practice test #1

# 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
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
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
8. The short run for Barbara's Bakery is

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

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