Question 1

The paradox of crime prevention is partly explained by
A) crime being a superior good
B) crime being an inferior enough good
C) nonconvexity of indifference curves

Accepted Answer

B

Question 2

The expenditure function identifies the maximum amount of income that we must give a consumer in order to allow the consumer to achieve a predetermined level of utility at given prices.

Accepted Answer

The expenditure function identifies the minimum amount of money that must be spent in order to achieve a certain level of utility at given prices, not the maximum amount of income to give a consumer.

Question 3

A characteristic of demand for a good where, at a given price, a 1% change in the price leads to a less than 1% change in the quantity demanded is called inelastic demand.

Accepted Answer

This is the definition of inelastic demand.

Question 4

The paradox of crime prevention is the cost of engaging in any activity or the opportunity forgone by choosing that particular activity.

Accepted Answer

The paradox of crime prevention refers to the difficulty in measuring the effectiveness of crime prevention strategies because successful prevention means the crime does not occur, making it hard to quantify what has been prevented.

Question 5

A characteristic of demand for a good where, at a given price, a 1% change in the price leads to exactly a 1% change in the quantity demanded is called unitary elastic demand.

Accepted Answer

This is the definition of unitary elastic demand.

Question 6

As Calvin Yoshino purchases more leisure, he devotes _______ time to work.
A) less
B) more
C) a constant amount of

Accepted Answer

As Calvin purchases more leisure, it implies that he is reducing his work time in order to make time for leisure activities. Therefore, the best choice is A, which means "less time to work".

Question 7

-Refer to Exhibit 5-1. Which demand curve has elasticity that varies along its length?
A) (a)
B) (b)
C) (c)

Accepted Answer

Demand curve (a) has elasticity that varies along its length because it is a non-linear curve. The elasticity of demand is measured by the slope of the demand curve, and the slope of demand curve (a) changes at different points along the curve.

Question 8

-Refer to Exhibit 5-1. Which demand curve is perfectly elastic?
A) (a)
B) (b)
C) (c)

Accepted Answer

A perfectly elastic demand curve is horizontal, indicating that consumers will only buy at one price and any change in price will result in zero quantity demanded.

Question 9

Researchers studying labor supply decisions of New York City cab drivers discovered that the time horizons of the drivers are
A) day-by-day
B) intertemporal
C) multi-year

Accepted Answer

The researchers found that New York City cab drivers tend to make labor supply decisions on a day-by-day basis, often setting daily income goals and stopping work once those goals are met, rather than considering longer-term or intertemporal earnings strategies.

Question 10

The fact that policies aimed at reducing crime may actually increase it if crime is an inferior enough good and the income effect of the crime prevention policies is big enough is known as the
A) Slutsky paradox
B) opportunity paradox
C) paradox of crime prevention

Accepted Answer

This phenomenon is referred to as the paradox of crime prevention, which suggests that under certain conditions, efforts to reduce crime might inadvertently lead to an increase in crime due to the complex interplay of economic factors and human behavior.

Question 11

The elasticity of demand measure the percentage change in the price of a good that results from a given percentage change in its demand.

Accepted Answer

The elasticity of demand measures the percentage change in the quantity demanded of a good that results from a given percentage change in its price.

Question 12

The Slutsky equation identifies the minimum amount of income that we must give a consumer in order to allow the consumer to achieve a predetermined level of utility at given prices.

Accepted Answer

The Slutsky equation decomposes the effect of a price change into a substitution effect and an income effect, rather than identifying the minimum amount of income needed to achieve a predetermined level of utility.

Question 13

Consumer surplus is the difference between what a producer receives for the goods it produces and the cost of producing them.

Accepted Answer

Consumer surplus is actually the difference between the maximum price a consumer is willing to pay for a good or service and the actual price they pay. It is not related to the cost of production.

Question 14

Elastic demand is a characteristic of demand for a good where, at a given price, a 1% change in the price of a good leads to ____________ 1% change in the quantity demanded of that good.
A) a more than
B) a less than
C) exactly a

Accepted Answer

Elastic demand means that the quantity demanded of a good is very responsive to changes in price. Therefore, a 1% change in price will lead to a more than 1% change in the quantity demanded.

Question 15

A demand curve that is horizontal and in which a zero quantity will be sold at any price above a given price p while, at price p, any quantity can be sold is called a(n)
A) unitary elastic demand curve
B) perfectly elastic demand curve
C) perfectly inelastic demand curve

Accepted Answer

A perfectly elastic demand curve represents a situation in which a small change in price results in an infinite change in quantity demanded. In other words, consumers are extremely responsive to any change in price and will not buy any quantity of the good if the price is even slightly too high. This results in a horizontal demand curve, as any increase in price above a certain level will result in zero quantity sold. At the specific price p, however, any quantity can be sold.

Question 16

A curve that represents graphically the relationship between the quantity of a good demanded by a consumer and the price of that good as the price varies is called the market demand curve.

Accepted Answer

The curve described is known as the demand curve for an individual consumer, not the market demand curve. The market demand curve represents the total quantity demanded by all consumers in the market at various prices.

Question 17

A measure of consumer surplus determined by the area under the compensated demand curve is the approximate measure of consumer surplus.

Accepted Answer

Consumer surplus is typically measured by the area above the price level and below the demand curve, not the compensated demand curve. The compensated demand curve, which adjusts for changes in income or utility, is used for different types of economic analysis.

Question 18

-Refer to Exhibit 5-1. Which demand curve is perfectly inelastic?
A) (a)
B) (b)
C) (c)

Accepted Answer

A perfectly inelastic demand curve is vertical, indicating that quantity demanded does not change as price changes. Curve (c) is vertical, fitting this description.

Question 19

Kristen's earnings from a California escort service are known as her
A) honest wage
B) dishonest wage
C) legal wage

Accepted Answer

Kristen's earnings from an escort service are not legal in California, therefore they cannot be considered a legal wage. Additionally, the term "honest wage" implies that the work being performed is legal and ethical, which is not the case in this scenario. Therefore, the only appropriate option is B) dishonest wage.

Question 20

A perfectly inelastic demand curve is perfectly vertical, representing zero quantity response to a price change.

Accepted Answer

A perfectly inelastic demand curve means that the quantity demanded remains constant regardless of changes in price, thus resulting in a perfectly vertical demand curve.

Quiz 5: Some Applications of Consumer Demand, and Welfare Analysis

The paradox of crime prevention is partly explained by

The expenditure function identifies the maximum amount of income that we must give a consumer in order to allow the consumer to achieve a predetermined level of utility at given prices.

A characteristic of demand for a good where, at a given price, a 1% change in the price leads to a less than 1% change in the quantity demanded is called inelastic demand.

The paradox of crime prevention is the cost of engaging in any activity or the opportunity forgone by choosing that particular activity.

A characteristic of demand for a good where, at a given price, a 1% change in the price leads to exactly a 1% change in the quantity demanded is called unitary elastic demand.

As Calvin Yoshino purchases more leisure, he devotes _______ time to work.

-Refer to Exhibit 5-1. Which demand curve has elasticity that varies along its length?

-Refer to Exhibit 5-1. Which demand curve is perfectly elastic?

Researchers studying labor supply decisions of New York City cab drivers discovered that the time horizons of the drivers are

The fact that policies aimed at reducing crime may actually increase it if crime is an inferior enough good and the income effect of the crime prevention policies is big enough is known as the

The elasticity of demand measure the percentage change in the price of a good that results from a given percentage change in its demand.

The Slutsky equation identifies the minimum amount of income that we must give a consumer in order to allow the consumer to achieve a predetermined level of utility at given prices.

Consumer surplus is the difference between what a producer receives for the goods it produces and the cost of producing them.

Elastic demand is a characteristic of demand for a good where, at a given price, a 1% change in the price of a good leads to ____________ 1% change in the quantity demanded of that good.

A demand curve that is horizontal and in which a zero quantity will be sold at any price above a given price p while, at price p, any quantity can be sold is called a(n)

A curve that represents graphically the relationship between the quantity of a good demanded by a consumer and the price of that good as the price varies is called the market demand curve.

A measure of consumer surplus determined by the area under the compensated demand curve is the approximate measure of consumer surplus.

-Refer to Exhibit 5-1. Which demand curve is perfectly inelastic?

Kristen's earnings from a California escort service are known as her

A perfectly inelastic demand curve is perfectly vertical, representing zero quantity response to a price change.