Question 1

The assumption of nonsatiation of preferences states that _____.

Accepted Answer

A) a consumer can rank all possible consumption bundles 
B) consumers have consistent preferences 
C) more of a good is always better 
D) consumers are indifferent between identical goods 
A) a consumer can rank all possible consumption bundles 
B) consumers have consistent preferences 
C) more of a good is always better 
D) consumers are indifferent between identical goods C

Question 2

Suppose initially that the price of X is $5,the price of Y is $10,and the consumer's income is $100.If Y is measured on the vertical axis,X is measured on the horizontal axis,and the price of Y increases to $20:

Accepted Answer

A) the entire budget line will shift inward toward the origin,with its slope changing from -1/2 to -1/4. 
B) the budget line will pivot inward toward the origin along the X axis,with its slope changing from -1/2 to -1/4. 
C) the budget line will pivot inward toward the origin along the Y axis,with the slope changing from -1/2 to -1/4. 
D) the budget line will pivot inward toward the origin along the Y axis,with the slope changing from -1/4 to -1/2. 
A) the entire budget line will shift inward toward the origin,with its slope changing from -1/2 to -1/4. 
B) the budget line will pivot inward toward the origin along the X axis,with its slope changing from -1/2 to -1/4. 
C) the budget line will pivot inward toward the origin along the Y axis,with the slope changing from -1/2 to -1/4. 
D) the budget line will pivot inward toward the origin along the Y axis,with the slope changing from -1/4 to -1/2. C

Question 3

Suppose a consumer must pay $P per visit to the local museum for each of the first 10 visits but only $P/2 per visit from the 11th visit on.With a composite consumption good on the Y-axis and visits to the museum on the X-axis,the budget line:

Accepted Answer

A) is vertical after 10 visits. 
B) becomes steeper after 10 visits. 
C) becomes flatter after 10 visits. 
D) shifts outward after 10 visits. 
A) is vertical after 10 visits. 
B) becomes steeper after 10 visits. 
C) becomes flatter after 10 visits. 
D) shifts outward after 10 visits. C

Question 4

Figure 3-1 shows the preferences of a consumer toward reading books and watching movies.Refer to Figure 3-1.ref SHAPE \* MERGEFORMAT Which of the following is the point at which the consumer maximizes his utility?

Accepted Answer

A) A 
B) C 
C) D 
D) E 
A) A 
B) C 
C) D 
D) E

Question 5

Suppose there are two goods,X and Y,with X measured on the horizontal axis and Y measured on the vertical axis.Which of the following statements about a budget line relating the two goods is correct?

Accepted Answer

A) The budget line shows all the possible combinations of X and Y a consumer can buy given the level of income and prices. 
B) The budget line shows all the possible combinations of X and Y a consumer can buy given the level of income,prices,and borrowings. 
C) The budget line shows the most preferred combinations of X and Y a consumer can buy given the level of income and prices. 
D) The budget line shows the least-cost combinations of X and Y a consumer will buy given the level of income and prices. 
A) The budget line shows all the possible combinations of X and Y a consumer can buy given the level of income and prices. 
B) The budget line shows all the possible combinations of X and Y a consumer can buy given the level of income,prices,and borrowings. 
C) The budget line shows the most preferred combinations of X and Y a consumer can buy given the level of income and prices. 
D) The budget line shows the least-cost combinations of X and Y a consumer will buy given the level of income and prices.

Question 6

A set of indifference curves between an economic good and an economic bad must be _____.

Accepted Answer

A) negatively sloped 
B) intersecting 
C) positively sloped 
D) horizontal 
A) negatively sloped 
B) intersecting 
C) positively sloped 
D) horizontal

Question 7

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

Accepted Answer

Diminishing marginal rate of substitutio

Question 8

A consumer attains equilibrium by _____.

Accepted Answer

A) consuming all goods to the point where the marginal utility of each are equal 
B) consuming all goods to the point where the total utility of each are equal 
C) allocating income such that the total amount spent on each good is equal 
D) allocating income such that the marginal utility of the last dollar spent on each good is the same 
A) consuming all goods to the point where the marginal utility of each are equal 
B) consuming all goods to the point where the total utility of each are equal 
C) allocating income such that the total amount spent on each good is equal 
D) allocating income such that the marginal utility of the last dollar spent on each good is the same

Question 9

Negatively-sloped,straight-line indifference curves imply:

Accepted Answer

A) that one of the goods has no effect on utility. 
B) that the goods are perfect complements. 
C) that the goods are perfect substitutes. 
D) that one of the goods is an economic "bad". 
A) that one of the goods has no effect on utility. 
B) that the goods are perfect complements. 
C) that the goods are perfect substitutes. 
D) that one of the goods is an economic "bad".

Question 10

When a consumer is in equilibrium this means that he or she is:

Accepted Answer

A) consuming the largest market basket possible. 
B) consuming the best market basket,given his or her preferences,income,and prices. 
C) maximizing his or her income. 
D) consuming goods with the highest total utility. 
A) consuming the largest market basket possible. 
B) consuming the best market basket,given his or her preferences,income,and prices. 
C) maximizing his or her income. 
D) consuming goods with the highest total utility.

Question 11

Incorporating altruistic preferences into the theory of consumer choice:

Accepted Answer

A) is not possible. 
B) requires modifying the original assumptions of nonsatiation,completeness,and transitivity. 
C) is possible,but results in corner solutions. 
D) is possible without changing any assumptions. 
A) is not possible. 
B) requires modifying the original assumptions of nonsatiation,completeness,and transitivity. 
C) is possible,but results in corner solutions. 
D) is possible without changing any assumptions.

Question 12

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 13

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 14

Figure 3-1 shows the preferences of a consumer toward reading books and watching movies.Refer to Figure 3-1.Given that the price of a book is $4 and a movie ticket costs $5,the consumer's marginal rate of substitution in equilibrium equals _____.

Accepted Answer

A) 1 
B) 5/4 
C) 4/5 
D) Cannot be determined without more information 
A) 1 
B) 5/4 
C) 4/5 
D) Cannot be determined without more information

Question 15

Intersecting indifference curves violate the assumption of _____.

Accepted Answer

A) nonsatiation 
B) rationality 
C) transitivity 
D) completeness 
A) nonsatiation 
B) rationality 
C) transitivity 
D) completeness

Question 16

Which of the following properties is not assumed to hold for a typical consumer's preferences?

Accepted Answer

A) Nonsatiation 
B) Completeness 
C) Transitivity 
D) Neutrality 
A) Nonsatiation 
B) Completeness 
C) Transitivity 
D) Neutrality

Question 17

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 18

Suppose movie theater tickets are on the vertical axis and books on the horizontal axis.You have a budget allowance of $100,and the price of movie theater passes is $10 and the price of books is $25 each.What is the vertical intercept of your budget constraint?

Accepted Answer

A) 1 
B) 4 
C) 10 
D) 100 
A) 1 
B) 4 
C) 10 
D) 100

Question 19

Which of the following will keep a consumer on the same indifference curve even if he wishes to move to a higher one?

Accepted Answer

A) An increase in the consumer's income 
B) An increase in the relative price of one good the consumer purchases,other prices remaining unchanged 
C) A decrease in the relative price of one good the consumer purchases,other prices remaining unchanged 
D) A doubling of the consumer's income and a halving of the prices of all the goods the consumer purchases 
A) An increase in the consumer's income 
B) An increase in the relative price of one good the consumer purchases,other prices remaining unchanged 
C) A decrease in the relative price of one good the consumer purchases,other prices remaining unchanged 
D) A doubling of the consumer's income and a halving of the prices of all the goods the consumer purchases

Question 20

Perfect complements are associated with _____ indifference curves.

Accepted Answer

A) U-shaped 
B) straight-line 
C) convex 
D) L-shaped 
A) U-shaped 
B) straight-line 
C) convex 
D) L-shaped

The assumption of nonsatiation of preferences states that _____.

Suppose initially that the price of X is $5,the price of Y is $10,and the consumer's income is $100.If Y is measured on the vertical axis,X is measured on the horizontal axis,and the price of Y increases to $20:

Suppose a consumer must pay $P per visit to the local museum for each of the first 10 visits but only $P/2 per visit from the 11^th visit on.With a composite consumption good on the Y-axis and visits to the museum on the X-axis,the budget line:

Suppose there are two goods,X and Y,with X measured on the horizontal axis and Y measured on the vertical axis.Which of the following statements about a budget line relating the two goods is correct?

A set of indifference curves between an economic good and an economic bad must be _____.

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

A consumer attains equilibrium by _____.

Negatively-sloped,straight-line indifference curves imply:

When a consumer is in equilibrium this means that he or she is:

Incorporating altruistic preferences into the theory of consumer choice:

Which of the following will lead to corner equilibrium?

Figure 3-1 shows the preferences of a consumer toward reading books and watching movies.Refer to Figure 3-1.Given that the price of a book is $4 and a movie ticket costs $5,the consumer's marginal rate of substitution in equilibrium equals _____.

Intersecting indifference curves violate the assumption of _____.

Which of the following properties is not assumed to hold for a typical consumer's preferences?

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:

Suppose movie theater tickets are on the vertical axis and books on the horizontal axis.You have a budget allowance of $100,and the price of movie theater passes is $10 and the price of books is $25 each.What is the vertical intercept of your budget constraint?

Which of the following will keep a consumer on the same indifference curve even if he wishes to move to a higher one?

Perfect complements are associated with _____ indifference curves.

An Introduction to Microeconomics

Supply and Demand

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

Exam 3: The Theory of Consumer Choice

The assumption of nonsatiation of preferences states that _____.

Suppose initially that the price of X is $5,the price of Y is $10,and the consumer's income is $100.If Y is measured on the vertical axis,X is measured on the horizontal axis,and the price of Y increases to $20:

Suppose a consumer must pay $P per visit to the local museum for each of the first 10 visits but only $P/2 per visit from the 11th visit on.With a composite consumption good on the Y-axis and visits to the museum on the X-axis,the budget line:

Figure 3-1 shows the preferences of a consumer toward reading books and watching movies.Refer to Figure 3-1.ref SHAPE \* MERGEFORMAT Which of the following is the point at which the consumer maximizes his utility?

Suppose there are two goods,X and Y,with X measured on the horizontal axis and Y measured on the vertical axis.Which of the following statements about a budget line relating the two goods is correct?

A set of indifference curves between an economic good and an economic bad must be _____.

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

A consumer attains equilibrium by _____.

Negatively-sloped,straight-line indifference curves imply:

When a consumer is in equilibrium this means that he or she is:

Incorporating altruistic preferences into the theory of consumer choice:

Which of the following will lead to corner equilibrium?

Figure 3-1 shows the preferences of a consumer toward reading books and watching movies.Refer to Figure 3-1.Given that the price of a book is $4 and a movie ticket costs $5,the consumer's marginal rate of substitution in equilibrium equals _____.

Intersecting indifference curves violate the assumption of _____.

Which of the following properties is not assumed to hold for a typical consumer's preferences?

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:

Suppose movie theater tickets are on the vertical axis and books on the horizontal axis.You have a budget allowance of $100,and the price of movie theater passes is $10 and the price of books is $25 each.What is the vertical intercept of your budget constraint?

Which of the following will keep a consumer on the same indifference curve even if he wishes to move to a higher one?

Perfect complements are associated with _____ indifference curves.

An Introduction to Microeconomics

Supply and Demand

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

Suppose a consumer must pay $P per visit to the local museum for each of the first 10 visits but only $P/2 per visit from the 11^th visit on.With a composite consumption good on the Y-axis and visits to the museum on the X-axis,the budget line: