Question 1

Figure 3.4.1
-Refer to Figure 3.4.1 above. The consumer chooses A on budget line I1 and B on budget line I2. Which of the following statements is NOT true?

Accepted Answer

A)  B is preferred to C. 
B)  A is preferred to B. 
C)  C is preferred to A. 
D)  All of the statements are correct. 
A)  B is preferred to C. 
B)  A is preferred to B. 
C)  C is preferred to A. 
D)  All of the statements are correct.

Question 2

A system of rationing:

Accepted Answer

A)  usually leaves everyone better off. 
B)  Leaves some consumers better off and others worse off. 
C)  usually leaves everyone worse off compared to a free market price system. 
D)  is not part of the traditional market system and cannot be evaluated by the traditional (neoclassical) model of consumer behavior. 
A)  usually leaves everyone better off. 
B)  Leaves some consumers better off and others worse off. 
C)  usually leaves everyone worse off compared to a free market price system. 
D)  is not part of the traditional market system and cannot be evaluated by the traditional (neoclassical) model of consumer behavior.

Question 3

Figure 3.1.2
-Refer to Figure 3.1.2. The shape of an indifference curve like the one in this figure:

Accepted Answer

A)  represents more realistically the preferences of a rational consumer. 
B)  implies that consumer preferences are not complete. 
C)  violates the assumption that more is preferred to less. 
D)  has market baskets that represent different levels of utility. 
A)  represents more realistically the preferences of a rational consumer. 
B)  implies that consumer preferences are not complete. 
C)  violates the assumption that more is preferred to less. 
D)  has market baskets that represent different levels of utility.

Question 4

Sue views hot dogs and hot dog buns as perfect complements in her consumption, and the corners of her indifference curves follow the 45-degree line. Suppose the price of hot dogs is $5 per package (8 hot dogs), the price of buns is $3 per package (8 hot dog buns), and Sue's budget is $48 per month. What is her optimal choice under this scenario?

Accepted Answer

A)  8 packages of hot dogs and 6 packages of buns 
B)  8 packages of hot dogs and 8 packages of buns 
C)  6 packages of hot dogs and 6 packages of buns 
D)  6 packages of hot dogs and 8 packages of buns 
A)  8 packages of hot dogs and 6 packages of buns 
B)  8 packages of hot dogs and 8 packages of buns 
C)  6 packages of hot dogs and 6 packages of buns 
D)  6 packages of hot dogs and 8 packages of buns

Question 5

The price of lemonade is $0.50; the price of popcorn is $1.00. If Fred has maximized his utility by purchasing lemonade and popcorn, his marginal rate of substitution will be:

Accepted Answer

A)  2 lemonades for each popcorn. 
B)  1 lemonades for each popcorn. 
C)  1/2 lemonade for each popcorn. 
D)  indeterminate unless more information on Fred's marginal utilities is provided. 
A)  2 lemonades for each popcorn. 
B)  1 lemonades for each popcorn. 
C)  1/2 lemonade for each popcorn. 
D)  indeterminate unless more information on Fred's marginal utilities is provided.

Question 6

A consumer has $100 per day to spend on product A, which has a unit price of $7, and product B, which has a unit price of $15. What is the slope of the budget line if good A is on the horizontal axis and good B is on the vertical axis?

Accepted Answer

A)  -7/15 
B)  -7/100 
C)  -15/7 
D)  7/15 
A)  -7/15 
B)  -7/100 
C)  -15/7 
D)  7/15

Question 7

At commodity bundle A, which consists of only apples and oranges, Annette's marginal utility per dollar spent on apples is 10 and her marginal utility per dollar spent on oranges is 8. Diagram a representative budget constraint and indifference curve that that passes through bundle A given Annette's budget is exhausted at bundle A. Is Annette maximizing utility? Why or why not? If she is not, what could she do to increase her level of satisfaction?

Accepted Answer

@#IMG-DLM& Annette should buy

Question 8

Alvin's preferences for good X and good Y are shown in the diagram below.
   Figure 3.1.6
-Based on Figure 3.1.6 above, it can be inferred that:

Accepted Answer

A)  Alvin does not consider good X as "good." 
B)  Alvin will never purchase any of good Y. 
C)  Alvin regards good X and good Y as perfect substitutes. 
D)  Alvin regards good X and good Y as perfect complements. 
E)  none of the above 
A)  Alvin does not consider good X as "good." 
B)  Alvin will never purchase any of good Y. 
C)  Alvin regards good X and good Y as perfect substitutes. 
D)  Alvin regards good X and good Y as perfect complements. 
E)  none of the above

Question 9

Sheila can watch as many television programs as she wants for free, but she must pay $2 for each video she rents. Draw Sheila's budget line for t.v. shows (T) and videos (V), and identify the set of affordable bundles (be sure to label the axes). At a particular point on Sheila's budget line, her MRS is 1T/2V. Illustrate this situation on your diagram. Has Sheila maximized her satisfaction at this point? If not, identify a change in consumption that will make her better off. Describe her preferences when satisfaction is maximized.

Accepted Answer

Sheila would be better off if

Question 10

If a consumer prefers basket A to basket B and basket B to basket C, then the consumer also prefers A to C. This assumption is called:

Accepted Answer

A)  completeness. 
B)  transitivity. 
C)  nonsatiation. 
D)  rationality. 
A)  completeness. 
B)  transitivity. 
C)  nonsatiation. 
D)  rationality.

Question 11

Scenario 3.1:
Andy derives utility from two goods, potato chips (Qp) and Cola (Qc). Andy receives zero utility unless he consumes some of at least one good. The marginal utility that he receives from the two goods is given as follows:
  
-Refer to Scenario 3.1. If the price of potato chips is $0.50 and the price of Cola is $4.00, and Andy has an unlimited income, how many units of potato chips will he consume?

Accepted Answer

A)  5 
B)  6 
C)  7 
D)  8 
E)  none of the above 
A)  5 
B)  6 
C)  7 
D)  8 
E)  none of the above

Question 12

The theory of consumer behavior assumes that consumers can compare and rank all possible market baskets. This assumption is called:

Accepted Answer

A)  completeness. 
B)  transitivity. 
C)  nonsatiation (more is preferred to less). 
D)  rationality. 
A)  completeness. 
B)  transitivity. 
C)  nonsatiation (more is preferred to less). 
D)  rationality.

Question 13

Alvin's preferences for good X and good Y are shown in the diagram below.
   Figure 3.1.6
-Envision a graph with meat on the horizontal axis and vegetables on the vertical axis. A strict vegetarian would have indifference curves that are:

Accepted Answer

A)  vertical lines. 
B)  horizontal lines. 
C)  diagonal straight lines. 
D)  right angles. 
E)  upward sloping. 
A)  vertical lines. 
B)  horizontal lines. 
C)  diagonal straight lines. 
D)  right angles. 
E)  upward sloping.

Question 14

Sally consumes two goods, X and Y. Her utility function is given by the expression   The current market price for X is $10, while the market price for Y is $5. Sally's current income is $500.
a. Sketch a set of two indifference curves for Sally in her consumption of X and Y.
b. Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope.
c. Determine the X,Y combination which maximizes Sally's utility, given her budget constraint. Show her optimum point on a graph. (Partial units for the quantities are possible.)   d. Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15. What would happen to her utility as a result of the price increase?

Accepted Answer

a.To draw indifference curves, pick 2 le

Figure 3.4.1 -Refer to Figure 3.4.1 above. The consumer chooses A on budget line I1 and B on budget line I2. Which of the following statements is NOT true?

A system of rationing:

Figure 3.1.2 -Refer to Figure 3.1.2. The shape of an indifference curve like the one in this figure:

The price of lemonade is $0.50; the price of popcorn is $1.00. If Fred has maximized his utility by purchasing lemonade and popcorn, his marginal rate of substitution will be:

A consumer has $100 per day to spend on product A, which has a unit price of $7, and product B, which has a unit price of $15. What is the slope of the budget line if good A is on the horizontal axis and good B is on the vertical axis?

Alvin's preferences for good X and good Y are shown in the diagram below. Figure 3.1.6 -Based on Figure 3.1.6 above, it can be inferred that:

If a consumer prefers basket A to basket B and basket B to basket C, then the consumer also prefers A to C. This assumption is called:

The theory of consumer behavior assumes that consumers can compare and rank all possible market baskets. This assumption is called:

Alvin's preferences for good X and good Y are shown in the diagram below. Figure 3.1.6 -Envision a graph with meat on the horizontal axis and vegetables on the vertical axis. A strict vegetarian would have indifference curves that are:

Preliminaries

The Basics of Supply and Demand

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment, Time, and Capital Markets

General Equilibrium and Economic Efficiency

Markets With Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Exam 3: Consumer Behavior

Figure 3.4.1 -Refer to Figure 3.4.1 above. The consumer chooses A on budget line I1 and B on budget line I2. Which of the following statements is NOT true?

A system of rationing:

Figure 3.1.2 -Refer to Figure 3.1.2. The shape of an indifference curve like the one in this figure:

The price of lemonade is $0.50; the price of popcorn is $1.00. If Fred has maximized his utility by purchasing lemonade and popcorn, his marginal rate of substitution will be:

A consumer has $100 per day to spend on product A, which has a unit price of $7, and product B, which has a unit price of $15. What is the slope of the budget line if good A is on the horizontal axis and good B is on the vertical axis?

Alvin's preferences for good X and good Y are shown in the diagram below. Figure 3.1.6 -Based on Figure 3.1.6 above, it can be inferred that:

If a consumer prefers basket A to basket B and basket B to basket C, then the consumer also prefers A to C. This assumption is called:

The theory of consumer behavior assumes that consumers can compare and rank all possible market baskets. This assumption is called:

Alvin's preferences for good X and good Y are shown in the diagram below. Figure 3.1.6 -Envision a graph with meat on the horizontal axis and vegetables on the vertical axis. A strict vegetarian would have indifference curves that are:

Preliminaries

The Basics of Supply and Demand

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment, Time, and Capital Markets

General Equilibrium and Economic Efficiency

Markets With Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters