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Microeconomic Theory Basic Principles and Extensions 12th Edition Nicholson Test Bank Download
Microeconomic Theory Basic Principles and Extensions 12th Edition Nicholson Test Bank Download
2. With only two goods, x and y, if x and y are gross substitutes, a rise in px must necessarily:
a. increase spending in x.
b. reduce spending in x.
c. increase spending in y.
d. reduce spending in y.
ANSWER: c
POINTS: 1
3. Two goods are Hicks (net) substitutes if a rise in the price of one causes a(n):
a. decline in the quantity demanded of the other holding nominal income constant.
b. increase in the quantity demanded of the other holding nominal income constant.
c. decline in the quantity demanded of the other holding utility constant.
d. increase in the quantity demanded of the other holding utility constant.
ANSWER: d
POINTS: 1
6. The primary additional insight provided by expanding the theory of demand from two to three goods is that a pair of
goods may now be:
a. gross substitutes.
b. gross complements.
c. net substitutes.
d. net complements.
ANSWER: d
POINTS: 1
7. "Hicks' Third Law of Demand" states that "most" goods must be:
a. gross substitutes.
b. gross complements.
c. net substitutes.
d. net complements.
ANSWER: c
POINTS: 1
8. Quasi-concavity of utility functions insures that with only two goods, these goods must be:
a. gross substitutes.
b. gross complements.
c. net substitutes.
d. net complements.
ANSWER: c
POINTS: 1
9. If goods x and y are complements, then the cross price elasticity of demand between them will be:
a. positive.
b. negative.
c. zero.
d. infinity.
ANSWER: b
POINTS: 1
11. For the "Composite Commodity Theorem" to hold, all goods in the composite must:
a. have constant prices.
b. have constant relative prices.
c. be used in fixed proportions.
d. be net complements.
ANSWER: b
POINTS: 1
12. The attributes model of consumer choice explains the possibility that an individual does not purchase a particular
good, z by assuming:
a. the person's preferences do not favor z.
b. linear combinations of other goods dominate z.
c. that is less than the marginal utility of income.
d. z is inferior.
ANSWER: b
POINTS: 1
13. Symmetry of net substitution effects is one of the principal conclusions of the theory of utility maximization. Which
two mathematical theorems are used to prove this symmetry?
a. Taylor's Theorem and Fundamental Theorem of Calculus
b. Cauchy's Theorem and DeMoivre's Theorem
c. Lagrangian Theorem and Fundamental Theorem of Calculus
d. Envelope Theorem and Young's Theorem
ANSWER: d
POINTS: 1
Questions 14-17 use the following definitions for an individual who consumes only two goods, x and y:
sy = 1–sx.
= price elasticity of demand for x.
= price elasticity of demand for y.
16. The elasticity of the compensated demand curve can be computed as:
a.
b.
c.
d.
ANSWER: c
POINTS: 1
c.
d. None of these relations hold since the demand function is not homogeneous of degree zero in
ANSWER: b
POINTS: 1
18. For the Cobb-Douglas utility function with two goods, the sum of the own price elasticities of demand must be:
a. 0.
b. -1.
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c. -2.
d. any number between 0 and -4.
ANSWER: c
POINTS: 1