Question 1

Given your budget constraint $60j + $20s = $300 and the graph above,what is the opportunity cost of a sweater?
A)$ \frac{1}{3} $ of a pair of jeans
B) $ \frac{1}{2} $ of a pair of jeans
C) 1 pair of jeans
D) 3 pairs of jeans

Accepted Answer

The opportunity cost of a sweater is the amount of jeans you give up to buy one more sweater. From the budget constraint, $60j + $20s = $300, solving for jeans in terms of sweaters gives $j = 5 - \frac{1}{3}s$. Thus, the opportunity cost of one sweater is $\frac{1}{3}$ of a pair of jeans.

Question 2

Assume that a consumer can spend $20 on two goods-pens and pencils.If the price of one pen is $5 and the price of one pencil is $2,which of the following combinations of the two goods represents a point on the consumer's budget constraint?
A) 3 pens and 2 pencils
B) 1 pen and 10 pencils
C) 2 pens and 5 pencils
D) 2 pens and 3 pencils

Accepted Answer

The total cost of 2 pens ($5 each) and 5 pencils ($2 each) is $20, which matches the consumer's budget.

Question 3

Which of the following statements is true?
A) A consumer's tastes and preferences do not change over time.
B) A consumer's tastes and preferences determine the satisfaction she receives from consumption.
C) A consumer's tastes and preferences are not revealed through her buying decisions and consumption patterns.
D) A consumer's tastes and preferences do not play an important role in arriving at a buying decision.

Accepted Answer

A consumer's tastes and preferences are the key determinant of the satisfaction she receives from consumption. It is well-established that tastes and preferences can evolve over time, but they play a critical role in shaping consumer behavior. While buying decisions are influenced by a variety of factors, including prices, availability, and brand reputation, ultimately the consumer's preferences will dictate whether a particular product or service will be satisfying to them. Options A, C, and D are all incorrect as they are either false or do not accurately reflect the role of tastes and preferences in consumer behavior.

Question 4

Which of the following is NOT a determining factor of consumers' purchase decisions?
A) Consumers' tastes and preferences
B) The market price of the finished goods
C) The cost of factor inputs
D) Consumers' income

Accepted Answer

The cost of factor inputs is a determining factor for producers when deciding whether or not to produce a good. It is not typically considered by consumers when making a purchase decision. Consumers' tastes and preferences, market price of the finished goods, and consumers' income are all factors that can affect their purchase decisions.

Question 5

Given your budget constraint $60j + $20s = $300 and the graph above,what is the opportunity cost of a pair of jeans?
A) $ \frac{1}{3} $ of a sweater
B) 1 sweater
C) 2 sweaters
D) 3 sweaters

Accepted Answer

The answer of Given your budget constraint $60j + $20s...

Question 6

In the graph above,which bundles of jeans and sweaters are in your budget set?
A) Only Bundle D (2 pairs of jeans and 8 sweaters)
B) Bundle D (2 pairs of jeans and 8 sweaters) and Bundle A (5 pairs of jeans and no sweaters)
C) Bundles D (2 pairs of jeans and 8 sweaters), A (5 pairs of jeans and no sweaters), and B (4 pairs of jeans and 4 sweaters)
D) Bundles D (2 pairs of jeans and 8 sweaters), A (5 pairs of jeans and no sweaters), and C (3 pairs of jeans and 6 sweaters)

Accepted Answer

The answer of In the graph above,which bundles of jeans...

Question 7

Your budget constraint contains ________.
A) only those bundles of jeans and sweaters that exhaust less than all your income
B) all bundles of jeans and sweaters that are affordable with your income
C) all bundles of jeans and sweaters that exhaust all your income
D) all bundles of jeans that are not affordable with your income

Accepted Answer

The answer of Your budget constraint contains ________.
A) only those...

Question 8

Which of the following correctly describes incentives?
A) Incentives refer to the maximum price that a buyer is willing to pay for a good.
B) Incentives are rewards or penalties that motivate people to behave in a particular way.
C) Incentives are prices that are fixed by the government and not by market forces.
D) Incentives refer to the minimum price at which a seller is willing to sell a product.

Accepted Answer

Incentives are rewards or penalties that motivate people to behave in a particular way. These can be monetary or non-monetary and can be used to encourage certain behaviors or discourage others. A and D both refer to prices, which is not a comprehensive definition of incentives. C is incorrect as incentives are not fixed by the government but rather by market forces.

Question 9

Scenario: Suppose pairs of jeans (j) cost $60 per pair, sweaters (s) cost $20 each, and you have $300 of income. Assume you purchase only jeans and sweaters with your income. Your budget constraint is:
$60 - j + $20 - s = $300.
The graph below shows 4 consumption bundles (combinations of jeans and sweaters).
 
-Your budget set contains ________.
A) only those bundles of jeans and sweaters that exhaust less than all your income
B) all bundles of jeans and sweaters that are affordable with your income
C) all bundles of jeans and sweaters that exhaust all your income
D) all bundles of jeans that are not affordable with your income

Accepted Answer

The budget constraint equation $60j + 20s = 300$ represents a line in the graph below, where the vertical axis measures the number of jeans (j) and the horizontal axis measures the number of sweaters (s).
The budget set contains all bundles of jeans and sweaters that are affordable with your income, represented by the area below and including the budget constraint line. Therefore, the answer is B. 
Among the given bundles, the one that maximizes utility (i.e. provides the most satisfaction) depends on your preferences. However, one possible option is bundle C, which balances a relatively high number of jeans with a moderate number of sweaters, and exhausts exactly all your income.

Question 10

Your mom has clipped two coupons from the Sunday paper.The first coupon is for a $5 off of a $10 shampoo,and the second one is for a $5 off of a $50 haircut.Your mom says the first coupon is more valuable.
A) You agree, because the first coupon entails a 50% savings versus a 10% savings in the second one.
B) You agree, because the first coupon is for a product, while the second one is for a service.
C) You disagree, because both coupons entail a $5 saving.
D) You disagree, because restaurant coupons are harder to find.

Accepted Answer

The answer of Your mom has clipped two coupons from...

Question 11

The set of all possible bundles of goods and services that can be purchased with a consumer's income is referred to as a ________.
A) demand set
B) supply set
C) budget set
D) universal set

Accepted Answer

The term "budget set" refers to the set of all possible combinations of goods and services that a consumer can purchase given their income and the prices of the goods. Option A, "demand set," refers to the quantity of a particular good or service that consumers are willing and able to buy at different prices, while option B, "supply set," refers to the quantity of a particular good or service that producers are willing and able to sell at different prices. Option D, "universal set," is a concept from set theory and refers to the set of all possible elements in a given context, which is not relevant in this case. Therefore, the best choice is C.

Question 12

If a consumer purchases any combination of goods on her budget constraint ________.
A) she will minimize total utility
B) she will exhaust her entire income
C) she will maximize her marginal utility obtained from the consumption of each additional amount of both goods
D) she will maximize her marginal benefit obtained from the consumption of each additional amount of both goods

Accepted Answer

When a consumer purchases any combination of goods on her budget constraint, she will exhaust her entire income, as the budget constraint represents the combinations of goods she can afford with her given income.

Question 13

In the graph above,which bundles of jeans and sweaters are on your budget constraint?
A) Bundles A (5 pairs of jeans, 0 sweaters) and C (3 pairs of jeans and 6 sweaters)
B) Bundles A (5 pairs of jeans, 0 sweaters), B(4 pairs of jeans and 4 sweaters), and C(3 pairs of jeans and 6 sweaters)
C) Bundles A (5 pairs of jeans, 0 sweaters), C (3 pairs of jeans and 6 sweaters), and D (2 pairs of jeans and 8 sweaters)
D) Bundles B (4 pairs of jeans and 4 sweaters), C (3 pairs of jeans and 6 sweaters), and D (2 pairs of jeans and 8 sweaters)

Accepted Answer

The answer of In the graph above,which bundles of jeans...

Question 14

A consumer's budget refers to the ________.
A) wealth the consumer has acquired over time
B) average prices of the goods and services bought by the consumer
C) amount of money the consumer can spend on various goods and services
D) difference between the consumer's willingness to pay for goods and services and the amount actually paid.

Accepted Answer

A consumer's budget refers to the amount of money the consumer can spend on various goods and services. It is not about the consumer's wealth, average prices of goods and services, or the difference between willingness to pay and actual amount paid.

Question 15

Which of the following statements is true of incentives?
A) Incentives can be financial or moral, but not coercive.
B) Incentives can be financial or coercive, but not moral.
C) Incentives are designed to change behavior.
D) Incentives are always in the form of rewards.

Accepted Answer

Incentives are designed to change behavior by encouraging individuals to take a desired action or refrain from an undesirable one. Incentives can be financial, moral, or coercive depending on the situation. However, incentives do not have to be in the form of rewards; punishment can also be considered an incentive.

Question 16

Suppose the prices of a pair of jeans,a shirt,and a tie are $30,$20,and $10,respectively.Which of the following statements is true in this context?
A) The opportunity cost of buying a pair of jeans is 2 ties.
B) The opportunity cost of buying a tie is 3 pairs of jeans.
C) The opportunity cost of buying a tie is 2 shirts.
D) The opportunity cost of buying a shirt is 2 ties.

Accepted Answer

The opportunity cost of buying a shirt is 2 ties. This is because for the price of one shirt, you could buy 2 ties ($20/$10 = 2). The other options do not accurately reflect the concept of opportunity cost in this scenario.

Question 17

The following figure displays John's budget constraint when he spends his income on tables and chairs.
 
-Refer to the figure above.If John spends his entire income on tables,how many tables can he purchase?
A) 8
B) 10
C) 30
D) 40

Accepted Answer

The answer of The following figure displays John's budget constraint...

Question 18

Assume that a combination of 10 bottles of wine and 2 cartons of milk lies on a consumer's budget constraint.If the price of one bottle of wine is $10 and the price of one carton of milk is $1,what is the consumer's income?
A) $100
B) $20
C) $120
D) $102

Accepted Answer

The consumer's income can be calculated by multiplying the quantity of each item by its price and then adding the totals together. For the wine, 10 bottles at $10 each equals $100. For the milk, 2 cartons at $1 each equals $2. Adding these together gives a total of $102.

Question 19

Which of the following statements is true?
A) A consumer's buying decisions do not indicate anything about her tastes and preferences.
B) A consumer's demand for a good determines the price of the good in a perfectly competitive market.
C) The relative prices of goods do not affect a consumer's buying decision.
D) A consumer in a perfectly competitive market buys only a tiny fraction of the total amount produced.

Accepted Answer

In a perfectly competitive market, a consumer buys only a tiny fraction of the total amount produced because there are many buyers and sellers, and no single buyer or seller has any influence on the market price. A consumer's demand for a good does not determine the price in a perfectly competitive market as the price is determined solely by the market forces of supply and demand. A consumer's buying decisions do indicate her tastes and preferences as the choices she makes reflect her preferences for certain goods over others. The relative prices of goods also affect a consumer's buying decision as she considers the opportunity cost of purchasing one good over another.

Question 20

In a perfectly competitive market,all consumers ________.
A) may buy one or many unit of the good, without the price changing
B) bid the lowest price for the good they want to consume
C) tend to buy equal amounts of a good
D) have exactly the same tastes and preferences

Accepted Answer

In a perfectly competitive market, the price of goods is determined by the market and remains constant regardless of the quantity purchased by an individual consumer. This means consumers may buy one or many units of the good without affecting the price. Choices B, C, and D do not accurately describe characteristics of a perfectly competitive market.

Quiz 5: Consumers and Incentives

Given your budget constraint $60j + $20s = $300 and the graph above,what is the opportunity cost of a sweater?

Assume that a consumer can spend $20 on two goods-pens and pencils.If the price of one pen is $5 and the price of one pencil is $2,which of the following combinations of the two goods represents a point on the consumer's budget constraint?

Which of the following statements is true?

Which of the following is NOT a determining factor of consumers' purchase decisions?

Given your budget constraint $60j + $20s = $300 and the graph above,what is the opportunity cost of a pair of jeans?

In the graph above,which bundles of jeans and sweaters are in your budget set?

Your budget constraint contains ________.

Which of the following correctly describes incentives?

Your mom has clipped two coupons from the Sunday paper.The first coupon is for a $5 off of a $10 shampoo,and the second one is for a $5 off of a $50 haircut.Your mom says the first coupon is more valuable.

The set of all possible bundles of goods and services that can be purchased with a consumer's income is referred to as a ________.

If a consumer purchases any combination of goods on her budget constraint ________.

In the graph above,which bundles of jeans and sweaters are on your budget constraint?

A consumer's budget refers to the ________.

Which of the following statements is true of incentives?

Suppose the prices of a pair of jeans,a shirt,and a tie are $30,$20,and $10,respectively.Which of the following statements is true in this context?

The following figure displays John's budget constraint when he spends his income on tables and chairs. -Refer to the figure above.If John spends his entire income on tables,how many tables can he purchase?

Assume that a combination of 10 bottles of wine and 2 cartons of milk lies on a consumer's budget constraint.If the price of one bottle of wine is $10 and the price of one carton of milk is $1,what is the consumer's income?

Which of the following statements is true?

In a perfectly competitive market,all consumers ________.