LSUS MBA 701 Exam 2: Questions With Objective
Solutions
If Mary prefers bananas to plums and plums to peaches, but is indifferent
between bananas and oranges, she
a. prefers oranges to peaches.
b. prefers plums to oranges.
c. is indifferent between oranges and plums.
d. is indifferent between oranges and peaches. Correct Answer - prefers
oranges to peaches.
A typical indifference curve
a. shows all combinations of goods that give a consumer the same level of
utility.
b. shows that as a consumer has more of a good, he is less willing to exchange
it for one unit of another good.
c. shifts out if income increases.
d. both a and b
e. all of the above Correct Answer - shows all combinations of goods that
give a consumer the same level of utility.
The rate at which a consumer is ABLE to substitute one good for another is
determined by
a. the indifference map.
b. the marginal rate of substitution.
c. the consumer's income.
d. the budget line. Correct Answer - Correct answer is marginal rate of
substitution- marked wrong so budget line
A utility function
a. shows the relation between prices and a consumer's utility.
b. shows the relation between income and a consumer's utility.
c. shows the relation between the amount of goods consumed and a
consumer's utility.
d. all of the above
e. none of the above Correct Answer - shows the relation between the
amount of goods consumed and a consumer's utility.
,Along an indifference curve
a. the MRS is constant.
b. the ratio of the marginal utilities is constant.
c. the price ratio is constant.
d. all of the above
e. none of the above Correct Answer - e. none of the above
The slope of an indifference curve
a. shows the change in utility from an additional unit of the good.
b. shows the rate at which the consumer is able to substitute goods in the
market.
c. is equal to the price ratio at all points.
d. is the rate at which the consumer is willing to exchange one good for
another, utility held constant.
e. all of the above Correct Answer - is the rate at which the consumer is
willing to exchange one good for another, utility held constant.
Which of the following assumptions is(are) NOT made in consumer behavior
theory?
a. Consumers can rank all bundles of goods.
b. Consumers can measure the utility they get from all bundles of goods.
c. Consumers have complete information.
d. both a and b
None of the above are assumptions made in consumer behavior theory.
Correct Answer - Consumers can measure the utility they get from all
bundles of goods.
In the figure above, if price DECREASES from $60 to $40, an arrow
representing the QUANTITY effect
a. will point downward.
b. will be shorter than (and in opposite direction of) the arrow representing
the price effect.
c. will be shorter than (and in same direction of) the arrow representing the
price effect.
d. will point in the direction in which total revenue will move.
e. both a and d Correct Answer - will be shorter than (and in opposite
direction of) the arrow representing the price effect.
, The cross-price elasticity of demand between goods X and Y
a. measures the responsiveness of the quantity of X demanded to changes in
the price of Y.
b. is the percentage change in the price of Y divided by the percentage change
in the quantity of X demanded.
c. is greater than zero if X and Y are substitutes.
d. both a and c
e. all of the above Correct Answer - both a and c
Marginal revenue
a. is the change in total revenue when output increases by one unit.
b. is always greater than zero.
c. measures the slope of the total revenue curve.
d. both a and c
e. all of the above Correct Answer - d. both a and c
When marginal revenue is positive,
a. demand is elastic.
b. marginal revenue is greater than price.
c. decreasing price will decrease total revenue.
d. both b and c
e. all of the above Correct Answer - a. demand is elastic.
If the demand for plastic surgery is price inelastic,
a.
then when more plastic surgery is performed, total expenditures on plastic
surgery will decrease.
b.
both "then when more plastic surgery is performed, total expenditures on
plastic surgery will decrease" and "the percentage change in price is less than
the percentage change in quantity".
c.
the percentage change in price is less than the percentage change in quantity.
d.
both "changes in price do not affect the number of operations" and "then
when more plastic surgery is performed, total expenditures on plastic surgery
will decrease".
e.
Solutions
If Mary prefers bananas to plums and plums to peaches, but is indifferent
between bananas and oranges, she
a. prefers oranges to peaches.
b. prefers plums to oranges.
c. is indifferent between oranges and plums.
d. is indifferent between oranges and peaches. Correct Answer - prefers
oranges to peaches.
A typical indifference curve
a. shows all combinations of goods that give a consumer the same level of
utility.
b. shows that as a consumer has more of a good, he is less willing to exchange
it for one unit of another good.
c. shifts out if income increases.
d. both a and b
e. all of the above Correct Answer - shows all combinations of goods that
give a consumer the same level of utility.
The rate at which a consumer is ABLE to substitute one good for another is
determined by
a. the indifference map.
b. the marginal rate of substitution.
c. the consumer's income.
d. the budget line. Correct Answer - Correct answer is marginal rate of
substitution- marked wrong so budget line
A utility function
a. shows the relation between prices and a consumer's utility.
b. shows the relation between income and a consumer's utility.
c. shows the relation between the amount of goods consumed and a
consumer's utility.
d. all of the above
e. none of the above Correct Answer - shows the relation between the
amount of goods consumed and a consumer's utility.
,Along an indifference curve
a. the MRS is constant.
b. the ratio of the marginal utilities is constant.
c. the price ratio is constant.
d. all of the above
e. none of the above Correct Answer - e. none of the above
The slope of an indifference curve
a. shows the change in utility from an additional unit of the good.
b. shows the rate at which the consumer is able to substitute goods in the
market.
c. is equal to the price ratio at all points.
d. is the rate at which the consumer is willing to exchange one good for
another, utility held constant.
e. all of the above Correct Answer - is the rate at which the consumer is
willing to exchange one good for another, utility held constant.
Which of the following assumptions is(are) NOT made in consumer behavior
theory?
a. Consumers can rank all bundles of goods.
b. Consumers can measure the utility they get from all bundles of goods.
c. Consumers have complete information.
d. both a and b
None of the above are assumptions made in consumer behavior theory.
Correct Answer - Consumers can measure the utility they get from all
bundles of goods.
In the figure above, if price DECREASES from $60 to $40, an arrow
representing the QUANTITY effect
a. will point downward.
b. will be shorter than (and in opposite direction of) the arrow representing
the price effect.
c. will be shorter than (and in same direction of) the arrow representing the
price effect.
d. will point in the direction in which total revenue will move.
e. both a and d Correct Answer - will be shorter than (and in opposite
direction of) the arrow representing the price effect.
, The cross-price elasticity of demand between goods X and Y
a. measures the responsiveness of the quantity of X demanded to changes in
the price of Y.
b. is the percentage change in the price of Y divided by the percentage change
in the quantity of X demanded.
c. is greater than zero if X and Y are substitutes.
d. both a and c
e. all of the above Correct Answer - both a and c
Marginal revenue
a. is the change in total revenue when output increases by one unit.
b. is always greater than zero.
c. measures the slope of the total revenue curve.
d. both a and c
e. all of the above Correct Answer - d. both a and c
When marginal revenue is positive,
a. demand is elastic.
b. marginal revenue is greater than price.
c. decreasing price will decrease total revenue.
d. both b and c
e. all of the above Correct Answer - a. demand is elastic.
If the demand for plastic surgery is price inelastic,
a.
then when more plastic surgery is performed, total expenditures on plastic
surgery will decrease.
b.
both "then when more plastic surgery is performed, total expenditures on
plastic surgery will decrease" and "the percentage change in price is less than
the percentage change in quantity".
c.
the percentage change in price is less than the percentage change in quantity.
d.
both "changes in price do not affect the number of operations" and "then
when more plastic surgery is performed, total expenditures on plastic surgery
will decrease".
e.
