Question 1

Exhibit 6-24  
-Along indifference curve I1 in Exhibit 6-24 which point would an individual prefer?

Accepted Answer

A)  point a 
B)  point b 
C)  point e 
D)  point f 
E)  prefers all equally 
A)  point a 
B)  point b 
C)  point e 
D)  point f 
E)  prefers all equally E

Question 2

Which of the following is not a characteristic of indifference curves?

Accepted Answer

A)  They do not intersect. 
B)  They are bowed out from the origin. 
C)  They slope downward. 
D)  Total utility on each curve is constant. 
E)  Total utility levels are greater on curves that are farther from the origin. 
A)  They do not intersect. 
B)  They are bowed out from the origin. 
C)  They slope downward. 
D)  Total utility on each curve is constant. 
E)  Total utility levels are greater on curves that are farther from the origin. B

Question 3

If the marginal utilities per dollar are not equal among the final set of goods Joe is planning to consume, he can increase his total utility by changing the amounts of what he intends to purchase.

Accepted Answer

A) True 
 B)False  True

Question 4

Combinations of goods along an indifference curve reflect a level of utility that is

Accepted Answer

A)  constant and measured by a specific number 
B)  variable along the curve and measured by specific numbers 
C)  variable along the curve, though unspecified 
D)  constant, though unspecified 
E)  inelastic above the midpoint and elastic below the midpoint 
A)  constant and measured by a specific number 
B)  variable along the curve and measured by specific numbers 
C)  variable along the curve, though unspecified 
D)  constant, though unspecified 
E)  inelastic above the midpoint and elastic below the midpoint

Question 5

The slope of an indifference curve is equal to the

Accepted Answer

A)  marginal rate of substitution 
B)  price elasticity of demand 
C)  marginal utility of the good measured on the horizontal axis 
D)  marginal utility of the good measured on the vertical axis 
E)  relative price of the good measured on the horizontal axis 
A)  marginal rate of substitution 
B)  price elasticity of demand 
C)  marginal utility of the good measured on the horizontal axis 
D)  marginal utility of the good measured on the vertical axis 
E)  relative price of the good measured on the horizontal axis

Question 6

If a consumer allocates income between goods x and y, consumer equilibrium occurs when

Accepted Answer

A)  the indifference curve farthest from the origin is reached 
B)  MUx/Px = MUy/Py and the budget is exhausted 
C)  marginal utility is maximized 
D)  MUx = MUy for the last unit consumed of each good 
E)  consumer surplus equals 0 
A)  the indifference curve farthest from the origin is reached 
B)  MUx/Px = MUy/Py and the budget is exhausted 
C)  marginal utility is maximized 
D)  MUx = MUy for the last unit consumed of each good 
E)  consumer surplus equals 0

Question 7

Although some of the statements below are true of both normal goods and inferior goods, only one of the statements defines a normal good. Which one?

Accepted Answer

A)  Normal goods are those for which the demand curve slopes downward. 
B)  Normal goods are those for which indifference curves slope downward. 
C)  Normal goods are those whose demand curves shift rightward when income increases. 
D)  Normal goods are those whose indifference curves shift rightward when income increases. 
E)  Normal goods are those for which demand decreases when price increases. 
A)  Normal goods are those for which the demand curve slopes downward. 
B)  Normal goods are those for which indifference curves slope downward. 
C)  Normal goods are those whose demand curves shift rightward when income increases. 
D)  Normal goods are those whose indifference curves shift rightward when income increases. 
E)  Normal goods are those for which demand decreases when price increases.

Question 8

The slope of a budget line with x on the vertical axis and y on the horizontal axis equals

Accepted Answer

A)  (-income/Px) / (income/Py) 
B)  (income - Px) / (income - Py) 
C)  (income + Px) / (income + Py) 
D)  (Px - Py) / (Px + Py) 
E)  (Px + Py) / (Py - Px) 
A)  (-income/Px) / (income/Py) 
B)  (income - Px) / (income - Py) 
C)  (income + Px) / (income + Py) 
D)  (Px - Py) / (Px + Py) 
E)  (Px + Py) / (Py - Px)

Question 9

A candy bar sells for 50 cents, video games are 25 cents each, the horizontal (candy) intercept of Ann's budget line is 12, and the vertical (video game) intercept of Ann's budget line is 24. Which of the following best describes what would happen to the budget line if Ann's income decreased?

Accepted Answer

A)  It would shift rightward to a parallel position. 
B)  It would shift rightward to a nonparallel position. 
C)  It would shift leftward to a parallel position. 
D)  It would shift leftward to a nonparallel position. 
E)  Nothing. 
A)  It would shift rightward to a parallel position. 
B)  It would shift rightward to a nonparallel position. 
C)  It would shift leftward to a parallel position. 
D)  It would shift leftward to a nonparallel position. 
E)  Nothing.

Question 10

Exhibit 6-29  
-Which graph in Exhibit 6-29 shows an increase in the price of food?

Accepted Answer

A)  Graph a 
B)  Graph b 
C)  Graph c 
D)  Graph d 
E)  Graph e 
A)  Graph a 
B)  Graph b 
C)  Graph c 
D)  Graph d 
E)  Graph e

Question 11

People change their consumption choices in response to changes in price because of

Accepted Answer

A)  the income effect and the substitution effect 
B)  the substitution effect 
C)  the utility effect 
D)  the income effect 
E)  both the income effect and the utility effect 
A)  the income effect and the substitution effect 
B)  the substitution effect 
C)  the utility effect 
D)  the income effect 
E)  both the income effect and the utility effect

Question 12

Exhibit 6-30  
-Consider Exhibit 6-30. Assume that you have $600 to spend on books and compact disks. What is the current price of compact disks?

Accepted Answer

A)  $1 
B)  $5 
C)  $10 
D)  $60 
E)  unable to determine 
A)  $1 
B)  $5 
C)  $10 
D)  $60 
E)  unable to determine

Question 13

Exhibit 6-24  
-Which point in Exhibit 6-24 yields the greatest amount of total satisfaction?

Accepted Answer

A)  point a 
B)  point b 
C)  point c 
D)  point d 
E)  point e 
A)  point a 
B)  point b 
C)  point c 
D)  point d 
E)  point e

Question 14

If a good is inferior, an increase in income will shift the budget line to the left.

Accepted Answer

A) True 
 B)False

Question 15

For inferior goods, a rise in price causes

Accepted Answer

A)  negative income and substitution effects 
B)  positive income and substitution effects 
C)  a negative income effect and a positive substitution effect 
D)  a positive income effect and a negative substitution effect 
E)  a positive income effect but no substitution effect 
A)  negative income and substitution effects 
B)  positive income and substitution effects 
C)  a negative income effect and a positive substitution effect 
D)  a positive income effect and a negative substitution effect 
E)  a positive income effect but no substitution effect

Question 16

Exhibit 6-23  
-In Exhibit 6-23, the marginal rate of substitution of clothing for food between points b and c is

Accepted Answer

A)  unable to be determined 
B)  2 
C)  1/3 
D)  less than 1/3 
E)  0 
A)  unable to be determined 
B)  2 
C)  1/3 
D)  less than 1/3 
E)  0

Question 17

Exhibit 6-24  
-Which of the combinations of Good A and Good B in Exhibit 6-24 would an individual prefer?

Accepted Answer

A)  point a 
B)  point b 
C)  point d 
D)  point e 
E)  point f 
A)  point a 
B)  point b 
C)  point d 
D)  point e 
E)  point f

Question 18

If a consumer purchases only one good, she must be on either the vertical or the horizontal intercept of her budget line.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 6-30  
-Consider Exhibit 6-30. Assume that you have $600 to spend on books and compact disks. What is the current price of books?

Accepted Answer

A)  $1 
B)  $5 
C)  $10 
D)  $60 
E)  unable to determine 
A)  $1 
B)  $5 
C)  $10 
D)  $60 
E)  unable to determine

Question 20

A consumer maximizes utility where the

Accepted Answer

A)  budget line intersects an indifference curve 
B)  budget line is tangent to an indifference curve 
C)  distance between the budget line and an indifference curve is greatest 
D)  indifference curve farthest from the origin intersects the budget line twice 
E)  area between the indifference curve and the budget line is the greatest 
A)  budget line intersects an indifference curve 
B)  budget line is tangent to an indifference curve 
C)  distance between the budget line and an indifference curve is greatest 
D)  indifference curve farthest from the origin intersects the budget line twice 
E)  area between the indifference curve and the budget line is the greatest

Exam 6: Appendix: Indifference Curves and Utility Maximization

Exhibit 6-24 -Along indifference curve I1 in Exhibit 6-24 which point would an individual prefer?

Which of the following is not a characteristic of indifference curves?

If the marginal utilities per dollar are not equal among the final set of goods Joe is planning to consume, he can increase his total utility by changing the amounts of what he intends to purchase.

Combinations of goods along an indifference curve reflect a level of utility that is

The slope of an indifference curve is equal to the

If a consumer allocates income between goods x and y, consumer equilibrium occurs when

Although some of the statements below are true of both normal goods and inferior goods, only one of the statements defines a normal good. Which one?

The slope of a budget line with x on the vertical axis and y on the horizontal axis equals

A candy bar sells for 50 cents, video games are 25 cents each, the horizontal (candy) intercept of Ann's budget line is 12, and the vertical (video game) intercept of Ann's budget line is 24. Which of the following best describes what would happen to the budget line if Ann's income decreased?

Exhibit 6-29 -Which graph in Exhibit 6-29 shows an increase in the price of food?

People change their consumption choices in response to changes in price because of

Exhibit 6-30 -Consider Exhibit 6-30. Assume that you have $600 to spend on books and compact disks. What is the current price of compact disks?

Exhibit 6-24 -Which point in Exhibit 6-24 yields the greatest amount of total satisfaction?

If a good is inferior, an increase in income will shift the budget line to the left.

For inferior goods, a rise in price causes

Exhibit 6-23 -In Exhibit 6-23, the marginal rate of substitution of clothing for food between points b and c is

Exhibit 6-24 -Which of the combinations of Good A and Good B in Exhibit 6-24 would an individual prefer?

If a consumer purchases only one good, she must be on either the vertical or the horizontal intercept of her budget line.

Exhibit 6-30 -Consider Exhibit 6-30. Assume that you have $600 to spend on books and compact disks. What is the current price of books?

A consumer maximizes utility where the

The Art and Science of Economic Analysis

Appendix: Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix: price Elasticity and Tax Incidence

Consumer Choice and Demand

Production and Cost in the Firm

Appendix: a Closer Look at Production and Cost

A: perfect Competition

B: perfect Competition

A: monopoly

B: Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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Exhibit 6-24 -Along indifference curve I₁ in Exhibit 6-24 which point would an individual prefer?