Exam 9: Possibilities, Preferences, and Choices

-Some parents struggling with back-to-school buys. "A couple of years ago, I was able to buy everything practically new," said Charles Lane-Bey, a U.S. Postal Service worker who's struggling to make ends meet. Suppose Charles has $10 to spend on back-to-school clothing for his son, and pants cost 50 cents and the price of shirts has decreased from $1 to 50 cents. What is the effect of the fall in price of shirts on Charles's real income in terms of pants?

"If Ivan says he is indifferent between the consumption of a new pair of jeans or a set of earrings, he means that he does not want either product." Is the previous analysis correct? Explain your answer.

A consumer will maximize utility, given income and prices, when the marginal rate of substitution is equal to the ratio of the prices of the two goods.

How is a budget line similar to a production possibilities frontier? How do they differ?

-In the above figure, Brendan originally consumes at point A. If his income rises and both compact discs and haircuts are normal goods then he will begin consuming at a point such as

-In the above figure, the indifference curves indicate that the two goods are

-In the figure above, at point A the consumer is willing to give up ________ pounds of pickles to get one additional pound of olives.

An indifference curve is a line that shows combinations of goods among which a consumer

-Given the indifference curve in the above figure, which point is preferred to point a?

-In the above figure if money income increases, the budget line

-Ramen noodles are hotter than ever in 2010. Considered a bargain meal for cash-starved college students... last year, 4 billion individual packets were devoured in the United States, a 4 percent increase over 2006. If once college students graduated, they stopped eating ramen, would ramen be considered a normal or inferior good?

Which of the following is NOT a divisible good?

-The above figure gives your budget line between CDs and magazines. Which of the following changes would NOT allow you to buy more CDs?

The more closely substitutable are two goods, the

-Some parents struggling with back-to-school buys. "A couple of years ago, I was able to buy everything practically new," said Charles Lane-Bey, a U.S. Postal Service worker who's struggling to make ends meet. Suppose Charles has $10 to spend on back-to-school clothing for his son, and pants cost 50 cents and shirts cost $1. Which of the following combinations of pants and shirts is affordable?

-If the newspaper reported that wearing plaid clothing was a sure way to obtain good grades, students'

On a big weekend of college football in 2010, The Associated Press found fans… who said they are making concessions yet determined to indulge their passion. "We basically let the wife and children not eat for a week so we can do this," joked Neil Plotkin, who was attending his first Penn State game. If Neil views eating and football games as perfect substitutes, how would his indifference curve be shaped?

-In the above figure, the budget line would rotate in the direction indicated as a result of a

-Suppose you have a $20 budget per week, the price of soda is $1 per bottle, and the price of pizza is $4 per slice. In the above figure, draw a budget line for soda and pizza, placing soda on the horizontal axis. Correctly label the axes.

-In the above figure, which curve is an indifference curve for someone who views frozen pizzas and milk as perfect complements?