Exam
Name___________________________________

VOCABULARY.  Define each term or phrase in the space provided or on a separate sheet of paper. 

1) 

A finite quantity of resources that is available to meet society's needs. 

2) 

The rate of exchange of pairs of consumption goods or services to leave utility or satisfaction unchanged. 

3) 

The consumption bundle that maximizes total utility and is feasible as defined by the budget constraint. 

4) 

Reflects what a $1 today would have purchased in goods and services in a particular base period. 

5) 

The schedule that shows how many units of a good that the consumer will purchase at different income levels, all other factors constant. 

6) 

Marginal utility declines as more of a good or service is consumed during a specified period of time. 

7) 

Defined by the income available for consumption and the prices that a consumer faces. 

SHORT ANSWER.  Write the word or phrase that best completes each statement or answers the question. 

8) 

A measure of the response of consumption of a good or service to changes in the price of another good or service. 

8)  

_____________ 

VOCABULARY.  Define each term or phrase in the space provided or on a separate sheet of paper. 

9) 

Decrease (increase) in price of a product means the consumer can afford to buy more (less) of the product. 

10) 

The value of food expenditures contributed by firms beyond the farm gate. 

11) 

A graph of the locus of consumption bundles that provide a consumer a given level of satisfaction. 

12) 

Branch of economics that focuses on the economic actions of individuals or specific groups of individuals. 

13) 

A branch of economics that focuses on the broad aggregates, such as the growth of gross domestic product, the money supply, the stability of prices, and the level of employment. 

14) 

The economic sacrifice of not doing something else or foregoing another opportunity. 

15) 

The level of output per unit of input. 

16) 

Goods for which consumption falls (rises) when income increases (decreases). 

17) 

As disposable income of a consumer increases, the percentage of income spent for food decreases if all other things remain constant. 

18) 

Shift in the demand curve caused generally by changes in the prices of complements or substitutes, income, and tastes and preferences. 

19) 

A mathematical or functional representation of the satisfaction a consumer derives from a consumption bundle. 

20) 

A measure of the relative response of consumption of a good or service to changes in price. 

21) 

Personal income after the payment of tax obligations. 

22) 

Substitution of a product for another because the price of the former has declined or increased. 

23) 

The assumption that all other factors that might affect demand are held constant during the time period. 

24) 

A measure of the relative response of demand to income changes. 

SHORT ANSWER.  Write the word or phrase that best completes each statement or answers the question. 

Using the graph, please fill in the blanks for the following questions.

 

25) 

If the price of hamburgers is $1.25, what is size of the budget represented by the budget constraint BA? 

25)  

_____________ 

26) 

What happened to cause the budget constraint to shift from line BA to line DB? 

26)  

_____________ 

27) 

What happened to cause the budget constraint to shift from line BA to line BG? 

27)  

_____________ 

28) 

Can we determine a demand schedule for tacos from this graph? 

28)  

_____________ 

Given this graph, please fill in the blanks for the following questions.
Point A on the graph was said to represent consumer equilibrium. 

 

29) 

Point B does not represent consumer equilibrium because 

29)  

_____________ 

30) 

Point C does not represent consumer equilibrium because 

30)  

_____________ 

31) 

Point D does not represent consumer equilibrium because 

31)  

_____________ 

Given the graph depicted, please fill in the blanks for the following questions.

 

32) 

The overall elasticity of this demand curve can be categorized as ________. 

32)  

_____________ 

33) 

An increase in the quantity coming onto this market will result in a(n) ________ in revenue to producers of this product. 

33)  

_____________ 

34) 

This increase in quantity coming onto the market will result in a ________ the demand curve. 

34)  

_____________ 

35) 

We refer to this as a ________. 

35)  

_____________ 

Use this data to fill in the blanks for the following questions.
The Dixie Chicken sells 1,500 Freddie Burger platters per month at $3.50 each.
The own price elasticity for this platter is estimated to be -1.30. 
If the Chicken reduces the price of the platter by 50 cents

 

36) 

How many platters will the Chicken sell? 

36)  

_____________ 

37) 

What will happen to the Chicken's monthly revenue $ ________. 

37)  

_____________ 

38) 

Consumers will be ________ off as a result of this price change. 

38)  

_____________ 

39) 

Because the demand curve for these platters is ________. 

39)  

_____________ 

Use this data to fill in the blanks for the following questions.
The own price elasticity of demand for rice was said to be -.1467 while the income elasticity for rice was said to be -.3664.  Given this information, please complete the following blanks

 

40) 

A 10 percent increase in the quantity of rice coming onto the market would cause the price of rice to ________ by ________ percent. 

40)  

_____________ 

41) 

The elasticity of the demand curve is ________. 

41)  

_____________ 

42) 

The income elasticity of demand for rice suggests that rice is an ________ good as income increases. 

42)  

_____________ 

43) 

A 10 percent increase in income would cause the demand for rice to ________ by ________ percent. 

43)  

_____________ 

Use this data to fill in the blanks for the following questions.
The cross price elasticity for beef with respect to chicken is 0.0572.  The cross price elasticity for chicken with respect to beef, however, is 0.2927. 

 

44) 

If the price of beef rose 10 percent, the demand for chicken would ________. 

44)  

_____________ 

45) 

If the price of chicken rose by 10 percent the demand for beef would ________ by only ________ percent. 

45)  

_____________ 

TRUE/FALSE.  Write 'T' if the statement is true and 'F' if the statement is false. 

46) 

Normal goods are goods for which consumption falls (rises) when income increases (decreases).  

46) 

______ 

47) 

The consumer is at equilibrium when the marginal rate of substitution is equal to the slope of the budget line. 

47) 

______ 

48) 

A good is said to be both normal and a necessity if the income elasticity of demand is greater than 1.0. 

48) 

______ 

MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question. 

49) 

Hill's Pet Nutrition, Inc. of Topeka, Kansas has three alternatives for manufacturing pet foods
Alternative 1 Manufacture cat food alone and obtain a profit of $20 million.
Alternative 2 Manufacture dog food alone and obtain a profit of $30 million.
Alternative 3 Manufacture both dog food and cat food and obtain a profit of $45 million.
The opportunity cost of the firm is 

49) 

______ 

A) 

$45 million. 

B) 

$15 million. 

C) 

 $20 million. 

D) 

$30 million. 

50) 

Economic reasoning that is true for one individual but not for society as a whole is referred to as 

50) 

______ 

A) 

Generalization. 

B) 

Fallacy of composition. 

C) 

Specialization. 

D) 

None of the above. 

51) 

The Latin phrase, ceteris paribus, means 

51) 

______ 

A) 

Everything else the same, or holding all other factors constant. 

B) 

The rational consumer maximizes satisfaction. 

C) 

Agricultural economics is an applied social science. 

D) 

Let the buyer beware. 

52) 

The U.S. economy represents what kind of economic system? 

52) 

______ 

A) 

Capitalistic 

B) 

Socialistic 

C) 

Mixed 

D) 

Communistic 

53) 

The output produced in bushels and the price of this output ($/bushel) for Robert Holden over the last three years are as follows

Year	Output	Price	Consumer Price Index
1998	7,000	$3.20	1.10
1999	7,500	$2.90	1.20
2000	8,000	$2.80	1.15

Assume that the only source of income for Robert Holden is from the production of this output.  The best year in terms of real income for Robert Holden was 

53) 

______ 

A) 

1999 

B) 

1998 

C) 

2000 

D) 

Insufficient information. 

54) 

According to the chart below, which bundle is preferred?

Bundle	Number of Wings  	Bottles of Coca-Cola	Total Utility	
(a)	3	       3	18	
(b)	6	       4	48	
(c)	9	       2	36	
(d)	12	       1	24	

54) 

______ 

A) 

(a) 

B) 

(b) 

C) 

(c) 

D) 

(d) 

55) 

The food and fiber industry today accounts for roughly what percent of GDP in the United States? 

55) 

______ 

A) 

16-20% 

B) 

4-7% 

C) 

12-15% 

D) 

8-11% 

56) 

The GDP for the U.S. economy in the year 2000 was in the range of 

56) 

______ 

A) 

$9 to $10 trillion. 

B) 

$7 to $8 trillion. 

C) 

$11 to $12 trillion. 

D) 

$13 to $14 trillion. 

57) 

Which of the following is true? 

57) 

______ 

A) 

If the cross-price elasticity of demand between two goods is negative, then the  two goods are complements. 

B) 

The law of demand states that as the price of a commodity rises, the change in consumer surplus is negative. 

C) 

The law of diminishing marginal utility states that total utility declines as more of a good is consumed. 

D) 

If the income elasticity of demand for a good is greater than 0, then the good is labeled as inferior. 

Consider the graph shown when answering the following question.

 

58) 

The counter-clockwise rotation of this diagram may be best explained as 

58) 

______ 

A) 

The price of Coca-Cola rose. 

B) 

Total income for the consumer fell. 

C) 

The price of Pepsi fell. 

D) 

The price of Pepsi rose. 

59) 

Suppose the index of prices received by farmers for 2000 was 1.02 and the base year of this index was 1995.  Then 

59) 

______ 

A) 

Relative to 2000, farm prices were 102% higher in 1995. 

B) 

Relative to 1995, farm prices were 2% higher in 2000. 

C) 

Relative to 2000, farm prices were 2% higher in 1995. 

D) 

Relative to 1995, farm prices were 102% higher in 2000. 

60) 

Data for Wilson's Lamb Slaughtering Plant are given below

Year	Pounds of Lamb Slaughtered
1998	100,000
1999	75,000
2000	110,000

Let the base year be 1.0 in 1998.  What is the output index for 1999? 

60) 

______ 

A) 

0.75 

B) 

75 

C) 

1.10 

D) 

1.33 

Consider the graph shown when answering the following question.

 

61) 

The graph depicts  

61) 

______ 

A) 

A budget line. 

B) 

A perfectly elastic demand curve. 

C) 

An Engel curve. 

D) 

A perfectly inelastic demand curve. 

 

1) 

Scarcity 

2) 

Marginal Rate of Substitution 

3) 

Consumer equilibrium 

4) 

Purchasing power 

5) 

Engel curve 

6) 

Law of diminishing marginal utility 

7) 

Budget constraint 

8) 

Cross-price elasticity 

9) 

Income effect 

10) 

Marketing margin 

11) 

Indifference curve 

12) 

Microeconomics 

13) 

Macroeconomics 

14) 

Opportunity cost 

15) 

Productivity 

16) 

Inferior good 

17) 

Engel's law 

18) 

Change in demand 

19) 

Utility function 

20) 

Own-price elasticity 

21) 

Disposable income 

22) 

Substitution effect 

23) 

Ceteris paribus 

24) 

Income elasticity 

25) 

$5.00 

26) 

price of hamburgers fell in half 

27) 

price of hamburgers doubled 

28) 

no 

29) 

exceeds the budgeted constraint 

30) 

utility not maximized 

31) 

costs more than combination at point A 

32) 

inelastic 

33) 

decrease 

34) 

movement along 

35) 

change in quantity demanded 

36) 

1,800 platters 

37) 

up by $150 

38) 

better 

39) 

elastic 

40) 

decrease, 3.664 

41) 

.1476 

42) 

inferior  

43) 

decrease, 3.664 

44) 

increase 

45) 

increase, 0.572 

46) 

FALSE 

47) 

TRUE 

48) 

FALSE 

49) 

B 

50) 

B 

51) 

A 

52) 

C 

53) 

B 

54) 

B 

55) 

B 

56) 

B 

57) 

A 

58) 

D 

59) 

B 

60) 

A 

61) 

B