MBA 701 EXAM 2 QUESTIONS AND
CORRECT ANSWERS.
Refer to the following indifference map for a consumer who has an income of $48 to spend
on goods X and Y and the market prices of X and Y are both $4:
Now suppose the price of good X increases to $12 while the price of good Y remains $4.
Utility will be maximized on which indifference curve?
II
The rate at which a consumer is able to substitute one good for another is determined by
the budget line.
The demand for heart surgery is price inelastic. So it follows that
if the price of heart surgery increases, total expenditure by consumers on heart surgery will rise.
If the demand for umbrellas is price inelastic,
if more umbrellas are sold as the result of a price decrease, total expenditures by consumers on
umbrellas will decrease.
The slope of an indifference curve
is the rate at which the consumer is willing to exchange one good for another, utility held
constant.
Suppose that the Houston Rockets' management is considering a plan in which fans who
donate blood can attend games for $35 instead of the usual $50. If both ticket revenues and
blood donations rise with this plan, which of the following is true?
The demand for Houston Rockets' tickets is price elastic.
Which of the following will NOT affect the elasticity of demand for a product?
the cost of producing the product
If the quantity of gidgets demanded increases when the price of gadgets decreases,
, gidgets and gadgets are complements.
Marginal revenue
"is the change in total revenue when output increases by one unit" and "measures the slope of the
total revenue curve".
A utility function
shows the relation between the amount of goods consumed and a consumer's utility.
The cross-price elasticity of demand between goods X and Y
both "measures the responsiveness of the quantity of X demanded to changes in the price of Y"
and "is greater than zero if X and Y are substitutes".
An individual's demand curve for X
shows how the utility-maximizing choice of X changes as the price of X changes.
Which of the following assumptions is (are) NOT made in consumer behavior theory?
Consumers can measure the utility they get from all bundles of goods.
When marginal revenue is positive,
demand is elastic.
A typical indifference curve
shows all combinations of goods that give a consumer the same level of utility.
Marginal utility is
the change in utility that results from increasing the amount of a good consumed by one unit.
If the demand for plastic surgery is price inelastic,
then when more plastic surgery is performed, total expenditures on plastic surgery will decrease.
According to the following figure, what could have caused a consumer's budget line to shift
from ML to MN?
CORRECT ANSWERS.
Refer to the following indifference map for a consumer who has an income of $48 to spend
on goods X and Y and the market prices of X and Y are both $4:
Now suppose the price of good X increases to $12 while the price of good Y remains $4.
Utility will be maximized on which indifference curve?
II
The rate at which a consumer is able to substitute one good for another is determined by
the budget line.
The demand for heart surgery is price inelastic. So it follows that
if the price of heart surgery increases, total expenditure by consumers on heart surgery will rise.
If the demand for umbrellas is price inelastic,
if more umbrellas are sold as the result of a price decrease, total expenditures by consumers on
umbrellas will decrease.
The slope of an indifference curve
is the rate at which the consumer is willing to exchange one good for another, utility held
constant.
Suppose that the Houston Rockets' management is considering a plan in which fans who
donate blood can attend games for $35 instead of the usual $50. If both ticket revenues and
blood donations rise with this plan, which of the following is true?
The demand for Houston Rockets' tickets is price elastic.
Which of the following will NOT affect the elasticity of demand for a product?
the cost of producing the product
If the quantity of gidgets demanded increases when the price of gadgets decreases,
, gidgets and gadgets are complements.
Marginal revenue
"is the change in total revenue when output increases by one unit" and "measures the slope of the
total revenue curve".
A utility function
shows the relation between the amount of goods consumed and a consumer's utility.
The cross-price elasticity of demand between goods X and Y
both "measures the responsiveness of the quantity of X demanded to changes in the price of Y"
and "is greater than zero if X and Y are substitutes".
An individual's demand curve for X
shows how the utility-maximizing choice of X changes as the price of X changes.
Which of the following assumptions is (are) NOT made in consumer behavior theory?
Consumers can measure the utility they get from all bundles of goods.
When marginal revenue is positive,
demand is elastic.
A typical indifference curve
shows all combinations of goods that give a consumer the same level of utility.
Marginal utility is
the change in utility that results from increasing the amount of a good consumed by one unit.
If the demand for plastic surgery is price inelastic,
then when more plastic surgery is performed, total expenditures on plastic surgery will decrease.
According to the following figure, what could have caused a consumer's budget line to shift
from ML to MN?
