ECON 3006 – The consumer is consuming Blank
Question 1
1. Consider the following Diagram At point B, the consumer is consuming Blank 1 than at point D, and Blank 2 (more/less/equal) leisure (more/less/equal) consumption good than at point D
At point A, the consumer is consuming Blank 3 than at point D, and Blank 4
point D
10 points
Question 2
1. Consider the following Diagram. (more/less/equal) leisure (more/less/equal) consumption good than at The consumer prefers (strictly) A to B
True False 10 points
Question 3 Consider the following Diagram Suppose that the consumer chooses Leisure=h…
Choosing Leisure=h means that the consumer doens’t work at all. It can afford to
consume only because profits are greater than government transfers
Choosing Leisure=h means that the consumer works all the time, and so when Leisure=h
the consumer can afford the highest level of consumption good Choosing Leisure=h means that the consumer
can’t afford any consumption good doens’t work at all, and for this reason she Choosing Leisure=h means that the consumer works all the time, and for this reason
she can afford any level of consumption good 10 points
Question 4
1. Consider the following Diagram The absolute value of the slope of the segment AB is…
The relative price of leisure (the wage) divided by the relative price of the
consumption good – which is also called the real wage w
The relative price of leisure the consumption good divided by the relative price of leisure
(the wage) The profit from owning the firm Government transfers
10 points
Question 5
1. Consider the following Diagram From this picture, you can see that…
The substitution effect (OF) dominates the income effect (OH), and leisure grows The substitution effect (OF) is dominated by the income effect (OH), and leisure
grows The substitution effect (OH) dominates the income effect (OF), and leisure falls
The substitution effect (OF) dominates the income effect (OH), and leisure falls 10 points Question 6
1. Consider a production function Y=zF(K,N d ) What is z?
The capital input (machines, computers, etc) Gross Domestic Product The Labor Input (workers)
Productivity level or Total Factor Productivity
10 points
Question 7
1. Consider a production function Y=zF(K,Nd) Which of the following properties we assume for F?
1. Constant returns to scale.
2. Output increases with increases in either the labor input or the capital input
3. The marginal product of labor decreases as the labor input increases.
4. The marginal product of capital decreases as the capital input increases.
5. The marginal product of labor increases as the quantity of the capital input increases. 1,2,3,4 and 5 1,2,3 and 4 1,2,3
Only 1 and 2 10 points
Question 8
1. Consider the following diagram Suppose the income effect is dominated by the substitution effect, and government
transfers T fall…which picture best represents what will happen? a. b.
Nothing will change
c. d. points
Question 9
1. Consider the following diagram Suppose the income effect dominates the substitution effect, and government transfers T
fall…which picture best represents what will happen? a.
Nothing will change
b. c. d. 10 points
Question 10
1. Consider the following Diagram At point A…
The marginal cost (w, the market wage) is greater than the marginal benefit (the marginal
product of labor). Profits are equal to AB, and they could get higher it the firm chose a
lower level of labor The marginal cost (w, the market wage) is lower than the marginal benefit (the marginal
product of labor). Profits are equal to AB, and they could get higher it the firm chose a
higher level of labor The marginal cost (w, the market wage) is equal to the marginal benefit (the marginal
product of labor). Profits are equal to AB, but they could get higher it the firm chose a lower
level of labor The marginal cost (w, the market wage) equals the marginal benefit (the marginal
product of labor). Profits are equal to AB, and they are as high as they can be
