NHM 373: Consumer EconomicsTest 1 QuestionsBasic Concepts1. Carl is considering attending a concert with a ticket price of $35. He estimates that the cost of driving to the concert and parking there will total an additional $20. In order to attend the concert, Carl will have to take time off from his part-time job. He estimates that he will lose 5 hours at work, at a wage of $6 per hour. Carls opportunity cost of attending the concert equals:a. $35b. $55c. $3d. $65e. $85

2. The opportunity cost to society of constructing a new motorway would be:a. The loss of farmland and natural habitat used in order to build the roadb. The other goods and services which labor employed constructing the road could producec. The financial cost of the roadd. The other goods and services that would be produced if the motorway were not built

3. The opportunity cost of a particular activitya. is the same for everyone pursuing this activityb. may include both monetary costs and forgone incomec. always decreases as more of that activity is pursuedd. usually is known with certaintye. measures the direct benefits of that activity

Consumer Sovereignty4. Which of the following is a Positive Economic Statementa. The rate of unemployment is too high.b. Nurses working the National Health Service should be on a maximum working week of 50 hours per week.c. The national minimum wage rate should be increased to $5 per hour for all workers.d. The extent of income inequality in the United States has increased over the last 30 years.

5. The statement The Planet is warming is ____.a. Positive b. Negativec. Normative

6. The Statement We should cut down our use of fossil fuels is _____.a. Positive b. Negativec. NormativeBudget Constraint7. Jane has $500 a week to spend on food and clothing. The price of food is $10 and the price of clothing is $25. Which of the following pairs of food and clothing are in Janes choice set?a. 20 units of clothing and 50 units of food.b. 50 units of clothing and 50 units of food.c. 10 units of clothing and 25 units of food.d. 0 units of clothing and 500 units of food.

8. Which of the following is an INCORRECT statement about a households budget constraint?a. Points on a budget constraint represent combinations of the goods that exactly use up the households income.b. Points within the budget constraint represent combinations of the goods that do not use up all the households income.c. If points A and B lie on the budget constraint, we can deduce that a household is indifferent between the two. d. If the price of one good decreased, ceteris paribus, the budget constraint will swivel or rotate outward.

9. To save enough money to attend a concert, Mary is willing to give up her cappuccino for four weeks. Which of the following is true?a. The benefit of the concert is at least the four weeks of cappuccino Mary is willing to give up.b. The benefit of four weeks of cappuccino is the concert that Mary will see. c. The benefit of cappuccino exceeds the benefit of the concert. d. The benefit of concert and cappuccino are equal to the opportunity cost of concert.Consumer Equilibrium

10. Suppose you are eating hamburgers. The first hamburger gives you 15 utils of satisfaction, the second hamburger 8 additional utils, and the third brings the total utility to 29. What was the Marginal Utility of the third hamburger?a) 6b) 8c) 21d) 23

11. Jane decides to buy a $75 ticket to a particular professional hockey game rather than a $50 ticket for a particular Broadway play. We can conclude that Jane:a) Is relatively unappreciatiative of the arts.b) Obtains more marginal utility from the play than from the hockey game.c) Has a higher marginal utility to price ratio for the hockey game than for the playd) Has recently attended several other broadways plays.

12. A consumer is choosing between books and movies. The price of a book is 10 and the price of the movie is 5. The marginal rate of substitution is 4, with books on the horizontal axis and movies on the vertical axis. The consumer is purchasing:a) Too many books b) Too many moviesc) Just the right number of both goods d) More than what her income would allow

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