03 Jun Question Name______________________________________ True/False 30% Indicate whether the statement is true or false.
Question
Name______________________________________
True/False 30%
Indicate whether the statement is true or false.
____ 1. Total utility can be objectively measured in numbers that indicate usefulness or benefit to the consumer.
____ 2. As a rule, the more of a commodity a consumer acquires, the smaller will be her total utility from that good.
____ 3. An optimal purchase is one that maximizes total utility.
____ 4. If the marginal net utility of beer is a positive number, the consumer should buy more beer in order to maximize utility.
____ 5. Consumer surplus is the difference between the worth of a commodity to the consumer and the price the consumer pays for the commodity.
____ 6. The resolution of Adam Smith’s diamond-water puzzle is based on the distinction between marginal and total utility.
____ 7. Scarcity raises both price and marginal utility but generally reduces total utility.
____ 8. Quantity demanded is not only affected by price but by variables such as income and the prices of other goods.
____ 9. The market demand curve is the horizontal summation of all individual demand curves.
____ 10. A change in the price of one good results in a rotation of the budget line, so that it is steeper or flatter.
____ 11. A decrease in the price of one good results in a parallel shift in the budget line.
____ 12. The budget line and the indifference curve are geometric devices used to provide a closer look at consumer choice.
____ 13. An increase in income shifts indifference curves outward.
____ 14. A consumer will consume the combination of goods at the point of tangency between the budget line and the indifference curve.
____ 15. A consumer will consume the combination of goods at the crossing point of a budget line and indifference curve.
____ 16. A vertical demand curve has an elasticity of demand equal to zero.
____ 17. A horizontal demand curve is perfectly elastic because a change in price will not induce a change in quantity demanded.
____ 18. A horizontal demand curve is perfectly elastic because a change in price will induce an infinite change in quantity demanded.
____ 19. A straight-line demand schedule has the same elasticity throughout its length.
____ 20. The unit-elastic demand curve is a rectangular hyperbola.
____ 21. If price goes up 20 percent and quantity demanded declines by 10 percent, total revenue will rise.
____ 22. If a demand curve is unit elastic, then P times Q will remain constant when P changes.
____ 23. A demand curve with unit elasticity can never touch either the vertical or horizontal axes.
____ 24. A price increase will always cause a firm’s revenue to fall, because they will sell less of the good.
____ 25. Necessities such as food and shelter have inelastic demand.
____ 26. If there are many close substitutes available for a good, its elasticity of demand will be higher.
____ 27. Since an individual spends a small share of her income on salt, the elasticity of demand is likely to be low.
____ 28. Cross-elasticity of demand could be used to measure the responsiveness of the quantity demanded of swimming pools to a change in the price of picnic tables.
____ 29. Demand curves often do not remain stationary; they shift because of changes in other variables.
____ 30. A decrease in the price of a good will cause a movement along the demand schedule to a higher quantity demanded.
Multiple Choice 30%
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