Deck 6: Consumption, Time Allocation and Production Choices

Question 1

According to the assumption of the basic consumer theory,which of the following is true?

A) If April consumes more pizza,her marginal utility of consuming pizza is decreasing.
B) If April consumes more pizza,her marginal utility of consuming pizza is increasing.
C) If April consumes more pizza,her marginal utility of consuming pizza is constant.
D) Eating more pizza does not increase April' utility.

Answer 1

A

Question 2

Joshua has income endowment of $1,000,the price of food is $2 per unit and the price of non-food is $4 per unit.Which of the following is his budget constraint?

A) $$2 \mathrm {~F} + 4 \mathrm {~N} \leq 1,000$$
B) $$F \leq 500 - 2 N$$
C) $$N \leq 250 - 1 / 2 F$$
D) All of the above

Answer 2

All of the above

Question 3

Utility is a measure of

A) the satisfaction from consuming goods and services.
B) the amount of money value people are willing to pay for goods and services.
C) the usefulness of goods and services.
D) the prices of goods and services.

Answer 3

A

Question 4

Joshua has income endowment of $1,000,the price of food is $2 per unit and the price of non-food is $4 per unit.If he spent all of his income on food,how many units of food can he buy?

A) 1,000 units.
B) 250 units.
C) 500 units.
D) 0 unit.

Question 5

Which of the following will increase consumption for a normal good?

A) an increase in income.
B) a decrease in income.
C) an increase in the price of a complement.
D) a decrease in the price of a substitute.

Question 6

If the prices of food and non-food stay constant and consumers income doubles,what will happen to the budget line?

A) The budget line will stay unchanged.
B) The budget line will shift in toward the origin in a parallel fashion.
C) The budget line will shift out from the origin in a parallel fashion.
D) The budget line will change but we need more information to know how.

Question 7

An indifference curve is ________.

A) all the combinations of food and non-food that consumers are able to afford.
B) all the combinations of food and non-food that consumers prefer equally.
C) a straight line.
D) downward sloping and concave (bowed out from the origin).

Question 8

Which of the following statements is true?

A) As we consume more of a good,utility will increase even if the good is subject to diminishing marginal utility.
B) As we consume more of a good,utility will increase unless the good is subject to diminishing marginal utility.
C) Marginal utility is just another name for utility.
D) We cannot rank utility from two different consumption bundles.

Question 9

Consumers' preference are described by

A) indifference curves.
B) budget lines.
C) their wealth.
D) price level in the economy.

Question 10

The substitution effect can be measured by holding ________constant.

A) income
B) price of food
C) price of non-food
D) utility

Question 11

When consumers receive distributions of free rise,the quantities of rise they consume are likely to ________ and by ________ the quantity of rice received in the distribution.

A) rise; more than
B) rise; the same amount as
C) rise,less than
D) the quantities of rise they consume are not going to change

Question 12

Suppose there is a reduction in the price of food while consumers' income and the price of non-food stay the same,which of the following statement is true?

A) spending on food consumption will always increase.
B) budget line will rotate out from the endpoint on the axis of food.
C) budget line will rotate out from the endpoint on the axis of non-food.
D) the slope of the budget line will stay the same.

Question 13

All of the following statements are true except:

A) People can make choices that help determine development outcomes.
B) Decision makers possess accurate and complete information.
C) Information is costly and difficult to obtain,especially in developing countries.
D) People cannot take advantage of new investment opportunities

Question 14

When labor suppliers choose how much time to allocate to wage labor and to other activities seeking to maximize utility ,their utility is often assumed to be a function of ________.

A) consumption of goods and services
B) time spent in non-labor activities.
C) both consumption of goods and services and time spent in non-labor activities.
D) neither consumption of goods and services nor time spent in non-labor activities.

Question 15

The price of home time is ________.

A) not measurable
B) the opportunity cost of time
C) increasing with higher income
D) depends on how many hours the labor supplier works

Question 16

When labor suppliers choose how much time to allocate to wage labor and to other activities seeking to maximize utility ,their constraint is given by

A) the time constraint S + H ≤ T
B) the cash constraint that C ≤ wS + M.
C) C + wH ≤ wT + M.
D) all of the above.

Question 17

The income elasticity of demand is________.

A) always positive.
B) always negative.
C) positive for a normal good and negative for an inferior good.
D) negative for a normal good and positive for an inferior good.

Question 18

If consumers' income increases by one dollar and consumers consume both food and non-food,________.

A) spending on food consumption will always increase.
B) spending on food consumption will increase but by less than one dollar if both food and non-food are normal goods.
C) spending on food consumption will increase only if non-food is inferior good.
D) spending on food consumption will increase only if non-food is normal good.

Question 19

A reduction in the price of good A reduces the consumption of good B,then ________.

A) A and B are substitutes.
B) A and B are complements.
C) A is a normal good.
D) A is an inferior good.

Question 20

If consumers' income increases and the consumption for food decreases,then we can conclude:

A) food is a normal good.
B) food is an inferior good.
C) consumers are not rational.
D) this situation does not happen in developing countries.

Question 21

Most analysts agree that if prices and wages had held constant,adoption of Green Revolution seed varieties would have increased the quantity of labor demanded in agriculture.Discuss.

Question 22

If George treats home time as normal good and he receives gift money of $10,000 from his family,suppose his hourly wage working as a electrician stays the same,what will mostly likely to happen?

A) George will work less hours.
B) George will work more hours.
C) George will work the same amount.
D) We cannot predict George's reaction.

Question 23

An increase in p will ________ the VMPL schedule and will lead to ________in the quantity of low-skill labor demanded.

A) shift up; an increase
B) shift up; a decrease
C) shift down; an increase
D) shift down; a decrease

Question 24

Why is labor demand a derived demand? Explain.What is a linkage between markets?

Question 25

If one worker suppliers fewer hours of labor when wage increases,we can conclude that ________.

A) the substitution effect is greater than the income effect
B) the income effect is greater than the substitution effect
C) the income effect is the same as the substitution effect
D) this worker is not efficient.

Question 26

An increase in hourly wage will ________ the wage line and will lead to ________in the quantity of low-skill labor demanded.

A) shift up; an increase
B) shift up; a decrease
C) shift down; an increase
D) shift down; a decrease

Question 27

If one worker suppliers more hours of labor when wage increases,we can conclude that ________.

A) the substitution effect is greater than the income effect
B) the income effect is greater than the substitution effect
C) the income effect is the same as the substitution effect
D) this worker is not efficient.