Question

1.    Which of the following statements is true?
    a.    consumers bear a greater excise tax burden than producers when the demand for the good is inelastic
    b.    consumers bear a greater excise tax burden than producers when the demand for the good is elastic
    c.    consumers and producers bear equal excise tax burdens when the demand for the good is inelastic
    d.    consumers and producers bear equal excise tax burdens when the demand for the good is elastic


2.    An indifference curve shows
    a.    combinations of goods that can be produced if all resources are fully employed
    b.    all combinations of two goods that are equally preferable to the consumer
    c.    all combinations of goods over which the consumer has no choice
    d.    combinations of goods that are equally affordable to a consumer


3.    A decrease in the price of a good will cause the consumer to attain a new equilibrium
    a.    on a lower indifference curve
    b.    on a higher indifference curve
    c.    on the same indifference curve but with a combination of goods containing more of the good whose price has fallen
    d.    on the same indifference curve but with a combination of goods containing less of the good whose price has fallen


4.    The relationship between a change in consumer income and a resulting change in demand for a good is described by
    a.    income elasticity of supply
    b.    cross elasticity of demand
    c.    income elasticity of demand
    d.    price elasticity of demand


5.    The intersection of two distinct indifference curves for the same consumer
    a.    shows the combination of goods at which consumer utility is maximized
    b.    shows the long-run equilibrium combinations of goods for this consumer
    c.    represents an unstable equilibrium if the curve with the higher marginal rate of substitution is steeper than the curve with the lower marginal rate of substitution
    d.    is impossible  

6.    Cross elasticity of demand is
    a.    negative for complementary goods    
    b.    positive for inferior goods    
    c.    negative for substitute goods
    d.    unitary for inferior goods


7.    A set of combinations of two goods that yield the same level of satisfaction to a consumer is known as
    a.    a demand set
    b.    a utility set
    c.    an indifference set
    d.    an elasticity set


8.    The demand for Cheerios cereal is more price-elastic than the demand for cereal as a whole. This is best explained by the fact that
    a.    Cheerios are a luxury
    b.    cereals are a necessity
    c.    there are more substitutes for Cheerios than for cereals as a whole
    d.    consumption of cereals as a whole is greater than consumption of Cheerios


9.    Convex indifference curves
    a.    are downward sloping straight lines, reflecting diminishing marginal utility    
    b.    get flatter as you move down the curves to the right    
    c.    may cross, but only at consumption bundles that have small amounts of both goods
    d.    will never be tangent to a budget line


10.    The marginal rate of substitution of beef for chicken is the
    a.    number of units of beef the consumer is prepared to give up as income falls
    b.    number of units of chicken the consumer is willing to give up to obtain one more unit of beef
    c.    number of units of beef the consumer must sacrifice to obtain one more unit of chicken
    d.    rate at which units of beef may be exchanged for units of chicken

Answer 1

1) option a is true when demand is inelastic then demand of good is not effected by the rise in prices so tax is included in selling price and consumer bears it and quantity demanded remains unaffected with change in selling price

2)B option is correct

indifference curve is a locus of a point of different quantities of two good at which the consumer is indifferent between them.

3)C option is correct

when the price on good falls consumer can buy more quantity with same income

4) c option is correct

income elasticity of demand is percent change in demand of a good with percent change in the income

6)option c is correct

Cross elasticity of demand is negative for substitute good because in case of substitute good if price of one good increases quantity demanded of other good falls .

7)option c is correct

8)option C is correct

there are more substitute of Cheerios therefore its demand is more responsive to price change and therefore it is more elastic

9)c option is correct

10)c option is correct