Mcq about budget constraint and substitution effect

Reference no: EM1312921

1) Michael can buy either pizzas or submarine sandwiches. If the prices of pizza and submarine sandwiches double and Michael's money income triples, we can conclude that Michael's budget constraint will

A) Shift in but remain parallel to the old one.

B) Shift out but remain parallel to the old one.

C) Swivel in so that the slope of the budget constraint is doubled.

D) Remain unchanged.

2) The marginal utility of the first cup of coffee that Tom drinks in the morning is worth $2.00.The marginal utility of the 9th cup of coffee he drinks is positive while the marginal utility of the 10th cup of coffee he drinks in the morning is worth $0. This implies that at a price of $0, Tom would drink

A) Zero cups of coffee per morning.

B) At most 10 cups of coffee per morning

C) more than 10 cups of coffee per morning, but the actual number is indeterminate from this information.

D) An infinite number of cups of coffee each morning.

3) If the substitution effect of a wage change outweighs the income effect of a wage change, the labor?supply curve is

A) Upward sloping.

B) Horizontal.

C) Vertical.

D) Backward bending.

4) You own a building that has four possible uses: a cafe, a craft store, a hardware store, and a bookstore. The value of the building in each use is $2,000; $3,000; $4,000; and $5,000, respectively. You decide to open a hardware store. The opportunity cost of using this building for a hardware store is

A) $2,000, the value if the building is used as a cafe

B) $3,000, the value if the building is used as a craft store

C) $10,000, the sum of the values if the building is used for a cafe, a craft store, or a bookstore.

D) $5,000, the value if the building is used for a bookstore

5) To determine the optimal method of production for a good or service, a perfectly competitive firm needs to know all of the following EXCEPT:

A) The market price of output.

B) The technologies of production those are available to the firm.

C) The prices of inputs.

D) The prices charged by its rivals.

Reference no: EM1312921

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