When the price of a good falls, consumers may increase the quantity consumed because they have greater total purchasing power. This statement describes the:
a. substitution effect.
b. income effect.
c. consumer equilibrium effect.
d. price effect.
QUESTION 2Price discrimination occurs when:
a. firms maximize their profit by setting price equal to marginal cost.
b. a seller charges different prices to different consumers of the same product or service.
c. a seller charges the same price to consumers of a different product or service.
d. a seller charges different prices to consumers, discriminating by race or gender of the consumer.
QUESTION 3Suppose you have spent your entire budget and for all the goods you purchase the marginal utilities per dollar spent are identical. Which of the following is true?
a. You are being irrational.
b. You can increase your utility by reallocating your income.
c. You will reduce your utility if you allocate income in any other way.
d. You are minimizing your marginal utility.
e. You can avoid diminishing marginal utility.
QUESTION 4Price discrimination requires:
a. a firm to be a competitive firm.
b. a firm to be able to segment its customers based on different price elasticities of demand.
c. arbitrage.
d. that the product can be easily resold.
QUESTION 5If a consumer is indifferent between 5 units of A and 8 units of B, then the consumer would:
a. also be indifferent between 4 units of A and 9 units of B.
b. also be indifferent between 8 units of A and 5 units of B.
c. prefer 6 units of A and 8 units of B.
d. give up 1 unit of A if he/she could acquire 2 units of B.
e. not trade product A in exchange for any units of product B.
QUESTION 6Which of the following correctly describes price discrimination?
a. Selling different products to different people for the same price.
b. Selling different products to identical people for different prices.
c. Selling the same product to different people for different prices.
d. Selling the same product to the same person for the same price.
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