Reference no: EM132302226

Question 1. A graph of an Individual's budget constraint
a. illustrates combinations of two goods within a consumer's consumption
b. shows consumption of a single good that a consumer can afford possibilities
c. is unlimited to most consumers
d. ail of the above

Question 2. The rate at which a consumer is willing to substitute one good for another is called the
a. marginal rate of utility
b. marginal rate of competition
c. marginal rate of substitution
d. marginal rate of indifference

Question 3. If the marginal utility per dollar spent on X is greater than the marginal utility per dollar spent on y, the consumer should
a. buy less of X or more of Y
b. buy less of both x and If
c. buy more of X or less of
d. buy more of X and Y

Question 4. A rational consumer
a. prefers indifference curves closer to the origin
b. is willing to give up larger amounts of one good to get smaller amounts of another good
c. prefers indifference curves further from the origin
d. gives up a good that he or she owns little of for a good that he or she has plenty at a given time

Question 5. Which of the following is illustrated by a right-angle indifference curve?
a. Perfect complements
b. Unlimited opportunity costs
c. Limited trade-offs
d Perfect substitutes

Question 6. When analyzing consumer choice, a change in the price of a good
a. shifts the entire budget line to the right in a parallel fashion
b. shifts the entire budget line to the left in a parallel fashion
c. will shift the intercept of the budget line of the good whose price has remained constant
d. will shift the intercept of the budget line of the good whose price has changed
Use Figure 1 to answer Questions 7 and 8

Question 7. What is the movement on the graph from Point A to Point B most likely the result of?
a. A change in the income of the consumer
b. An increase in the price of caramels
c. A fall in the price of caramels
d. A change in the price of apples

Question 8. How is the movement from indifference curve 1 to indifference curve 2 best described?
a. a change in income
b. the substitution effect
c. the indifference effect
d. the income effect

Question 9. Mr. Greene's income doubles overnight because AOA now allows students to tip excellent teachers for jobs well done. We would expect Mr. Greene's budget constraint for beer and pretzels to
a. shift inward in a parallel fashion
b. shift outward in a parallel fashion
c. rotate around a fixed point inward
d. rotate around a fixed point outward

Question 10. As more of one good is purchased, Consumers will
a. get more satisfaction with each additional unit
b. get less satisfaction with each additional unit
c. exhibit the law of diminishing marginal utility
d. both B and C are correct

Question 11. If a buyer is willing to pay $10 for a product, but finds that she only has to pay the market price of $7, the buyer is said to have
a. $10 of consumer surplus
b. $10 of consumer utility
c. $7 of consumer surplus
d. $3 of consumer surplus

Question 12. If the price of a product is equal to a buyer's willingness to pay, the buyer will
I. always turn down the product because he is not getting enough satisfaction for his money
II. always buy the product because he wants it enough to buy it
III. be Indifferent to the product because his willingness to pay is exactly equal to his cost
IV. realize zero consumer surplus
a. I only
b. II only
c. I and II
d. III only
e. ill and IV

Question 13. The study of how the allocation of resources affects economic well-being is called
a. cost-benefit analysis
b. profit maximization
c. welfare economics
d. willingness to pay principle

Question 14. Consumer surplus may be defined as
I. the area below the demand curve and above the market price
II. the amount buyers are willing to pay minus the amount they actually pay
Ill, the area above the supply curve and below the market price
IV. the amount sellers are willing to accept minus the marketprice
V. the market price minus the seller's willingness to sell
a. I only
b. 1 and II
c. I, II and III
d. 1, II, III, and IV
e. III and IV

Question 15. Producer surplus may be defined as
I. the area below the demand curve and above market price
ii. the amount buyers are willing to minus the amount they actually pay
III. the area above the supply curve and below the market price
IV. the amount sellers are willing to accept minus the market price
v. the market price minus the seller's willingness to sell
a. I only
b. I and II
c. I, II, and III
d. I, II, III, and IV
e. III and V only

Question 16. When markets are in equilibrium, producing the quantity where the supply Curve intersects the demand q curve, we say that the market
I. allocates resources efficiently
II. maximizes the sum of producer and consumer surplus
III. minimizes costs of production
a. I only
b. II only
c. III only
d. I and II
e. II and III

Question 17. Taxes collected from the producer have which of the following effects on the market for a good?
a. Supply shifts upward by the amount of the tax
b. Supply shifts downward by the amount of the tax
c. Demand shifts upward by the amount of the tax
d. Demand shifts downward by the amount of the tax

Question 18. Taxes have which of the following effects on a competitive market?
a. The quantity falls below the efficient, equilibrium quantity
b. The quantity increase beyond the efficient, equilibrium quantity
c. Prices rise by the full amount of the tax
d. Buyers and sellers split the tax burden equally

Question 19. If subsidies to producers are "taxes in reverse, " a subsidy would have which of the following effects on the market for a good?
a. Supply shifts upward by the amount of the tax
b. Supply shifts downward by the amount of the tax
c. Demand shifts upward by the amount of the tax
d. Demand shifts downward by the amount of the tax

Question 20. What do we call the area representing the efficiency loss due to a market distortion?
a. externality
b. deadweight loss
c. tax revenue
d. market equality
Refer to Figure 2 to answer Questions 21 and 22

Question 21. The area of producer surplus is represented by area
a. A
b. B
c. A + C
d. B + C

Question 22. The area of total surplus is represented by area
a. A+B+C+0
b. A + B + C
c. A + B
d. B + C
Refer to Figure 3 for Question 23 and 24

Question 23 If the shift in supply is due to government placing a tax in this market, the tax revenue is illustrated b acing a tax y the area
a. A + D
b. A + B
c. A+B+C
d. D+E+H

Question 24. If the shift in supply is due to government placing a Tax in this market, the deadweight loss area is illustrate by the area
a. F +I
b. C + G
c. E + F
d. H + I

Question 25. Assuming demand is constant, government programs may be less costly if they are funded by taxes on
a. goods where supply is inelastic
b. goods where supply is elastic
c. goods with a large number of substitutes
d. luxury goods

Question 26. If the labor supply is relatively elastic, an increased tax on labor
a. encourages participation in the labor market
b. discourages participation in the labor market
c. maximizes tax revenue
d. minimizes deadweight losses

Question 27. If the labor supply is relatively inelastic, then a change of the tax on labor
a. causes workers to work less and the government to collect less revenue than if the
supply of labor were elastic
b. causes little change in the market behavior of workers
c. is likely to cause more workers to emigrate in search of higher wages
d. discourages employers from hiring more workers

Question 28. If demand is more price elastic than supply, the tax burden
a. falls mainly on the demanders, who will adjust their behavior and buy substitute products
b. falls mainly on demanders, who will be slow to adjust their behavior and buy substitute products
c. falls mainly on suppliers, who will adjust their production decisions
d. falls mainly on suppliers, who will be slow to adjust their production decisions

Question 29. The more elastic the supply and demand, the
a. smaller the deadweight loss from the tax
b. greater the deadweight loss from the tax
c. the greater the opportunity for raising tax revenue
d. the more fairly the deadweight loss from the tax is shared by demanders and suppliers

Question 30. In Canada and other nations with universal healthcare programs, the prices of most medical services are regulated by the government (that is, they are a. an increase in the quantity of medical services provided subject to price ceilings). This type of regulation is likely to result in which of the following outcomes?
b. consumption of medical services such that the marginal benefit is less than the marginal cost
c. lower incomes for providers of medical services
d. high tax revenues for governments

Part Two: Problems

1. Using a supply and demand model, draw the market for apples, a normal good.
(a) Clearly indicate the equilibrium price (P) and the equilibrium quantity (Q,) on your graph.
(b) Completely shade the area that represents consumer surplus
(c) Is the quantity that you drew on your graph an efficient quantity? Explain.
(d) Due to the health benefits of consuming apples, the government concludes that all citizens should be able to afford apples. As a result, a price ceiling was imposed in the market for apples.
(I) On your graph, identify a binding price ceiling and label it (Pc). Label the market quantity (Qc).
(ii) Is the quantity supplied at the price ceiling efficient? Explain.

Consider Figure 4 to answer the next question

2. On whom is the tax directly imposed: the producer or the consumer? Explain.
(a) What is the dollar amount of the per-unit tax?
(b) Using the labels on the graph, indicate the following areas
(i) Consumer surplus before the tax
(ii) Consumer surplus after the tax
(iii) Producer surplus before the tax
(iv) Producer surplus after the tax
(v) Deadweight
(c) What is the total revenue raised by the tax?
(d) What is the size of the deadweight loss resulting from the tax?

Use the information in the chart to answer Question 3

3. Hugo is a utility-maximizing consumer. He has $21 to spend on chocolate-covered peanuts and soda pop. The price of the chocolate-covered peanuts is $2 per bag, and the price of soda is $5 per six-pack.
(a) Calculate the amount of each product that Hugo will purchase.
(b) Use the utility-maximizing rule to explain your answer to part (a).
(c) Calculate the total utility that Hugo will get from the purchase you calculated in part (a)
(d) The price of chocolate-covered peanuts rises to $3 per bag
(i) Explain how the income effect will alter Hugo's consumption as a result of the price increase.
(ii) Explain how the substitution effect will alter Hugo's consumption as a result of this price increase.

Attachment:- figures.rar