Question 1

Only a change in income can affect a consumer's budget line.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following illustrates the concept of "more is better"?

Accepted Answer

A)  An increase in income shifts the budget line to the right. 
B)  Consumers moving along an indifference curve. 
C)  Higher indifference curves yield higher utility. 
D)  Budget lines closer to the origin represent lower income. 
E)  Sam's indifference curves are steeper than Frazier's. 
A)  An increase in income shifts the budget line to the right. 
B)  Consumers moving along an indifference curve. 
C)  Higher indifference curves yield higher utility. 
D)  Budget lines closer to the origin represent lower income. 
E)  Sam's indifference curves are steeper than Frazier's.

Question 3

At consumer equilibrium between goods F and C, all of the following statements is true except one. Which is the exception?

Accepted Answer

A)  MUF/MUC = PF/PC 
B)  MRS = -PF/PC 
C)  MRS = the absolute value of the slope of the budget line 
D)  utility is maximized subject to the budget constraint 
E)  PF/PC = TUF/TUC 
A)  MUF/MUC = PF/PC 
B)  MRS = -PF/PC 
C)  MRS = the absolute value of the slope of the budget line 
D)  utility is maximized subject to the budget constraint 
E)  PF/PC = TUF/TUC

Question 4

A consumer can afford to move between any two points on his current budget line.

Accepted Answer

A) True 
 B)False

Question 5

If a consumer's income rises,

Accepted Answer

A)  her indifference curves shift inward 
B)  her indifference curves shift outward 
C)  her budget line shifts outward 
D)  her budget line shifts inward 
E)  the slope of her budget line increases 
A)  her indifference curves shift inward 
B)  her indifference curves shift outward 
C)  her budget line shifts outward 
D)  her budget line shifts inward 
E)  the slope of her budget line increases

Question 6

Which of the following statements about indifference curves is not true?

Accepted Answer

A)  The consumer is indifferent among the combinations illustrated along a given curve. 
B)  Every indifference curve intersects the consumer's budget line at least once. 
C)  Indifference curves slope downward. 
D)  Indifference curves are concave (bowed in toward the origin). 
E)  Indifference curves do not intersect. 
A)  The consumer is indifferent among the combinations illustrated along a given curve. 
B)  Every indifference curve intersects the consumer's budget line at least once. 
C)  Indifference curves slope downward. 
D)  Indifference curves are concave (bowed in toward the origin). 
E)  Indifference curves do not intersect.

Question 7

A curve representing combinations of two goods that yield equal total utility is a(n)

Accepted Answer

A)  production possibilities frontier 
B)  demand curve 
C)  supply curve 
D)  marginal utility curve 
E)  indifference curve 
A)  production possibilities frontier 
B)  demand curve 
C)  supply curve 
D)  marginal utility curve 
E)  indifference curve

Question 8

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. If Ann's income increased to $20, the vertical intercept would be

Accepted Answer

A)  $4 
B)  $2 
C)  20 
D)  40 
E)  80 
A)  $4 
B)  $2 
C)  20 
D)  40 
E)  80

Question 9

If the price of apples falls, the substitution effect will cause a consumer to reduce her consumption of apples.

Accepted Answer

A) True 
 B)False

Question 10

Exhibit 6-22  
-If a consumer moves from point a to point b on the indifference curve shown in Exhibit 6-22,

Accepted Answer

A)  the consumer's total utility from food and books remains unchanged 
B)  the consumer's total utility from food and books falls 
C)  the consumer becomes more willing to give up additional units of books in order to consume one more unit of food 
D)  the consumer's willingness to give up additional units of books in order to consume more units of food does not change 
E)  the consumer's total utility from food and books rises 
A)  the consumer's total utility from food and books remains unchanged 
B)  the consumer's total utility from food and books falls 
C)  the consumer becomes more willing to give up additional units of books in order to consume one more unit of food 
D)  the consumer's willingness to give up additional units of books in order to consume more units of food does not change 
E)  the consumer's total utility from food and books rises

Question 11

All combinations of goods along a budget line are affordable with a given level of income.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 6-30  
-Consider Exhibit 6-30. Assume that you initially have $600 to spend on books and compact disks. What happens if the amount you have to spend increases to $800?

Accepted Answer

A)  The budget line shifts inward along the horizontal axis. 
B)  The budget line shifts inward along the vertical axis. 
C)  The budget line shifts outward along the horizontal axis and the vertical axis. 
D)  The budget line shifts outward along the vertical axis. 
E)  The budget line shifts outward along the horizontal axis. 
A)  The budget line shifts inward along the horizontal axis. 
B)  The budget line shifts inward along the vertical axis. 
C)  The budget line shifts outward along the horizontal axis and the vertical axis. 
D)  The budget line shifts outward along the vertical axis. 
E)  The budget line shifts outward along the horizontal axis.

Question 13

Exhibit 6-24  
-Which of the following represents a correct preference ordering for the indifference map represented in Exhibit 6-24?

Accepted Answer

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

Question 14

If a good is offered to a rational individual for free, she will

Accepted Answer

A)  accept unlimited quantities of the good each time period 
B)  stop consuming it when its marginal utility begins to increase 
C)  stop consuming it when its marginal utility begins to diminish 
D)  stop consuming it when its marginal utility equals zero 
E)  stop consuming it when its total utility equals zero 
A)  accept unlimited quantities of the good each time period 
B)  stop consuming it when its marginal utility begins to increase 
C)  stop consuming it when its marginal utility begins to diminish 
D)  stop consuming it when its marginal utility equals zero 
E)  stop consuming it when its total utility equals zero

Question 15

Exhibit 6-31  
-Assume that a consumer is initially in equilibrium at point a in Exhibit 6-31. Then the price of good B falls. The movement from point a to point b represents

Accepted Answer

A)  the substitution effect 
B)  the income effect 
C)  the substitution effect minus the income effect 
D)  the sum of the substitution and income effects 
E)  the income effect minus the substitution effect 
A)  the substitution effect 
B)  the income effect 
C)  the substitution effect minus the income effect 
D)  the sum of the substitution and income effects 
E)  the income effect minus the substitution effect

Question 16

All combinations of goods along the same indifference curve have the same cost to a consumer.

Accepted Answer

A) True 
 B)False

Question 17

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 increased?

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 18

-Which of the following is true of Exhibit 6-25?

Accepted Answer

A)  Points a, b, and c all represent the same level of utility, which is lower than that represented by points d, e, andB. 
B)  Points a, b, and c all represent the same level of utility, which is higher than that represented by points d, e, and B 
C)  Points a, c, and e all represent the same level of utility, which is lower than that represented by point 
D)  Points a, c, and e all represent the same level of utility, which is higher than that represented by point b. 
E)  Point d represents a level of utility higher than any other point on the graph. 
A)  Points a, b, and c all represent the same level of utility, which is lower than that represented by points d, e, andB. 
B)  Points a, b, and c all represent the same level of utility, which is higher than that represented by points d, e, and B 
C)  Points a, c, and e all represent the same level of utility, which is lower than that represented by point 
D)  Points a, c, and e all represent the same level of utility, which is higher than that represented by point b. 
E)  Point d represents a level of utility higher than any other point on the graph.

Question 19

__________ utility is constant along a given indifference curve.

Accepted Answer

A)  Marginal 
B)  Average 
C)  Total 
D)  Incremental 
E)  Mean 
A)  Marginal 
B)  Average 
C)  Total 
D)  Incremental 
E)  Mean

Question 20

The slope of the budget line is measured in units of income.

Accepted Answer

A) True 
 B)False

Exam 6: Appendix: Indifference Curves and Utility Maximization

Only a change in income can affect a consumer's budget line.

Which of the following illustrates the concept of "more is better"?

At consumer equilibrium between goods F and C, all of the following statements is true except one. Which is the exception?

A consumer can afford to move between any two points on his current budget line.

If a consumer's income rises,

Which of the following statements about indifference curves is not true?

A curve representing combinations of two goods that yield equal total utility is a(n)

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. If Ann's income increased to $20, the vertical intercept would be

If the price of apples falls, the substitution effect will cause a consumer to reduce her consumption of apples.

Exhibit 6-22 -If a consumer moves from point a to point b on the indifference curve shown in Exhibit 6-22,

All combinations of goods along a budget line are affordable with a given level of income.

Exhibit 6-30 -Consider Exhibit 6-30. Assume that you initially have $600 to spend on books and compact disks. What happens if the amount you have to spend increases to $800?

Exhibit 6-24 -Which of the following represents a correct preference ordering for the indifference map represented in Exhibit 6-24?

If a good is offered to a rational individual for free, she will

Exhibit 6-31 -Assume that a consumer is initially in equilibrium at point a in Exhibit 6-31. Then the price of good B falls. The movement from point a to point b represents

All combinations of goods along the same indifference curve have the same cost to a consumer.

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 increased?

-Which of the following is true of Exhibit 6-25?

__________ utility is constant along a given indifference curve.

The slope of the budget line is measured in units of income.

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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