STUDENTS SUCCESS
Revision Examination Tests
“Come all for this Greatness”
... 100% Correct Ans ...
ECON 302 EXAM 2 AND CORRECT DETAILED ANSWERS 2024/2025: COVERS
ALMOST EVERY QUESTION IN DETAILS
Quiz Monica consumes only goods A and B. Suppose that her marginal utility from
consuming good A is equal to 1/Qa, and her marginal utility from consuming good B
is 1/Qb. If the price of A is $0.50, the price of B is $4.00, and the Monica's income is
$120.00, how much of good A will she purchase?
Ans: 120
Quiz The assumption of transitive preferences implies that indifference curves must
Ans: not cross one another.
Quiz Oscar consumes only two goods, X and Y. Assume that Oscar is not at a
corner solution, but he is maximizing utility. Which of the following is NOT
necessarily true?
Ans: Px/Py = money income.
Quiz If prices and income in a two-good society double, what will happen to the
budget line?
Ans: There will be no effect on the budget line.
Quiz If a market basket is changed by adding more of at least one good, then
rational consumers will:
Ans: rank the market basket more highly after the change.
Quiz Mikey is very picky and insists that his mom make his breakfast with equal
parts of cereal and apple juice any other combination and it ends up on the floor.
Cereal costs 4 cents per tablespoon and apple juice costs 6 cents per tablespoon. If
Mikey's mom budgets $8 per month for Mikey's breakfast, how much cereal and
juice does she buy?
Ans: 80 tablespoons each of cereal and juice
,Quiz If indifference curves are concave to the origin, which assumption on
preferences is violated?
Ans: Diminishing marginal rates of substitution
Quiz Suppose you only consume food and clothing, and clothing is plotted on the
vertical axis. Also, you purchase food at a fixed price (PF), but the price of clothing
declines as you buy in larger quantities (i.e., quantity discounts). What does the
budget line look like in this case?
Ans: The budget line is now convex to (bows in toward) the origin
Quiz A consumer prefers market basket A to market basket B, and prefers market
basket B to market basket C. Therefore, A is preferred to C. The assumption that
leads to this conclusion is:
Ans: transitivity
Quiz Alvin's preferences for good X and good Y are shown in the diagram below.
Figure 3.2
Ans: Alvin regards good X and good Y as perfect complements.
Quiz A consumer's original utility maximizing market basket of goods is shown in
Figure 4.2 as point A. Following a price change, the consumer's utility maximizing
market basket is at point B.
Based Figure 4.2, clothing is:
Ans: a normal good
Quiz An individual demand curve can be derived from the __________ curve.
Ans: price-consumption
Quiz A consumer's original utility maximizing market basket of goods is shown in
Figure 4.2 as point A. Following a price change, the consumer's utility maximizing
market basket is at point B.
Refer to Figure 4.2. The income effect on the quantity of clothing purchased is:
Ans: the change from c2 to c3
Quiz Which of the following pairs of goods are NOT complements?
Computer CPUs and computer monitors
,On-campus student housing and off-campus rental apartments
Hockey sticks and hockey pucks
all of the above
none of the above
Ans: On-campus student housing and off-campus rental apartments
Quiz Picture
Refer to Figure 5.6. Which diagram shows an increase in income with both bread
and soup being normal goods?
Ans: A
Quiz Good A is a normal good. The demand curve for good A:
Ans: slopes downward
Quiz Suppose the price of rice increases and you view rice as an inferior good. The
substitution effect results in a ________ change in rice consumption, and the income
effect leads to a ________ change in rice consumption.
Ans: negative, positive
Quiz A consumer's original utility maximizing market basket of goods is shown in
Figure 4.2 as point A. Following a price change, the consumer's utility maximizing
market basket is at point B.
Refer to Figure 4.2. The substitution effect on the quantity of clothing purchased is
Ans: the change from c1 to c2
Quiz Which of the following statements is true?
No good can be inferior at all levels of income
The income elasticity of demand is negative for normal goods
It is possible for a good to be inferior at all income levels
It is possible for all of the goods a consumer buys to be inferior
Ans: No good can be inferior at all levels of income
Quiz If the income-consumption path slopes down, then
Ans: One good is normal and the other good is inferior
, Quiz Which of the following describes the Giffen good case? When the price of the
good
Ans: falls, the income effect is in the opposite direction to the substitution effect, and
consumption falls
Quiz Which of the following is true concerning the substitution effect of a decrease in
price?
Ans: It always will lead to an increase in consumption.
Quiz Use the following two statements in answering this question:
I. All Giffen goods are inferior goods.
II. All inferior goods are Giffen goods.
Ans: I is true, and II is false.
Quiz Suppose the price of rice increases and you view rice as an inferior good. The
substitution effect results in a ________ change in rice consumption, and the income
effect leads to a ________ change in rice consumption
Ans: negative, positive
Quiz As we move downward along a demand curve for apples,
Ans: the marginal utility of apples decreases.
Quiz An individual demand curve can be derived from the __________ curve.
Ans: price-consumption
Quiz When the income-consumption curve has a positive slope throughout its entire
length, we can conclude that
Ans: both goods are normal.
Quiz Good A is a normal good. The demand curve for good A
Ans: slopes downward
Quiz As a group, U.S. consumers have no income response for their consumption of
ice cream so that the income elasticity of demand for ice cream equals zero. Does
this mean that the change in ice cream consumption that results from a price
increase is entirely composed of the substitution effect?
Ans: Yes, the income effect associated with a price change is zero
Quiz For any given level of output
Ans: None of the above is necessarily correct
Revision Examination Tests
“Come all for this Greatness”
... 100% Correct Ans ...
ECON 302 EXAM 2 AND CORRECT DETAILED ANSWERS 2024/2025: COVERS
ALMOST EVERY QUESTION IN DETAILS
Quiz Monica consumes only goods A and B. Suppose that her marginal utility from
consuming good A is equal to 1/Qa, and her marginal utility from consuming good B
is 1/Qb. If the price of A is $0.50, the price of B is $4.00, and the Monica's income is
$120.00, how much of good A will she purchase?
Ans: 120
Quiz The assumption of transitive preferences implies that indifference curves must
Ans: not cross one another.
Quiz Oscar consumes only two goods, X and Y. Assume that Oscar is not at a
corner solution, but he is maximizing utility. Which of the following is NOT
necessarily true?
Ans: Px/Py = money income.
Quiz If prices and income in a two-good society double, what will happen to the
budget line?
Ans: There will be no effect on the budget line.
Quiz If a market basket is changed by adding more of at least one good, then
rational consumers will:
Ans: rank the market basket more highly after the change.
Quiz Mikey is very picky and insists that his mom make his breakfast with equal
parts of cereal and apple juice any other combination and it ends up on the floor.
Cereal costs 4 cents per tablespoon and apple juice costs 6 cents per tablespoon. If
Mikey's mom budgets $8 per month for Mikey's breakfast, how much cereal and
juice does she buy?
Ans: 80 tablespoons each of cereal and juice
,Quiz If indifference curves are concave to the origin, which assumption on
preferences is violated?
Ans: Diminishing marginal rates of substitution
Quiz Suppose you only consume food and clothing, and clothing is plotted on the
vertical axis. Also, you purchase food at a fixed price (PF), but the price of clothing
declines as you buy in larger quantities (i.e., quantity discounts). What does the
budget line look like in this case?
Ans: The budget line is now convex to (bows in toward) the origin
Quiz A consumer prefers market basket A to market basket B, and prefers market
basket B to market basket C. Therefore, A is preferred to C. The assumption that
leads to this conclusion is:
Ans: transitivity
Quiz Alvin's preferences for good X and good Y are shown in the diagram below.
Figure 3.2
Ans: Alvin regards good X and good Y as perfect complements.
Quiz A consumer's original utility maximizing market basket of goods is shown in
Figure 4.2 as point A. Following a price change, the consumer's utility maximizing
market basket is at point B.
Based Figure 4.2, clothing is:
Ans: a normal good
Quiz An individual demand curve can be derived from the __________ curve.
Ans: price-consumption
Quiz A consumer's original utility maximizing market basket of goods is shown in
Figure 4.2 as point A. Following a price change, the consumer's utility maximizing
market basket is at point B.
Refer to Figure 4.2. The income effect on the quantity of clothing purchased is:
Ans: the change from c2 to c3
Quiz Which of the following pairs of goods are NOT complements?
Computer CPUs and computer monitors
,On-campus student housing and off-campus rental apartments
Hockey sticks and hockey pucks
all of the above
none of the above
Ans: On-campus student housing and off-campus rental apartments
Quiz Picture
Refer to Figure 5.6. Which diagram shows an increase in income with both bread
and soup being normal goods?
Ans: A
Quiz Good A is a normal good. The demand curve for good A:
Ans: slopes downward
Quiz Suppose the price of rice increases and you view rice as an inferior good. The
substitution effect results in a ________ change in rice consumption, and the income
effect leads to a ________ change in rice consumption.
Ans: negative, positive
Quiz A consumer's original utility maximizing market basket of goods is shown in
Figure 4.2 as point A. Following a price change, the consumer's utility maximizing
market basket is at point B.
Refer to Figure 4.2. The substitution effect on the quantity of clothing purchased is
Ans: the change from c1 to c2
Quiz Which of the following statements is true?
No good can be inferior at all levels of income
The income elasticity of demand is negative for normal goods
It is possible for a good to be inferior at all income levels
It is possible for all of the goods a consumer buys to be inferior
Ans: No good can be inferior at all levels of income
Quiz If the income-consumption path slopes down, then
Ans: One good is normal and the other good is inferior
, Quiz Which of the following describes the Giffen good case? When the price of the
good
Ans: falls, the income effect is in the opposite direction to the substitution effect, and
consumption falls
Quiz Which of the following is true concerning the substitution effect of a decrease in
price?
Ans: It always will lead to an increase in consumption.
Quiz Use the following two statements in answering this question:
I. All Giffen goods are inferior goods.
II. All inferior goods are Giffen goods.
Ans: I is true, and II is false.
Quiz Suppose the price of rice increases and you view rice as an inferior good. The
substitution effect results in a ________ change in rice consumption, and the income
effect leads to a ________ change in rice consumption
Ans: negative, positive
Quiz As we move downward along a demand curve for apples,
Ans: the marginal utility of apples decreases.
Quiz An individual demand curve can be derived from the __________ curve.
Ans: price-consumption
Quiz When the income-consumption curve has a positive slope throughout its entire
length, we can conclude that
Ans: both goods are normal.
Quiz Good A is a normal good. The demand curve for good A
Ans: slopes downward
Quiz As a group, U.S. consumers have no income response for their consumption of
ice cream so that the income elasticity of demand for ice cream equals zero. Does
this mean that the change in ice cream consumption that results from a price
increase is entirely composed of the substitution effect?
Ans: Yes, the income effect associated with a price change is zero
Quiz For any given level of output
Ans: None of the above is necessarily correct
