Deck 31: Understanding Direct and Inverse Relationships between Variables

Question 1

Which of the following pairs is the most likely to exhibit a direct relationship?

A) The price of gasoline and the amount of gasoline that people purchase.
B) Cholesterol levels and the likelihood of developing heart disease.
C) Outdoor temperature and heating oil sales.
D) Annual income and weekly pawn shop visits.

Answer 1

B

Question 2

Which of the following statements is correct?

A) Slope is the ratio of the vertical change (the rise or fall) to the horizontal change (the run).
B) A direct relationship is one in which two variables change in the opposite direction.
C) An inverse relationship is one in which two variables change in same directions.
D) An independent relationship is one in which two variables are upward sloping.

Answer 2

A

Question 3

Suppose two variables are directly related. If one variable rises, then the other variable:

A) also rises.
B) falls.
C) remains unchanged.
D) reacts unpredictably.

Answer 3

A

Question 4

If the amount of time spent procrastinating and the performance on an exam are inversely related, then

A) more procrastination leads to lower exam grades.
B) more procrastination leads to higher exam grades.
C) a graph with this relationship would be positively sloped.
D) the slope of the line reflecting this relationship will be 0.

Question 5

Exhibit 1A-3 Straight line

Straight line AB in Exhibit 1A-3 is a downward sloping line illustrating:

A) a direct relationship between X and Y.
B) an inverse relationship between X and Y.
C) X and Y are unrelated variables.
D) the ceteris paribus assumption.

Question 6

Exhibit 1A-8 Straight line relationship

According to the Exhibit 1A-8, the relationship between the price and quantity purchased of pizza is:

A) direct.
B) inverse.
C) complex.
D) independent.

Question 7

A direct relationship exists when:

A) there is no association between two variables.
B) one variable increases and there is no change in the other variable.
C) one variable increases and the other variable increases.
D) one variable increases and the other variable decreases.

Question 8

Exhibit 1A-7 Straight line relationship

According to Exhibit 1A-7, the relationship between annual income and air-travel expenditures is:

A) direct.
B) inverse.
C) complex.
D) independent.

Question 9

An upward-sloping line or curve is used to illustrate:

A) a direct relationship.
B) an inverse relationship.
C) two unrelated variables.
D) the ceteris paribus assumption.

Question 10

Graphically express a direct and an inverse or negative relationship. What could cause a shift in a line or curve expressing a relationship between two variables?

Question 11

Measured between two points on a curve, the ratio of the change in the variable on the vertical axis to the change in the variable on the horizontal axis is the:

A) axis.
B) slope.
C) dependent curve.
D) independent curve.

Question 12

Exhibit 1A-5 Straight line

In Exhibit 1A-5, as X increases along the horizontal axis, from point C to point D on the line, the Y values

A) increase so the relationship between X and Y is direct.
B) decrease so the relationship between X and Y is inverse.
C) remain unchanged so the relationship between X and Y is independent.
D) change so the relationship between X and Y is variable.

Question 13

When an inverse relationship is graphed, the resulting line or curve is:

A) horizontal.
B) vertical.
C) upward-sloping.
D) downward-sloping.

Question 14

If the amount of lemonade purchased and the outdoor temperature are directly related, then

A) when temperature rises, the amount of lemonade purchased rises.
B) a graph with this relationship would be negatively sloped.
C) sellers of lemonade hope for cooler temperatures.
D) the slope of the line reflecting this relationship will be 0.

Question 15

Exhibit 1A-1 Straight line

In Exhibit 1A-1, as X increases along the horizontal axis, from point A to point B on the line, the Y values

A) increase so the relationship between X and Y is direct.
B) decrease so the relationship between X and Y is inverse.
C) remain unchanged so the relationship between X and Y is independent.
D) change so the relationship between X and Y is variable.

Question 16

A direct relationship is expressed graphically as a:

A) positively sloped line or curve.
B) negatively sloped line or curve.
C) horizontal line.
D) vertical line.

Question 17

Distinguish a direct and an inverse relationship. Provide an example of each type of relationship.

Question 18

Which of the following pairs is the most likely to exhibit an inverse relationship?

A) The amount of time you study and your grade point average.
B) People's annual income and their expenditure on personal computers.
C) Baseball players' salaries and their batting averages.
D) The price of a concert and the number of tickets people purchase.

Question 19

Suppose two variables are inversely related. If one variable rises, then the other variable:

A) also rises.
B) falls.
C) remains unchanged.
D) reacts unpredictably.

Question 20

An inverse relationship exists when:

A) there is no association between two variables.
B) one variable increases and there is no change in the other variable.
C) one variable increases and the other variable increases.
D) one variable increases and the other variable decreases.

Question 21

Exhibit 1A-1 Straight line

As shown in Exhibit 1A-1, the slope of straight line AB:

A) decreases with increases in X.
B) increases with increases in X.
C) increases with decreases in X.
D) remains constant with changes in X.

Question 22

Consumer surplus measures the value between the price consumers are willing to pay and the:

A) producer surplus price.
B) deadweight gain price.
C) actual price paid.
D) preference price.

Question 23

​ Assume there is a relationship between two variables and the other-variables-held constant assumption (ceteris paribus) is relaxed. We would expect that the line representing this relationship would:

A) ​change from inverse to direct.
B) ​change from direct to inverse.
C) ​have a greater number of data points.
D) ​change its location.

Question 24

Exhibit 1A-2 Straight line

In Exhibit 1A-2, explain the slope of straight line CD.

A) As the X value increases by 20, the Y value increases by 5, so the slope is 4.
B) As the Y value increases by 5, the X value increases by 20, so the slope is 1/4.
C) As the X value increases by 10, the Y value increases by 5, so the slope is 2.
D) As the Y value increases by 5, the X value increases by 10, so the slope is 1/2.

Question 25

A drought destroys much of the peach crop. As a result, consumer surplus in the peach market:

A) increases.
B) decreases.
C) remains unchanged.
D) equals the deadweight loss increase.

Question 26

Exhibit 1A-4 Straight line

Straight line A-D in Exhibit 1A-4 shows that:

A) as the X value increases by 80, the Y value increases by 40 so the slope is 2.
B) as the Y value increases by 40, the X value increases by 80 so the slope is 1/2.
C) increasing values for X do not affect the value of Y.
D) increasing values for Y do not affect the value of X.

Question 27

Suppose Sam buys a good for $100 at a yard sale. If consumer surplus from the sale is $75, Sam would have been willing to pay:

A) $100.
B) $175.
C) $25.
D) equal to the deadweight loss.

Question 28

Exhibit 1A-8 Straight line relationship

Which of the following would cause a shift in the relationship shown in Exhibit 1A-8?

A) A fall in household incomes.
B) A fall in the price of pizza.
C) A fall in the quantity of pizza that people wish to purchase.
D) A rise in the price of pizza.

Question 29

Exhibit 1A-5 Straight line

In Exhibit 1A-5, the slope for straight line CD is:

A) 5.
B) 1.
C) − 1.
D) − 5.

Question 30

Exhibit 1A-7 Straight line relationship

Which of the following would cause a shift in the relationship shown in Exhibit 1A-7?

A) A rise in people's annual income.
B) A rise in people's expenditure on air travel.
C) A rise in the price of air travel.
D) Nothing will shift the line in the graph.

Question 31

Using supply and demand curve analysis, the triangular area above the equilibrium price and under the demand curve is:

A) consumer surplus.
B) producer surplus.
C) marginal cost.
D) deadweight loss.

Question 32

Exhibit 1A-10 Multi-curve graph

Exhibit 1A-10 represents a three-variable relationship. As the annual income of consumers rises from $20,000 (line A) to $40,000 (line B), the result is a:

A) rightward movement along each curve.
B) leftward movement along each curve.
C) leftward shift from curve B to curve A.
D) rightward shift from curve A to curve B.

Question 33

Exhibit 1A-1 Straight line

In Exhibit 1A-1, the slope of straight line AB is:

A) positive.
B) zero.
C) negative.
D) variable.

Question 34

Exhibit 1A-4 Straight line

In Exhibit 1A-4, as X increases along the horizontal axis, corresponding to points A-D on the line, the Y value remains unchanged at 40 units. The relationship between the X and Y variables is:

A) direct.
B) inverse.
C) independent.
D) undefined.

Question 35

Which of the following is used to illustrate an independent relationship between two variables?

A) An upward-sloping curve
B) A downward-sloping curve
C) A hill-shaped curve
D) A horizontal or vertical line

Question 36

Exhibit 1A-7 Straight line relationship

Using the relationship shown in Exhibit 1A-7, suppose the price of air travel increases. How would you revise the graph to show this change?

A) Draw a new point on the graph upward and to the left.
B) Draw a new point on the graph downward and to the right.
C) Draw a new line on the graph.
D) Change the current line so that its slope is flatter.

Question 37

Exhibit 1A-8 Straight line relationship

For the relationship shown in Exhibit 1A-8, suppose the price of hamburgers increases and hamburgers are a substitute for pizza. What change would occur on the graph?

A) There will be a movement upward and to the left along the curve.
B) There will be a movement downward and to the right along the curve.
C) The curve will shift.
D) The slope of the curve will become steeper.

Question 38

Suppose Sue's buys a good for $60 on eBay. If the consumer surplus from the sale is $25, Sue would have been willing to pay:

A) $35.
B) $25.
C) $60.
D) $85.

Question 39

Exhibit 1A-9 Multi-curve graph

Exhibit 1A-9 represents a three-variable relationship. As the annual income of consumers falls from $50,000 (line A) to $30,000 (line B), the result is a:

A) rightward movement along each curve.
B) leftward movement along each curve,.
C) leftward shift from curve A to curve B.
D) rightward shift from curve B to curve A.

Question 40

A shift in a curve represents a change in:

A) the variable on the horizontal axis.
B) the variable on the vertical axis.
C) a third variable that is not on either axis.
D) any variable that is relevant to the relationship being graphed.

Question 41

Producer surplus measures the value between the actual selling price and the:

A) price at which sellers are willing to sell the product.
B) deadweight loss price.
C) lowest price sellers are willing to sell the product.
D) profit-maximization price.

Question 42

Using supply and demand curve analysis, the triangular area below the equilibrium price and above the supply curve is:

A) ​consumer surplus.
B) ​producer surplus.
C) ​ marginal cost.
D) ​deadweight loss. ​

Question 43

Suppose Gizmo Inc. is willing to sell one gizmo for $10, a second gizmo for $12, a third for $14, and a fourth for $20, and the market price is $20. What is Gizmo Inc.'s producer surplus?

A) $56
B) $24
C) $20
D) $10

Question 44

Suppose a consumer is willing to pay $20 for one unit of good X, $10 for a second, and $5 for a third, and the market price is $4. The consumer surplus is:

A) $16.
B) $6.
C) $1.
D) $23.

Question 45

If Sam is willing to pay $50 for one unit of good X, $30 for a second, $20 for a third, $8 for a fourth, and the market price is $10, then Sam's consumer surplus is:

A) $40 and he buys 1 unit of good X.
B) $60 and he buys 2 units of good X.
C) $70 and he buys 3 units of good X
D) $68 and he buys 4 units of good X.

Question 46

Suppose Jones sells a good for $100 at a yard sale. If the producer surplus from the sale is $75, Jones's cost of the good must have been:

A) $100.
B) $175.
C) $25.
D) equal to the deadweight loss.

Question 47

Total surplus equals:

A) consumer surplus + producer surplus − deadweight loss.
B) consumer surplus − producer surplus − deadweight loss.
C) consumer surplus − producer surplus + deadweight loss.
D) consumer surplus + producer surplus.

Question 48

Consumer surplus:

A) is minimized in market equilibrium.
B) measures the value between the actual selling price of a product and the price at which sellers are willing to sell the product.
C) measures the value between the price consumers are willing to pay for a product and the price they actually pay.
D) measures the price at which sellers extract excess profits from consumers.

Question 49

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss

As shown in Exhibit 3A-2, if the market is in equilibrium, then total surplus is represented by

A) BGHF
B) CBEFDA
C) CBEA
D) AEFD

Question 50

Which of the following statements is not  correct?

A) Total surplus is the sum of consumer and producer surplus.
B) Deadweight loss is the net loss of both consumer and producer surplus resulting from underproduction or overproduction of a product.
C) Deadweight loss is a measure of market inefficiency.
D) Total surplus is maximized when the actual quantity supplied exceeds the equilibrium quantity.

Question 51

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss

As shown in Exhibit 3A-2, if the market price falls from P₁ to P₂, then:

A) total surplus increases.
B) deadweight loss increases.
C) overproduction increases.
D) underproduction decreases.

Question 52

Consumer surplus:

A) does not exist in equilibrium.
B) is illustrated by the area under the demand curve and above the market price.
C) is illustrated by the area under the demand curve and below the market price.
D) is illustrated by the area above the supply curve and under the demand curve.

Question 53

Suppose seller X is willing to sell one good X for $5, a second good X for $10, a third for $16, a fourth for $25, and the market price is $20. What is seller X's producer surplus?

A) $15
B) $20
C) $22
D) $29

Question 54

Deadweight loss is not the result of:

A) an efficient market.
B) an inefficient market.
C) zero consumer surplus.
D) zero producer surplus.

Question 55

Producer surplus is the:

A) amount by which the quantity supplied of a good exceeds the quantity demanded of a good.
B) value of the sum of producers' willingness to sell a good plus the price of the good.
C) measure of how much producers value a good.
D) value of the difference between the actual selling price of a good and the price producers are willing to sell it for on the supply curve.

Question 56

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss

As shown in Exhibit 3A-1, if the market is in equilibrium, then producer surplus is represented by:

A) ADFB.
B) CEFD.
C) EGH.
D) BEF.

Question 57

Suppose Alice sells a good for $60 on eBay. If the producer surplus from the sale is $25, Alice's cost of the good must have been:

A) $35.
B) $25.
C) $60.
D) $85.

Question 58

Assuming peaches are a normal good and consumer incomes rise, producer surplus in the peach market:

A) increases.
B) decreases.
C) remains unchanged.
D) equals the deadweight loss increase.

Question 59

In an efficient market, deadweight loss is ____.

A) maximum.
B) minimum.
C) constant.
D) zero.

Question 60

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss

As shown in Exhibit 3A-2, if the market is in equilibrium, then total surplus is represented by:

A) ACBEFD - BEF
B) AEFD + ACBE
C) BEG + EFH
D) CBEFDA + EGH

Question 61

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss

As shown in Exhibit 3A-1, if the market is in equilibrium, then ____ represents total surplus.

A) ABEFD
B) ABEC
C) EFG
D) BEF

Question 62

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss

As shown in Exhibit 3A-1, if the market is in equilibrium, then total surplus is represented by:

A) ABEFD + EFG
B) ABEC + CEFD
C) CDFE + EFG
D) ABEFD - BEF

Question 63

The slope of an indifference curve is equal to the ratio of the ____ of the good on the horizontal axis to the ____ of the good on the vertical axis.

A) marginal product; marginal product
B) marginal utility; marginal utility
C) price; price
D) total utility; price

Question 64

Along an indifference curve for goods X and Y, the vertical and horizontal axes measure the:

A) prices of X and Y.
B) total utilities of X and Y.
C) quantities of X and Y.
D) marginal utilities of X and Y.

Question 65

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss

As shown in Exhibit 3A-2, if the quantity supplied of good X per year is Q₁, the result is a deadweight loss represented by area:

A) BEG.
B) CBEFD.
C) EGH.
D) BEF.

Question 66

An indifference map states:

A) indifference curves farther from the origin yield higher levels of total utility.
B) that the consumer's income varies with the level of the indifference curve.
C) indifference curves closer to the origin yield higher levels of total utility.
D) that the points on either parts of indifference curves are preferred to the midpoint.

Question 67

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss

As shown in Exhibit 3A-2, if the market price falls from P₂ to P₃, then:

A) total surplus increases.
B) deadweight loss decreases.
C) overproduction increases.
D) underproduction decreases.

Question 68

At the equilibrium price, deadweight loss is:

A) minimized.
B) zero.
C) maximized.
D) equal to the equilibrium price multiplied by the quantity exchanged.

Question 69

If Max's marginal rate of substitution for goods A and B is 3, then

A) the price of good A exceeds the price of good B.
B) the marginal utility of good A is 3 and the marginal utility of good B is 3.
C) the ratio of the total utilities of good A and good B is 3.
D) Max is willing to give up 3 units of good A for 1 unit of good B.

Question 70

An indifference curve is:

A) downward sloping and concave to the origin.
B) downward sloping and convex to the origin.
C) upward sloping and concave to the origin.
D) upward sloping and convex to the origin.

Question 71

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss

As shown in Exhibit 3A-1, if the market price falls from $2.00 to $1.00, then:

A) total surplus increases.
B) deadweight loss increases.
C) overproduction decreases.
D) underproduction decreases.

Question 72

Moving downward along an indifference curve causes a(n)

A) reduction in the total utility a consumer receives.
B) loss in the marginal utility of one good but an equal increase in the marginal utility of the other good.
C) increase in the marginal utility of both goods.
D) decrease in the price of one good and an increase in the price of the other good.

Question 73

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss

As shown in Exhibit 3A-2, if the quantity supplied of good X per year is Q₁, the result is:

A) deadweight loss.
B) efficiency.
C) overproduction.
D) equilibrium.

Question 74

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss

As shown in Exhibit 3A-2, if the market price falls from P₂ to P₃, then:

A) consumer surplus increases.
B) producer surplus increases.
C) deadweight loss increases.
D) the market moves to an equilibrium price and quantity.

Question 75

The net loss of consumer and producer surplus from underproduction or overproduction is called:

A) government revenue.
B) total surplus.
C) efficiency.
D) deadweight loss.

Question 76

The absolute value of the slope of an indifference curve is called the:

A) marginal rate of transformation.
B) transitivity slope.
C) indifference rate of preference.
D) marginal rate of substitution.

Question 77

When quantities of two goods belong to the same indifference curve, which of the following is true ?

A) The combinations of the two goods along the indifference curve yield the same total utility.
B) Prices of the two goods are equal.
C) Marginal utilities of both goods are equal.
D) The total utility of all combinations above the curve equal zero.

Question 78

Which of the following is not a result if the quantity supplied exceeds the quantity demanded in a market?

A) Deadweight loss
B) Inefficiency
C) Overproduction
D) Shortage

Question 79

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss

As shown in Exhibit 3A-1, if the quantity supplied is 2 million pounds of ground beef per year, the result is a deadweight loss represented by area:

A) ABEC.
B) CEFD.
C) EGH.
D) BEF.

Question 80

If the slope of the indifference curve for goods X and Y is -2, then the marginal rate of substitution is

A) 0.
B) 1/2.
C) 2.
D) infinite.