ECP3704 Exam 2 Questions and
Answers 100% Pass
Joe prefers a three pack of soda to a six-pack. What properties does this
preference violate?
Completeness
Transitivity
More is better
Diminishing MRS - ✔✔More is better
When the price of one good increases, the associated income effect is
represented by a move from one indifference curve to a
Lower indifference curve since real income is now higher
Lower indifference curve since real income is now lower
Higher indifference curve since real income is now higher
1
100% Pass Guarantee Katelyn Whitman, All Rights
,Higher indifference curve since real income is now lower - ✔✔Lower
indifference curve since real income is now lower
When the price of one good decreases, the associated substitution effect is
represented by a
Move from one indifference to a higher indifference curve since real
income is now higher
Move from one indifference to a lower indifference curve since real income
is now lower
Move along a given indifference curve holding real income constant
Move along a given indifference curve since real income increases -
✔✔Move along a given indifference curve holding real income constant
The substitution affect isolates the change in the consumption of a good
caused by:
The lower "real" income
The change in the relative prices of two goods
The change in consumer preferences
2
100% Pass Guarantee Katelyn Whitman, All Rights
, None of the statements associated with this question are correct - ✔✔The
change in the relative prices of two goods
Given that income is $750 and PX = $32 and PY = $8, what is the market
rate of substitution between goods X and Y?
-0.75
-3
-4
-25 - ✔✔-4
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 = $10, PY = $15, X =
30, and M = 600?
10
15
20
25 - ✔✔20 M=PX(X) + PY(Y)
3
100% Pass Guarantee Katelyn Whitman, All Rights
Answers 100% Pass
Joe prefers a three pack of soda to a six-pack. What properties does this
preference violate?
Completeness
Transitivity
More is better
Diminishing MRS - ✔✔More is better
When the price of one good increases, the associated income effect is
represented by a move from one indifference curve to a
Lower indifference curve since real income is now higher
Lower indifference curve since real income is now lower
Higher indifference curve since real income is now higher
1
100% Pass Guarantee Katelyn Whitman, All Rights
,Higher indifference curve since real income is now lower - ✔✔Lower
indifference curve since real income is now lower
When the price of one good decreases, the associated substitution effect is
represented by a
Move from one indifference to a higher indifference curve since real
income is now higher
Move from one indifference to a lower indifference curve since real income
is now lower
Move along a given indifference curve holding real income constant
Move along a given indifference curve since real income increases -
✔✔Move along a given indifference curve holding real income constant
The substitution affect isolates the change in the consumption of a good
caused by:
The lower "real" income
The change in the relative prices of two goods
The change in consumer preferences
2
100% Pass Guarantee Katelyn Whitman, All Rights
, None of the statements associated with this question are correct - ✔✔The
change in the relative prices of two goods
Given that income is $750 and PX = $32 and PY = $8, what is the market
rate of substitution between goods X and Y?
-0.75
-3
-4
-25 - ✔✔-4
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 = $10, PY = $15, X =
30, and M = 600?
10
15
20
25 - ✔✔20 M=PX(X) + PY(Y)
3
100% Pass Guarantee Katelyn Whitman, All Rights
