Question

15. A budget constraint shows:

Multiple Choice

1. the amount of goods and services a firm can produce.
2. how much more money a consumer needs to consume at the next income level.
3. the boundary of the opportunity set.
4. consumer preference for one good relative to another.

19. The law of diminishing marginal utility tells us that:

Multiple Choice

1. the more we consume, the more satisfaction we get from each additional unit.
2. in order to maximize our utility, we must consume large portions of one item.
3. consuming less is a better way to live our lives.
4. the more we consume, the less satisfaction we get from each additional unit

24. The choice on a production possibilities frontier that is socially preferred, or the choice on an individual’s budget constraint that is personally preferred, will display _____________________.

Multiple Choice

1. allocative efficiency
2. productive efficiency
3. trade-offs
4. scarcity

43. What happens to the equilibrium price and equilibrium quantity of chicken if the price of pork, a substitute, decreases?

Multiple Choice

1. Equilibrium price and equilibrium quantity both decrease.
2. Equilibrium price and equilibrium quantity both increase.
3. Equilibrium price increases and equilibrium quantity decreases.
4. Equilibrium price decreases and equilibrium quantity increases

44. What happens to the equilibrium price and equilibrium quantity of chicken, a normal good, if consumer incomes increase?

Multiple Choice

1. Equilibrium price and equilibrium quantity both decrease.
2. Equilibrium price and equilibrium quantity both increase.
3. Equilibrium price increases and equilibrium quantity decreases.
4. Equilibrium price decreases and equilibrium quantity increases.

45. What is the effect on the equilibrium price and equilibrium quantity of grapefruit, if the wages paid to grapefruit-grove workers rises substantially?

Multiple Choice

1. Equilibrium price and equilibrium quantity both decrease.
2. Equilibrium price and equilibrium quantity both increase.
3. Equilibrium price increases and equilibrium quantity decreases.
4. Equilibrium price decreases and equilibrium quantity increases.

46. What is the effect on the equilibrium price and equilibrium quantity of grapefruit, if the wages paid to grapefruit-grove workers rises and the price of oranges, a substitute, rises?

Multiple Choice

1. Equilibrium price and equilibrium quantity both decrease.
2. Equilibrium price increases and the effect on quantity is unclear until we know more about the magnitude of the shifts.
3. Equilibrium quantity increases and the effect on price is unclear until we know more about the magnitude of the shifts.
4. Equilibrium price decreases and equilibrium quantity increases.

47. Government often sets a legal limit that prevents the price of a good or service from rising above a certain level. This is an example of a:

Multiple Choice

1. price floor.
2. price subsidy.
3. price limit.
4. price ceiling.

48. Minimum wage is an example of:

Multiple Choice

1. a price ceiling in the labor market.
2. a price floor in the labor market.
3. a price control in the product market.
4. a price stabilizer in the product market.

49. Price ceilings, such as rent-control laws, tend to:

Multiple Choice

1. anger property owners.
2. transfer some producer surplus to consumers.
3. transfer some consumer surplus to producers.
4. create a surplus in the rent-controlled apartment market.

50. Price ceiling and price floors create inefficiency in markets by preventing the adjustment to equilibrium price and quantity. On a graph, this inefficiency can be shown as the:

Multiple Choice

1. consumer loss.
2. producer surplus.
3. deadweight loss.
4. deadweight surplus.

Answer 1

15) Answer: D

Consumer budget constraint show the combination of goods or a service a consumer will buy with in his income level. It shows consumer preferences realative one good to another.

19) Answer: D

According to law of diminishing marginal utility the more we consume the marginal utility that we get from each additional unit we consume will decrease.

43) Answer: Both equillibrium price and quantity decrease

If the price of substitute good decrease than the demand for the good decrease which lead to a fall in demand curve thus making the supply curve to also fall as people will demand less. Then when both demand and supply falls the price of good also falls.

Thus both equillibrium price and quantity decrease.

47) Answer: Price ceiling

Price ceiling is the maximum price level set by the government and above that price the seller should not sell good or a service.

48) Answer: price floor in the labour market

Price floor is one form of price control set by government where the government fix a minimum price and below that price n good or service can be supplied

49) Answer: transfer producer Surplus to consumer.

When a price ceiling is set for rents the property owner cannot rent their property above that price which will leads them to loose their surplus and the consumer will have a benefit as he pays rent less than market price. Thus producer surplus will decrease and consumer surplus will increase.

50) Answer: Dead weight loss

The loss that is seen when there is no economic efficiency is their market is called dead weight loss. Dead weight loss occurs when. Equillibrium conditions is not achieved in the market due to inefficient allocation.