Deck 10: The Rational Consumer

Question 1

For most goods, indifference curves:

A)may intersect.
B)slope upward.
C)are concave from the origin.
D)slope downward.

Answer 1

D

Question 2

An indifference curve shows combinations of two goods that yield:
A.equal prices.
B.equal money income.
C.equal satisfaction.
D.increasing prices.

Answer 2

equal satisfaction

Question 3

Greater levels of utility are represented by:

A)indifference curves that are farther from the origin.
B)indifference curves that are closer to the origin.C.moving up to the left on the same indifference curve.
D)moving down to the right on the same indifference curve.

Answer 3

A

Question 4

In terms of indifference curves, an increase in total utility is represented by a:

A)shift to the right to a higher indifference curve.
B)shift to the left to a lower indifference curve.
C)movement upward along an indifference curve.
D)movement downward along an indifference curve.

Question 5

Which of the following statements is true?

A)Higher indifference curves represent less utility than lower curves.
B)Higher indifference curves represent more utility than lower curves.
C)Higher indifference curves represent the same utility as lower curves.
D)Higher indifference curves may represent either more or less utility than lower curves.

Question 6

An indifference curve is a line that shows all of the consumption bundles that:

A)an individual can purchase with a given income.
B)yield the same total utility for an individual.
C)yield the same marginal utility.
D)have the same marginal rate of substitution.

Question 7

When Laurie asks Matt if he wants a large popcorn and small soda or a large soda and small popcorn, Matt says, "Oh, I'm indifferent." This means Matt:

A)doesn't want popcorn and soda.
B)thinks both bundles give him the same
C)utility.thinks both bundles give him no utility.
D)thinks the utility he gained from popcorn and soda exactly equals their cost.

Question 8

For most goods, as we move down an indifference curve:

A)the slope gets flatter.
B)the slope gets steeper.
C)the slope stays the same.
D)total utility decreases.

Question 9

Assume that two combinations of two goods yield the same level of satisfaction.We can conclude that these combinations are on:

A)the same price line.
B)the same budget constraint.
C)the same indifference curve.
D)different indifference curves.

Question 10

(Table: Bundles of X and Y) Look at the table Bundles of X and Y.A consumer can choose among combinations of goods X and Y.The table documents several bundles of X and Y and the utility produced by those combinations.Given this information, it can be said that:

A)bundles A and B are on the same indifference curve.
B)bundles A and C are on the same indifference curve.
C)bundle D is on the highest indifference curve.
D)bundle C is on the highest indifference curve and bundles A and B are on the lowest indifference curve.

Question 11

The slope of a(n) ________ curve shows the rate at which two goods can be exchanged ________ the consumer's _.

A)marginal utility; by increasing; marginal
B)utility indifference; without affecting; total
C)utility iso-utility; without affecting; budget
D)indifference; without affecting; budget

Question 12

A(n) is a curve that shows all of the consumption bundles that yield the same level of total utility for an individual.

A)budget line
B)indifference
C)curve utility function
D)marginal rate of substitution

Question 13

If two combinations of two goods yield the same level of satisfaction, then they are on:

A)the same price line.
B)the same budget constraint.
C)the same indifference curve.
D)different indifference curves.

Question 14

Combinations of two goods that yield equal levels of utility are shown on a(n) curve.

A)indifference
B)budget
C)marginal utility
D)utility-maximizing

Question 15

Consumption bundles that yield equal levels of total utility are shown on _.

A)a budget line
B)a marginal utility curve
C)an indifference curve
D)a utility maximizing curve

Question 16

Higher indifference curves represent:

A)less utility than lower indifference curves.
B)more utility than lower indifference curves.
C)the same level of utility as lower indifference curves.
D)unknown levels of utility compared to lower indifference curves.

Question 17

If a consumer moves upward along an indifference curve, his or her total utility:

A)remains constant.
B)first decreases, then increases.
C)increases.
D)first increases, then decreases.

Question 18

If a consumer moves downward along an indifference curve, his or her total utility:

A)remains constant.
B)first decreases, then increases.
C)decreases.
D)first increases, then decreases.

Question 19

A curve that represents combinations of two goods that yield equal levels of satisfaction isa(n):

A)indifference curve.
B)budget curve.
C)marginal utility curve.price-D.consumption curve.

Question 20

In terms of indifference curves, higher total utility is represented by:

A)a higher indifference curve.
B)a lower indifference curve.
C)movement leftward along an indifference curve.
D)movement rightward along an indifference curve.

Question 21

If you are willing to give up 10 shirts (on the vertical axis) for 5 pairs of pants (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:

A)0.5.
B)2.
C)5.
D)10.

Question 22

Two points on an indifference curve that displays a diminishing marginal rate of substitution between apples and oranges are (10 apples and 2 oranges), (8 apples and 4 oranges).Which of the following combinations of apples and oranges could also lie on this indifference curve?

A)10 apples and 6 oranges
B)6 apples and 7 oranges
C)9 apples and 4 oranges
D)8 apples and 3 oranges

Question 23

Indifference curves that are convex to the origin imply which of the following?

A)increasing marginal utility
B)diminishing marginal rate of substitution
C)As we move down an indifference curve, the slope gets steeper.
D)constant prices of goods

Question 24

(Table: Food and Clothing Bundles) Teddy enjoys consuming food and clothing.The table shows five bundles of food and clothing that all provide Teddy with the same amount of utility.If units of food were put on the horizontal axis, what does this table tell us about the shape of Teddy's indifference curve?

A)It is horizontal.
B)It is upward sloping, with a declining marginal rate of substitution.
C)It is downward sloping, with a constant marginal rate of
D)substitution.It is downward sloping, with a declining marginal rate of substitution.

Question 25

The marginal rate of substitution shows how a consumer can substitute between two goods to:

A)maintain the same income.
B)maintain the same level of total utility.
C)maintain the same marginal
D)utility.increase total utility.

Question 26

Figure: Indifference Curves and Consumption Bundles (Figure: Indifference Curves and Consumption Bundles) Let MUP = marginal utility of pizza, MUH = marginal utility of hot dogs, PP = price of a slice of pizza, PH = price of a hot dog.In the figure, the absolute value of the slope of an indifference curve is equal to:

A)MUP/MUH.
B)MUH/MUP.
C)PH/PP.
D)PP/PH.

Question 27

Max consumes only yogurt and almonds, and he is on his highest possible indifference curve.Two bundles on this indifference curve are bundle A (4 yogurts and 2 almonds), bundle B (3 yogurts and 3 almonds).Between points A and B, what is Max's marginal rate of substitution of yogurt for almonds?

A)1
B)2
C)3
D)1.33

Question 28

The maximum amount of one good a consumer would be willing to give up to obtain an additional unit of another is called the:

A)marginal rate of substitution.
B)marginal rate of utility exchange.
C)average rate of substitution.D.marginal rate of exchange.

Question 29

Which of the following statements is correct?

A)The slope of an indifference curve shows the rate at which two goods can be exchanged without changing the total budget.
B)The slope of a utility curve shows the rate at which two goods can be exchanged without changing the total budget.
C)The slope of an indifference curve shows the rate at which two goods can be exchanged without changing total utility.
D)The slope of a marginal utility curve shows the rate at which two goods can be exchanged in order to increase the consumer's marginal utility.

Question 30

If you are willing to give up 5 units of good Y (on the vertical axis) for 5 units of good X (on the horizontal axis) and your level of satisfaction is unchanged, the marginal rate of substitution is:

A)0.5.
B)1.
C)2.
D)5.

Question 31

An indifference curve typically:

A)slopes downward.
B)shows combinations of two goods that yield equal money income.
C)slopes upward.
D)has a concave shape.

Question 32

Indifference curves that exhibit a diminishing marginal rate of substitution are:

A)concave to the origin.
B)upward sloping over part of their length.
C)downward-sloping straight lines.
D)convex to the origin.

Question 33

(Table: Food and Clothing Bundles) Teddy enjoys consuming food and clothing.The table shows five bundles of food and clothing that all provide Teddy with the same amount of utility.The marginal rate of substitution of food for clothing as Teddy moves from bundle D to bundle E is equal to:

A)1.
B)-2.8.
C)-14.
D)-5.

Question 34

As a consumer moves upward along an indifference curve, giving up some of X (on the horizontal axis) to get more of Y (on the vertical axis), his or her marginal rate of substitution of X for Y:

A)becomes infinite.
B)goes from negative to positive.
C)increases.
D)decreases.

Question 35

The principle of marginal rate of substitution states that the more chocolate Susan consumes in proportion to coffee, the coffee she is willing to substitute for another piece
Of chocolate.

A)diminishing; less
B)diminishing; more
C)increasing; less
D)increasing; more

Question 36

Manny consumes only bananas and DVDs, and he is on his highest possible indifference curve.Two bundles on this indifference curve are bundle A (5 bananas and 2 DVDs), and bundle B (3 bananas and 3 DVDs).Between points A and B, what is Manny's marginal rate of substitution of bananas for DVDs?

A)1
B)2
C)0.5
D)1.33

Question 37

The marginal rate of substitution assumes that:

A)prices remain unchanged.
B)money income remains unchanged.
C)total utility remains unchanged.
D)the quantities of both goods remain unchanged.

Question 38

LaToya sees honey and sugar as perfect substitutes.She is always willing to substitute 1 teaspoon of honey for 2 teaspoons of sugar.The marginal rate of substitution of sugar for honey is equal to:

A)1.
B)0.5.
C)2.
D)undefined

Question 39

Which of the following is not true of indifference curves for ordinary goods?

A)They never cross.
B)They slope downward.
C)They are convex from the origin.
D)Indifference curves farther away from the origin have lower levels of utility.

Question 40

Ersida purchases both baby food (F) and cloth diapers (C).The price of a jar of baby food is PF and the price of a box of cloth diapers is PC.At any point on an indifference curve, the marginal rate of substitution for food and clothing can be represented by:

A)MUF/MUC.
B)MUF × PF.
C)MUF/PF.
D)(MUF/MUC) × (PF/PC).

Question 41

Figure: A Budget Constraint for CDs and Movies
(Figure: A Budget Constraint for CDs and Movies) Look at the figure A Budget Constraint for CDs and Movies.Chantal likes to spend her weekly income on new CDs and tickets to see movies.The price of a CD is $12 and the movie ticket price is $10.The graph shows Chantal's budget line.What is her weekly income?

A)$240
B)$100
C)$120
D)$22

Question 42

If you are willing to give up 8 units of good A (on the vertical axis) for 4 units of good B (on the horizontal axis) and your level of satisfaction is unchanged, the marginal rate of substitution of B for A is:

A)0.5.
B)2.
C)1.
D)5.

Question 43

When consumers maximize utility, they try to obtain:

A)a point of intersection between indifference curves.
B)any intersection of the budget line and the indifference curve.
C)the highest indifference curve that touches their budget constraint.
D)the lowest indifference curve that touches their budget constraint.

Question 44

If the price of a ticket to a Minnesota Wild Hockey game equals $60 and the price of a snow shovel equals $40, the relative price of the hockey ticket equals:

A)40 shovels.
B)23 shovels.
C)1.5 shovels.
D)6 shovels.

Question 45

If the price of a cookie is $2 and the price of a brownie is $4, the relative price of cookies in terms of brownies is:

A)0.5.
B)1.0.
C)2.0.
D)undefined.

Question 46

A consumer maximizes utility, given her income, when she chooses a consumption bundle whose:

A)marginal utility of each good is equal.
B)highest indifference curve is tangent to the budget line.
C)marginal rate of substitution is highest.
D)marginal utility of each good is highest.

Question 47

If the combination of two goods occurs at a point of tangency between the budget line and an indifference curve, then:

A)consumer equilibrium has not been achieved.
B)all available income has been spent and total utility is maximized.
C)total utility can be increased by consuming less of both goods.D.total utility can be decreased by consuming more of both goods.

Question 48

Assume that a combination of two goods reflects a point of tangency between the budget line and an indifference curve.In this situation, which of the following is incorrect?

A)Consumer equilibrium has been achieved.
B)All available income has been spent.
C)Utility can be increased by consuming less of both goods.
D)The optimal consumption bundle has been reached.

Question 49

The is the maximum amount of good X a consumer would be willing to give up in order to obtain an additional unit of good Y:

A)marginal rate of substitution.
B)marginal rate of utility exchange.
C)average rate of substitution.
D)marginal rate of exchange.

Question 50

A decreasing marginal rate of substitution indicates that an indifference curve is:

A)a straight line.
B)a vertical line.
C)a horizontal line.
D)bowed in toward the origin.

Question 51

If the price of a cookie is $1 and the price of a brownie is $2, the relative price of cookies in terms of brownies is:

A)0.5.
B)1.0.
C)2.0.
D)undefined.

Question 52

According to the relative price rule, the optimal consumption bundle between hot dogs and beer takes place when the ________ rate of substitution is their relative price.

A)total; equal to
B)marginal; equal to
C)marginal; higher
D)than total; lower than

Question 53

If you are willing to give up 15 units of good A (on the vertical axis) for 5 units of good B (on the horizontal axis) and your level of satisfaction is unchanged, the marginal rate of substitution of B for A is:

A)2.
B)3.
C)5.
D)10.

Question 54

In terms of indifference curves, the optimal consumption bundle is determined by the:

A)intersection of a budget line and an indifference curve.
B)tangency of a budget line and an indifference curve.
C)tangency of a price consumption curve and an income consumption curve.
D)intersection of an income consumption curve and a price consumption curve.

Question 55

Which of the following statements is true?

A)Calculating the marginal rate of substitution assumes that prices remain unchanged.
B)Calculating the marginal rate of substitution assumes that money income remains unchanged.
C)Calculating the marginal rate of substitution assumes that satisfaction remains unchanged.
D)Calculating the marginal rate of substitution assumes that the quantities of both goods remain unchanged.

Question 56

Sandy has a monthly income of $4,000.She spends her income on business suits and prepared organic meals.The price of a business suit is $1,000 and the price of prepared meals is $50.If we plot business suits on the vertical axis, the slope of Sandy's budget line is equal to:

A)20.
B)-0.05.
C)-20.
D)1,000.

Question 57

As a consumer gives up some of good A to get more of good B, his or her marginal rate of substitution of good A for good B:

A)becomes infinite.
B)goes from negative to positive.
C)increases.
D)decreases.

Question 58

Rhonda spends all her income on two goods: clothes and CDs.Suppose this situation were graphed with clothes on the vertical axis and CDs on the horizontal axis.Rhonda consumes a bundle of the two goods whose indifference curve is flatter than the budget line.To increase total utility given her income, Rhonda should:

A)increase her consumption of clothes and decrease her consumption of CDs.
B)increase her consumption of CDs and decrease her consumption of clothes.
C)do nothing-she is consuming a bundle on her budget line.
D)Not enough information is given to answer this question.

Question 59

If the combination of two goods occurs at a point of tangency between the budget line and an indifference curve, then:

A)utility has been maximized.
B)some available income has not been spent.
C)utility can be decreased by consuming more of both goods.
D)utility can be increased by consuming more of one good and less of the other.

Question 60

An individual consuming two goods, X and Y, has the usual downward-sloping, convex indifference curves.All except one of the following will characterize the optimal consumption point.Which is the exception?

A)the intersection of an indifference curve and the budget line at the optimal
B)point tangency between an indifference curve and the budget line at the
C)optimal point the optimal consumption point lying on the budget line
D)maximal utility at the optimal consumption point

Question 61

Figure: The Indifference Curve Map II (Figure: The Indifference Curve Map II) Look at the figure The Indifference Curve Map II.Sara enjoys attending Chicago Cubs' baseball games and eating babyback rib dinners.The figure shows two of her indifference curves for Cubs' tickets and babyback rib dinners.If a new health report is released stating that there is a connection between babyback rib dinners and heart attacks, and this concerns Sara, each combination of Cubs' tickets and babyback ribs will now yield for
Sara.

A)less utility
B)more utility
C)the same level of utility
D)It is impossible to determine how Sara's utility will be affected.

Question 62

If the marginal rate of substitution of cookies for brownies equals the relative price of cookies in terms of brownies when the consumer is on the budget line, the consumer:

A)is maximizing total utility.
B)should consume more cookies and fewer brownies to maximize total utility.
C)should consume fewer cookies and more brownies to maximize total utility.
D)may or may not be maximizing total utility.

Question 63

The relative price rule says that at the optimal consumption bundle the marginal rate of substitution between two goods must be equal to their relative price.This is equivalent to saying that:

A)the marginal utility per dollar is the same for both goods.
B)the marginal utility of each good consumed must be the same.
C)goods should be consumed in the same ratio as their relative
D)price.the MRS is not equal to the ratio of marginal utilities.

Question 64

Figure: Consumer Equilibrium I The figure shows three of Owen's indifference curves for pizza and soda per week.Owen has $180 per month to spend on the two goods, and the price of a pizza is $20 and the price of a soda is
$1)50. (Figure: Consumer Equilibrium I) Look at the figure Consumer Equilibrium I.If Owen consumes 1.5 pizzas and 100 sodas, which of the following is true?

A)Owen is maximizing his total utility, given his budget line.
B)Owen should consume more pizza and less soda to maximize his total utility, given his budget line.
C)Owen should consume less pizza and more soda to maximize his total utility, given his budget line.
D)Owen should consume more pizza and more soda to maximize his total utility, given his budget line.

Question 65

Gillian is consuming her optimal consumption bundle of peanuts and raisins.The marginal utility associated with the last peanut she consumes is 4 utils, and the marginal utility associated with the last raisin is 2 utils.What must be the price of peanuts relative to that of raisins?

A)0.5
B)1
C)2
D)The relative price is undefined.

Question 66

Margo has a monthly income of $60 to spend on cups of coffee or bagels.Each cup of coffee costs $3 and each bagel costs $4.Margo spends all of her income, and at her consumption bundle, she is willing to forgo 1 bagel to get the next cup of coffee to achieve the same level of utility.To maximize her utility, Margo should:

A)increase coffee consumption and decrease bagel consumption.
B)increase bagel consumption and decrease coffee consumption.
C)do nothing.
D)decrease both coffee and bagel consumption.

Question 67

Figure: The Indifference Curve Map II (Figure: The Indifference Curve Map II) Look at the figure The Indifference Curve Map II.Sara
Enjoys attending Chicago Cubs' baseball games and eating baby back rib dinners.The figure shows two of her indifference curves for Cubs' tickets and baby back rib dinners.If she consumes 20 baby back rib dinners and 6 tickets to Cubs' games, she would be equally happy to give up 8 dinners for more ticket(s) to Cubs' games.

A)1
B)1/2
C)3
D)4

Question 68

Joseph chooses a combination of apples and oranges along his budget line.The marginal rate of substitution of apples for oranges is 2, the price of an apple is $0.50, and the price of an orange is $1.50.Joseph:

A)is maximizing total utility.
B)should consume more apples and fewer oranges to maximize total utility.
C)should consume fewer apples and more oranges to maximize total utility.
D)may or may not be maximizing total utility.

Question 69

Joseph chooses a combination of apples and oranges along his budget line.The marginal rate of substitution of apples in place of oranges is 2, the price of an apple is $0.50, and the price of an orange is $0.25.Joseph:

A)is maximizing total utility.
B)should consume more apples and fewer oranges to maximize total utility.
C)should consume fewer apples and more oranges to maximize total utility.
D)may or may not be maximizing total utility.

Question 70

Figure: Consumer Equilibrium I The figure shows three of Owen's indifference curves for pizza and soda per week.Owen has $180 per month to spend on the two goods, and the price of a pizza is $20 and the price of a soda is
$1)50. (Figure: Consumer Equilibrium I) Look at the figure Consumer Equilibrium I.If Owen consumes 1.5 pizzas and 100 sodas, which of the following describes the relationship between his marginal rate of substitution of pizza in place of soda and the relative price of pizza in terms of soda?

A)The marginal rate of substitution equals the relative price.
B)The marginal rate of substitution is greater than the relative price.
C)The marginal rate of substitution is less than the relative price.
D)It is impossible to determine, given the information available.

Question 71

At the optimal consumption bundle, which of the following conditions does not hold?
A)The ratio of marginal utilities of any two goods are equal to the ratio of their prices.

A)The indifference curve is tangent to the budget line.
C)The marginal utility per dollar spent is equal for all goods consumed.
D)The prices of the goods in the optimal bundle are equal.

Question 72

Figure: The Indifference Curve Map II (Figure: The Indifference Curve Map II) Look at the figure The Indifference Curve Map II.Sara enjoys attending Chicago Cubs' baseball games and eating babyback rib dinners.The figure shows two of her indifference curves for Cubs' tickets and babyback rib dinners.Which of the following combinations gives Sara the highest level of utility?

A)40 babyback rib dinners and 2 Cubs' tickets
B)20 babyback rib dinners and 4 Cubs' tickets
C)12 babyback rib dinners and 10 Cubs' tickets
D)All combinations give the same level of utility.

Question 73

Figure: Consumer Equilibrium I The figure shows three of Owen's indifference curves for pizza and soda per week.Owen has $180 per month to spend on the two goods, and the price of a pizza is $20 and the price of a soda is
$1)50. (Figure: Consumer Equilibrium I) Look at the figure Consumer Equilibrium I.What is Owen's marginal rate of substitution of pizza in place of soda when he is consuming his optimal consumption bundle?

A)0.75
B)1.5
C)13.3
D)20

Question 74

Luis is consuming his optimal consumption bundle of pizza and tacos.The marginal utility associated with the last pizza he consumes is 1 util, and the marginal utility associated with the last taco is 3 utils.What must be the relative price of pizza in terms of tacos?

A)0.33
B)1
C)3
D)The relative price is undefined.

Question 75

Joseph chooses a combination of apples and oranges along his budget line.the marginal rate of substitution of apples in place of oranges is 2, the price of an apple is $0.50, and the price of an orange is $0.10.Joseph:

A)is maximizing total utility.
B)should consume more apples and fewer oranges to maximize total utility.
C)should consume fewer apples and more oranges to maximize total utility.
D)may or may not be maximizing total utility.

Question 76

Figure: Consumer Equilibrium I The figure shows three of Owen's indifference curves for pizza and soda per week.Owen has $180 per month to spend on the two goods, and the price of a pizza is $20 and the price of a soda is
$1)50. (Figure: Consumer Equilibrium I) Look at the figure Consumer Equilibrium I.If in equilibrium, Owen receives marginal utility of 10 utils from the last pizza he consumes, his marginal utility from the last soda must be utils.

A)0.50
B)0.75
C)1.5
D)13.3

Question 77

After learning about indifference curves, Sandy realizes that her marginal rate of substitution of grapes for cheese is equal to 2.Since the price of cheese is $3 and the price of grapes is $1, Sandy:

A)should buy more grapes and less cheese.
B)should buy more cheese and fewer grapes.
C)is maximizing her utility.
D)is on her highest possible indifference curve.

Question 78

Joseph chooses a combination of apples and oranges along his budget line.The marginal rate of substitution of apples in place of oranges is 2, the price of an apple is $0.50, and the price of an orange is $0.50.Joseph:

A)is maximizing total utility.
B)should consume more apples and fewer oranges to maximize total utility.
C)should consume fewer apples and more oranges to maximize total utility.
D)may or may not be maximizing total utility.

Question 79

Figure: Consumer Equilibrium I The figure shows three of Owen's indifference curves for pizza and soda per week.Owen has $180 per month to spend on the two goods, and the price of a pizza is $20 and the price of a soda is
$1)50. (Figure: Consumer Equilibrium I) Look at the figure Consumer Equilibrium I.What is Owen's optimal consumption bundle?

A)4 pizzas and 150 sodas
B)8 pizzas and 40 sodas
C)6 pizzas and 40 sodas
D)14 pizzas and 20 sodas

Question 80

Figure: The Indifference Curve Map II
(Figure: The Indifference Curve Map II) Look at the figure The Indifference Curve Map II.Sara enjoys attending Chicago Cubs' baseball games and eating babyback rib dinners.The figure shows two of her indifference curves for Cubs' tickets and babyback rib dinners.If she consumes 20 baby back rib dinners and 4 tickets to Cubs' games, she would be equally happy to give up 8 dinners for
________ more ticket(s) to Cubs' games.

A)1
B)0.5
C)2
D)4