Question 1

Which of the following best describes the buyer's problem in microeconomics?

Accepted Answer

Maximizing utility given preferences, prices, and a budget constraint.

Question 2

Suppose a consumer is choosing between sweaters and jeans. If the price of a sweater is $$25, the price of jeans is 50$$, and the consumer has a budget of $300, what is the equation for the budget constraint?

Accepted Answer

$$25x + 50y = 300$$

Question 3

Which of the following statements about indifference curves is correct?

Accepted Answer

Indifference curves cannot cross each other.

Question 4

A consumer has a complementary preference for left and right shoes. Which of the following best describes their indifference curves?

Accepted Answer

L-shaped, increasing satisfaction only when both goods increase together.

Question 5

If a consumer's preferences are not well defined, which of the following statements might they make?

Accepted Answer

"These two goods are not comparable."

Question 6

Suppose the price of jeans falls from $$50 to 25$$, while the price of sweaters remains at $$25 and the budget is 300. $$What happens to the budget line?

Accepted Answer

The budget line pivots outward, allowing the consumer to buy more jeans for the same budget.

Question 7

At the optimal consumption bundle, which of the following must be true?

Accepted Answer

The marginal rate of substitution equals the ratio of the prices of the two goods: $$\frac{MU_x}{MU_y} = \frac{P_x}{P_y}$$

Question 8

If the price of a good increases and the demand for another good increases as a result, what is the relationship between the two goods?

Accepted Answer

They are substitutes.

Question 9

Which of the following is the correct formula for the arc price elasticity of demand?

Accepted Answer

$$\frac{(Q_2$ - Q_1$) / ((Q_2$ + Q_1$)/2)}{(P_2$ - P_1$) / ((P_2$ + P_1$)/2)}$$

Question 10

Suppose the price of solar-powered lights falls from $$8 to 4$$, and the quantity demanded increases from 6 to 14. What is the absolute value of the arc elasticity of demand?

Accepted Answer

2.00

Question 11

If the income elasticity of demand for a good is less than 0, what type of good is it?

Accepted Answer

Inferior good

Question 12

Which of the following would cause a movement along the demand curve for a product, rather than a shift of the demand curve?

Accepted Answer

A change in the product's own price

Question 13

If the price elasticity of demand for cigarettes is 0.40, what does this imply about the demand for cigarettes?

Accepted Answer

Demand is inelastic; quantity demanded changes less than price.

Question 14

A consumer is willing to pay $$100 for a concert ticket but only pays 60. $$What is the consumer surplus?

Accepted Answer

$40

Question 15

If the cross-price elasticity of demand between two goods is positive, which of the following is true?

Accepted Answer

The goods are substitutes.

Question 16

Suppose the price of a good increases by 10% and the quantity demanded decreases by 20%. What is the price elasticity of demand, and what does it imply about total revenue?

Accepted Answer

Elastic ($$|E_d| = 2$$); total revenue decreases.

Question 17

Which of the following is NOT a reason for a shift in the demand curve?

Accepted Answer

A change in the product's own price

Question 18

If a consumer has a neutral preference for anchovies, what does this mean for their indifference curves?

Accepted Answer

Indifference curves are vertical lines; more anchovies do not increase satisfaction.

Question 19

If a consumer's budget increases from $$300 to 600$$, with prices unchanged, what happens to the budget set?

Accepted Answer

The budget line shifts outward, allowing more of both goods to be purchased.

Question 20

Which of the following best describes consumer surplus?

Accepted Answer

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

Introduction to Microeconomics: Consumers and Incentives

Study Guide - Practice Questions

Study Guide - Flashcards