chapter 5 - 1 Suppose that Jean normally orders three tacos...

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1. Suppose that Jean normally orders three tacos, but on seeing that their price has gone up, decides to buy only two. Jean's decision is best explained by: A. income and substitution effects. B. the law of supply. C. the principle of comparative advantage. D. the law of increasing opportunity costs. 2. (Last Word) All of the following would reduce property crime by increasing its "price," except: A. imposing greater penalties for those who are caught and convicted. B. using more sophisticated security systems. C. enhancing the legitimate earnings of potential criminals. D. cutting out the middlemen ("fences") by selling stolen goods via Internet auction sites. 3. It is possible for a consumer's indifference curves to intersect. A. True B. False 4. R-1 F21017 Refer to the above diagram. The total utility yielded by 4 units of X is: A. 4. B. 15. C. 17. D. 18. 5. R-2 F21020 Refer to the above diagram. Total utility: A. increases so long as additional units of Y are purchased. B. becomes negative at 4 units. C. increases at a diminishing rate, reaches a maximum, and then declines. D. is maximized at 2 units.
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6. In moving along a given budget line: A. the prices of both products and money income are assumed to be constant. B. each point on the line will be equally satisfactory to consumers. C. money income varies, but the prices of the two goods are constant. D. the prices of both products are assumed to vary, but money income is constant. 7. When a consumer is maximizing total utility, he or she cannot increase total utility by reallocating expenditures among different products. A. True B. False 8. Which of the following has been a significant factor in DVDs replacing video cassettes (VCs) in the retail home video market? A. DVDs are now less than one-half the price of VCs. B. A scarcity of production capacity has curtailed the manufacture of VCs. C. Most consumers perceive DVD sound and video reproduction to be of higher quality. D. The price of DVD players has increased dramatically. 9. Suppose that Ms. Spencer is currently exhausting her money income by purchasing 10 units of A and 8 units of B at prices of $2 and $4 respectively. The marginal utility of the last units of A and B are 16 and 24 respectively. These data suggest that Ms. Spencer: A. has preferences that are at odds with the principle of diminishing marginal
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This note was uploaded on 10/15/2009 for the course ECON 2302 taught by Professor Parker during the Spring '09 term at University of Texas-Tyler.

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chapter 5 - 1 Suppose that Jean normally orders three tacos...

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