A budget line shows:
a. the combinations of two goods that yield the same level of utility.
b. the relationship between the price and the quantity supplied of a good or service.
c. the combinations of two goods that can be purchased at given prices with a given level of income.
d. the relationship between the price and the quantity demanded of a good or service.
QUESTION 2It is said that a wage increase can have two opposing effects. Which of the following captures these two effects?
a. A backward-bending labor-supply curve
b. A perfectly elastic labor-supply curve
c. A perfectly inelastic labor-supply curve
d. A perfectly elastic labor-demand curve
e. A backward-bending labor-demand curve
QUESTION 3Which of the following is a determinant of price elasticity of demand?
a. Availability of substitute goods
b. Excess capacity
c. Scale of production
d. Inventories
e. Cost of production
QUESTION 4The price-consumption curve:
a. connects the various combinations of two goods as a consumer's income changes.
b. connects the various combinations of two goods as the relative price of one good changes.
c. shows the quantity of a good consumed as a function on income.
d. All of the above are correct statements.
QUESTION 5Which of the following best explains the shape of the individual labor-supply curve?
a. The individual labor-supply curve is exactly like any supply curve, it always has a positive slope.
b. The individual labor-supply curve slopes downward at all wage rates because, as wages increase, people are able to buy more leisure.
c. The individual labor-supply curve slopes upward at lower wage rates and then bends back at higher wage rates.
d. The individual labor-supply curve must be vertical because each person can work only eight hours per day.
e. The individual labor-supply curve must be horizontal because labor markets are assumed to be perfectly competitive.
QUESTION 6Suppose the value of price elasticity of demand for goods manufactured by firms A, B, C, and D are 0, -0.8, -1, and -1.5 respectively. The demand for the good will be elastic for:
a. firms A, B, C, and D.
b. firms B, C, and D.
c. only firm A.
d. firms C and D only.
e. only firm D.
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