Question 1

Suppose the demand for gasoline is given by the equation $$Q_d = 350 - 50P. $$What is the inverse demand function?

Accepted Answer

$$P = 7 - 0.02Q_d$$

Question 2

Given the budget constraint $$50j + 25s = 300$$, what is the opportunity cost of one additional pair of jeans in terms of sweaters?

Accepted Answer

2 sweaters

Question 3

If the price of jeans increases from $$50 to 75$$, what happens to the consumer's budget line (assuming income and the price of sweaters remain unchanged)?

Accepted Answer

The budget line pivots inward, reducing the maximum number of jeans that can be purchased.

Question 4

A consumer has $$300 to spend on jeans (50 $$each) and sweaters ($25 each). What is the equation for the budget constraint?

Accepted Answer

$$50j + 25s = 300$$

Question 5

If a consumer's marginal benefit per dollar spent on sweaters is greater than that for jeans, what should the consumer do to maximize utility?

Accepted Answer

Buy more sweaters and fewer jeans until the marginal benefit per dollar is equalized.

Question 6

Suppose the price elasticity of demand for jeans between $$P=25$$ and $$P=50 is $$calculated as follows: Quantity decreases from 4 to 3 pairs. What is the price elasticity of demand?

Accepted Answer

$$-0.25$$

Question 7

If the cross-price elasticity of demand between meat and potatoes is $$-0.2$$, what does this imply about the relationship between these goods?

Accepted Answer

They are complements.

Question 8

If a consumer's income doubles, what happens to the budget line in a graph with jeans and sweaters on the axes (assuming prices remain constant)?

Accepted Answer

The budget line shifts outward, parallel to the original.

Question 9

Which of the following best describes consumer surplus?

Accepted Answer

The difference between what a buyer is willing to pay and what the buyer actually pays.

Question 10

Suppose the demand for a good is $$Q_d = 12 - 2P. If $$the price is $4, what is the consumer surplus?

Accepted Answer

$$18$$

Question 11

If the income elasticity of demand for rice is $$-0.44$$, what type of good is rice?

Accepted Answer

Inferior good

Question 12

Which of the following is NOT a determinant of the price elasticity of demand?

Accepted Answer

The consumer's income

Question 13

If the price elasticity of demand for a good is less than 1, what happens to total revenue if the price increases?

Accepted Answer

Total revenue increases

Question 14

A utility function is written as $$U = f(x, y). $$What does this function represent?

Accepted Answer

A mathematical representation of preferences over bundles of goods

Question 15

If the marginal utility per dollar spent on good X is greater than that for good Y, what should a rational consumer do?

Accepted Answer

Buy more of good X and less of good Y

Question 16

Which of the following statements about indifference curves is correct?

Accepted Answer

Higher indifference curves represent higher levels of utility.

Question 17

If the cross-price elasticity of demand between two goods is positive, what does this imply?

Accepted Answer

The goods are substitutes.

Question 18

Suppose a consumer's income increases and the quantity demanded of a good decreases. What type of good is this?

Accepted Answer

Inferior good

Question 19

Which of the following best explains why last-minute airplane tickets are expensive but last-minute Broadway show tickets are cheap?

Accepted Answer

Airplane tickets have inelastic demand, while Broadway show tickets have elastic demand.

Question 20

If the price of sweaters increases, what happens to the budget line in a graph with jeans and sweaters on the axes (assuming income and the price of jeans remain constant)?

Accepted Answer

The budget line pivots inward, reducing the maximum number of sweaters that can be purchased.

Consumer Behavior, Budget Constraints, and Elasticity in Microeconomics

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