Maximizing Behavior: Sample Quiz

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1. Which of the following would always increase consumers' surplus?

A shift in the demand curve to the left
 A shift in the supply curve to the right
 A price ceiling
 A price floor

2. If a consumer moves upward along an indifference curve, his total utility:

increases.
 decreases.
 first increases; then decreases.
 first decreases; then increases.
 remains the same.

3. Jane says the she hates economics and does not bother to learn it because she can see no possible use for it. An objective economist would tell Jane that she:

may be rationally ignorant.
 would think differently if she understood the concept of present value.
 would think differently if she understood the paradox of value.
 has a most peculiar utility function.

4. The table below shows Jack's demand curve for pizzas. If the price of pizzas is $4.50, what will Jack's consumer surplus be?

Number of Pizzas
Willingness to Pay
1
$9.00
2
$8.00
3
$5.00
4
$2.00
5
$1.00
$13.50
 $12.00
 $9.00
 $8.50
 $.50

5. Stella Bright would be willing to pay $100 to be cast as an extra in a Hollywood movie. Instead she is paid $100 for her work. This situation is a case of:

$200 of producers' surplus.
 $100 of opportunity cost.
 $200 of in-kind gifts.
 present value, but the amount cannot be computed without an interest rate.

6. The fact that some things that are cheap have very large use values to people, whereas other things that are expensive have small use values was known as:

the Paradox of Thrift.
 the Paradox of Value.
 Smith's Dilemma.
 the Labor Theory of Value.

7. Economists argue that cash grants are better than in-kind grants because they offer more options. Which of the following transactions would violate (that is, contradict) this argument?

A person sells $1.00 worth of food stamps for $.90.
 A person sells $1.00 worth of food stamps for $1.00.
 A person sells $1.00 worth of food stamps for $1.10.
 All these transactions are consistent with the argument.

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Copyright Robert Schenk