ECON 1002 Microeconomics Unit 2 Challenges

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Unit 2 Challenge 1

Which of the following is the best example of transitivity?

Ben preferred Uncle Moe's Family Feedbag and Catering over University Catering. He liked Hob Knob Fine Dining best of all. So he must prefer Hob Knob over University Catering.

Ben preferred Uncle Moe's Family Feedbag and Catering over University Catering because Uncle Moe's offered more of the same options at the same price.

Ben contemplated every possible option given by the catering companies and still could not decide which option he liked best.

Ben contemplated every possible option given by the catering companies and decided that Hob Knob Fine Dining was the best choice.

Tina must make a decision about the number of bottles of sports drink and how many cases of water she wants to purchase for her soccer practices. Tina decided to buy four cases of water and 16 bottles of sports drink.

As she waited in line to check out, Tina noticed there was a special display offering five cases of water for the price of four. Tina opted to pick up an additional case of water, even though she might not use it until next week.

Tina exhibited the economic principle of __________, because she decided that five cases of water and 16 bottles of sports drink was better than four cases of water and 16 bottles of sports drink.

completeness

non-satiation

transitivity

utility theory

Juan is able to list out the pros and cons of each possible bundle based on his personal preferences to help him decide which is ultimately the best bundle.

Which of the following economic principles is Juan exhibiting?

Transitivity

Completeness

Utility

Non-satiation

 

Which of the following is true using the graph above?

• A.)

Point C is more desirable than points A or B.

• B.)

Point D is attainable.

• C.)

Bundle A is preferable to Bundle B.

• D.)

Points A, B and C are all equally desirable.

Paula liked to consume both water and sports drinks during her basketball games, but she always began with water. Knowing her own preferences helped in her decision of how much water versus how much sports drink to purchase.

Which of the following choices would be characteristic of the law of diminishing returns for Paula?

·        A.)

If Paula only drinks water at practice, she would no longer crave sports drinks.

·        B.)

As Paula drinks more and more bottles of water, she would be more likely to want to trade off a bottle of water for a bottle of sports drink.

·        C.)

If Paula denies the water and just drinks the sports drink, she would no longer want to drink water at practice anymore.

·        D.)

As Paula drinks more and more bottles of water, she would continue to want more water and would not desire the sports drink.

 

Using the graph above, which of the following is true concerning Indifference Curves 1 and 2?

• A.)

A consumer can expect to have 20 units of t-shirts and 16 units of sweatshirts.

• B.)

None of the points on Curve 1 are desirable.

• C.)

All of the points on Curve 1 are more desirable than any on Curve 2.

• D.)

A consumer would prefer any point on Curve 2 to any points on Curve 1.

This preference map shows the indifference curves and various points, based on the possible combinations of refillable water bottles and crackers.

 

Which statement is true, based on the preference map above?

Option A is the most affordable option.

Point B is the optimal choice.

Option C is preferable to both options B and D.

Options C and D are equally desirable.

There are four combinations of key lime pie and raspberry cheesecake, each of which are denoted by a point on the graph below.

 

Which of the following statements is true as it relates to the graph?

Point Z is the best possible option given the budget constraints.

Point W would yield the least amount of utility.

Point Y is the optimal choice given the budget constraints.

Point X would be considered below the budget constraint.

This graph shows the indifference curves for the different bundles of running socks and shoes that Ben can purchase. Ben's current budget constraint would allow him to purchase either the bundle represented by points 1, 2 or 3.

 

Which option should Ben select, and why?

Option 2, because it allows him to purchase a greater number of socks.

Option 1, because it is the least expensive.

Ben would be equally satisfied with options 1, 2 and 3.

Option 3, because it is on a greater indifference curve.

 

Consumers move from Curve 1 to Curve 2 as a result of __________.

• A.)

an increase in the price of burgers

• B.)

a change of taste away from burgers and towards pizza

• C.)

an increase in the price of pizza

• D.)

an increase in consumer income

The store owner of Speedy Feet raised the price of running shorts. He was wondering how this would affect customer demand. Most customers buy a shirt of some sort to go along with the running shorts, so he is worried that the customers would buy fewer of both the shorts and shirts.

Which graph below accurately shows what will happen to the budget constraint as a result of the store owner's prediction?

 

 

 

Megan has $50 to spend on refillable water bottles and crackers. This graph shows the budget constraint when the bottles are $7 each on Monday and the budget constraint when the bottles drop to $5 each on Thursday.

 

Which of the following statements would be true if Megan were to wait and purchase the disposable water bottles on Thursday?

Megan's budget line would make a parallel shift outward to the right.

Megan's consumption of water bottles would increase.

When the water bottle price decreases, Megan's budget constraint shifts to the left.

The decrease in water bottle price would cause Megan to give up crackers for water bottles.

Susan recently was told that the honor society just received additional funds from the university in order to showcase their academic programs.

The chart below represents Susan's initial budget for the honor society, prior to the university's financial assistance:

 

Which point may now be attainable, given the budget increase?

B

D

C

A

The college science fair recently received a $100 donation from the physics professor, who is a proud supporter of the organization.

The graph below shows the original budget constraint, BEFORE the professor's generous donation:

 

Which of the following describes the shift in the budget constraint AFTER the $100 donation?

It will shift to a horizontal position.

It will shift to the left.

It will remain the same.

It will shift to the right.

Jackson is planning a banquet to honor the students who have made the Dean's List this semester. He receives a call from an assistant at the office of the Dean of Undergraduate Studies who tells him that the budget for the banquet has been reduced, due to a miscalculation.

This is the original budget constraint, before the phone call:

 

After the reduction in budget, option __________ would most likely become the optimal choice, while option _________ would no longer be possible.

B; C

A; D

C; B

D; A

When incomes increase, consumers will purchase more of what type of good?

Normal

Free

Public

Inferior

Which of the following will occur when consumer incomes decrease?

The purchase of inferior goods will increase.

The budget constraint will shift outward.

The purchase of normal goods will increase.

The optimal utility levels will increase.

An increase in income could cause Mark to do several things.

Which of the following examples would be considered an inferior good in Mark's situation?

Mark buys more off-brand products.

Mark purchases a new video game.

Mark purchases fewer ramen noodles.

Mark buys his lunch rather than packing one at home.

Unit Challenge 2

If the price of medication doubles, and the quantity demanded remains unchanged, this good is said to be __________.

relatively inelastic

perfectly elastic

relatively elastic

perfectly inelastic

Which of the following statements is the best example of inelastic demand?

Tom bought banners sold in town before; they were high quality, so he buys them there again, despite an increase in price.

Tom chose the less expensive Common Scents brand candles rather than Scentsational brand.

​Tom followed the trend of others and purchased table cloths from an online website at a lower price.

Tom chose Pretty/Cheap disposable plates, which were $1 less than Notso Cheap brand.

Pedro had type I diabetes and had to remember to maintain normal levels of blood glucose, whether that required insulin injections, snacking on sugary foods or eating whole wheat bagels and fruit. Pedro did not prefer any particular fruit over another. If a certain type of fruit was on sale, he would always choose the sale price. When it comes to sugary snacks and whole wheat bagels, there were certain brands that he liked to have more than others, and he might spend a little more money to get the brands he preferred. His diabetes medication (insulin) was an item that he couldn't live without, and Pedro would always purchase it, regardless of the price.

Which of the following items would be a more elastic demand for Pedro?

Whole wheat bagels

Diabetes medication (insulin)

Sugary snacks

Fruit

When using the midpoint formula to calculate elasticity of demand, the answer will always be a negative number.

This is due to the __________.

law of demand

utility function

law of supply

demand for related goods

Arc price elasticity measures which of the following?

Percent change in quantity added to the percent change in price

Percent change in quantity divided by the percent change in price

Change in quantity divided by percent change in price

Change in quantity multiplied by the change in price

 

Diet Coke has an elasticity of demand of 1.6, which makes it __________.

perfectly elastic

perfectly inelastic

elastic

inelastic

One month ago, Olivia purchased 300 pages of printer paper at $1 per sheet. Today she learned that the price of the printer paper had risen to $1.50 per sheet, so she purchased only 100 sheets.

 

Using the graph of printer paper elasticity below and the midpoint formula, the own-price elasticity is __________.

-1

-2.5

1.25

0.5

Trent needed pinnies for the lacrosse team to wear during scrimmages and called a local supplier and was told that he could purchase pinnies for $10 each. He asked the supplier to hold five pinnies for him to purchase.

However, when Trent arrived at the store a few days later, he found the price of the pinnies had increased to $12. Due to the price increase, Trent only purchased four pinnies.

Using the mid-point formula, Trent's own-price elasticity of the pinnies is __________.

-2

4.5

3

-1.22

John was ordering orange cones to use for soccer drills during practices. If John decided to purchase cones now, he would buy 10 sets at $5 per set. If he decided to purchase the cones at a later time when the demand decreased, he would purchase 14 sets at $3 per set.

Using the mid-point formula, the own-price elasticity of the soccer cones is __________.

-12

4

-0.67

0.25

On his most recent trip to the running store, Andy noticed that the water bottles for his favorite hydration belt were on sale. They were usually priced at $8, but they were on sale for $5.

The store owner told Andy that he was surprised that people were not only buying more water bottles due to the sale, but also more of the hydration belt, even though the belts were not on sale.

Based on the scenario above, what type of goods are the water bottles and hydration belts?

·        A.)

Normal

·        B.)

Substitutes

·        C.)

Inelastic

·        D.)

Complements

If the cross-price elasticity of demand is positive, the goods are said to be __________.

complements

normal

substitutes

inferior

The cross-price elasticity of demand for soda and pretzels is -0.6.

Therefore, soda and pretzels must be __________ goods.

complementary

substitute

inferior

elastic

Rachel is hosting the neighborhood barbecue party at her house and decides to grill hotdogs. Last year, a package of hotdog buns costed $7 and a package of hotdogs costed $10 and Rachel had bought 15 packages of buns and 15 packages of hotdogs at that time.

Now the price of buns has increased to $8 a package, and the price of hotdogs remained at $10. Rachel decides she will only buy 10 packages of hotdogs this year.

Using the mid-point formula, the cross-price elasticity is __________ and the goods are __________.

-1; complements

2; substitutes

-3; complements

5; substitutes

A store recently marked a hydration belt on sale, lowering the price from $20 to $12. The store also sells a hydration bottle, which has a similar concept to the belt, except that a runner can hold it in his or her hand with a strap while running.

When the store owner lowered the price of the hydration belt, he noticed that the quantity of hydration bottles that he sold decreased from seven the previous week to five, as more people chose to buy the belt.

Using the mid-point formula, the cross-price elasticity is __________ and the goods are __________.

1.005; substitutes

0.667; substitutes

-0.714; complements

-1.333; complements

Juan raised the price of a certain brand of running shorts in his store from $30 to $35. Once he did this, Juan noticed that customers were purchasing fewer shirts to go with the shorts. Last week, he sold 40 shirts, which decreased to 20 after the price increase with the shorts.

Using the mid-point formula, the cross-price elasticity is __________ and the goods are __________.

-0.23; complements

0.05; substitutes

-4.33; complements

1.04; substitutes

Which of the following would be considered an inferior good?

A used car that can be traded in for a newer and better one

New professional clothes that can be bought with a higher income

Eating at high-end restaurants

A flight to the beach for a week-long spring break vacation

Which of the following would be considered a normal good?

Buying less generic cereal when your income increased

Eating fast food because your income decreased

Taking the bus to work because your income decreased

Buying more of your favorite ice cream because your income increased

Which of the following would be considered a luxury good?

Eating breakfast at the local diner on Saturdays with an income elasticity of 0.85.

Saving money by shopping at the local thrift store to find a dress with an income elasticity of -1.

Purchasing dining hall passes for weekday meals with an income elasticity of 0.15.

Renting a limousine with an income elasticity of 2.

Ashley received a raise at work that increased her monthly income from $1,000 to $1,250. Last year, Ashley bought 20 slices of cheesecake for her birthday party. Due to her increase in income, she is able to buy 24 slices for her birthday this year.

Using the mid-point formula, the income elasticity is _________ and the cheesecake slices are __________ goods.

• A.)

0.8; normal

• B.)

1.2; luxury

• C.)

0.5; normal

• D.)

1.3; luxury

In the past eight months, Raquel's income increased from $1,000 per month to $1,200 per month. Raquel and her husband usually made 16 cheese sandwiches in a month, however due to Raquel's new salary, they now only make 10 sandwiches per month.

Using the mid-point formula, the income elasticity is _________ and cheese sandwiches are __________ goods.

1.9; normal

-0.4; inferior

-2.5; inferior

0.5; normal

In the past six months, Luke's take-home income increased from $4,000 per month to $5,000 per month. While on vacation in Hawaii, Luke told his wife to buy whatever jewelry she would like, as the jewelry was rare to find off the island. Normally his wife would buy one jewelry item while on vacation. However, this time she purchased four jewelry items.

Using the mid-point formula, the income elasticity is _________ and the jewelry items are __________ goods.

1.5; luxury

0.2; normal

0.7; normal

5.4; luxury

 

 

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