Chapter 2

Question 1

An price increase will always cause an individual to choose less of that good

Accepted Answer

Substitution effect

Question 2

Demand curve is horizontal, quantity demanded changes infinitely

Accepted Answer

perfectly elastic

Question 3

The demand curve is vertical, and quantity demand does not change when price rises

Accepted Answer

perfectly inelastic

Question 4

The rate at which a consumer is willing to trade one good for another

Accepted Answer

MRS

Question 5

The set of tools designed to analyze data and answer questions raised by theoretical analysis

Accepted Answer

Empirical Tool

Question 6

Indifference curves are always upward sloping

Accepted Answer

False

Question 7

Mathematical or graphical representations of reality.

Accepted Answer

Model

Question 8

The competitive equilibrium, where supply equals demand, maximizes social efficiency.

Accepted Answer

First fundamental theorem of welfare economics

Question 9

Consumers prefer higher indifference curves

Accepted Answer

True

Question 10

A graphical representation of all bundles of goods that make an individual equally well off

Accepted Answer

Indifference curve

Question 11

Redistributing resources among individuals and then allowing them to freely trade

Accepted Answer

Second fundamental theorem of welfare economics

Question 12

Goods for which demand falls as income rises

Accepted Answer

Inferior goods

Question 13

Which one is incorrect

Accepted Answer

Change in the price of one good will not affect other demand

Question 14

Diminishing marginal utility : individual less happy than the consumption of the previous one

Accepted Answer

True

Question 15

The net gains to society from all trades that are made in a market

Accepted Answer

Social efficiency, Social surplus

Question 16

Society should ensure that all individuals have equal opportunities for success

Accepted Answer

Equality of opportunity

Question 17

The combination of price and quantity that satisfies both demand and supply

Accepted Answer

Market Equilibrium

Question 18

The set of tools designed to understand the mechanics behind economic decision making

Accepted Answer

Theoretical Tool

Question 19

Marginal utility is the additional to utility obtained by consuming an additional good

Accepted Answer

True

Question 20

The principle that society should ensure that individuals meet a set of basic needs

Accepted Answer

Commodity egalitarianism

Questions 20