practice test #1 - 1 Budget constraints exist for consumers...

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1. Budget constraints exist for consumers because a. their utility from consuming goods eventually reaches a maximum level b. even with unlimited incomes, they have to pay for each good they consume *c. they have to pay for goods and they have limited incomes d. prices and income are inversely related e. demand curves for goods generally slope downward
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2. If a consumer's budget line between meat and potatoes has a vertical axis intercept at 100 pounds of meat and a horizontal axis intercept at 100 pounds of potatoes a.demand must be inelastic b.the consumer's budget must equal $100 c. both meat and potatoes must be priced at $1 per pound *d. the price of a pound of meat must equal the price of a pound of potatoes e.the opportunity cost of meat in terms of potatoes cannot be determined
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3. Joe spends all of his money on concert tickets and compact disks. The price of a ticket is $20, while the price of a compact disk is $10. His income is $100. If Joe currently buys 3 tickets and would like to purchase a fourth, his opportunity cost would be a.1 compact disk b.$20 c. $10 *d. 2 compact disks e.4 compact disks
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4. Which panel in Figure 5-2 shows the effect of a decrease in the price of apples, other things constant? a.panel a *b. panel b c.panel c d.panel d e.panel e
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5. Which panel in Figure 5-2 shows the effect of an increase in income, other things constant? a.panel a b.panel b c.panel c d.panel d *e. panel e
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6. As Reba consumes four slices of pizza, her total utility rises from 0 to 18, to 24, to 28, and to 30, respectively. What is her marginal utility of the fourth slice of pizza? a.28 b.24 *c. 2 d.7 e.8
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7. If bread costs $1 per pound and meat costs $4 per pound, a consumer whose marginal utility of meat equals 80 utils per pound is maximizing utility only if the marginal utility per pound of bread equals a.4 utils b.5 utils c.10 utils *d. 20 utils e.80 utils
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8. The short run for Barbara's Bakery is
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This note was uploaded on 11/23/2010 for the course FINANCE 08FB40447 taught by Professor Raymond during the Spring '10 term at University of Manchester.

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practice test #1 - 1 Budget constraints exist for consumers...

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