Exam (elaborations)
Exam (elaborations) ECP3704
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ENTAILS QUESTIONS AND ANSWERS
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, Joe prefers a three pack of soda to a six-pack. What properties does this preferenceviolate?
Completeness
Transitivity
More is better
Diminishing MRS - CORRECT ANSWERS-More is better
When the price of one good increases, the associated income effect is represented by a
move from one indifference curve to a
Lower indifference curve since real income is now higher
Lower indifference curve since real income is now lower
Higher indifference curve since real income is now higher
Higher indifference curve since real income is now lower - CORRECT ANSWERS-
Lower indifference curve since real income is now lower
When the price of one good decreases, the associated substitution effect is represented
by a
Move from one indifference to a higher indifference curve since real income is now
higher
Move from one indifference to a lower indifference curve since real income is now
lower
Move along a given indifference curve holding real income constant
Move along a given indifference curve since real income increases - CORRECT
ANSWERS-Move along a given indifference curve holding real income constant
The substitution affect isolates the change in the consumption of a good caused by:
The lower "real" income
The change in the relative prices of two goods
The change in consumer preferences
None of the statements associated with this question are correct - CORRECT
ANSWERS-The change in the relative prices of two goods
Given that income is $750 and PX = $32 and PY = $8, what is the market rate of
substitution between goods X and Y?
-0.75
-3
-4
-25 - CORRECT ANSWERS--4
What is the maximum amount of good Y that can be purchased if X and Y are the only
two goods available for purchase and PX = $10, PY = $15, X = 30, and M = 600?
10
15
20
25 - CORRECT ANSWERS-20 M=PX(X) + PY(Y)
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