1.Suppose a person's utility is only a function of their consumption of diet soda and they do not care

which brand, Diet Coke (DC) or Diet Pepsi (DP) they consume. Suppose further that P_DC < P_DP. If P_DC

rises but it remains less than P_DP thenthe consumption of DC

Select one:

a. Falls from a positive amount to zero

b. Falls from a positive amount to another positive amount.

c. rises.

d. stays at zero.

2.If good X is a normal good and its price rises, then quantity demanded

Select one:

a. may or may not fall.

b. will always fall.

c. will always rise.

d. will remain unchanged.

3.Suppose a person's utility is only a function of their consumption of diet soda and they do not care

which brand, Diet Coke (DC) or Diet Pepsi (DP) they consume. Suppose further that P_DC < P_DP. If P_DC

rises to a point where P_DC > P_DP then the consumption of DC

Select one:

a. Falls from a positive amount to zero

b. Falls from a positive amount to another positive amount.

c. rises.

d. stays at zero.

4.Suppose there are two goods (X and Y). On a traditional graph of a budget line a tripling of all

prices and incomes will

Select one:

a. alter the slope of the budget line only.

b. alter the slope of the budget line as well as the Y-intercept.

c. alter the slope of the budget line as well as the X-intercept.

d. leave the budget line unaltered.

5.Suppose two goods coffee and cream provide the consumer with utility but only if they are

consumed in fixed proportions. An increase in the price of coffee will yield

Select one:

a. a substitution effect and an income effect in opposite directions.

b. a substitution effect and an income effect in the same direction.

c. a substitution effect but no income effect.

d. an income effect but no substitution effect.

6.With only two goods, if the income effect is in the same direction as the substitution effect then the

good is

Select one:

a. normal

b. inferior but not Giffen

c. Giffen

d. There is not enough information to answer.

7.If a good is inferior and its price decreases,

Select one:

a. the income effect will be positive and the substitution effect will be positive.

b. the income effect will be negative and the substitution effect will be negative.

c. the income effect will be positive and the substitution effect will be negative.

d. the income effect will be negative and the substitution effect will be positive.

8.If the prices of all goods increase by the same proportion as income, the quantity demanded of

good X will

Select one:

a. decrease.

b. increase.

c. remain unchanged.

d. change in a way that cannot be determined from the information given.

9.Consider the two statements:

I.X is an inferior good.

II.X exhibits Giffen's Paradox.

Which of the following is true?

Select one:

a. I implies II, but II does not necessarily imply I.

b. II implies I, but I does not necessarily imply II.

c. I and II are statements of the same phenomenon.

10.If a good is inferior and its price increases,

Select one:

a. the income effect will be positive and the substitution effect will be positive.

b. the income effect will be negative and the substitution effect will be negative.

c. the income effect will be positive and the substitution effect will be negative.

d. the income effect will be negative and the substitution effect will be positive.