Question 1

When the consumer is at his or her best affordable consumption point, it is the case that the marginal rate of substitution is

Accepted Answer

A)  equal to the price ratio. 
B)  less than the price ratio. 
C)  greater than the price ratio. 
D)  maximised. 
A)  equal to the price ratio. 
B)  less than the price ratio. 
C)  greater than the price ratio. 
D)  maximised.

Question 2

-In the figure above, an increase in income would result in the budget line

Accepted Answer

A)  making a parallel shift toward point a. 
B)  becoming steeper. 
C)  becoming flatter. 
D)  making a parallel shift toward point c. 
A)  making a parallel shift toward point a. 
B)  becoming steeper. 
C)  becoming flatter. 
D)  making a parallel shift toward point c.

Question 3

-The indifference curves in the above figure could represent your indifference curves between

Accepted Answer

A)  Coke and Pepsi, which you consider perfect substitutes. 
B)  eyeglass frames and eyeglass lenses, which you think are perfect complements. 
C)  hot dogs and textbooks, which you think are neither perfect substitutes nor perfect complements. 
D)  None of the above. 
A)  Coke and Pepsi, which you consider perfect substitutes. 
B)  eyeglass frames and eyeglass lenses, which you think are perfect complements. 
C)  hot dogs and textbooks, which you think are neither perfect substitutes nor perfect complements. 
D)  None of the above.

Question 4

When the price of a normal good decreases, the _______ can be divided between the _______, which keeps the best affordable point on the same indifference curve and the _______, which moves the best affordable point farther away from the origin.

Accepted Answer

A)  price effect; substitution effect; income effect 
B)  price effect; income effect; substitution effect 
C)  income effect; substitution effect; price effect 
D)  substitution effect; price effect; income effect 
A)  price effect; substitution effect; income effect 
B)  price effect; income effect; substitution effect 
C)  income effect; substitution effect; price effect 
D)  substitution effect; price effect; income effect

Question 5

The _______ effect can be divided into the _______ effect and the _______ effect.

Accepted Answer

A)  substitution; price; income 
B)  marginal; substitution; price 
C)  price; substitution; income 
D)  income; substitution; price 
A)  substitution; price; income 
B)  marginal; substitution; price 
C)  price; substitution; income 
D)  income; substitution; price

Question 6

-The above figure shows Jane's budget line and two of her indifference curves. When Jane is consuming at her best affordable point, what is her marginal rate of substitution?

Accepted Answer

A)  0.5 lobster dinners per steak dinner 
B)  0.33 lobster dinners per steak dinner 
C)  1.0 lobster dinner per steak dinner 
D)  2.0 lobster dinners per steak dinner 
A)  0.5 lobster dinners per steak dinner 
B)  0.33 lobster dinners per steak dinner 
C)  1.0 lobster dinner per steak dinner 
D)  2.0 lobster dinners per steak dinner

Question 7

-In the above figure, the best affordable point is

Accepted Answer

A)  8 hamburgers and 0 magazines. 
B)  4 hamburgers and 3 magazines. 
C)  0 hamburgers and 6 magazines. 
D)  some combination that is not given above. 
A)  8 hamburgers and 0 magazines. 
B)  4 hamburgers and 3 magazines. 
C)  0 hamburgers and 6 magazines. 
D)  some combination that is not given above.

Question 8

Bobby moves along an indifference curve for shirts and pants by increasing consumption of shirts and decreasing consumption of pants. As Bobby has more and more pants, the number of shirts he is willing to trade for yet another pair of pants

Accepted Answer

A)  decreases. 
B)  does not change. 
C)  increases. 
D)  initially decreases and then increases. 
A)  decreases. 
B)  does not change. 
C)  increases. 
D)  initially decreases and then increases.

Question 9

-Which of the following statements about the above figure is true?

Accepted Answer

A)  Point C is preferred to point A. 
B)  Point A is equally preferred to point C. 
C)  Point B is equally preferred to point C. 
D)  Point A is preferred to point C. 
A)  Point C is preferred to point A. 
B)  Point A is equally preferred to point C. 
C)  Point B is equally preferred to point C. 
D)  Point A is preferred to point C.

Question 10

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

Accepted Answer

A)  fall in the price of a book. 
B)  rise in the price of a book. 
C)  rise in the price of a movie. 
D)  decrease in income. 
A)  fall in the price of a book. 
B)  rise in the price of a book. 
C)  rise in the price of a movie. 
D)  decrease in income.

Question 11

-The indifference curves in the above figure could represent your indifference curves between

Accepted Answer

A)  Coke and Pepsi, which you consider perfect substitutes. 
B)  eyeglass frames and eyeglass lenses, which you think are perfect complements. 
C)  hot dogs and textbooks, which you think are neither perfect substitutes nor perfect complements. 
D)  None of the above. 
A)  Coke and Pepsi, which you consider perfect substitutes. 
B)  eyeglass frames and eyeglass lenses, which you think are perfect complements. 
C)  hot dogs and textbooks, which you think are neither perfect substitutes nor perfect complements. 
D)  None of the above.

Question 12

-In the figure above, a decrease in the price of a bag of potato chips would result in the budget line

Accepted Answer

A)  becoming steeper. 
B)  becoming flatter. 
C)  making a parallel shift toward point a. 
D)  making a parallel shift toward point c. 
A)  becoming steeper. 
B)  becoming flatter. 
C)  making a parallel shift toward point a. 
D)  making a parallel shift toward point c.

Question 13

In an indifference curve diagram, the quantities of good Y are measured along the vertical axis and the quantities of good X are measured along the horizontal axis. The marginal rate of substitution is defined as

Accepted Answer

A)  how much good Y you must give up to get one more unit of good X. 
B)  how much good Y you are willing to give up to get one more unit of good X. 
C)  how much you prefer to substitute good X for good Y. 
D)  the relative price of good Y in terms of good X. 
A)  how much good Y you must give up to get one more unit of good X. 
B)  how much good Y you are willing to give up to get one more unit of good X. 
C)  how much you prefer to substitute good X for good Y. 
D)  the relative price of good Y in terms of good X.

Question 14

-The indifference curve in the above figure

Accepted Answer

A)  illustrates two goods that are perfect complements. 
B)  illustrates two goods that are perfect substitutes. 
C)  violates assumptions about preferences. 
D)  None of the above statements is correct. 
A)  illustrates two goods that are perfect complements. 
B)  illustrates two goods that are perfect substitutes. 
C)  violates assumptions about preferences. 
D)  None of the above statements is correct.

Question 15

Sam buys petrol and coffee each week. In order to draw his budget line between petrol and coffee, Sam would have to know

Accepted Answer

A)  only the prices of one litre of petrol and one kilogram of coffee. 
B)  only how much income he has available to spend on petrol and coffee. 
C)  only how much petrol he wants to buy and how much coffee he wants to drink. 
D)  both how much income he has to spend and the prices of one litre of petrol and one kilogram of coffee. 
A)  only the prices of one litre of petrol and one kilogram of coffee. 
B)  only how much income he has available to spend on petrol and coffee. 
C)  only how much petrol he wants to buy and how much coffee he wants to drink. 
D)  both how much income he has to spend and the prices of one litre of petrol and one kilogram of coffee.

Question 16

The price effect refers to how changes in

Accepted Answer

A)  preference affect prices. 
B)  price affect the quantity of a good consumed. 
C)  income affect prices. 
D)  price affect real income. 
A)  preference affect prices. 
B)  price affect the quantity of a good consumed. 
C)  income affect prices. 
D)  price affect real income.

Question 17

Wendy spends $30 a week on movies and magazines. The price of a movie is $8, the price of a magazine is $2, and Wendy sees 3 movies a week and buys 3 magazines. The price of a magazine now increases to $4 and Wendy's brother gives her $6 a week so that she can still see 3 movies a week and buy 3 magazines. In this situation, Wendy will see _______ movies and buy _______ magazines.

Accepted Answer

A)  less than 3; less than 3 
B)  less than 3; more than 3 
C)  more than 3; less than 3 
D)  3; 3 
A)  less than 3; less than 3 
B)  less than 3; more than 3 
C)  more than 3; less than 3 
D)  3; 3

Question 18

A budget line is drawn with automobiles on the vertical axis and boats on the horizontal. Imposing a tax on boats that boosts the price of a boat makes the

Accepted Answer

A)  budget line steeper. 
B)  indifference curves steeper. 
C)  budget line flatter. 
D)  indifference curves flatter. 
A)  budget line steeper. 
B)  indifference curves steeper. 
C)  budget line flatter. 
D)  indifference curves flatter.

Question 19

-The above figure shows Jane's budget line and two of her indifference curves. Which of the following happens to Jane's budget line if the price of a lobster dinner increases?

Accepted Answer

A)  It would rotate inward around the vertical intercept, 10 lobster dinners. 
B)  It would rotate outward around the horizontal intercept, 20 steak dinners. 
C)  It would rotate inward around the horizontal intercept, 20 steak dinners. 
D)  It would rotate outward around the vertical intercept, 10 lobster dinners. 
A)  It would rotate inward around the vertical intercept, 10 lobster dinners. 
B)  It would rotate outward around the horizontal intercept, 20 steak dinners. 
C)  It would rotate inward around the horizontal intercept, 20 steak dinners. 
D)  It would rotate outward around the vertical intercept, 10 lobster dinners.

Question 20

_______ on an indifference curve that is/are farther from the origin _______ on an indifference curve that is/are closer to the origin.

Accepted Answer

A)  Most combinations; are preferred to all combinations 
B)  Combinations; are not as affordable as combinations 
C)  Any combination; is preferred to any combination 
D)  Some combinations; are preferred to some combinations 
A)  Most combinations; are preferred to all combinations 
B)  Combinations; are not as affordable as combinations 
C)  Any combination; is preferred to any combination 
D)  Some combinations; are preferred to some combinations

When the consumer is at his or her best affordable consumption point, it is the case that the marginal rate of substitution is

-In the figure above, an increase in income would result in the budget line

-The indifference curves in the above figure could represent your indifference curves between

When the price of a normal good decreases, the ___ can be divided between the _, which keeps the best affordable point on the same indifference curve and the _____, which moves the best affordable point farther away from the origin.

The ___ effect can be divided into the _ effect and the _____ effect.

-The above figure shows Jane's budget line and two of her indifference curves. When Jane is consuming at her best affordable point, what is her marginal rate of substitution?

-In the above figure, the best affordable point is

Bobby moves along an indifference curve for shirts and pants by increasing consumption of shirts and decreasing consumption of pants. As Bobby has more and more pants, the number of shirts he is willing to trade for yet another pair of pants

-Which of the following statements about the above figure is true?

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

-The indifference curves in the above figure could represent your indifference curves between

-In the figure above, a decrease in the price of a bag of potato chips would result in the budget line

In an indifference curve diagram, the quantities of good Y are measured along the vertical axis and the quantities of good X are measured along the horizontal axis. The marginal rate of substitution is defined as

-The indifference curve in the above figure

Sam buys petrol and coffee each week. In order to draw his budget line between petrol and coffee, Sam would have to know

The price effect refers to how changes in

A budget line is drawn with automobiles on the vertical axis and boats on the horizontal. Imposing a tax on boats that boosts the price of a boat makes the

-The above figure shows Jane's budget line and two of her indifference curves. Which of the following happens to Jane's budget line if the price of a lobster dinner increases?

_ on an indifference curve that is/are farther from the origin _ on an indifference curve that is/are closer to the origin.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Public Choices and Public Goods

Economics of the Environment

Monopoly and Its Regulation

Economic Inequality

Producer Choices and Constraints

Perfect Competition

Monopolistic Competition

Oligopoly Games and Strategy

Decisions in Factor Markets

Filters

Exam 12: Consumer Choices and Constraints

When the consumer is at his or her best affordable consumption point, it is the case that the marginal rate of substitution is

-In the figure above, an increase in income would result in the budget line

-The indifference curves in the above figure could represent your indifference curves between

When the price of a normal good decreases, the _______ can be divided between the _______, which keeps the best affordable point on the same indifference curve and the _______, which moves the best affordable point farther away from the origin.

The _______ effect can be divided into the _______ effect and the _______ effect.

-The above figure shows Jane's budget line and two of her indifference curves. When Jane is consuming at her best affordable point, what is her marginal rate of substitution?

-In the above figure, the best affordable point is

Bobby moves along an indifference curve for shirts and pants by increasing consumption of shirts and decreasing consumption of pants. As Bobby has more and more pants, the number of shirts he is willing to trade for yet another pair of pants

-Which of the following statements about the above figure is true?

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

-The indifference curves in the above figure could represent your indifference curves between

-In the figure above, a decrease in the price of a bag of potato chips would result in the budget line

In an indifference curve diagram, the quantities of good Y are measured along the vertical axis and the quantities of good X are measured along the horizontal axis. The marginal rate of substitution is defined as

-The indifference curve in the above figure

Sam buys petrol and coffee each week. In order to draw his budget line between petrol and coffee, Sam would have to know

The price effect refers to how changes in

A budget line is drawn with automobiles on the vertical axis and boats on the horizontal. Imposing a tax on boats that boosts the price of a boat makes the

-The above figure shows Jane's budget line and two of her indifference curves. Which of the following happens to Jane's budget line if the price of a lobster dinner increases?

_______ on an indifference curve that is/are farther from the origin _______ on an indifference curve that is/are closer to the origin.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Public Choices and Public Goods

Economics of the Environment

Monopoly and Its Regulation

Economic Inequality

Producer Choices and Constraints

Perfect Competition

Monopolistic Competition

Oligopoly Games and Strategy

Decisions in Factor Markets

Filters

When the price of a normal good decreases, the ___ can be divided between the _, which keeps the best affordable point on the same indifference curve and the _____, which moves the best affordable point farther away from the origin.

The ___ effect can be divided into the _ effect and the _____ effect.

_ on an indifference curve that is/are farther from the origin _ on an indifference curve that is/are closer to the origin.