Question 1

A consumer's best affordable point occurs

Accepted Answer

A) inside the budget line. 
B) outside the budget line. 
C) on the budget line. 
D) at a point that cannot be determined. 
E) at a corner on the budget line, with only one good consumed. 
A) inside the budget line. 
B) outside the budget line. 
C) on the budget line. 
D) at a point that cannot be determined. 
E) at a corner on the budget line, with only one good consumed. C

Question 2

Junkfood Jill spends all of her income on jellybeans and Jolt cola. Suppose that Jill's income is $30, the price of a bag of jellybeans is $6, and the price of a bottle of Jolt cola is $2. Which of the following combinations of jellybeans and Jolt cola lies inside Jill's budget line?

Accepted Answer

A) 2 bags of jellybeans and 8 bottles of Jolt 
B) 5 bags of jellybeans and 0 bottles of Jolt 
C) 4 bags of jellybeans and 4 bottles of Jolt 
D) 3 bags of jellybeans and 6 bottles of Jolt 
E) 5 bags of jellybeans and 15 bottles of Jolt 
A) 2 bags of jellybeans and 8 bottles of Jolt 
B) 5 bags of jellybeans and 0 bottles of Jolt 
C) 4 bags of jellybeans and 4 bottles of Jolt 
D) 3 bags of jellybeans and 6 bottles of Jolt 
E) 5 bags of jellybeans and 15 bottles of Jolt A

Question 3

Use the figure below to answer the following questions.
   
Figure 9.2.3
-Refer to Figure 9.2.3. Rashid buys only books and albums. The figure shows his preferences. When Rashid chooses the consumption point of 3 books and 2 albums, his marginal rate of substitution is

Accepted Answer

A) 1 book per album. 
B) zero. 
C) 3/2 books per album. 
D) 2/3 books per album. 
E) 0.5 books per album. 
A) 1 book per album. 
B) zero. 
C) 3/2 books per album. 
D) 2/3 books per album. 
E) 0.5 books per album. A

Question 4

Use the figure below to answer the following question.
   
Figure 9.3.2
-Which one of the following statements about Figure 9.3.2 is true?

Accepted Answer

A) Point S is preferred to point Q, but S is not affordable. 
B) Point R is not affordable. 
C) Point T is preferred to point Q, but T is not affordable. 
D) Points Q and S cost the same, but Q is preferred to S. 
E) Point R is the best affordable point. 
A) Point S is preferred to point Q, but S is not affordable. 
B) Point R is not affordable. 
C) Point T is preferred to point Q, but T is not affordable. 
D) Points Q and S cost the same, but Q is preferred to S. 
E) Point R is the best affordable point.

Question 5

The magnitude of the slope of the budget line is the

Accepted Answer

A) relative price of the good measured on the vertical axis. 
B) relative price of the good measured on the horizontal axis. 
C) absolute price of the good measured on the horizontal axis. 
D) real price of the good measured on the vertical axis. 
E) price of the good measured on the vertical axis. 
A) relative price of the good measured on the vertical axis. 
B) relative price of the good measured on the horizontal axis. 
C) absolute price of the good measured on the horizontal axis. 
D) real price of the good measured on the vertical axis. 
E) price of the good measured on the vertical axis.

Question 6

Which of the following results in a rightward shift of your indifference curves for gasoline and movie rentals?

Accepted Answer

A) an increase in the price of a litre of gasoline with no change in the price of a movie rental 
B) an increase in the price of a movie rental with no change in the price of a litre of gasoline 
C) an increase in income if gasoline and movie rentals are normal goods 
D) a decrease in the price of a litre of gasoline or a decrease in the price of a movie rental 
E) none of the above 
A) an increase in the price of a litre of gasoline with no change in the price of a movie rental 
B) an increase in the price of a movie rental with no change in the price of a litre of gasoline 
C) an increase in income if gasoline and movie rentals are normal goods 
D) a decrease in the price of a litre of gasoline or a decrease in the price of a movie rental 
E) none of the above

Question 7

Use the figure below to answer the following question.
   
Figure 9.2.2
-Figure 9.2.2 shows three indifference curves for Brenda. Which one of the following is not true?

Accepted Answer

A) Brenda would be equally happy consuming at either point B or point C. 
B) Brenda prefers consuming at point B to consuming at point A. 
C) Brenda prefers consuming at point D to consuming at either point B or point C. 
D) The marginal rate of substitution is higher at point C than at point B. 
E) Brenda prefers consuming at point D to consuming at point A. 
A) Brenda would be equally happy consuming at either point B or point C. 
B) Brenda prefers consuming at point B to consuming at point A. 
C) Brenda prefers consuming at point D to consuming at either point B or point C. 
D) The marginal rate of substitution is higher at point C than at point B. 
E) Brenda prefers consuming at point D to consuming at point A.

Question 8

Use the figure below to answer the following questions.
   
Figure 9.3.3
-Consider an initial budget line labelled RS in Figure 9.3.3. If the budget line becomes RT, the substitution effect is illustrated by the move from point

Accepted Answer

A) A to B. 
B) A to C. 
C) A to D. 
D) B to D. 
E) D to C. 
A) A to B. 
B) A to C. 
C) A to D. 
D) B to D. 
E) D to C.

Question 9

Use the figure below to answer the following questions.
   
Figure 9.3.1
-Consider the budget line and indifference curve in Figure 9.3.1. If the price of good X is $2 a unit, what is the price of good Y?

Accepted Answer

A) $0.37 a unit 
B) $0.67 a unit 
C) $1.50 a unit 
D) $2.67 a unit 
E) impossible to calculate without additional information 
A) $0.37 a unit 
B) $0.67 a unit 
C) $1.50 a unit 
D) $2.67 a unit 
E) impossible to calculate without additional information

Question 10

A change in the price of the good measured on the horizontal axis changes ________ of the budget line.

Accepted Answer

A) the slope and y-intercept 
B) the slope and x-intercept 
C) the x- and y-intercepts but not the slope 
D) only the slope 
E) only the y-intercept 
A) the slope and y-intercept 
B) the slope and x-intercept 
C) the x- and y-intercepts but not the slope 
D) only the slope 
E) only the y-intercept

Question 11

If the price of the good measured on the vertical axis increases, the budget line

Accepted Answer

A) becomes steeper. 
B) becomes flatter. 
C) shifts leftward and parallel to the original budget line. 
D) shifts rightward and parallel to the original budget line. 
E) shifts leftward and becomes steeper. 
A) becomes steeper. 
B) becomes flatter. 
C) shifts leftward and parallel to the original budget line. 
D) shifts rightward and parallel to the original budget line. 
E) shifts leftward and becomes steeper.

Question 12

If the price of an inferior good rises, the income effect

Accepted Answer

A) will have an uncertain effect on consumption of the good, and the substitution effect will decrease consumption. 
B) will decrease consumption of the good, and the substitution effect will decrease consumption. 
C) and the substitution effect will both increase consumption of the good. 
D) and the substitution effect will both decrease consumption of the good. 
E) will increase consumption of the good and the substitution effect will decrease consumption. 
A) will have an uncertain effect on consumption of the good, and the substitution effect will decrease consumption. 
B) will decrease consumption of the good, and the substitution effect will decrease consumption. 
C) and the substitution effect will both increase consumption of the good. 
D) and the substitution effect will both decrease consumption of the good. 
E) will increase consumption of the good and the substitution effect will decrease consumption.

Question 13

The shape of a person's indifference curves between two goods depends on

Accepted Answer

A) the prices of the two goods. 
B) the person's income. 
C) the degree of substitutability between the two goods. 
D) the level of satisfaction for the person. 
E) the person's income and the prices of the two goods. 
A) the prices of the two goods. 
B) the person's income. 
C) the degree of substitutability between the two goods. 
D) the level of satisfaction for the person. 
E) the person's income and the prices of the two goods.

Question 14

The substitution effect is the effect of

Accepted Answer

A) a change in income on the quantity bought. 
B) a change in price on the quantity bought when the consumer moves to a higher indifference curve. 
C) a change in income on the quantity bought when the consumer moves to a higher indifference curve. 
D) a change in the best affordable point. 
E) a change in price on the quantity bought when the consumer hypothetically remains on the same indifference curve. 
A) a change in income on the quantity bought. 
B) a change in price on the quantity bought when the consumer moves to a higher indifference curve. 
C) a change in income on the quantity bought when the consumer moves to a higher indifference curve. 
D) a change in the best affordable point. 
E) a change in price on the quantity bought when the consumer hypothetically remains on the same indifference curve.

Question 15

Peter's income increases and so does his consumption of both movies and pop, but his consumption of pop increases by less than his consumption of movies increases. Which one of the following statements is true for Peter?

Accepted Answer

A) A movie is an inferior good; pop is a normal good. 
B) A movie is a normal good; pop is an inferior good. 
C) A movie is an inferior good; pop is an inferior good. 
D) Movies and pop are both normal goods. 
E) A movie is a normal good; we cannot tell whether pop is a normal good or an inferior good. 
A) A movie is an inferior good; pop is a normal good. 
B) A movie is a normal good; pop is an inferior good. 
C) A movie is an inferior good; pop is an inferior good. 
D) Movies and pop are both normal goods. 
E) A movie is a normal good; we cannot tell whether pop is a normal good or an inferior good.

Question 16

Use the figure below to answer the following question.
   
Figure 9.2.5
-Refer to Figure 9.2.5. The graphs show indifference curves for various goods. Graph ________ best describes the pair of goods baseballs and baseball bats. Graph ________ best describes the pair of goods desktop computers and laptop computers.

Accepted Answer

A) 2; 3 
B) 2; 1 
C) 1; 1 
D) 1; 3 
E) 3; 2 
A) 2; 3 
B) 2; 1 
C) 1; 1 
D) 1; 3 
E) 3; 2

Question 17

Use the figure below to answer the following question.
   
Figure 9.2.4
-Refer to Figure 9.2.4. Rashid buys only books and albums. The figure shows his preferences. Rashid's indifference curves ________ display diminishing marginal rate of substitution because ________.

Accepted Answer

A) do; Rashid is indifferent between consuming 6 albums and 2 books and consuming 2 albums and 3 books 
B) do not; the magnitude of the slope of both indifference curves decreases as Rashid consumes more albums and fewer books 
C) do not; Rashid is indifferent between consuming 6 albums and 2 books and consuming 2 albums and 3 books 
D) do; the magnitude of the slope of both indifference curves decreases as Rashid consumes more albums and fewer books 
E) do; the price of an album decreases as Rashid increases the quantity he buys 
A) do; Rashid is indifferent between consuming 6 albums and 2 books and consuming 2 albums and 3 books 
B) do not; the magnitude of the slope of both indifference curves decreases as Rashid consumes more albums and fewer books 
C) do not; Rashid is indifferent between consuming 6 albums and 2 books and consuming 2 albums and 3 books 
D) do; the magnitude of the slope of both indifference curves decreases as Rashid consumes more albums and fewer books 
E) do; the price of an album decreases as Rashid increases the quantity he buys

Question 18

Use the figure below to answer the following questions.
   
Figure 9.1.1
-Shelly's budget line is shown in Figure 9.1.1 Which point is unaffordable given her income and current prices?

Accepted Answer

A) A and B 
B) B only 
C) C only 
D) C and D only 
E) All points are unattainable. 
A) A and B 
B) B only 
C) C only 
D) C and D only 
E) All points are unattainable.

Question 19

Guy has an income (Y)of $50 with which he can purchase DVDs (D)at $10 each and haircuts (H)at $20 each. Which one of the following represents Guy's budget line?

Accepted Answer

A) Y = 10QD - 20QH 
B) 50 = QD + QH 
C) Y = 50 + QD + QH 
D) 20Y = QD + 10QH 
E) 50 = 10QD + 20QH 
A) Y = 10QD - 20QH 
B) 50 = QD + QH 
C) Y = 50 + QD + QH 
D) 20Y = QD + 10QH 
E) 50 = 10QD + 20QH

Question 20

Suppose the price of potatoes falls and there is a decrease in the purchases of potatoes, what can we infer?

Accepted Answer

A) The income effect is negative and exceeds the substitution effect. 
B) The income effect is negative and reinforces the substitution effect. 
C) The income effect is positive and exceeds the substitution effect. 
D) The income effect is positive and reinforces the substitution effect. 
E) The income effect is negative and just about offsets the substitution effect. 
A) The income effect is negative and exceeds the substitution effect. 
B) The income effect is negative and reinforces the substitution effect. 
C) The income effect is positive and exceeds the substitution effect. 
D) The income effect is positive and reinforces the substitution effect. 
E) The income effect is negative and just about offsets the substitution effect.

Exam 9: Possibilities, Preferences, and Choices

A consumer's best affordable point occurs

Junkfood Jill spends all of her income on jellybeans and Jolt cola. Suppose that Jill's income is $30, the price of a bag of jellybeans is $6, and the price of a bottle of Jolt cola is $2. Which of the following combinations of jellybeans and Jolt cola lies inside Jill's budget line?

Use the figure below to answer the following questions. Figure 9.2.3 -Refer to Figure 9.2.3. Rashid buys only books and albums. The figure shows his preferences. When Rashid chooses the consumption point of 3 books and 2 albums, his marginal rate of substitution is

Use the figure below to answer the following question. Figure 9.3.2 -Which one of the following statements about Figure 9.3.2 is true?

The magnitude of the slope of the budget line is the

Which of the following results in a rightward shift of your indifference curves for gasoline and movie rentals?

Use the figure below to answer the following question. Figure 9.2.2 -Figure 9.2.2 shows three indifference curves for Brenda. Which one of the following is not true?

Use the figure below to answer the following questions. Figure 9.3.3 -Consider an initial budget line labelled RS in Figure 9.3.3. If the budget line becomes RT, the substitution effect is illustrated by the move from point

Use the figure below to answer the following questions. Figure 9.3.1 -Consider the budget line and indifference curve in Figure 9.3.1. If the price of good X is $2 a unit, what is the price of good Y?

A change in the price of the good measured on the horizontal axis changes ________ of the budget line.

If the price of the good measured on the vertical axis increases, the budget line

If the price of an inferior good rises, the income effect

The shape of a person's indifference curves between two goods depends on

The substitution effect is the effect of

Peter's income increases and so does his consumption of both movies and pop, but his consumption of pop increases by less than his consumption of movies increases. Which one of the following statements is true for Peter?

Use the figure below to answer the following question. Figure 9.2.4 -Refer to Figure 9.2.4. Rashid buys only books and albums. The figure shows his preferences. Rashid's indifference curves ________ display diminishing marginal rate of substitution because ________.

Use the figure below to answer the following questions. Figure 9.1.1 -Shelly's budget line is shown in Figure 9.1.1 Which point is unaffordable given her income and current prices?

Guy has an income (Y)of $50 with which he can purchase DVDs (D)at $10 each and haircuts (H)at $20 each. Which one of the following represents Guy's budget line?

Suppose the price of potatoes falls and there is a decrease in the purchases of potatoes, what can we infer?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Governments Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Macro Only: International Trade Policy

Filters

Use the figure below to answer the following question. Figure 9.2.4 -Refer to Figure 9.2.4. Rashid buys only books and albums. The figure shows his preferences. Rashid's indifference curves display diminishing marginal rate of substitution because .