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Exam 4: The Theory of Individual Behavior

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Question 31

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The difference between a price decrease and an increase in income is that

A) A price decrease does not affect the consumption of other goods, while an increase in income does.
B) An increase in income does not affect the slope of the budget line, while a decrease in price does change the slope.
C) A price decrease decreases real income, while an increase in income increases real income.
D) A price decrease leaves real income unchanged, while an increase in income increases real income.

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Question 32

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The total earnings of a worker are represented by E = 100 + $10(24 − L) ,where E is earnings and L is the number of hours of leisure.How much will the worker earn if he takes 14 hours of leisure per day?

A) $150
B) $240
C) $100
D) $200

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Question 33

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Explain what would happen to the equilibrium consumption of two goods,X and Y,if (a)income doubled and all prices tripled,(b)all prices doubled and income tripled,and (c)all prices and income doubled.In each case,show the effects when both goods are normal goods and when one good is a normal good and the other an inferior good.

If a consumer is given a $10 gift certificate good for items in store X,and all items in store X are inferior goods,then the consumer desires to consume:

The total earnings of a worker are represented by E = 150 + $12(24 − L) ,where E is earnings and L is the number of hours of leisure.How much will the worker earn if he takes 16 hours of leisure per day?

Under the buy one,get one free regime,the:

The substitution effect reflects how a consumer will react to a different:

If the price of a good Y falls,then the marginal rate of substitution between X and Y:

Sam Voter prefers Ronald to Joe,Joe to Gary,and Gary to Ronald.Sam's preferences:

If the price of good X is $10 and the price of good Y is $5,how much of good X will the consumer purchase if her income is $15?

Most workers view leisure and income as:

Sally Consumer's indifference curve between cigarettes and hamburgers is upward sloping.Based on this information,can we conclude that Sally views cigarettes as "bads" and hamburgers as "goods"?

If the price of computers decreases,then the:

Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied.Furthermore,assume that both X and Y are normal goods and that the price of good Y increases.Then,which of the following effects is known with certainty?

After a price decrease for good X,the new consumer equilibrium level of good X will be:

Which of the following is most likely NOT an example of a normal good?

Kate's money income is $250,the price of X is $3,and the price of Y is $2.Given these prices and income,Kate buys 60 units of X and 35 units of Y.Call this combination of X and Y bundle J.At bundle J,Kate's MRS is 3.At bundle J,if Kate increases consumption of Y by 1 unit,how many units of X must she give up in order to satisfy her budget constraint?

An economics professor went out to dinner one night and observed one of her students drinking heavily.The next day was a final exam.When the professor's husband found out the student was in her class,he said the student's behavior was irrational.The professor disagreed.Under what condition is behavior irrational according to the properties of consumer behavior discussed in the chapter? What situations could make the student's behavior rational?

If you were running an advertising campaign for designer men's suits,you should target families with:

Along the same indifference curve,MRS is ________ as more of one good is obtained.