Question 1

Which of the following would not cause the budget line between books and food to shift?

Accepted Answer

A) A fall in the price of books. 
B) A fall in the price of food. 
C) A change in the consumer's preferences. 
D) A fall in income. 
E) A fall in income coupled with a rise in the price of food. 
A) A fall in the price of books. 
B) A fall in the price of food. 
C) A change in the consumer's preferences. 
D) A fall in income. 
E) A fall in income coupled with a rise in the price of food.

Question 2

If two goods have the same price, a consumer will buy equal quantities of those two goods.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Exhibit 6-25   At point b in Exhibit 6-25, the consumer's utility is

Accepted Answer

A) higher than at points a and c, but the total cost of the goods is the same 
B) the same as at points a and c, but the total cost of the goods is lower 
C) the same as at points a and c, but the total cost of the goods is higher 
D) lower than at points a and c, and so is the total cost of the goods 
E) higher than at points a and c, and so is the total cost of the goods 
A) higher than at points a and c, but the total cost of the goods is the same 
B) the same as at points a and c, but the total cost of the goods is lower 
C) the same as at points a and c, but the total cost of the goods is higher 
D) lower than at points a and c, and so is the total cost of the goods 
E) higher than at points a and c, and so is the total cost of the goods

Question 5

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 6

__________ 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 7

According to the law of diminishing marginal rate of substitution,

Accepted Answer

A) as consumption of good A increases, other things constant, its marginal utility declines 
B) as consumption of good A increases, other things constant, one is willing to give up increasing amounts of good B to get another unit of good A 
C) as consumption of good A increases, other things constant, the amount of good B one is willing to give up to get another unit of good A falls 
D) the indifference curve's slope increases as more of the good on the horizontal axis is consumed 
E) indifference curves intersect when marginal utilities fall 
A) as consumption of good A increases, other things constant, its marginal utility declines 
B) as consumption of good A increases, other things constant, one is willing to give up increasing amounts of good B to get another unit of good A 
C) as consumption of good A increases, other things constant, the amount of good B one is willing to give up to get another unit of good A falls 
D) the indifference curve's slope increases as more of the good on the horizontal axis is consumed 
E) indifference curves intersect when marginal utilities fall

Question 8

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 9

A family on a trip budgets $800 for restaurant meals and fast food.The family can buy 16 restaurant meals if they buy no fast-food meals.What is the price of a restaurant meal for the family?

Accepted Answer

A) $5 
B) $16 
C) $20 
D) $50 
E) it is impossible to tell from the information given 
A) $5 
B) $16 
C) $20 
D) $50 
E) it is impossible to tell from the information given

Question 10

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 11

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 income effect is positive. 
B) Normal goods are those for which the income effect is negative. 
C) Normal goods are those for which the substitution effect overrides the income effect. 
D) Normal goods are those for which the income effect overrides the substitution effect. 
E) Normal goods are those for which demand increases when price increases. 
A) Normal goods are those for which the income effect is positive. 
B) Normal goods are those for which the income effect is negative. 
C) Normal goods are those for which the substitution effect overrides the income effect. 
D) Normal goods are those for which the income effect overrides the substitution effect. 
E) Normal goods are those for which demand increases when price increases.

Question 12

What would happen to the budget line when the price of tennis shoes decreases if tennis shoes are measured on the horizontal axis?

Accepted Answer

A) It would shift to the left. 
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 left. 
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 13

Exhibit 6-25   Which of the following points in Exhibit 6-25 represent combinations of goods that cost the consumer the same amount of money to purchase?

Accepted Answer

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

Question 14

This morning, Yoriko Dazai learned that the price of clams had dropped overnight while the price of mussels and her income stayed constant.Assuming that she must maintain the same level of utility, an increase in Yoriko's quantity demanded of clams would be caused by

Accepted Answer

A) the income effect 
B) the law of supply 
C) the substitution effect 
D) a perfectly elastic demand curve 
E) clams being an inferior good 
A) the income effect 
B) the law of supply 
C) the substitution effect 
D) a perfectly elastic demand curve 
E) clams being an inferior good

Question 15

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 16

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

Accepted Answer

A) unable to be determined 
B) 2 
C) 3 
D) more than 3 
E) 0 
A) unable to be determined 
B) 2 
C) 3 
D) more than 3 
E) 0

Question 17

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 18

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

Accepted Answer

A) True 
 B)False

Question 19

Economists assume that, within a given budget, consumers will

Accepted Answer

A) maximize average utility 
B) minimize average utility 
C) maximize total utility 
D) face diminishing total utility after consuming the first unit of a good 
E) continue to consume a good until its utility is negative 
A) maximize average utility 
B) minimize average utility 
C) maximize total utility 
D) face diminishing total utility after consuming the first unit of a good 
E) continue to consume a good until its utility is negative

Question 20

A consumer allocates income between clams and mussels.If clams are a normal good, then when the price of clams rises, 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) fewer 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) fewer clams, but the effect of the price change on purchases of mussels cannot be predicted

Exam 6: Appendix--Indifference Curves and Utility Maximization

Which of the following would not cause the budget line between books and food to shift?

If two goods have the same price, a consumer will buy equal quantities of those two goods.

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

Exhibit 6-25 At point b in Exhibit 6-25, the consumer's utility is

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

__________ utility is constant along a given indifference curve.

According to the law of diminishing marginal rate of substitution,

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?

A family on a trip budgets $800 for restaurant meals and fast food.The family can buy 16 restaurant meals if they buy no fast-food meals.What is the price of a restaurant meal for the family?

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?

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?

What would happen to the budget line when the price of tennis shoes decreases if tennis shoes are measured on the horizontal axis?

Exhibit 6-25 Which of the following points in Exhibit 6-25 represent combinations of goods that cost the consumer the same amount of money to purchase?

This morning, Yoriko Dazai learned that the price of clams had dropped overnight while the price of mussels and her income stayed constant.Assuming that she must maintain the same level of utility, an increase in Yoriko's quantity demanded of clams would be caused by

If a consumer's income rises,

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

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

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

Economists assume that, within a given budget, consumers will

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

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

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