ESFM2-L3 Score:
1.    Jane spends all her income on goods A and B that are perfect complements
consumed at a ratio of 2 units of good A with 1 unit of good B. If we measure the
amount of good A on the horizontal axis, then the price consumtion curve
A is linear with zero intercept and the slope of 1/2.
B overlaps with the vertical axis.
C is not linear.
D is linear with zero intercept and the slope of 2.
2.    Martin spends his income on goods A and B that are perfect substitutes. He is
willing to substitute these goods at a ratio of 1:1. If we measure the quantity of
good A on the horizontal axis and the price of good A is higher than the price of
good B, then the income consumption curve
A equals to the horizontal axis.
B equals to the vertical axis.
C has the intercept of zero and the slope of 1.
D has a kink.
3.    If the Engel curve of a good is increasing, then the good is
A a bad.
B neutral.
C inferior.
D normal.
4.    The substitution effect can be
A only negative.
B zero or negative.
C negative, zero or positive.
5.    If consumer buys less of good due to a reduction in his income, we can be
certain, that the good is
A ordinary.
B inferior.
C a complement.
D None of the above.
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6.    A consumer with Cobb-Douglas preferences chooses from two goods: X and Y.
Suppose good X is inferior, but not Giffen, and the price of good X goes down, the
total effect of the price change on quantity demanded will be
A lower than if good X was normal.
B higher than if good X was normal.
7.    Goods 1 and 2 are perfect substitutes. At original prices Michael buys only good
1. Then the price of good 2 falls and Michael starts buying only good 2. In that case,
A the substitution effect is zero.
B the income effect is zero.
C both the substitution effect and the income effect are positive.
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