Question 1

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.

Question 2

What is a distinguishing characteristic of goods that are perfect complements?

Accepted Answer

A) straight-line indifference curves 
B) upward-sloping demand curves 
C) L-shaped indifference curves 
D) upward-sloping indifference curves 
E) curved indifference curves, bowed away from the origin 
A) straight-line indifference curves 
B) upward-sloping demand curves 
C) L-shaped indifference curves 
D) upward-sloping indifference curves 
E) curved indifference curves, bowed away from the origin

Question 3

Which of the following statements is false?

Accepted Answer

A) A consumer possesses a preference map. 
B) An indifference curve is a line that shows combinations of goods among which a consumer is indifferent. 
C) A consumer has only one indifference curve. 
D) The marginal rate of substitution is the rate at which a consumer will give up good y to get an additional unit of good x and remain on the same indifference curve. 
E) If the indifference curve is steep, the marginal rate of substitution is high. 
A) A consumer possesses a preference map. 
B) An indifference curve is a line that shows combinations of goods among which a consumer is indifferent. 
C) A consumer has only one indifference curve. 
D) The marginal rate of substitution is the rate at which a consumer will give up good y to get an additional unit of good x and remain on the same indifference curve. 
E) If the indifference curve is steep, the marginal rate of substitution is high.

Question 4

David has an income of $60 to buy movie tickets and bus tickets.The price of a movie ticket is $12 and the price of a bus ticket is $4.What is the relative price of a bus ticket in terms of movie tickets?

Accepted Answer

A) 2 movie tickets 
B) 15 movie tickets 
C) $3 
D) 1/3 movie ticket 
E) $6 
A) 2 movie tickets 
B) 15 movie tickets 
C) $3 
D) 1/3 movie ticket 
E) $6

Question 5

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 carrots?

Accepted Answer

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

Question 6

The number of pizza slices is plotted on the horizontal axis and number of hot dogs is plotted on the vertical axis.If the price of a hot dog rises, the

Accepted Answer

A) x-intercept and the slope of the budget line increase. 
B) y-intercept and the slope of the budget line increase. 
C) x-intercept and the slope of the budget line decrease. 
D) y-intercept decreases and the slope of the budget line does not change. 
E) y-intercept and the slope of the budget line decrease. 
A) x-intercept and the slope of the budget line increase. 
B) y-intercept and the slope of the budget line increase. 
C) x-intercept and the slope of the budget line decrease. 
D) y-intercept decreases and the slope of the budget line does not change. 
E) y-intercept and the slope of the budget line decrease.

Question 7

A change in the price of the good measured on the vertical 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 8

Which statement is true for an inferior good?

Accepted Answer

A) The substitution effect is positive; as price rises, consumption increases. 
B) The income effect is absent; as income increases, consumption remains constant. 
C) The income effect works in the opposite direction to the substitution effect. 
D) The good is of poor workmanship. 
E) The income effect works in the same direction as the substitution effect. 
A) The substitution effect is positive; as price rises, consumption increases. 
B) The income effect is absent; as income increases, consumption remains constant. 
C) The income effect works in the opposite direction to the substitution effect. 
D) The good is of poor workmanship. 
E) The income effect works in the same direction as the substitution effect.

Question 9

An indifference curve slopes downward because

Accepted Answer

A) it shows that people are only happy when they increase consumption of all goods. 
B) it shows that when a person gives up some of good X they must increase their consumption of good Y to remain indifferent. 
C) it shows that when a person gives up some of good X they can afford to increase their consumption of good Y. 
D) it is a demand curve without prices. 
E) the quantity demanded increases as the price falls. 
A) it shows that people are only happy when they increase consumption of all goods. 
B) it shows that when a person gives up some of good X they must increase their consumption of good Y to remain indifferent. 
C) it shows that when a person gives up some of good X they can afford to increase their consumption of good Y. 
D) it is a demand curve without prices. 
E) the quantity demanded increases as the price falls.

Question 10

Goods that can be bought in any quantity desired are called

Accepted Answer

A) divisible goods. 
B) invisible goods. 
C) inferior goods. 
D) services. 
E) normal goods. 
A) divisible goods. 
B) invisible goods. 
C) inferior goods. 
D) services. 
E) normal goods.

Question 11

Use the figure below to answer the following questions.
   
Figure 9.2.3
-Refer to Figure 9.2.3.When Rashid chooses the consumption point of 2 books and 6 albums, his marginal rate of substitution is

Accepted Answer

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

Question 12

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 13

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.

Question 14

Larry consumes only beer (B)and chips (C).If beer is measured on the vertical axis, the relative price of chips in terms of beer is all of the following except

Accepted Answer

A) PC/PB. 
B) the magnitude of the slope of the budget line. 
C) equal to the opportunity cost of 1 bag of chips. 
D) the real income in terms of beer. 
E) the inverse of the relative price of beer in terms of chips. 
A) PC/PB. 
B) the magnitude of the slope of the budget line. 
C) equal to the opportunity cost of 1 bag of chips. 
D) the real income in terms of beer. 
E) the inverse of the relative price of beer in terms of chips.

Question 15

When Jim is at his best affordable point, the budget line

Accepted Answer

A) is steeper than the highest attainable indifference curve. 
B) is flatter than the highest attainable indifference curve. 
C) does not touch the highest attainable indifference curve. 
D) is tangent to the highest attainable indifference curve. 
E) intersects the highest attainable indifference curve. 
A) is steeper than the highest attainable indifference curve. 
B) is flatter than the highest attainable indifference curve. 
C) does not touch the highest attainable indifference curve. 
D) is tangent to the highest attainable indifference curve. 
E) intersects the highest attainable indifference curve.

Question 16

Use the information below to answer the following questions.
Fact 9.3.1
Marc has an income of $20 and spends it on two goods, root beer (measured on the vertical axis)and chips (measured on the horizontal axis). The price of root beer is $1 a can. The price of chips is $0.50 a bag. Initially, Marc chooses to consume 10 cans of root beer and 20 bags of chips. Then the price of root beer rises to $1.50 per can and the price of chips falls to $0.25 a bag.
-Refer to Fact 9.3.1.When the price of a bag of chips falls, Marc

Accepted Answer

A) will consume more beer, more chips, and be better off. 
B) will consume less beer, more chips, and be better off. 
C) will consume less beer, more chips, and be worse off. 
D) will consume less beer, less chips, and be worse off. 
E) will consume more beer, less chips, and be better off. 
A) will consume more beer, more chips, and be better off. 
B) will consume less beer, more chips, and be better off. 
C) will consume less beer, more chips, and be worse off. 
D) will consume less beer, less chips, and be worse off. 
E) will consume more beer, less chips, and be better off.

Question 17

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 compact discs?

Accepted Answer

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

Question 18

The marginal rate of substitution

Accepted Answer

A) is the amount of good Y substituted for good X as a consumer moves along his budget line. 
B) is the rate at which a person gives up the good measured on the y-axis to get an additional unit of the good measured on the x-axis while remaining on the same indifference curve. 
C) increases as a consumer consumes more of the good measured on the x-axis. 
D) is greater than the magnitude of the slope of the budget line. 
E) is equal to the slope of the budget line. 
A) is the amount of good Y substituted for good X as a consumer moves along his budget line. 
B) is the rate at which a person gives up the good measured on the y-axis to get an additional unit of the good measured on the x-axis while remaining on the same indifference curve. 
C) increases as a consumer consumes more of the good measured on the x-axis. 
D) is greater than the magnitude of the slope of the budget line. 
E) is equal to the slope of the budget line.

Question 19

Which one of the following statements is true about the indifference curves for two goods that are perfect substitutes?

Accepted Answer

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

Question 20

A consumer always has a cup of coffee with a tablespoon of sugar.What would the consumer's indifference curves for these two goods look like?

Accepted Answer

A) upward sloping 
B) horizontal along the entire length 
C) downward sloping with a constant slope 
D) vertical along the entire length 
E) L-shaped 
A) upward sloping 
B) horizontal along the entire length 
C) downward sloping with a constant slope 
D) vertical along the entire length 
E) L-shaped

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

What is a distinguishing characteristic of goods that are perfect complements?

Which of the following statements is false?

David has an income of $60 to buy movie tickets and bus tickets.The price of a movie ticket is $12 and the price of a bus ticket is $4.What is the relative price of a bus ticket in terms of movie tickets?

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 carrots?

The number of pizza slices is plotted on the horizontal axis and number of hot dogs is plotted on the vertical axis.If the price of a hot dog rises, the

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

Which statement is true for an inferior good?

An indifference curve slopes downward because

Goods that can be bought in any quantity desired are called

Use the figure below to answer the following questions. Figure 9.2.3 -Refer to Figure 9.2.3.When Rashid chooses the consumption point of 2 books and 6 albums, his marginal rate of substitution is

The substitution effect is the effect of

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

Larry consumes only beer (B)and chips (C).If beer is measured on the vertical axis, the relative price of chips in terms of beer is all of the following except

When Jim is at his best affordable point, the budget line

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 compact discs?

The marginal rate of substitution

Which one of the following statements is true about the indifference curves for two goods that are perfect substitutes?

A consumer always has a cup of coffee with a tablespoon of sugar.What would the consumer's indifference curves for these two goods look like?

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

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Exam 9: Possibilities, Preferences, and Choices

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

What is a distinguishing characteristic of goods that are perfect complements?

Which of the following statements is false?

David has an income of $60 to buy movie tickets and bus tickets.The price of a movie ticket is $12 and the price of a bus ticket is $4.What is the relative price of a bus ticket in terms of movie tickets?

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 carrots?

The number of pizza slices is plotted on the horizontal axis and number of hot dogs is plotted on the vertical axis.If the price of a hot dog rises, the

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

Which statement is true for an inferior good?

An indifference curve slopes downward because

Goods that can be bought in any quantity desired are called

Use the figure below to answer the following questions. Figure 9.2.3 -Refer to Figure 9.2.3.When Rashid chooses the consumption point of 2 books and 6 albums, his marginal rate of substitution is

The substitution effect is the effect of

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

Larry consumes only beer (B)and chips (C).If beer is measured on the vertical axis, the relative price of chips in terms of beer is all of the following except

When Jim is at his best affordable point, the budget line

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 compact discs?

The marginal rate of substitution

Which one of the following statements is true about the indifference curves for two goods that are perfect substitutes?

A consumer always has a cup of coffee with a tablespoon of sugar.What would the consumer's indifference curves for these two goods look like?

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