(Test Bank) Intermediate Microeconomics

Varian,Bergstrom,West, 9

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Test Bank

9th Edition

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Test Bank for Intermediate Microeconomics, The downloadable file consists of 708 pages, and the total size of the file is 5.75 MB. Purchase now only for highly discounted price.

Author(s): Varian, Bergstrom, West

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TEST BANK Intermediate Microeconomics NINTH EDITION TEST BANK Intermediate Microeconomics NINTH EDITION Hal R. Varian Theodore C. Bergstrom James E. West W • W • NORTON & COMPANY • NEW YORK • LONDON W. W. Norton & Company has been independent since its founding in 1923, when William Warder Norton and Mary D. Herter Norton first published lectures delivered at the People’s Institute, the adult education division of New York City’s Cooper Union. The firm soon expanded its program beyo nd the Institute, publishing books by celebrated academics from America and abroad. By midcentury, the two major pillars of Norton’s publishing program —trade books and college texts —were firmly established. In the 1950s, the Norton family transferred control of the company to its employees, and today —with a staff of four hundred and a comparable number of trade, college, and professional titles published each year—W. W. Norton & Company stands as the largest and oldest publishing house owned wholly by its employees. Copyright © 2014 by W. W. Norton & Company, Inc. All rights reserved. Printed in the United States of America. ISBN 978-0-393-93675 -9 W. W. Norton & Company, Inc. 500 Fifth Avenue, New York, N.Y. 10110 -0017 wwnorton.com W. W. Norton & Company Ltd. Castle House, 75/76 Wells Street, London W1T 3QT 1 2 3 4 5 6 7 8 9 0 CONTENTS Preface vii Part I Test Bank Chapter 2  Budget Constraint 3 Chapter 3  Preferences 11 Chapter 4  Utility 17 Chapter 5  Choice 24 Chapter 6  Demand 32 Chapter 7  Revealed Preference 41 Chapter 8  Slutsky Equation 49 Chapter 9  Buying and Selling 55 Chapter 10  Intertemporal Choice 65 Chapter 11  Asset Markets 72 Chapter 12  Uncertainty 79 Chapter 13  Risky Assets 86 Chapter 14  Consumer’s Surplus 89 Chapter 15  Market Demand 94 Chapter 16  Equilibrium 105 Chapter 17  Measurement 112 Chapter 18  Auctions 113 Chapter 19  Technology 119 Chapter 20  Profit Maximization 125 Chapter 21  Cost Minimization 132 Chapter 22  Cost Curves 143 Chapter 23  Firm Supply 150 Chapter 24  Industry Supply 155 Chapter 26  Monopoly Behavior 172 Chapter 27  Factor Markets 177 Chapter 28  Oligopoly 181 Chapter 25  Monopoly 162 Chapter 30  Game Applications 195 Chapter 31  Behavioral Economics 202 Chapter 32  Exchange 207 Chapter 33  Production 217 Chapter 34  Welfare 224 Chapter 35  Externalities 228 Chapter 36  Information Technology 235 Chapter 37  Public Goods 239 Chapter 38  Asymmetric Information 243 Part II Alternative Quizzes Chapter 2  Budget Constraint 251 Chapter 3  Preferences 256 Chapter 4  Utility 261 Chapter 5  Choice 266 Chapter 6  Demand 270 Chapter 7  Revealed Preference 275 Chapter 8  Slutsky Equation 280 Chapter 9  Buying and Selling 285 Chapter 10  Intertemporal Choice 290 Chapter 11  Asset Markets 294 Chapter 12  Uncertainty 299 Chapter 13  Risky Assets 304 Chapter 14  Consumer’s Surplus 306 Chapter 15  Market Demand 311 Chapter 16  Equilibrium 315 Chapter 17  Measurement 319 Chapter 18  Auctions 320 Chapter 19  Technology 326 Chapter 20  Profit Maximization 330 Chapter 29  Game Theory 189 Chapter 29  Game Theory 365 Chapter 30  Game Applications 371 Chapter 34  Welfare 389 Chapter 35  Externalities 394 Chapter 37  Public Goods 402 Chapter 21  Cost Minimization 333 Chapter 22  Cost Curves 337 Chapter 23  Firm Supply 341 Chapter 24  Industry Supply 343 Chapter 25  Monopoly 348 Chapter 26  Monopoly Behavior 353 Chapter 27  Factor Markets 356 Chapter 28  Oligopoly 360 Chapter 31  Behavioral Economics 377 Chapter 32  Exchange 378 Chapter 33  Production 384 Chapter 36  Information Technology 399 Chapter 38  Asymmetric Information 406 PREFACE The second part of this volume consists of alternative quizzes for the multiple -choice questions in Bergstrom and Varian’s Workouts in Intermediate Microeconomics . These questions use new parameters and scrambled responses so that an instructor can use them as a quiz or for more formal graded examinations. A computerized version of this Test Bank is available at no charge to any instructor who adopts Hal Varian’s Intermediate Microeconomics, Ninth Edition by contacting your local representative at 1-800-353-9909 or wwnorton.com. PART I: TEST BANK CHAPTER 2 BUDGET CONSTRAINT TRUE/FALSE 1. If there are two goods with positive prices and the price of one good is reduced, while income and other prices remain constant, then the size of the budget set is reduced. ANS: F DIF: 1 2. If good 1 is measured on the horizontal axis and good 2 is measured on the vertical axis and if the price of good 1 is p1 and the price of good 2 is p2, then the slope of the budget line is p2/p1. ANS: F DIF: 1 3. If all prices are doubled and money income is left the same, the budget set does not change because relative prices do not change. ANS: F DIF: 1 4. If there are two goods and if one good has a negative price and the other has a positive price, then the slope of the budget line will be positive. ANS: T DIF: 1 5. If all prices double and income triples, then the budget line will become steeper. ANS: F DIF: 1 6. If good 1 is on the horizontal axis and good 2 is on the vertical axis, then an increase in the price of good 1 will not change the horizontal intercept of the budget line. ANS: F DIF: 1 7. If there are two goods and the prices of both goods rise, then the budget line must become steeper. ANS: F DIF: 1 8. There are two goods. You know how much of good 1 a consumer can afford if she spends all of her income on good 1. If you knew the ratio of the prices of the two goods, then you could draw the consumer’s budget line without any more information. ANS: T DIF: 1 9. A consumer prefers more to less of every good. Her income rises, and the price of one of the goods falls while other prices stay constant. These changes must have made her better off. ANS: T DIF: 1 10. There are 3 goods. The price of good 1 is 1, the price of good 2 is 1, and the price of good 3 is 2. It is physically possible for a consumer to consume any commodity bundle with nonnegative amounts of each good. A consumer who has an income of 10 could afford to consume some commodity bundles that include 5 units of good 1 and 6 units of good 2. ANS: T DIF: 2 11. A decrease in income pivots the budget line around the bundle initially consumed. ANS: F DIF: 1 MULTIPLE CHOICE 1. If she spends all of her income on breadfruits and melons, Natalie can just afford 9 breadfruits and 10 melons per day. She could also use her entire budget to buy 3 breadfruits and 12 melons per day. The price of breadfruits is 8 yen each. How much is Natalie’s income per day? a. 313 yen b. 317 yen c. 309 yen d. 303 yen e. None of the above. ANS: E DIF: 1 2. If she spends all of her income on uglifruits and breadfruits, Maria can just afford 11 uglifruits and 4 breadfruits per day. She could also use her entire budget to buy 3 uglifruits and 8 breadfruits per day. The price of uglifruits is 6 pesos each. How much is Maria’s income per day? a. 115 pesos b. 105 pesos c. 114 pesos d. 119 pesos e. None of the above. ANS: C DIF: 1 3. Harold lives on Doritos and seafood salads. The price of Doritos is 1 dollar per bag and the price of seafood salads is 2 dollars each. Harold allows himself to spend no more than 11 dollars a day on food. He also restricts his consumption to 6,500 calories per day. There are 1,500 calories in a bag of Doritos and 500 calories in a seafood salad. If he spends his entire money budget each day and consumes no more calories than his calorie limit, he can consume up to a. 3 bags of Doritos per day but no more. b. 1 bag of Doritos per day but no more. c. 4 seafood salads per day but no more. d. 4 bags of Doritos per day but no more. e. None of the above. ANS: A DIF: 2 4. Quincy lives on pretzels and seafood salads. The price of pretzels is 1 dollar per bag and the price of seafood salads is 2 dollars each. Quincy allows himself to spend no more than 14 dollars a day on food. He also restricts his consumption to 3,400 calories per day. There are 600 calories in a bag of pretzels and 200 calories in a seafood salad. If he spends his entire money budget each day and consumes no more calories than his calorie limit, he can consume up to a. 2 bags of pretzels per day but no more. b. 5 seafood salads per day but no more. c. 4 bags of pretzels per day but no more. d. 5 bags of pretzels per day but no more. e. None of the above. ANS: C DIF: 2 5. Clara spends her entire budget and consumes 5 units of x and 13 units of y. The price of x is twice the price of y. Her income doubles and the price of y doubles, but the price of x stays the same. If she continues to buy 13 units of y, what is the largest number of units of x that she can afford? a. 10 b. 5 c. 12 d. 14 e. There is not enough information to say. ANS: A DIF: 1 6. Maria spends her entire budget and consumes 5 units of x and 6 units of y. The price of x is twice the price of y. Her income doubles and the price of y doubles, but the price of x stays the same. If she continues to buy 6 units of y, what is the largest number of units of x that she can afford? a. 12 b. 10 c. 14 d. 5 e. There is not enough information to say. ANS: B DIF: 1 7. In year 1, the price of good x was $3, the price of good y was $2, and income was $90. In year 2, the price of x was $9, the price of good y was $6, and income was $90. On a graph with x on the horizontal axis and y on the vertical, the new budget line is a. flatter than the old one and lies below it. b. flatter than the old one and lies above it. c. steeper than the old one and lies below it. d. steeper than the old one and lies above it. e. None of the above. ANS: E DIF: 1 8. In year 1, the price of good x was $4, the price of good y was $1, and income was $70. In year 2, the price of x was $9, the price of good y was $2, and income was $70. On a graph with x on the horizontal axis and y on the vertical, the new budget line is a. steeper than the old one and lies below it. b. steeper than the old one and lies above it. c. flatter than the old one and lies below it. d. flatter than the old one and lies above it. e. None of the above. ANS: A DIF: 1 9. If she spends her entire budget, Betsy can afford 74 peaches and 9 pineapples. She can also just afford 14 peaches and 21 pineapples. The price of peaches is 17 cents. What is the price of pineapples in cents? a. 95 cents b. 5 cents c. 22 cents d. 85 cents e. None of the above. ANS: D DIF: 1 10. If she spends her entire budget, Heidi can afford 39 peaches and 12 pears. She can also just afford 24 peaches and 17 pears. The price of peaches is 9 cents. What is the price of pears in cents? a. 12 cents b. 37 cents c. 27 cents d. 3 cents e. None of the above. ANS: C DIF: 1 11. Isabella thrives on two goods: lemons and tangerines. The cost of lemons is 40 guineas each and the cost of tangerines is 20 guineas each. If her income is 320 guineas, how many lemons can she buy if she spends all of her income on lemons? a. 6 b. 8 c. 16 d. 11 e. None of the above. ANS: B DIF: 1 12. Georgina thrives on two goods: pears and bananas. The cost of pears is 30 pesos each and the cost of bananas is 15 pesos each. If her income is 180 pesos, how many pears can she buy if she spends all of her income on pears? a. 9 b. 12 c. 4 d. 6 e. None of the above. ANS: D DIF: 1 13. Will spends his entire income on 8 sacks of acorns and 8 crates of butternuts. The price of acorns is 9 dollars per sack and his income is 88 dollars. He can just afford a commodity bundle with A sacks of acorns and B crates of butternuts that satisfies the budget equation a. 9A  4B  88. b. 18A  4B  176. c. 11A  2B  88. d. 9A  6B  90. e. None of the above. ANS: B DIF: 1 14. Eduardo spends his entire income on 9 sacks of acorns and 4 crates of butternuts. The price of acorns is 6 dollars per sack and his income is 90 dollars. He can just afford a commodity bundle with A sacks of acorns and B crates of butternuts that satisfies the budget equation a. 6A  13B  92. b. 12A  18B  180. c. 8A  9B  90. d. 6A  11B  90. e. None of the above. ANS: B DIF: 1 15. Harry thrives on two goods, paperback novels and bananas. The cost of paperback novels is 4 dollars each and the cost of bananas is 3 dollars per bunch. If Harry spent all of his income on bananas, he could afford 12 bunches of bananas per week. How many paperback novels could he buy if he spent all of his income on paperback novels? a. 36 b. 48 c. 9 d. 16 e. None of the above. ANS: C DIF: 1 16. Suppose that the prices of good x and good y both double and income triples. On a graph where the budget line is drawn with x on the horizontal axis and y on the vertical axis, a. the budget line becomes steeper and shifts inward. b. the budget line becomes flatter and shifts outward. c. the budget line becomes flatter and shifts inward. d. the new budget line is parallel to the old budget line and lies below it. e. None of the above. ANS: E DIF: 1 17. Suppose that the price of good x triples and the price of good y doubles while income remains constant. On a graph where the budget line is drawn with x on the horizontal axis and y on the vertical axis, the new budget line a. is flatter than the old one and lies below it. b. is flatter than the old one and lies above it. c. crosses the old budget line. d. is steeper than the old one and lies below it. e. is steeper than the old one and lies above it. ANS: D DIF: 1 18. While traveling abroad, Tammy spent all of the money in her purse to buy 5 plates of spaghetti and 6 oysters. Spaghetti costs 8 units of the local currency per plate and she had 82 units of currency in her purse. If s denotes the number of plates of spaghetti and o denotes the number of oysters purchased, the set of commodity bundles that she could just afford with the money in her purse is described by the equation a. 8s  6o  82. b. 6s  8o  82. c. 8s  7o  82. d. 5s  6o  82. e. There is not enough information to determine the answer. ANS: C DIF: 3 19. Billy Bob wants to gain some weight so that he can play football. Billy consumes only milk shakes and spinach. Milk shakes cost him $1 each and spinach costs $2 per serving. A milk shake has 850 calories and a serving of spinach has 200 calories. Billy Bob never spends more than $20 a day on food and he always consumes at least 8,000 calories per day. Which of the following is necessarily true? a. Billy Bob consumes at least 9 milk shakes a day. b. Billy Bob never consumes more than 6 servings of spinach a day. c. Billy Bob never consumes positive amounts of both goods. d. Billy Bob consumes only milk shakes. e. None of the above. ANS: B DIF: 2 20. Lars consumes only potatoes and herring. When the price of potatoes was 9 crowns per sack and the price of herring was 5 crowns per crock, he spent his entire income to buy 5 sacks of potatoes and 10 crocks of herring per month. Now the government subsidizes potatoes. Market prices haven’t changed, but consumers get a subsidy of 5 crowns for every sack of potatoes consumed. To pay for this subsidy, the government introduced an income tax. Lars pays an income tax of 20 crowns per month. If s is the number of sacks of potatoes and c is the number of crocks of herring, what is Lars’s new budget equation? a. 9s  5c  100. b. 14s  5c  95. c. 4s  5c  95. d. 4s  5c  75. e. 14s  5c  120. ANS: D DIF: 2 21. If you spent your entire income, you could afford either 3 units of x and 9 units of y or 9 units of x and 3 units of y. If you spent your entire income on x, how many units of x could you buy? a. 21 b. 16 c. 12 d. There is not enough information to determine the number of x. e. None of the above. ANS: C DIF: 1 22. If you spent your entire income, you could afford either 6 units of x and 13 units of y or 13 units of x and 6 units of y. If you spent your entire income on x, how many units of x could you buy? a. 19 b. 32 c. 24 d. There is not enough information to determine the number of x. e. None of the above. ANS: A DIF: 1 23. Bella’s budget line for x and y depends on all of the following except a. the amount of money she has to spend on x and y. b. the price of x. c. her preferences between x and y. d. the price of y. e. None of the above. ANS: C DIF: 1 24. Your budget constraint for the two goods A and B is 12A  4B  I, where I is your income. You are currently consuming more than 27 units of B. In order to get 3 more units of A, how many units of B would you have to give up? a. 0.33 b. 0.11 c. 3 d. 9 e. None of the above. ANS: D DIF: 1 25. Your budget constraint for the two goods A and B is 8A  4B  I, where I is your income. You are currently consuming more than 18 units of B. In order to get 3 more units of A, how many units of B would you have to give up? a. 6 b. 0.50 c. 0.17 d. 2 e. None of the above. ANS: A DIF: 1 26. Young Alasdair loves lollipops and hates oatmeal. To induce him to eat enough oatmeal and to restrain him from eating too many lollipops, his mum pays him 10 pence for every quart of oatmeal that he eats. The only way that he can get lollipops is to buy them at the sweet shop, where lollipops cost 5 pence each. Besides what he earns from eating oatmeal, Alasdair gets an allowance of 10 pence per week. If Alasdair consumes only oatmeal and lollipops and if his consumption bundles are graphed with quarts of oatmeal on the horizontal axis and lollipops on the vertical axis, then Alasdair’s budget line has a slope a. of 2. b. of less than 2. c. of 2. d. of 1/2. e. greater than 2. ANS: A DIF: 2 27. The Chuzzlewits have an income of $m per week. Let x be food and let y be all other goods. Let px be the price of food and py be the price of other goods. They can use food stamps to buy food at a price of px(1-s) for up to x* units of food per week. If they buy more food than x*, they have to pay the full price px for additional units. Their weekly income is greater than px(1-s)x*. The maximum amount of food that they can buy per week is a. x*  (m/p x). b. (m  x*)/px. c. (m/p x)  sx*. d. m/(1-s)px. e. (m  px)/(1-s)px. ANS: C DIF: 2 28. Edmund must pay $6 each for punk rock video cassettes, V. If Edmund is paid $24 per sack for accepting garbage, G, and if his relatives send him an allowance of $48, then his budget line is described by the equation