ECON 1002 Microeconomics Unit 2 Milestone Click below link for Answer https://www.sobtell.com/q/tutorial/default/206918-econ-1002-microeconomics-unit-2milestone https://www.sobtell.com/q/tutorial/default/206918-econ-1002-microeconomics-unit-2milestone 1 Determine which statement below applies when income goes down. • Consumer preference for inferior goods decreases. • Consumer preference for normal goods increases. • The indifference curve shifts to the right. • The indifference curve shifts downward and to the left.
Budget Constraints: Change in Income 2 Last month, Robert’s income was $1,000, and he went to the movies twice. This month, Robert’s income increased to $2,000, and he went to the movies five times. Determine the income elasticity using the midpoint formula. • 2.5 • 1.28 • -2.1 • 0.5
Income Elasticity
3 Jim usually goes to the movies with friends on Friday nights at the local movie theater. This week, the movie theater held over the movie, Anchorman 2, which Jim saw last week. Jim and his buddies decide to go bowling rather than attend the movie a second time.
Which of the following best describes why Jim decided to go bowling this weekend? • Consumer budget constraint • Profit maximization • Diminishing marginal returns • Jim's utility function
Utility Theory 4
What does point D on this graph represent? • An optimal choice • A choice that would result in income left over • An impossible choice given the income • A choice on the budget constraint
Optimal Choice 5 A popular clothing website sold five units of a dress when the price was $300 and 20 units when the price was marked down to $100.
What is the own-price elasticity of demand for the dress using the midpoint formula? • -1.2 • 2.5 • 1.25 • -2
Own-Price Elasticity 6 A Chinese restaurant and a Thai restaurant both sold buffet meals at the single price of $15 per person. When the Thai restaurant reduced their price to $12 per person, the number of dinners sold at the Chinese restaurant decreased from 100 to 75.
What is the cross-price elasticity for dinners at the two restaurants, using the midpoint formula? • -0.28 • 1.28 • 1 • -1.5
Cross-Price Elasticity 7 Select the cross-price elasticity amount below that is categorized as a substitute. •
-1.2 • -0.23 • 0 • 0.71
Cross-Price Elasticity 8 Perfectly inelastic demand for a good exists when __________. • a 50% increase in price will result in a 50% decrease in quantity demanded • a small increase in price results in a big change in quantity demanded • consumers will purchase the same amount of the good, regardless of price • firms will only offer a set amount of a good for sale, regardless of price
Defining Elasticity 9
Using the graph shown here, determine which statement is FALSE. • A is the optimal choice. • C could become the optimal choice if the budget increased. • Point A represents a choice that is under budget. •
These indifference curves are from a rational consumer.
Optimal Choice 10
Which economic below is NOT present on the graph shown here? • Change in price • Substitution effect • Optimal choice • Change in income
Budget Constraints: Change in Price 11 When the price of surfboards goes down, demand for both surfboards and wetsuits increases, meaning that these two goods are which of the following, based on their elasticity? • Substitute goods • Normal goods • Complement goods • Unit elastic
Cross-Price Elasticity 12 Select the statement below that is true.
• Indifference means that only a particular combination of goods are preferable to the consumer. • The consumer's preference is indicated by the Y axis. • Non-satiation means that more is always better. • Completeness means that none of the items in a set should be missing.
Consumer Choice Theory 13 Ryan greatly preferred oranges during long football practices. His teammates often joked that Ryan would pay 10 times the usual amount to have his oranges rather than eat other fruits, and they always knew when the price had jumped too much by the days when Ryan showed up with cheaper bananas instead.
What type of elasticity can be used to describe the oranges that Ryan eats during practice? • Perfectly inelastic • Perfectly elastic • Relatively elastic • Relatively inelastic
Own-Price Elasticity 14 Which of the following best describes an indifference curve? • A graph that shows how the price of substitute goods causes a consumer to prefer one bundle of goods over another
• A graph that shows the change in demand for a good when the price of its complementary good changes • A graph that shows the change in demand for goods and services when income changes • A graph that shows different bundles of goods for which a consumer has equal preference
Utility Theory 15 Which scenario below is an example of completeness? • A consumer is able to logically rank his preferences for the three different price combinations for a flight that he will purchase for an upcoming trip. • For $7, a shopper can buy a gallon of milk and one box of an expensive cereal or a gallon of milk and two boxes of a cheaper cereal. He decides to purchase a gallon of milk and one box of cheaper cereal, keeping the leftover cash. • If a guest at a banquet can purchase a raffle ticket for gift baskets that are nearly identical, she will choose to purchase a ticket for the basket that has an additional gift. • A consumer is able to compare possible combinations and quantities of bath towels and wash cloths she is purchasing for her bathroom to determine the best combination based on her preferences.
Consumer Choice Theory 16 According to consumer choice theory, what will a rational consumer do? • Choose the bundle of goods that is least expensive, in order to maximize utility • Always choose a bundle of goods that has the best quality
• Always select the bundle of goods below his/her budget constraint • Compare two bundles of goods and select the one which provides the best utility
Consumer Choice Theory 17 Determine which scenario below is an example of own-price elasticity. • Because he makes more money this year than he did last year, George purchased more gifts for his family members this year. • Tom, a construction foreman, will buy 100 sheets of plywood when the price is $12 per sheet. He will buy 150 sheets of plywood when the price drops to $10 per sheet. • Helium balloons are on sale this week, so LaTisha will need fewer streamers for the party to celebrate her husband's job promotion. • If the price of leather sofas increases next month, Heather will opt to purchase a microfiber sofa instead.
Own-Price Elasticity 18 Which of the following would most likely have an income elasticity of -1? • A deluxe manicure-pedicure • A necklace for regular price • A pair of brand new shoes that are not on sale • A dress on clearance
Income Elasticity 19 Which of the following corresponds to an increase in income? • The budget constraint will make a parallel shift inward. • The budget constraint will shift outward in a non-parallel fashion. • The budget constraint will make a parallel shift outward. • The budget constraint will shift inward in a non-parallel fashion.
Budget Constraints: Change in Income 20 Which of the following describes what will happen to Peter’s budget constraint on his annual trip to the amusement park when the price of game tokens remains the same as last year but the price of ride tickets decreases? • The budget constraint will pivot out along the axis with ride tickets. • The budget constraint will remain the same. • Indifference curves will cross. • The budget constraint will shift to the right, parallel.
Budget Constraints: Change in Price 1 A popular clothing website sold five units of a dress when the price was $300 and 20 units when the price was marked down to $100.
What is the own-price elasticity of demand for the dress using the midpoint formula? • -2 • 1.25 • 2.5 • -1.2
Own-Price Elasticity 2 Ryan greatly preferred oranges during long football practices. His teammates often joked that Ryan would pay 10 times the usual amount to have his oranges rather than eat other fruits, and they always knew when the price had jumped too much by the days when Ryan showed up with cheaper bananas instead.
What type of elasticity can be used to describe the oranges that Ryan eats during practice? • Relatively elastic • Relatively inelastic • Perfectly elastic • Perfectly inelastic
Own-Price Elasticity 3 Which description below describes an indifference curve? • Where the quantities of two items are maximized
• The highest level of satisfaction that a consumer can attain within certain limits • A curve on a consumer choice graph that indicates different combinations of goods that are all equally appealing to the consumer • The curve on a consumer choice graph that indicates how much money the consumer can spend
Utility Theory 4
Which point(s) on the graph shown here are over budget? • E and A • B only • B and C • D only
Optimal Choice 5 The idea that a consumer must be able to evaluate all of the choices offered fulfills the assumptions of which of the following, related to preference behavior? • Transitivity • Completeness • Consumer choice
• Non-satiation
Consumer Choice Theory 6 Ben recently took a 20% cut in pay at work.
Which of the following is most likely to happen as a result? • Ben will hire a career consultant in order to secure a new job. • Ben will drive to work more, rather than taking the bus, as driving is faster. • Ben will work more hours, as his leisure is now relatively more expensive. • Ben will bring his lunch to work rather than going to a restaurant.
Budget Constraints: Change in Income 7
According to the conditions of consumer choice theory which of the following options shows what is being violated in this indifference curve? • Non-satiation • Non-satiation & Transitivity • Completeness & Transitivity • Transitivity
Consumer Choice Theory 8 In anticipation of the college's athletic banquet, Lauren considered purchasing gifts for several members of the athletics club who had put a lot of time and effort into making it such a successful program. Lauren decided to buy roses for the women and a leather-bound portfolio and resume paper combination for the men. Which of the following scenarios corresponds to cross-price elasticity? • Lauren cannot decide which color of roses to buy because they are all priced the same. • Lauren worked overtime last week and made more money. As a result, she decided to purchase the more expensive portfolios that have the university logo on the front, and she decided to buy one more than she had originally planned. • A local high school’s prom is also the same weekend as the ceremony, so the price of roses has increased. • The price of resume paper has decreased. Because of this, Lauren can now afford to purchase more paper and an additional portfolio and still be within her budget for gifts.
Cross-Price Elasticity 9 Select the example below that could be categorized as own-price elasticity. • Since Tanya got a new job, she was able to buy a new car and get rid of the old one. • When the price of gasoline goes up, people purchase fewer large vehicles. • When the price of colombiano coffee goes up, people purchase guatemalteco coffee instead. • Tim's favorite brand of tools are marked down 50%, so he buys twice as many.
Own-Price Elasticity
10 Last year, Paula's income was $2,000, and she went to vacation twice. This year, Paula's income increased to $3,000, and she went to vacation five times.
Determine the income elasticity using the midpoint formula. • 0.33 • 0.47 • 1.80 • 2.14
Income Elasticity 11 According to consumer choice theory, which of the statements below must be true? • It is possible that a rational consumer cannot come to a decision after considering all possible combinations. • A rational consumer's choices will yield indifference curves that cross each other on a preference map. • When given the opportunity, a rational consumer will always prefer the bundle of goods that will give him the greatest utility maximization. • A rational consumer will always prefer a bundle that offers fewer of one of the goods, keeping the amount of the other good constant.
Consumer Choice Theory 12
When the price of salad was $5, a cafeteria sold 50 packets of salad dressing a day at $0.50 per packet. When they raised the price of salad to $7 but kept the dressing at the same price, they sold only 25 packets of dressing per day. This graph shows the elasticity of demand for salad and dressing.
Using the mid-point formula, the cross-price elasticity is __________ and the goods are __________. • 2, substitutes • -2, complements • -0.5, complements • 0.5, substitutes
Cross-Price Elasticity 13 Perfectly inelastic demand for a good exists when __________. • a small increase in price results in a big change in quantity demanded • firms will only offer a set amount of a good for sale, regardless of price • consumers will purchase the same amount of the good, regardless of price • a 50% increase in price will result in a 50% decrease in quantity demanded
Defining Elasticity 14
Using the graph shown here, determine which statement is FALSE.
• A is the optimal choice. • Point A represents a choice that is under budget. • These indifference curves are from a rational consumer. • C could become the optimal choice if the budget increased.
Optimal Choice 15 Which of the following would most likely have an income elasticity of 3? • Dinner at a local pizzeria • A high-end luxury car • Clothing from a second-hand store • A cell phone
Income Elasticity 16 Laura was in charge of purchasing food for the next book club meeting. She usually ordered sandwiches from the nearby deli, but the price of sandwiches had increased. One option for food was ordering pizza, which was $3 less than a sandwich. However, because the price of sandwiches had gone up, Laura could afford fewer sandwiches and pizza than previous meetings.
The reduction in Laura's ability to purchase both sandwiches and pizza due to the increase of price in sandwiches is known in economic terms as ________. • a change in income
• the income effect • the substitution effect • a budget constraint
Budget Constraints: Change in Price 17 This graph depicts Laura's budget for airline flights and road trips.
What is the most likely cause of the change in her budget line? • Road trips got less expensive. • Airline flights got less expensive. • Airline flights got more expensive. • Road trips got more expensive.
Budget Constraints: Change in Price 18 Jim usually goes to the movies with friends on Friday nights at the local movie theater. This week, the movie theater held over the movie, Anchorman 2, which Jim saw last week. Jim and his buddies decide to go bowling rather than attend the movie a second time.
Which of the following best describes why Jim decided to go bowling this weekend? • Profit maximization • Jim's utility function
• Diminishing marginal returns • Consumer budget constraint
Utility Theory 19 If jeans and yoga pants are substitutes, what is true about their cross-price elasticity? • It can be positive or negative. • It will always be positive. • It will always be negative. • It will always be greater than 1.
Cross-Price Elasticity 20 Which of the following is likely to happen when Crystal increases her income by earning a promotion and pay raise at work? • On a graph for indifference curves for new clothing and new shoes, Crystal’s budget constraint will shift to the left. • Crystal’s preference for normal goods will increase. • Crystal's consumption of inferior goods, such as generic brand items, will stay the same. • Crystal will buy fewer normal and luxury goods.
Budget Constraints: Change in Income
1 Which of the following is an example of perfectly elastic demand? • The Smith family eats at the same pizza restaurant each week because they have the best sauce. • Susie always purchases three bagels on Friday because the bakery runs a special that day. • Juan stopped purchasing peaches from his cousin's stall at the farmer's market when his cousin was the only farmer to raise prices. • Danny got a tip that the price of downloads on iTunes was going to increase, so he purchased 20 additional songs today.
Defining Elasticity 2 According to consumer choice theory, which of the statements below must be true? • When given the opportunity, a rational consumer will always prefer the bundle of goods that will give him the greatest utility maximization. • A rational consumer's choices will yield indifference curves that cross each other on a preference map. • A rational consumer will always prefer a bundle that offers fewer of one of the goods, keeping the amount of the other good constant. • It is possible that a rational consumer cannot come to a decision after considering all possible combinations.
Consumer Choice Theory 3 Select the statement that is unlikely to happen when Miguel scales down from 40 to 25 hours per week, thus lowering his income.
• Miguel will buy more inferior goods. • Miguel will buy fewer normal goods. • Miguel’s budget constraint will shift outward. • Miguel will purchase goods that provide him with the highest level of utility.
Budget Constraints: Change in Income 4 Cross-price elasticity refers to the change in demand that happens as a result of change in __________. • income • price of complement or substitute goods • consumer taste or preferences • change in the price of the good itself
Cross-Price Elasticity 5 Which description below describes an indifference curve? • A curve on a consumer choice graph that indicates different combinations of goods that are all equally appealing to the consumer • The curve on a consumer choice graph that indicates how much money the consumer can spend •
Where the quantities of two items are maximized • The highest level of satisfaction that a consumer can attain within certain limits
Utility Theory 6 Determine which scenario below is an example of own-price elasticity. • Tom, a construction foreman, will buy 100 sheets of plywood when the price is $12 per sheet. He will buy 150 sheets of plywood when the price drops to $10 per sheet. • If the price of leather sofas increases next month, Heather will opt to purchase a microfiber sofa instead. • Because he makes more money this year than he did last year, George purchased more gifts for his family members this year. • Helium balloons are on sale this week, so LaTisha will need fewer streamers for the party to celebrate her husband's job promotion.
Own-Price Elasticity 7 Which of the following describes what will happen to Peter’s budget constraint on his annual trip to the amusement park when the price of game tokens remains the same as last year but the price of ride tickets decreases? • The budget constraint will remain the same. • The budget constraint will pivot out along the axis with ride tickets. • Indifference curves will cross. • The budget constraint will shift to the right, parallel.
Budget Constraints: Change in Price 8 When the price of salad was $5, a cafeteria sold 50 packets of salad dressing a day at $0.50 per packet. When they raised the price of salad to $7 but kept the dressing at the same price, they sold only 25 packets of dressing per day. This graph shows the elasticity of demand for salad and dressing.
Using the mid-point formula, the cross-price elasticity is __________ and the goods are __________. • 0.5, substitutes • -2, complements • -0.5, complements • 2, substitutes
Cross-Price Elasticity 9 When Sam's Sandwiches were priced at $6, he sold 70 each day during lunch. When he reduced the price to $4 a sandwich, he sold 80 each day.
Using the midpoint formula, the own price elasticity for Sam's Sandwiches would be __________. • -0.67 • -0.33 • 1.33 •
0.50
Own-Price Elasticity 10 Which choice below is one of the three assumptions of behavior within consumer choice theory? • Indifference • Preference • Utility • Completeness
Consumer Choice Theory 11 Last year, Paula's income was $2,000, and she went to vacation twice. This year, Paula's income increased to $3,000, and she went to vacation five times.
Determine the income elasticity using the midpoint formula. • 2.14 • 0.33 • 1.80 • 0.47
Income Elasticity 12
Which statement below is true about the $75 Peter and his wife occasionally spend for two meals and drinks at a Korean barbecue restaurant since Peter was promoted, if the income elasticity for the expense is 2? • It is a substitute. • It is an inferior good. • It is a complement. • It is a luxury good.
Income Elasticity 13 Which of the following is an example of the law of diminishing returns? • If Shane and Marie order an additional bucket of popcorn, it will provide more satisfaction to them than the first bucket. • The rate of utility gained decreases each additional hour that Isabella stays up to study, because her studying provides less benefit to her as she starts to get tired. • As Shana continues to win more and more first place awards, each additional first place award means more to her than the previously earned ones. • As Alice consumes more tea, each additional cup of tea provides her with more satisfaction than the previous one.
Utility Theory 14 Laura was in charge of purchasing food for the next book club meeting. She usually ordered sandwiches from the nearby deli, but the price of sandwiches had increased. One option for food was ordering pizza, which was $3 less than a sandwich. However, because the price of sandwiches had gone up, Laura could afford fewer sandwiches and pizza than previous meetings.
The reduction in Laura's ability to purchase both sandwiches and pizza due to the increase of price in sandwiches is known in economic terms as ________. • a change in income • the substitution effect • a budget constraint • the income effect
Budget Constraints: Change in Price 15 Select the statement below that is true. • Completeness means that none of the items in a set should be missing. • Non-satiation means that more is always better. • Indifference means that only a particular combination of goods are preferable to the consumer. • The consumer's preference is indicated by the Y axis.
Consumer Choice Theory 16 Select the cross-price elasticity amount below that is categorized as a substitute. • 0.71 • -0.23
• -1.2 • 0
Cross-Price Elasticity 17
Using the graph shown here, determine which statement is FALSE. • C could become the optimal choice if the budget increased. • Point A represents a choice that is under budget. • A is the optimal choice. • These indifference curves are from a rational consumer.
Optimal Choice 18 Perfectly inelastic demand for a good exists when __________. • a small increase in price results in a big change in quantity demanded • a 50% increase in price will result in a 50% decrease in quantity demanded • firms will only offer a set amount of a good for sale, regardless of price • consumers will purchase the same amount of the good, regardless of price
Defining Elasticity
19 Jacob recently graduated from college and was promoted from intern to a paid position.
Which of the following is most likely to change in his spending habits? • Jacob will purchase more normal goods. • Jacob's budget constraint will shift to the left if shown on a graph. • Jacob will not respond as much to price changes in normal goods. • Jacob will purchase fewer normal goods and more inferior goods.
Budget Constraints: Change in Income 20
Which point(s) on the graph shown here are over budget? • B only • B and C • D only • E and A
Optimal Choice