Economics Answers

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Economics Answers

Question 1. The theory of consumer behaviour – (a) Completeness

Question 2. The vertical intercept of the budget line equals 40 which is equivalent to – (c) I/PC

Question 3. The optimal choice under Sue’s scenario – (b) 8 packages of hot dogs and 8

packages of buns

Question 4. The principle of revealed preference – (b) if A is more expensive than B, then

Xavier must prefer B to A

Question 5. When the consumer maximizes utility – (b) MU(X) must equal MU(Y)

Question 6. The price index which tends to understate the impact of price changes on consumers

– (c) Paasche index

Question 7. The connection of points B and D forms – (d) a shift from one demand curve to

the other

Question 8. How the total expenditures on movie tickets vary along the demand curve – (d) total

expenditures increase through the upper portion of the curve and then decreases at low

price levels

Question 9. Considering the given statements – (b) 1 is true, and 2 is false

Question 10. Reducing the consumption of beer – (c) beer is an inferior good, and the taxes

collected from this tax are rebated to consumers

Question 11. The falling of the price of some goods and attracting more buyers/consumers – (b)

the substitution effect

Question 12. The price of the red herring is (a) $96

Question 13. As the demand curve becomes more inelastic, the consumer surplus in the market

tends to – (a) increase

Question 14. The quantity of good demanded by a typical consumer increases in response to the

growth in purchases by the other consumers – (b) a positive network externality is present

Question 15. The variable input in the long run – (a) labour

Question 16. The figure showing the impact of technological improvement conveys the message

that – (b) technology causes an increase in the output per time period, but as the production

functions show, the contributions of technology are also subject to diminishing marginal

returns

Question 17. The output in the isoquant map shows – (b) diminishing marginal returns

Question 18. Increasing the inputs by 9% but the output increases by less than 9% - (a)

decreasing returns to scale

Question 19. The situation pictured in the figure – (c) shows a constant returns to scale

Question 20. The MRTS for isoquants in a fixed-proportion production function is – (a) zero or

one

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