Exam 9: Possibilities, Preferences, and Choices

Zarina can afford to buy 3 tomatoes and no toothbrushes, or 2 toothbrushes and no tomatoes.The relative price of a toothbrush is

Use the information below to answer the following questions. Fact 9.3.2 Boom Time for "Gently Used" Clothes Most retailers are blaming the economy for their poor sales, but one store chain that sells used name-brand children's clothes, toys, and furniture is boldly declaring that an economic downturn can actually be a boon for its business. Last year, the company took in $20 million in sales, up 5% from the previous year. Sales are already up 5% this year. Source: CNN, April 17, 2008 -Refer to Fact 9.3.2.According to the news clip, used clothing is ________ good.If the price of used clothing falls and income remains the same, the quantity of used clothing bought ________.

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 questions. Figure 9.3.4 Original equilibrium at A, new equilibrium at B -Refer to Figure 9.3.4.Which graphs show the case where good Y is an inferior good?

Use the information below to answer the following questions. Fact 9.3.3 Jim has made his best affordable choice of muffins and coffee. He spends all of his income on 10 muffins at $1 each and 20 cups of coffee at $2 each. Muffins and coffee are ordinary goods. Now the price of a muffin rises to $1.50 and the price of coffee falls to $1.75 a cup. -Refer to Fact 9.3.3.When the price of a muffin and the price of a cup of coffee change,

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

Sam buys gasoline and coffee each week.To draw his budget line for gasoline and coffee, Sam needs to know

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 income effect is illustrated by the move from point

When price rises, the substitution effect

If two consumption points are on different indifference curves, then one point is

Which one of the following statements is always true of the substitution effect?

Use the information below to answer the following questions. Fact 9.2.1 You May Be Paid More (or Less)Than You Think It's so hard to put a price on happiness, isn't it? But if you've ever had to choose between a jobs you like and a better-paying one that you like less, you probably wished some economist would tell you how much job satisfaction is worth. Trust in management is by far the biggest component to consider. Say you get a new boss and your trust in management goes up a bit (say, up 1 point on a 10-point scale). That's like getting a 36 percent pay raise. In other words, that increased level of trust will boost your level of overall satisfaction in life by about the same amount as a 36 percent raise would. Source: CNN, March 29, 2006 -Refer to Fact 9.2.1.What is the marginal rate of substitution?

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

Use the information below to answer the following questions. Fact 9.2.1 You May Be Paid More (or Less)Than You Think It's so hard to put a price on happiness, isn't it? But if you've ever had to choose between a jobs you like and a better-paying one that you like less, you probably wished some economist would tell you how much job satisfaction is worth. Trust in management is by far the biggest component to consider. Say you get a new boss and your trust in management goes up a bit (say, up 1 point on a 10-point scale). That's like getting a 36 percent pay raise. In other words, that increased level of trust will boost your level of overall satisfaction in life by about the same amount as a 36 percent raise would. Source: CNN, March 29, 2006 -Refer to Fact 9.2.1.The news clip implies that the marginal rate of substitution is ________, which is likely ________ implication.

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?

Use the figure below to answer the following questions. Figure 9.2.1 -Which of the graphs in Figure 9.2.1 shows perfect substitutes?

Larry consumes only beer (B)and chips (C).His real income in terms of beer is

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 9.1.2 -Refer to Figure 9.1.2.Which budget line shows the greatest real income in terms of compact discs?

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