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

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.Ann's income must be

Accepted Answer

A) $3 
B) $6 
C) $12 
D) $24 
E) $36 
A) $3 
B) $6 
C) $12 
D) $24 
E) $36 B

Question 3

A rotation of the budget line indicates a change in the price of one of the goods under consideration.

Accepted Answer

A) True 
 B)False  True

Question 4

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

Accepted Answer

A) 1 
B) 2 
C) 1/3 
D) 5/6 
E) 100 
A) 1 
B) 2 
C) 1/3 
D) 5/6 
E) 100

Question 5

Exhibit 6-25   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, and f. 
B) Points a, b, and c all represent the same level of utility, which is higher than that represented by points d, e, and f. 
C) Points a, c, and e all represent the same level of utility, which is lower than that represented by point b. 
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, and f. 
B) Points a, b, and c all represent the same level of utility, which is higher than that represented by points d, e, and f. 
C) Points a, c, and e all represent the same level of utility, which is lower than that represented by point b. 
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 6

Exhibit 6-29   Which graph in Exhibit 6-29 shows the effect of a decrease in the price of clothing, other things constant?

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 7

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

Question 8

Exhibit 6-29   Which graph in Exhibit 6-29 shows the effect of an increase in the price of clothing and a decrease in the price of food?

Accepted Answer

A) Graph a 
B) Graph b 
C) Graph c 
D) Graph d 
E) none of these 
A) Graph a 
B) Graph b 
C) Graph c 
D) Graph d 
E) none of these

Question 9

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 10

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.

Question 11

Exhibit 6-27   The rotation of the budget line in Exhibit 6-27 from AC to AB represents a(n)

Accepted Answer

A) increase in the price of clams 
B) increase in the price of mussels 
C) decrease in the price of clams 
D) decrease in the price of mussels 
E) increase in the amount the consumer can spend 
A) increase in the price of clams 
B) increase in the price of mussels 
C) decrease in the price of clams 
D) decrease in the price of mussels 
E) increase in the amount the consumer can spend

Question 12

Exhibit 6-25   Point b in Exhibit 6-25 is better than which other point(s)?

Accepted Answer

A) Points a and c because b represents the same utility at a lower level of expenditure. 
B) Points a and c because b represents higher utility at the same level of expenditure. 
C) Points a and c because b represents higher utility at a lower level of expenditure. 
D) Point e only because b represents a lower level of expenditure. 
E) All other points on the graph. 
A) Points a and c because b represents the same utility at a lower level of expenditure. 
B) Points a and c because b represents higher utility at the same level of expenditure. 
C) Points a and c because b represents higher utility at a lower level of expenditure. 
D) Point e only because b represents a lower level of expenditure. 
E) All other points on the graph.

Question 13

What would happen to the budget line if the price of orange juice increased and orange juice is measured on the vertical axis?

Accepted Answer

A) It would shift to the right. 
B) It would rotate outward along the horizontal axis. 
C) It would rotate inward along the horizontal axis. 
D) It would rotate outward along the vertical axis. 
E) It would rotate inward along the vertical axis. 
A) It would shift to the right. 
B) It would rotate outward along the horizontal axis. 
C) It would rotate inward along the horizontal axis. 
D) It would rotate outward along the vertical axis. 
E) It would rotate inward along the vertical axis.

Question 14

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 15

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 16

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

Accepted Answer

A) True 
 B)False

Question 17

A consumer allocates income between clams and mussels.If clams are a normal good, then when the price of clams falls, the consumer will definitely buy

Accepted Answer

A) more clams and more mussels 
B) fewer clams and fewer mussels 
C) more clams and fewer mussels 
D) fewer clams and more mussels 
E) more clams, but the effect of the price change on purchases of mussels cannot be predicted 
A) more clams and more mussels 
B) fewer clams and fewer mussels 
C) more clams and fewer mussels 
D) fewer clams and more mussels 
E) more clams, but the effect of the price change on purchases of mussels cannot be predicted

Question 18

Within the framework of indifference curve analysis, what prevents the individual from purchasing more of all goods?

Accepted Answer

A) Legal prohibitions 
B) Budget constraint 
C) The slope of the indifference curve 
D) Psychological considerations 
E) Diminishing marginal utility 
A) Legal prohibitions 
B) Budget constraint 
C) The slope of the indifference curve 
D) Psychological considerations 
E) Diminishing marginal utility

Question 19

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 horizontal 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 20

If clams and mussels are normal goods, then when the amount the consumer can spend increases,

Accepted Answer

A) purchases of whichever good is preferred will increase, and purchases of the good not preferred will decrease 
B) purchases of both goods will increase 
C) only purchases of the cheaper good will increase 
D) only purchases of the more expensive good will increase 
E) it is unclear what will happen to purchases of clams and mussels 
A) purchases of whichever good is preferred will increase, and purchases of the good not preferred will decrease 
B) purchases of both goods will increase 
C) only purchases of the cheaper good will increase 
D) only purchases of the more expensive good will increase 
E) it is unclear what will happen to purchases of clams and mussels

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?

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.Ann's income must be

A rotation of the budget line indicates a change in the price of one of the goods under consideration.

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

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

Exhibit 6-29 Which graph in Exhibit 6-29 shows the effect of a decrease in the price of clothing, other things constant?

A consumer maximizes utility where the

Exhibit 6-29 Which graph in Exhibit 6-29 shows the effect of an increase in the price of clothing and a decrease in the price of food?

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

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

Exhibit 6-27 The rotation of the budget line in Exhibit 6-27 from AC to AB represents a(n)

Exhibit 6-25 Point b in Exhibit 6-25 is better than which other point(s)?

What would happen to the budget line if the price of orange juice increased and orange juice is measured on the vertical axis?

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?

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

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

A consumer allocates income between clams and mussels.If clams are a normal good, then when the price of clams falls, the consumer will definitely buy

Within the framework of indifference curve analysis, what prevents the individual from purchasing more of all goods?

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 horizontal intercept would be

If clams and mussels are normal goods, then when the amount the consumer can spend increases,

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

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

Filters

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