Question

What is (are) constant along a consumers budget constraint?

A) Marginal utility of the two goods

B) Total income

C) Total utility of the two goods

D All of the answers are correct

2. Which of the following statements is INCORRECT?

A) Normal goods have income elasticities that are positive

B) Luxury goods have very high income elasticities

C) Inferior goods must also be necessity goods

D) Inferior goods have income elasticities that are negative

4. Which of the following is (are) CORRECT about an indifference curve?

A) As the consumer consumes more of one of the good along an indifference curve, the overall level of total utility falls

B) Higher indifference curves correspond to higher levels of total utility

C) The midpoint of an indifference curve yields a higher utility level than those points

closer to the horizontal or vertical axis

D) All of the answers are correct

5.Suppose the government is thinking of offering a subsidy, which is a negative tax, to theproducers of a product. This subsidy will encourage a large increase in equilibrium quantity if

A) The supply is vertical

B) The demand is very inelastic

C) The demand is vertical

D) The demand is very elastic

6.Decrease in the equilibrium quantity and either an increase or decrease in the

A)

equilibrium price

B) Increase in the equilibrium quantity but a decrease in the equilibrium price

C) Decrease in the equilibrium quantity and a decrease in the equilibrium price

Dy Increase in the equilibrium quantity and either an increase or decrease in the

D)

equilibrium price

Answer 1