Question 1

If a consumer is at a corner solution,this means that:

Accepted Answer

A) she is not spending all of his or her income. 
B) MRS is equal to the ratio of the prices of two goods. 
C) she would prefer to buy infinite amounts of one good. 
D) consumption of the first unit of one good is not worth its cost. 
A) she is not spending all of his or her income. 
B) MRS is equal to the ratio of the prices of two goods. 
C) she would prefer to buy infinite amounts of one good. 
D) consumption of the first unit of one good is not worth its cost.

Question 2

If the prices of two goods,X and Y,increase by 50 percent and the consumer's income rises by 100 percent:

Accepted Answer

A) the slope of the consumer's budget line will change,becoming flatter to indicate that X and Y are now relatively less expensive. 
B) the consumer's budget line will shift out from the origin,with its slope unchanged. 
C) the consumer's budget line will shift out from the origin and its slope will also change,reflecting the lower prices for X and Y. 
D) the consumer's budget line will remain unchanged as the price and income effects will cancel each other out. 
A) the slope of the consumer's budget line will change,becoming flatter to indicate that X and Y are now relatively less expensive. 
B) the consumer's budget line will shift out from the origin,with its slope unchanged. 
C) the consumer's budget line will shift out from the origin and its slope will also change,reflecting the lower prices for X and Y. 
D) the consumer's budget line will remain unchanged as the price and income effects will cancel each other out.

Question 3

Consider a graph with Yvonne's income on the Y-axis and Xavier's income on the X-axis.Yvonne has twice as much income as Xavier.If Yvonne cares about the material well-being of Oscar,and considers the latter's income as an economic good,the slope of the indifference curves representing Yvonne's preferences:

Accepted Answer

A) will be steeper,the more willing she is to transfer some of her income to Xavier. 
B) will be flatter,the more willing she is to transfer some of her income to Xavier. 
C) cannot be determined from the information given. 
D) will not change as Yvonne's willingness to donate to Xavier changes. 
A) will be steeper,the more willing she is to transfer some of her income to Xavier. 
B) will be flatter,the more willing she is to transfer some of her income to Xavier. 
C) cannot be determined from the information given. 
D) will not change as Yvonne's willingness to donate to Xavier changes.

Question 4

Explain the difference between diminishing marginal utility and diminishing marginal rate of substitution.

Accepted Answer

Diminishing marginal rate of substitutio

Question 5

Figure 3-3 shows dollar outlays a composite good on the vertical axis and units of good X costing $5 a unit measured on the horizontal axis.
Figure 3-3  
-Given the indifference curve and the budget line shown in Figure 3-3,which of the following is correct?

Accepted Answer

A) The slope of the budget line is $5 
B) The prices of other goods vary with income 
C) The slope of the budget line shows how much the consumer is willing to reduce dollar outlays on other goods to obtain one more unit of clothing 
D) The optimal point of consumption is at point E 
A) The slope of the budget line is $5 
B) The prices of other goods vary with income 
C) The slope of the budget line shows how much the consumer is willing to reduce dollar outlays on other goods to obtain one more unit of clothing 
D) The optimal point of consumption is at point E

Question 6

Using the utility approach,the consumer is in equilibrium when:

Accepted Answer

A) the marginal utility associated with consuming the last unit is zero. 
B) total utility from each good is at a maximum. 
C) the marginal utilities associated with consuming an extra unit of each good are equal. 
D) the marginal utility per dollar's worth of each good is equal. 
A) the marginal utility associated with consuming the last unit is zero. 
B) total utility from each good is at a maximum. 
C) the marginal utilities associated with consuming an extra unit of each good are equal. 
D) the marginal utility per dollar's worth of each good is equal.

Question 7

Suppose there are two goods,X and Y,with X being measured on the horizontal axis and Y being measured on the vertical axis.The budget line connecting these two goods does not:

Accepted Answer

A) show all the possible combinations of X and Y a consumer can buy given the level of income and prices. 
B) have a positive slope. 
C) have a slope that reflects the trade-off of one good for another. 
D) reflect the assumption of continuous divisibility if drawn as a straight line. 
A) show all the possible combinations of X and Y a consumer can buy given the level of income and prices. 
B) have a positive slope. 
C) have a slope that reflects the trade-off of one good for another. 
D) reflect the assumption of continuous divisibility if drawn as a straight line.

Question 8

Define indifference curves and explain their properties.

Accepted Answer

An indifference curve is the locus of al

Question 9

The law of diminishing marginal utility states that:

Accepted Answer

A) the additional utility from consuming an additional unit of a good declines as more of the good is consumed. 
B) the additional utility from consuming an additional unit of a good eventually becomes positive as more of the good is consumed. 
C) as less of one good and more of another good is consumed,the marginal utility of the first good eventually declines. 
D) total utility eventually increases because marginal utility eventually increases as more of a good is consumed. 
A) the additional utility from consuming an additional unit of a good declines as more of the good is consumed. 
B) the additional utility from consuming an additional unit of a good eventually becomes positive as more of the good is consumed. 
C) as less of one good and more of another good is consumed,the marginal utility of the first good eventually declines. 
D) total utility eventually increases because marginal utility eventually increases as more of a good is consumed.

Question 10

Which of the following will lead to corner equilibrium?

Accepted Answer

A) The consumer has a fixed amount of income 
B) The first unit of one good is not worth its cost 
C) The consumer has L-shaped indifference curves 
D) The proportion of income spent on both goods is the same 
A) The consumer has a fixed amount of income 
B) The first unit of one good is not worth its cost 
C) The consumer has L-shaped indifference curves 
D) The proportion of income spent on both goods is the same

Question 11

John will eat peanut butter and jelly sandwiches only when they are made with exactly two ounces of peanut butter and one ounce of jelly.If peanut butter is on the horizontal axis (PB)and jelly on the vertical axis (J),John's indifference curve for peanut butter and jelly is:

Accepted Answer

A) L-shaped,beginning at 2PB and 1J. 
B) convex to the origin with a slope of -1/2. 
C) a parallel straight line with a slope of -2. 
D) concave to the origin with a slope of -2. 
A) L-shaped,beginning at 2PB and 1J. 
B) convex to the origin with a slope of -1/2. 
C) a parallel straight line with a slope of -2. 
D) concave to the origin with a slope of -2.

Question 12

A decline in income is shown on the budget line by:

Accepted Answer

A) a rotation of the budget line such that its horizontal intercept is larger than its vertical intercept. 
B) a parallel shift in the budget constraint toward the origin. 
C) a rotation in the budget line so it intersects the vertical axis closer to the origin. 
D) a change in the relative price ratio. 
A) a rotation of the budget line such that its horizontal intercept is larger than its vertical intercept. 
B) a parallel shift in the budget constraint toward the origin. 
C) a rotation in the budget line so it intersects the vertical axis closer to the origin. 
D) a change in the relative price ratio.

Question 13

Consider a graph with Yvonne's income on the Y-axis and Xavier's income on the X-axis.Yvonne has twice as much income as Xavier.If Yvonne cares about the material well-being of Oscar,and considers the latter's income as an economic good,the slope of Yvonne's budget line relating her income to Xavier's income would be _____.

Accepted Answer

A) -1 
B) -2 
C) -1/2 
D) -4 
A) -1 
B) -2 
C) -1/2 
D) -4

Question 14

Suppose food is on the horizontal axis and all other goods on the vertical axis.Your budget allowance is $200,the market price of food is $5,and the market price of all other goods is $20.You are expending your total budget and the marginal rate of substitution at your present consumption bundle is 0.1 so to maximize utility you should consume:

Accepted Answer

A) more food and less of all other goods. 
B) less food and more of all other goods. 
C) less of both food and all other goods. 
D) more of both food and all other goods. 
A) more food and less of all other goods. 
B) less food and more of all other goods. 
C) less of both food and all other goods. 
D) more of both food and all other goods.

Question 15

Consider a graph with the composite consumption good on the Y-axis and commencement tickets on the X-axis.Assume seniors are allowed only 5 tickets at a price of zero.As the price of commencement tickets increases from $0 to $20,the slope of the:

Accepted Answer

A) indifference curves for students with large families increases. 
B) budget line decreases. 
C) budget line is zero,that is,the budget line becomes vertical. 
D) indifference curves for students with small families increases. 
A) indifference curves for students with large families increases. 
B) budget line decreases. 
C) budget line is zero,that is,the budget line becomes vertical. 
D) indifference curves for students with small families increases.

Question 16

Consider a budget line drawn with apples on the vertical axis and oranges on the horizontal axis.The consumer's income is $100,the price of apples is $5,and the price of oranges is $10.Suppose the consumer's income falls to $75.00,but the prices of apples and oranges remain unchanged.The change in income produces a:

Accepted Answer

A) parallel shift inward of the indifference curves. 
B) new budget line which is steeper than the original one. 
C) parallel shift inward of the budget line. 
D) new budget line which is flatter than the original one. 
A) parallel shift inward of the indifference curves. 
B) new budget line which is steeper than the original one. 
C) parallel shift inward of the budget line. 
D) new budget line which is flatter than the original one.

Question 17

Indifference curves cannot intersect because:

Accepted Answer

A) consumers are indifferent between two consumption bundles. 
B) that would violate the assumption of nonsatiation. 
C) each person has a different set of indifference curves. 
D) indifference curves are two-dimensional. 
A) consumers are indifferent between two consumption bundles. 
B) that would violate the assumption of nonsatiation. 
C) each person has a different set of indifference curves. 
D) indifference curves are two-dimensional.

Question 18

With a composite good on the vertical axis,the slope of the budget line is _____.

Accepted Answer

A) the price of the composite good 
B) - 1 
C) the price of the good on the horizontal axis 
D) 0 
A) the price of the composite good 
B) - 1 
C) the price of the good on the horizontal axis 
D) 0

Question 19

Karen is at the supermarket buying her weekly groceries.Since she is on a budget,she wants to limit her purchases to canned soup (C)and prepackaged salad (S).A can of soup costs $1.2 and a tub of salad costs $2.Her utility function is expressed as U(C,S)= F × S.Given that she has only $10 to spend,derive the equilibrium condition using the utility approach.

Accepted Answer

Since Karen has only $10,her budget cons

Question 20

Graphically and mathematically illustrate the consumer's optimal choice between two goods,yams and xylophones,which are consumed in positive amounts.

Accepted Answer

Let I = income,P_X = per unit price of xyl

If a consumer is at a corner solution,this means that:

If the prices of two goods,X and Y,increase by 50 percent and the consumer's income rises by 100 percent:

Explain the difference between diminishing marginal utility and diminishing marginal rate of substitution.

Figure 3-3 shows dollar outlays a composite good on the vertical axis and units of good X costing $5 a unit measured on the horizontal axis. Figure 3-3 -Given the indifference curve and the budget line shown in Figure 3-3,which of the following is correct?

Using the utility approach,the consumer is in equilibrium when:

Suppose there are two goods,X and Y,with X being measured on the horizontal axis and Y being measured on the vertical axis.The budget line connecting these two goods does not:

Define indifference curves and explain their properties.

The law of diminishing marginal utility states that:

Which of the following will lead to corner equilibrium?

John will eat peanut butter and jelly sandwiches only when they are made with exactly two ounces of peanut butter and one ounce of jelly.If peanut butter is on the horizontal axis (PB)and jelly on the vertical axis (J),John's indifference curve for peanut butter and jelly is:

A decline in income is shown on the budget line by:

Consider a graph with the composite consumption good on the Y-axis and commencement tickets on the X-axis.Assume seniors are allowed only 5 tickets at a price of zero.As the price of commencement tickets increases from $0 to $20,the slope of the:

Indifference curves cannot intersect because:

With a composite good on the vertical axis,the slope of the budget line is _____.

Graphically and mathematically illustrate the consumer's optimal choice between two goods,yams and xylophones,which are consumed in positive amounts.

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

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Exam 1: An Introduction to Microeconomics

If a consumer is at a corner solution,this means that:

If the prices of two goods,X and Y,increase by 50 percent and the consumer's income rises by 100 percent:

Explain the difference between diminishing marginal utility and diminishing marginal rate of substitution.

Figure 3-3 shows dollar outlays a composite good on the vertical axis and units of good X costing $5 a unit measured on the horizontal axis. Figure 3-3 -Given the indifference curve and the budget line shown in Figure 3-3,which of the following is correct?

Using the utility approach,the consumer is in equilibrium when:

Suppose there are two goods,X and Y,with X being measured on the horizontal axis and Y being measured on the vertical axis.The budget line connecting these two goods does not:

Define indifference curves and explain their properties.

The law of diminishing marginal utility states that:

Which of the following will lead to corner equilibrium?

John will eat peanut butter and jelly sandwiches only when they are made with exactly two ounces of peanut butter and one ounce of jelly.If peanut butter is on the horizontal axis (PB)and jelly on the vertical axis (J),John's indifference curve for peanut butter and jelly is:

A decline in income is shown on the budget line by:

Consider a graph with the composite consumption good on the Y-axis and commencement tickets on the X-axis.Assume seniors are allowed only 5 tickets at a price of zero.As the price of commencement tickets increases from $0 to $20,the slope of the:

Indifference curves cannot intersect because:

With a composite good on the vertical axis,the slope of the budget line is _____.

Graphically and mathematically illustrate the consumer's optimal choice between two goods,yams and xylophones,which are consumed in positive amounts.

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters