Answer
verified

Correct Answer
verified
When the choke price is 10 and price is ...
View Answer

Which of the following statements provides the best example of consumer surplus?

Correct Answer
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A demand curve will have a positive slope when:

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

Correct Answer
verified

In case of a normal good,the income and substitution effects:

Correct Answer
verified

Which of the following is true of a Giffen good?

Correct Answer
verified

Which of the following describes the bandwagon effect?

Correct Answer
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Which of the following is true of inferior goods?

Correct Answer
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At the price of $3,consumers A,B,C,and D demand 10 units,12 units,14 units,and 8 units of commodity A respectively.Calculate the market demand for commodity A at $3 assuming that A,B,C,and D are the only four consumers of this product.

Correct Answer
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Which of the following is true of a market demand curve?

Correct Answer
verified

Exam 4: Individual and Market Demand

Correct AnswerverifiedMariana's behavior can be explained in t...View AnswerShow Answer

For the average consumer,the combination of an excise tax and a tax rebate:

Correct AnswerverifiedShow Answer

Positive network effects are often viewed as a two-edged sword for firms because they:

Correct AnswerverifiedShow Answer

If the price-consumption curve for X is entirely downward sloping,it implies:

Correct AnswerverifiedShow Answer

Suppose we measure good X on the horizontal axis and other goods on the vertical axis.When the price-consumption curve for good X is:

Correct AnswerverifiedShow Answer

At every point on a demand curve,the height of the demand curve indicates:

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedMarket demand is the horizontal summatio...View AnswerShow Answer

Assume that as the price of good X rises,the demand for good Z shifts outward.On the basis of this information we can conclude that:

Correct AnswerverifiedShow Answer

A market demand curve for a commodity may be obtained by:

Correct AnswerverifiedShow Answer

For two goods which are perfect complements,the substitution effect of a price decrease is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedWhen the choke price is 10 and price is ...View AnswerShow Answer

Which of the following statements provides the best example of consumer surplus?

Correct AnswerverifiedShow Answer

A demand curve will have a positive slope when:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In case of a normal good,the income and substitution effects:

Correct AnswerverifiedShow Answer

Which of the following is true of a Giffen good?

Correct AnswerverifiedShow Answer

Which of the following describes the bandwagon effect?

Correct AnswerverifiedShow Answer

Which of the following is true of inferior goods?

Correct AnswerverifiedShow Answer

At the price of $3,consumers A,B,C,and D demand 10 units,12 units,14 units,and 8 units of commodity A respectively.Calculate the market demand for commodity A at $3 assuming that A,B,C,and D are the only four consumers of this product.

Correct AnswerverifiedShow Answer

Which of the following is true of a market demand curve?

Correct AnswerverifiedShow Answer

Correct Answer
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Mariana's behavior can be explained in t...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified

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

Correct Answer
verified
Market demand is the horizontal summatio...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
When the choke price is 10 and price is ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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