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I Demand

giiial uiilic) per dollar spent is equal for all goods purchased.

p If at hi.s current level of consumption, J. Appleseed receives a marginal udlity of 6 utils per pound of apples and if the price of apples is 500 per pound, then for Mn Appleseed the marginal utility per dollar spent on apples is: (a) 3 utils per dollar (b) 12 mils per dollar (c) 300 utils per dollar (d) 6/5 utils per dollar (e) 5/6 utils per dollar

0. We use consumer surplus to measure: (a) the total benefits received from consuming a given amount of a good (b) the amount of income spent on a good (e) diminishing marginal utility (d) the net benefits remaining after the cost of buying the good is deducted (e) whether goods are complements or sub- stitutes.

We Avotild expect to find the consumer surplus Tpr water to: (a) exceed the consumer surplus for dia-Rnonds since the total sulyecdve value of water is so Oarge in relation to its price (b) be less dian the con-gamer surplus for diamonds since the price of water is peladvely low (c) equal that of diamonds since a rado-Bial consumer will attain udlity maximization onh

when consumer surplus is the same for all. goods

(d) equal that of diamonds because a consumer will buy many more ounces of water than diamonds

(e) none of die above.

S. According to economist Sam Peltzman, the increased testing and regulation of drugs mandated by a re\ision in the law reduced the consumer surplus obtained from drugs. The interpretadon is: (a) the law injured consumers (b) drug regulation was a good idea (c) fewer drugs should be marketed (d) the demand curve for drugs shifted upward (e) the total costs of making and reguladng drugs exceed the total benefits.

T. Clas-sical historians have long believed that railroads were extremely important to American economic development. InvesUgadng this quesdon, economist-historian Robert Fishlow found the gain in consumer surplus due to railroads was su risingly small. Fishlow would: (a) agree with the classical historians (b) argue that railroads were more important than the classical historians recognized (c) argue that the classical historians exaggerated the impact ofthe raihoads

(d) argue that fewer railroads should have been built

(e) argue that rzdlroads hurt consiuners.

p. lb-

Ill: 1,(1


1. Which of the following would be inconsistent with the law of demand? (a) last year, the price of lobster was low compared to this year, yet more lobster was bought this year (b) the Vatican has received many offers for the Pieta but has refused them all (c) a polidcian refuses to change his vote even if it costs him the next elecdon (d) you would buy the same quandty of gas no matter what the price (e) all of the above.

2. Which of the follo\ving points cannot be on the same demand curve as the others?

(a) (b) (c) (d) (e)

P $7 $63 $5

9 2 11 1

all can be on the same demand curve

The next three quesdons refer to the following coconut demand data for the four person market.

Harpo Groucho Zeppo Chico Community






3. The market demand for coconuts at $5.00, $4.50, and $4.00,. are respecdvely; (a) indeterminate from the data given (b) 1,1, and 4 (c) 1,1, and 2

(d) 4,1, and 1 (e) none ofthe above.

4. At a price of $3.50, the quandty of coconuts demanded by Zeppo is; (a) 1 (b) unknowii (c) inconsistent with the laws of demand (d) (a) and (c)

(e) none of the above.

5. At a price of $3.00: (a) Groucho will demand 2 and Chico 2 (b) Groucho will demand 3 and Chico 2 (c) (a) or (b) (d) Crouchos and Chicos indixid-ual demand is completely indeterminate (e) none of the above.

6. Which of the follo\ving would iiot be expected to increase the demand for bicvcles? (a) an increase

in the number of bike paths (b) a ban on skateboards (c) an increased interest in ecolog) (d) a decrease jij the price of bicycles (e) none: ihev all would increase the demand for bicycles.

7. Which of the following means increased demand? (a) a willingness to buy more of a good as the price falls (b) a willingness to,pay a higher price for every quamit) (c) a willingness to buy more of a good at every price (d) all ofthe above (e) (b) and, (c) only.

8. Which of the following wotdd not be expecieds to change the demand for coffee? (a) an increase in the price of tea (b) a new medical finding concern-i ing caffeine (c) a change in incomes (d) a bumperj crop of coffee (e) a prouacted period of cold, w weather

9. \ 1 of the following vould be expected increase the demand for petroleum? (a) an increa in die price of natural gas (b) an increase in the pric of cars (c) a new cheap technolog) for making diedc fuels (d) the exhausdon of U.S. petrolet reserves (e) a huge Alaskan oil find.

10. If "A" and "B" are substitutes, dien (a) higher the price of "B", the lower the demand for */ (b) the lower the price of A", the higher the demanjj for "B" (c) the higher the price of "B". the more pie will switch out of "A" (d) die lower die price of " the lower the demand for "B" (e) both (a) and (d).

11. Lower prices of which of the following woul tend to decrease the deinand for gasoline ceter paribus? (a) diesel fuel (b) small cars (c) fuel cient carburetor (d) tune-ups (e) all of die above.

12. Which of the following is not normally a coij plement to autos? (a) dies (b) mountain resorts ( gasoline (d) suburban living (e) television.

13. Joe Gaucho enjoys both movies and beer dniij ing, allocadng his purchases so as to maximize utilig If Joe gets half as much udlity from the last can ofl as from the last movie we knoAV that: (a) die price < movies is twice that of beer (b) joe gets more toC udhty from movies than beer (c) Joe gets more toJ udlity from beer than movies (d) Joe should incr his movie consumpdon (e) none ofthe above.

14. Radon L. Mann consvimes both cakes


pretzels, If the price of a cake is five times that of a pretzel, then we can deduce that for R. L. Mann: (a) the total utilit) of cakes consumed is five times that of pretzels (b) the total utility of cakes consumed is one fifth that of pretzels (c) the marginal udlity of the last cake consumed is five umes that of the last pretzel (d) the marginal utility of the last cake consumed is one fifth that of the last pretzel (e) both, choices (a) and (c).

15. If the price of pretzels rises, then we can deduce that in equilibrium for R. L. Mann: (a) the marginal utilit) of the last pretzel consumed will rise (b) the marginal udlity of the last pretzel consumed will fall (c) the total udlity derived from the conic sumption of pretzels will fall (d) both choices (a) »i and (c) (e) both choices (b) and (c).

16. Consumer surplus is a measure of: (a) the * value of having another unit of a good (b) the total

I benefits obtained from consuming a good (c) the total benefits obtained from consuming a good after }-,die cost of buying it is subtracted (d) the sum of the .marginal benefits from consuming a good (e) none , of the above.

17 Soap has a constant marginal udlity equal to one up to and including three bars consumed per J month; after that its marginal udlity is zero. The only pother good is bread with a marginal udlity as follows:

cloaves per mouth 1 2 3 4 5 6 7 8 {>marginal luilit) 21 18 15 12 9 6 3 1

lJrf the price of .soap is 50? per bar and that of bread is j$3.00 per loaf, the minimum income at which a con->isumer woidd be willing to buy soap is: (a) $6.50 (b) $18.50 (c) $12.00 (d) $15.50 (e) $21.50.

:18. The following schedule indicates the prices that a consinuer isjust willing to pay for each pound of coffee consumed annually before he is induced to pgive it up:

Price per pound $25 $20 SIO

$2 S 1

Number of Pounds Consumed per Year

If the price is $10, con.sumer surplus would be: (a) $57 (b)$10 (c) $15 (d) all of die above (e) none of the above.

19. If, in the previous example, the price of coffee were to fall from $20 to $10, then the gain in consumer surplus would be: (a) $30 (b) $25 (c) $20 (d) S15 (e) $10.

20. If in the Bakersfield coffee market there are 1,000 consumers idenucal to the consumer in the preceding questions and 1,000 consumers with characteristics given by:

Price per pound $40 $30 $10

Number of Pounds Consumed per Year

Then, aggregate consumer surplus in the Bakersfield coffee market at the price of $2, would be: (a) $98,000 (b) $100,000 (c) $16,000 (d) $129,000 (e) $145,000.

21. If in quesdon #18 we know that the consumers surplus is $25, the price of coffee must have been: (a) $25 (b) $20 (c) $10 (d) $2 (e) $1.

22. Which of the following represents a movement along the market demand curve for candy bars? (a) an increase in consumer income (b) a fall in the price of popcorn (c) decline in the price of candy bars (d) a dental health campaign against sugar (e) a fall in consumer incomes

23. Ina pardcular market for wedding cakes, the sole supplier bakes cakes to order at an advertised price of $50. There are five weddings in a particular week, and the households involved (A, B. C, D, and E) have the following demands:


Quantity of cakes demanded


0 0

0 1

0 1

0 1

0 1

1 1

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