Question 1

The magnitude of the slope of an indifference curve is

Accepted Answer

A) the marginal rate of substitution. 
B) the marginal rate of transformation. 
C) the marginal propensity to consume. 
D) the marginal propensity to substitute. 
E) the relative price of good Y. 
A) the marginal rate of substitution. 
B) the marginal rate of transformation. 
C) the marginal propensity to consume. 
D) the marginal propensity to substitute. 
E) the relative price of good Y. A

Question 2

At the best affordable point, which statement is true?

Accepted Answer

A) The slope of the indifference curve equals the slope of the budget line. 
B) The marginal rate of substitution between two goods equals their absolute price. 
C) The highest affordable indifference curve has the same intercept as the budget line. 
D) Other points on the same indifference curve are affordable but not preferred. 
E) Some income is not spent. 
A) The slope of the indifference curve equals the slope of the budget line. 
B) The marginal rate of substitution between two goods equals their absolute price. 
C) The highest affordable indifference curve has the same intercept as the budget line. 
D) Other points on the same indifference curve are affordable but not preferred. 
E) Some income is not spent. A

Question 3

Albert is consuming at a point where his budget line is not as steep as indifference curve.To reach consumer equilibrium, Albert

Accepted Answer

A) consumes less of the good that is measured on the horizontal axis. 
B) consumes none of the good that is measured on the horizontal axis. 
C) must increase his income. 
D) must shop at stores that have lower prices. 
E) consumes more of the good that is measured on the horizontal axis. 
A) consumes less of the good that is measured on the horizontal axis. 
B) consumes none of the good that is measured on the horizontal axis. 
C) must increase his income. 
D) must shop at stores that have lower prices. 
E) consumes more of the good that is measured on the horizontal axis. E

Question 4

What is the relationship between goods and the income effect?

Accepted Answer

A) An inferior good has a positive income effect. 
B) A normal good has a positive income effect. 
C) An inferior good has no income effect. 
D) A normal good has no income effect. 
E) A normal good has a negative income effect. 
A) An inferior good has a positive income effect. 
B) A normal good has a positive income effect. 
C) An inferior good has no income effect. 
D) A normal good has no income effect. 
E) A normal good has a negative income effect.

Question 5

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.

Question 6

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

Accepted Answer

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

Question 7

As a consumer moves rightward along an indifference curve,

Accepted Answer

A) the relative price of the good measured on the x-axis falls. 
B) the relative price of the good measured on the y-axis falls. 
C) the income required to buy the combinations of the goods increases. 
D) the consumer remains indifferent among the different combinations of goods. 
E) the consumer prefers the combinations of goods that are farther rightward along the indifference curve. 
A) the relative price of the good measured on the x-axis falls. 
B) the relative price of the good measured on the y-axis falls. 
C) the income required to buy the combinations of the goods increases. 
D) the consumer remains indifferent among the different combinations of goods. 
E) the consumer prefers the combinations of goods that are farther rightward along the indifference curve.

Question 8

Use the figure below to answer the following questions.
   
Figure 9.1.2
-Refer to Figure 9.1.2.Which budget line has the lowest relative price for carrots?

Accepted Answer

A) AD 
B) BD 
C) CD 
D) The relative price is equal for all three budget lines. 
E) Cannot be determined without studying the indifference curves. 
A) AD 
B) BD 
C) CD 
D) The relative price is equal for all three budget lines. 
E) Cannot be determined without studying the indifference curves.

Question 9

If two goods are perfect substitutes, then their

Accepted Answer

A) indifference curves are positively-sloped straight lines. 
B) indifference curves are negatively-sloped straight lines. 
C) indifference curves are L-shaped. 
D) marginal rate of substitution is zero. 
E) marginal rate of substitution is infinity. 
A) indifference curves are positively-sloped straight lines. 
B) indifference curves are negatively-sloped straight lines. 
C) indifference curves are L-shaped. 
D) marginal rate of substitution is zero. 
E) marginal rate of substitution is infinity.

Question 10

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 11

The price of one good divided by the price of another good is

Accepted Answer

A) an absolute price. 
B) a relative price. 
C) a marginal price. 
D) a demand price. 
E) a money price. 
A) an absolute price. 
B) a relative price. 
C) a marginal price. 
D) a demand price. 
E) a money price.

Question 12

Good X is measured on the horizontal axis and good Y is measured on the vertical axis.The marginal rate of substitution is

Accepted Answer

A) the relative price of good X in terms of good Y. 
B) the relative price of good Y in terms of good X. 
C) the rate at which a consumer will give up good Y to obtain an additional unit of good X while remaining indifferent. 
D) the rate at which a consumer will give up good X to obtain an additional unit of good Y while remaining indifferent. 
E) equal to the magnitude of the slope of the budget line. 
A) the relative price of good X in terms of good Y. 
B) the relative price of good Y in terms of good X. 
C) the rate at which a consumer will give up good Y to obtain an additional unit of good X while remaining indifferent. 
D) the rate at which a consumer will give up good X to obtain an additional unit of good Y while remaining indifferent. 
E) equal to the magnitude of the slope of the budget line.

Question 13

Which one of the following is always true of the income effect?

Accepted Answer

A) It leads to a positive income effect. 
B) It is positive. 
C) It decreases consumption. 
D) It leads to a negative income effect. 
E) None of the above 
A) It leads to a positive income effect. 
B) It is positive. 
C) It decreases consumption. 
D) It leads to a negative income effect. 
E) None of the above

Question 14

The substitution effect

Accepted Answer

A) always dominates the income effect. 
B) is always dominated by the income effect. 
C) results in an increase in the quantity of the good consumed when the price rises. 
D) results in a decrease in the quantity of the good consumed when the price falls. 
E) is greater than the price effect. 
A) always dominates the income effect. 
B) is always dominated by the income effect. 
C) results in an increase in the quantity of the good consumed when the price rises. 
D) results in a decrease in the quantity of the good consumed when the price falls. 
E) is greater than the price effect.

Question 15

A rise in the price of gasoline, everything else remaining the same, ________ the relative price of a restaurant meal and ________ real income in terms of restaurant meals.

Accepted Answer

A) increases; does not change 
B) does not change; decreases 
C) decreases; does not change 
D) does not change; increases 
E) decreases; decreases 
A) increases; does not change 
B) does not change; decreases 
C) decreases; does not change 
D) does not change; increases 
E) decreases; decreases

Question 16

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 17

The price of a cup of coffee is $2.00.The price of a cup of tea is $1.20.The relative price of a cup of tea with respect to a cup of coffee is

Accepted Answer

A) 0.6 cups of coffee. 
B) 1.67 cups of coffee. 
C) 1.0 cup of coffee. 
D) 1.25 cups of coffee. 
E) 0.75 cups of coffee. 
A) 0.6 cups of coffee. 
B) 1.67 cups of coffee. 
C) 1.0 cup of coffee. 
D) 1.25 cups of coffee. 
E) 0.75 cups of coffee.

Question 18

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 19

Use the figure below to answer the following questions.
   
Figure 9.3.3
-Consider an initial budget line labelled RT in Figure 9.3.3.What would rotate the budget line to RS?

Accepted Answer

A) a rise in the price of good X 
B) a fall in the price of good X 
C) a rise in the price of good Y 
D) a decrease in the preference for good X 
E) an increase in real income 
A) a rise in the price of good X 
B) a fall in the price of good X 
C) a rise in the price of good Y 
D) a decrease in the preference for good X 
E) an increase in real income

Question 20

Moving down along a given budget line, real income

Accepted Answer

A) decreases but prices remain constant. 
B) and prices are constant. 
C) decreases and prices decrease. 
D) increases but prices remain constant. 
E) remains constant but prices decrease. 
A) decreases but prices remain constant. 
B) and prices are constant. 
C) decreases and prices decrease. 
D) increases but prices remain constant. 
E) remains constant but prices decrease.

The magnitude of the slope of an indifference curve is

At the best affordable point, which statement is true?

Albert is consuming at a point where his budget line is not as steep as indifference curve.To reach consumer equilibrium, Albert

What is the relationship between goods and the income effect?

A consumer's best affordable point occurs

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

As a consumer moves rightward along an indifference curve,

Use the figure below to answer the following questions. Figure 9.1.2 -Refer to Figure 9.1.2.Which budget line has the lowest relative price for carrots?

If two goods are perfect substitutes, then their

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.

The price of one good divided by the price of another good is

Good X is measured on the horizontal axis and good Y is measured on the vertical axis.The marginal rate of substitution is

Which one of the following is always true of the income effect?

The substitution effect

A rise in the price of gasoline, everything else remaining the same, the relative price of a restaurant meal and real income in terms of restaurant meals.

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 price of a cup of coffee is $2.00.The price of a cup of tea is $1.20.The relative price of a cup of tea with respect to a cup of coffee is

The magnitude of the slope of the budget line is the

Use the figure below to answer the following questions. Figure 9.3.3 -Consider an initial budget line labelled RT in Figure 9.3.3.What would rotate the budget line to RS?

Moving down along a given budget line, real income

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government 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

Filters

Exam 9: Possibilities, Preferences, and Choices

The magnitude of the slope of an indifference curve is

At the best affordable point, which statement is true?

Albert is consuming at a point where his budget line is not as steep as indifference curve.To reach consumer equilibrium, Albert

What is the relationship between goods and the income effect?

A consumer's best affordable point occurs

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

As a consumer moves rightward along an indifference curve,

Use the figure below to answer the following questions. Figure 9.1.2 -Refer to Figure 9.1.2.Which budget line has the lowest relative price for carrots?

If two goods are perfect substitutes, then their

The price of one good divided by the price of another good is

Good X is measured on the horizontal axis and good Y is measured on the vertical axis.The marginal rate of substitution is

Which one of the following is always true of the income effect?

The substitution effect

A rise in the price of gasoline, everything else remaining the same, ________ the relative price of a restaurant meal and ________ real income in terms of restaurant meals.

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 price of a cup of coffee is $2.00.The price of a cup of tea is $1.20.The relative price of a cup of tea with respect to a cup of coffee is

The magnitude of the slope of the budget line is the

Use the figure below to answer the following questions. Figure 9.3.3 -Consider an initial budget line labelled RT in Figure 9.3.3.What would rotate the budget line to RS?

Moving down along a given budget line, real income

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government 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

Filters

A rise in the price of gasoline, everything else remaining the same, the relative price of a restaurant meal and real income in terms of restaurant meals.