ECP3704 Exam 1 Questions and
Answers 100% Pass
The income effect means that when the price of a good rises - ✔✔the
buying power of your income falls.
Assume Joseph spends his entire income on X and Y, and his indifference
curves have the usual convex shape. If Joseph maximizes his utility, then -
✔✔he will spend his entire available income.
A budget line - ✔✔shows all the combinations of goods that require the
same total expenditure.
Johnny consumes only bread and milk. Suppose the quantity of bread is
measured along the horizontal axis. If the price of milk falls, his budget
constraint will - ✔✔rotate clockwise outward.
1
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, My wife really likes shoes. Every time she buys new shoes, she claims to
need both a right shoe and a matching left shoe. Her indifference curves for
right shoes and left shoes - ✔✔are L-shaped.
The idea that a consumer is limited to selecting a bundle of goods that is
affordable is captured by the: - ✔✔Budget constraint
What is the maximum amount of good Y that can be purchased if X and Y
are the only two goods available for purchase and PX = $3, PY = $2, X =
100, and M = 1200? (Note: X is the quantity of X purchased, PX is the price
of X, PY is the price of Y, and M is income) - ✔✔450
Given that income is $800 and the price of good Y is $40. What is the
vertical intercept of the budget line on a normal X-Y graph? - ✔✔20
If you lend $100 to that friend who never pays you back, what will happen
to your budget line? - ✔✔It will shift inward
If consumers expect future prices to be higher, - ✔✔then demand will
increase.
Which of the following is not a supply shifter? - ✔✔Average income level
2
100% Pass Guarantee Katelyn Whitman, All Rights
Answers 100% Pass
The income effect means that when the price of a good rises - ✔✔the
buying power of your income falls.
Assume Joseph spends his entire income on X and Y, and his indifference
curves have the usual convex shape. If Joseph maximizes his utility, then -
✔✔he will spend his entire available income.
A budget line - ✔✔shows all the combinations of goods that require the
same total expenditure.
Johnny consumes only bread and milk. Suppose the quantity of bread is
measured along the horizontal axis. If the price of milk falls, his budget
constraint will - ✔✔rotate clockwise outward.
1
100% Pass Guarantee Katelyn Whitman, All Rights
, My wife really likes shoes. Every time she buys new shoes, she claims to
need both a right shoe and a matching left shoe. Her indifference curves for
right shoes and left shoes - ✔✔are L-shaped.
The idea that a consumer is limited to selecting a bundle of goods that is
affordable is captured by the: - ✔✔Budget constraint
What is the maximum amount of good Y that can be purchased if X and Y
are the only two goods available for purchase and PX = $3, PY = $2, X =
100, and M = 1200? (Note: X is the quantity of X purchased, PX is the price
of X, PY is the price of Y, and M is income) - ✔✔450
Given that income is $800 and the price of good Y is $40. What is the
vertical intercept of the budget line on a normal X-Y graph? - ✔✔20
If you lend $100 to that friend who never pays you back, what will happen
to your budget line? - ✔✔It will shift inward
If consumers expect future prices to be higher, - ✔✔then demand will
increase.
Which of the following is not a supply shifter? - ✔✔Average income level
2
100% Pass Guarantee Katelyn Whitman, All Rights
