B is $2, and assuming you can only purchase whole units (not fractional) of A
and B, how many units of A and B should he/she purchase?
a) 2 units of A and 4 units of B.
b) 4 units of A and 3 units of B.
c) 6 units of A and 2 units of B.
d) 0 units of A and 5 units of B.
Ans: B
Difficulty: Medium
Heading: Three Key Analytical Tools
LO 2 Describe the concepts of constrained optimization, equilibrium analysis, and
comparative statics.
20. An exogenous variable in a consumer’s choice problem would typically be:
a) satisfaction level.
b) consumption level.
c) price level.
d) quantity consumed.
Ans: C
Difficulty: Medium
Heading: Three Key Analytical Tools
LO 2 Describe the concepts of constrained optimization, equilibrium analysis, and
comparative statics.
21. Suppose the price of X is $15 per unit, the price of Y is $12 per unit, the
consumer’s income is $100, and the consumer’s level of satisfaction is
measured by XY + Y . The consumer’s constraint is
a) X + Y ≤ 100
b) max XY
c) 15X + 12Y ≤ 100
d) Max XY + Y
Ans: C
Difficulty: Medium
Heading: Three Key Analytical Tools
LO 2 Describe the concepts of constrained optimization, equilibrium analysis, and
comparative statics.
22. A good example of marginal reasoning would be
7
a) the addition to total sales from spending an additional dollar on
advertising.
b) the sales resulting from total spending on advertising.
c) the decision to shut down production.
d) the decision to maximize profits rather than sales.
Ans: A
Difficulty: Medium
Heading: Three Key Analytical Tools
LO 2 Describe the concepts of constrained optimization, equilibrium analysis, and
comparative statics.
23. What term in microeconomics tells us how a dependent variable changes as a
result of adding one unit of an independent variable
a) Equilibrium impact.
b) Comparative statics.
c) Independent impact.
d) Marginal impact.
Ans: D
Difficulty: Easy
Heading: Three Key Analytical Tools
LO 2 Describe the concepts of constrained optimization, equilibrium analysis, and
comparative statics.
24. An equilibrium
a) is a condition that is reached eventually in any market.
b) is a state that will continue indefinitely as long as exogenous factors
remain unchanged.
c) is a concept that is often meaningless because most markets never
reach equilibrium.
d) is a temporary state.
Ans: B
Difficulty: Easy
Heading: Three Key Analytical Tools
LO 2 Describe the concepts of constrained optimization, equilibrium analysis, and
comparative statics.
25. Identify the truthfulness of the following statements:
I. Marginal analysis can explain why you would always choose to eat
Chinese food rather than pizza.
II. Marginal analysis can explain the incremental impact of an increase in
8
total cost when one more unit of output is produced.
a) Both I and II are true.
b) Both I and II are false.
c) I is true; II is false.
d) I is false; II is true.
Ans: D
Difficulty: Easy
Heading: Three Key Analytical Tools
LO 2 Describe the concepts of constrained optimization, equilibrium analysis, and
comparative statics.
26. Identify the truthfulness of the following statements:
I. Equilibrium analysis helps economists determine the market-clearing
price.
II. Comparative statics help economists analyze how a change in an
exogenous variable affects the level of a related endogenous variable in an
economic model.
a) Both I and II are false.
b) Both I and II are true.
c) I is true; II is false.
d) I is false; II is true.
Ans: B
Difficulty: Easy
Heading: Three Key Analytical Tools
LO 2 Describe the concepts of constrained optimization, equilibrium analysis, and
comparative statics.
27. Another term for equilibrium would be
a) a point of infinite supply.
b) a point of insatiable wants.
c) a point of stability.
d) a point of scarcity.
Ans: C
Difficulty: Easy
Heading: Three Key Analytical Tools
LO 2 Describe the concepts of constrained optimization, equilibrium analysis, and
comparative statics.
28. Comparative statics
a) examines how exogenous variables change as endogenous factors
9
change.
b) examines how endogenous variables change as exogenous factors
change.
c) presents a comparison of two separate markets at a single point in
time.
d) is often rendered useless because exogenous variables can never be
expected to remain constant for long.
Ans: B
Difficulty: Easy
Heading: Three Key Analytical Tools