Deck 3: Consumer Behavior

Question 1

An upward sloping indifference curve defined over two goods violates which of the following assumptions from the theory of consumer behavior?

A)transitivity.
B)preferences are complete.
C)more is preferred to less.
D)all of the above
E)none of the above

Answer 1

C

Question 2

Suppose that a market basket of two goods is changed by adding more of one of the goods and subtracting one unit of the other.The consumer will:

A)rank the market basket more highly after the change.
B)rank the market basket more highly before the change.
C)rank the market basket just as desirable as before.
D)any one of the above statements may be true.

Answer 2

D

Question 3

The assumption of transitive preferences implies that indifference curves must:

A)not cross one another.
B)have a positive slope.
C)be L-shaped.
D)be convex to the origin.
E)all of the above

Answer 3

A

Question 4

Alvin's preferences for good X and good Y are shown in the diagram below. Figure 3.2
Based on Figure 3.2,it can be inferred that:

A)Alvin does not consider good X as "good."
B)Alvin will never purchase any of good Y.
C)Alvin regards good X and good Y as perfect substitutes.
D)Alvin regards good X and good Y as perfect complements.
E)none of the above

Question 5

The theory of consumer behavior is based on certain assumptions.The set of four basic assumptions includes:

A)completeness.
B)transitivity.
C)intransitivity.
D)Both A and B are correct.
E)Both A and C are correct.

Question 6

A curve that represents all combinations of market baskets that provide the same level of utility to a consumer is called:

A)a budget line.
B)an isoquant.
C)an indifference curve.
D)a demand curve.
E)none of the above

Question 7

Gary Franklin is a movie critic.He invented the Franklin Scale with which he rates movies from 1 to 10 (10 being best).When asked about his scale,Mr.Franklin explained "that it is a subjective measure of movie quality.A movie with a ranking of 10 is not necessarily 10 times better than a movie with a ranking of 1,but it is better.A movie with a ranking of 5 is better than a movie with a ranking of 1,but is not as good a movie with a ranking of 10.That's all it really tells you." Based on Mr.Franklin's description,his scale is:

A)ordinal but not cardinal.
B)cardinal but not ordinal.
C)an objective standard to judge movies.
D)neither cardinal nor ordinal.

Question 8

If a market basket is changed by adding more of at least one good,then rational consumers will:

A)rank the market basket more highly after the change.
B)more likely prefer a different market basket.
C)rank the market basket as being just as desirable as before.
D)be unable to decide whether the first market basket is preferred to the second or vice versa.
E)have indifference curves that cross.

Question 9

In what ways can economists help auto manufacturers estimate the marginal rate of substitution between features such as vehicle interior size and acceleration?

A)Examining production cost data
B)Conducting consumer surveys about willingness to pay for auto features
C)Solving the standard consumer model
D)Statistically analyzing historical data on purchases of different types of autos
E)B and D only

Question 10

Alvin's preferences for good X and good Y are shown in the diagram below. Figure 3.2
Refer to Figure 3.2.At any consumption bundle with the quantity of good X exceeding the quantity of good Y (that is,a bundle located below the 45 degree line,like point
A)diminishing.

A),Alvin's marginal rate of substitution of good X for good Y is
B)positive.
C)constant and positive.
D)zero.

Question 11

Indifference curves are convex to the origin because of:

A)transitivity of consumer preferences.
B)the assumption of a diminishing marginal rate of substitution.
C)the assumption that more is preferred to less.
D)the assumption of completeness.
E)none of the above

Question 12

Alvin's preferences for good X and good Y are shown in the diagram below. Figure 3.1
Refer to Figure 3.1.Which assumption concerning preferences do Alvin's indifference curves violate?

A)Diminishing marginal rates of substitution
B)Transitivity of preferences
C)More is preferred to less
D)Completeness

Question 13

A consumer prefers market basket A to market basket B,and prefers market basket B to market basket C.Therefore,A is preferred to C.The assumption that leads to this conclusion is:

A)transitivity.
B)completeness.
C)all goods are good.
D)diminishing MRS.
E)assumption of rationality.

Question 14

Alvin's preferences for good X and good Y are shown in the diagram below. Figure 3.1
Based on Figure 3.1,it can be inferred that:

A)Alvin does not consider good X as "good."
B)Alvin will never purchase any of good Y.
C)Alvin regards good X and good Y as perfect substitutes.
D)Alvin regards good X and good Y as perfect complements.
E)none of the above

Question 15

Alvin's preferences for good X and good Y are shown in the diagram below. Figure 3.1
Refer to Figure 3.1.Which of the following is true concerning Alvin's marginal rate of substitution?

A)It is diminishing.
B)It is positive but varies along the indifference curve.
C)It is constant.
D)It is zero.

Question 16

The assumption that preferences are complete:

A)means that a consumer will spend her entire income.
B)is unnecessary,as long as transitivity is assumed.
C)recognizes that there may be pairs of market baskets that cannot be compared.
D)means that the consumer can compare any two market baskets of goods and determine that either one is preferred to the other or that she is indifferent between them.

Question 17

The slope of an indifference curve reveals:

A)that preferences are complete.
B)the marginal rate of substitution of one good for another good.
C)the ratio of market prices.
D)that preferences are transitive.
E)none of the above

Question 18

Zoe is an executive at Dell Computer Company who is in charge of designing the next version of laptop computers.She will consider such features as screen size,weight,processor speed,and CD and DVD drives.Given the fact that it is costly to include more features in new products,why might Zoe be interested in data on how much consumers paid for a range of laptops with different attributes?

A)in order to estimate willingness to pay for each feature.
B)in order to set an optimal price for the laptops.
C)in order to determine the best features to include.
D)in order to estimate willingness to trade off one feature for another.
E)all of the above

Question 19

If indifference curves cross,then:

A)the assumption of a diminishing marginal rate of substitution is violated.
B)the assumption of transitivity is violated.
C)the assumption of completeness is violated.
D)consumers minimize their satisfaction.
E)all of the above

Question 20

Which of the following is NOT an assumption regarding people's preferences in the theory of consumer behavior?

A)Preferences are complete.
B)Preferences are transitive.
C)Consumers prefer more of a good to less.
D)All of the above are basic assumptions about consumer preferences.

Question 21

Which of the following is true about the indifference curve where one commodity (such as pollution)is "bad"?

A)It has a negative slope.
B)It has a positive slope.
C)It is horizontal.
D)It is vertical.

Question 22

What is a good argument for using the model of the consumer despite the fact that it requires making many simplifying assumptions?

A)It is complex to solve.
B)The assumptions are sometimes realistic.
C)It explains observed patterns of behavior.
D)It is used in many scholarly fields.

Question 23

Use the following two statements to answer this question: I.If utility is ordinal,a market basket that provides 30 utils provides twice the satisfaction of a market basket that provides 15 utils.
II)When economists first studied utility it was believed that utility was cardinal,but it was later discovered that ordinal preferences are sufficient to explain how most individual decisions are made.

A)Both I and II are true.
B)I is true,and II is false.
C)I is false,and II is true.
D)Both I and II are false.

Question 24

Which of the following are examples of situations in which the standard model of the consumer may not be realistic?

A)Impulse purchases
B)Following fads and fashions instead of one's own preferences
C)Addictions or other strong habits in consumption
D)all of the above

Question 25

Consider the following three market baskets:
Table 3.1
Refer to Table 3.1.If preferences satisfy all four of the basic assumptions:

A)A is on the same indifference curve as B.
B)B is on the same indifference curve as C.
C)A is preferred to C.
D)B is preferred to A.
E)Both A and B answer choices are correct.

Question 26

Consider the following three market baskets:
Table 3.1
Consider the following three market baskets: If baskets B and C are on the same indifference curve,and if preferences satisfy all four of the basic assumptions,then:

A)A is preferred to C.
B)A is preferred to B.
C)Both A and B answer choices are correct.
D)none of the above

Question 27

Consider the following three market baskets:
Table 3.1
Refer to Table 3.1.Which of the following cannot be true?

A)The consumer could be indifferent between A and B.
B)A and C could be on the same indifference curves.
C)The consumer could be indifferent between B and C.
D)A and C could be on different indifference curves.

Question 28

The magnitude of the slope of an indifference curve is:

A)called the marginal rate of substitution.
B)equal to the ratio of the total utility of the goods.
C)always equal to the ratio of the prices of the goods.
D)all of the above
E)A and C only

Question 29

Figure 3.3
Refer to the indifference curve in Figure 3.3.Which of the following is true about the MRS?

A)It is negative.
B)It is positive.
C)It is equal to zero.
D)It is undefined.

Question 30

Consider the following three market baskets: If baskets A and B are on the same indifference curve and if indifference curves exhibit diminishing MRS:

A)C is preferred to both A and B.
B)A and B are both preferred to C.
C)C is on the same indifference curve as A and B.
D)There is not enough information to determine preferences for C relative to the other goods.

Question 31

Figure 3.3
Refer to the indifference curve in Figure 3.3.Which of the following statements is correct?

A)MU(A)= 0.
B)MU(B)= 0.
C)MU(A)is negative.
D)MU(B)is negative.

Question 32

If a consumer is always indifferent between an additional one grapefruit or an additional two oranges,then when oranges are on the horizontal axis the indifference curves:

A)will be straight lines with a slope of -1/2.
B)will be straight lines with a slope of -1.
C)will be straight lines with a slope of +1/2.
D)will be right angles whose corners occur on a ray from the origin with a slope of +2.
E)none of the above

Question 33

If X and Y are perfect substitutes,which of the following assumptions about indifference curves is not satisfied?

A)Completeness
B)Transitivity
C)More is preferred to less
D)Diminishing MRS
E)none of the above (All of the above assumptions are satisfied.)

Question 34

Use the following two statements to answer this question: I.According to the three basic assumptions regarding people's preferences,a person will always prefer to earn a living through honest work rather than a life of crime.
II)When we say that preferences are complete,we mean that if a consumer prefers market basket A to market basket B,and prefers market basket B to market basket C,then the consumer prefers market basket A to market basket C.

A)Both I and II are true.
B)I is true and II is false.
C)I is false and II is true.
D)Both I and II are false.

Question 35

Envision a graph with meat on the horizontal axis and vegetables on the vertical axis.A strict vegetarian would have indifference curves that are:

A)vertical lines.
B)horizontal lines.
C)diagonal straight lines.
D)right angles.
E)upward sloping.

Question 36

If indifference curves are concave to the origin,which assumption on preferences is violated?

A)Diminishing marginal rates of substitution
B)Transitivity of preferences
C)More is preferred to less
D)Completeness

Question 37

Figure 3.3
Refer to the indifference curve in Figure 3.3.Which of the following statements is correct?

A)This individual receives no satisfaction from Good A.
B)This individual receives no satisfaction from Good B.
C)This individual will only consume A and B in fixed proportions.
D)none of the above

Question 38

Jane is trying to decide which courses to take next semester.She has narrowed down her choice to two courses,Econ 1 and Econ 2.Now she is having trouble and cannot decide which of the two courses to take.It's not that she is indifferent between the two courses,she just cannot decide.An economist would say that this is an example of preferences that:

A)are not transitive.
B)are incomplete.
C)violate the assumption that more is preferred to less.
D)all of the above

Question 39

Alvin's preferences for good X and good Y are shown in the diagram below. Figure 3.2
Refer to Figure 3.2.Which assumption concerning preferences do Alvin's indifference curves violate?

A)Diminishing marginal rates of substitution
B)Transitivity of preferences
C)More is preferred to less
D)Completeness
E)both A and C

Question 40

Mikey is very picky and insists that his mom make his breakfast with equal parts of cereal and apple juice  any other combination and it ends up on the floor.Cereal costs 4 cents per tablespoon and apple juice costs 6 cents per tablespoon.If Mikey's mom budgets $8 per month for Mikey's breakfast,how much cereal and juice does she buy?

A)40 tablespoons each of cereal and juice
B)80 tablespoons each of cereal and juice
C)40 tablespoons of cereal and 75 tablespoons of juice
D)100 tablespoons of cereal and 67 tablespoons of juice

Question 41

Suppose a consumer only purchases food and clothing,and food is plotted along the horizontal axis of the consumer's indifference map.If the price of food and clothing increase and income does not change,then the budget line changes by rotating:

A)counter-clockwise about the fixed vertical axis intercept.
B)clockwise about the fixed vertical axis intercept.
C)counter-clockwise about the fixed horizontal axis intercept.
D)clockwise about the fixed horizontal axis intercept.
E)none of the above

Question 42

If prices and income in a two-good society double,what will happen to the budget line?

A)The intercepts of the budget line will increase.
B)The intercepts of the budget line will decrease.
C)The slope of the budget line may either increase or decrease.
D)Insufficient information is given to determine what effect the change will have on the budget line but we know society is worse-off.
E)There will be no effect on the budget line.

Question 43

Which of the following statements concerning utility as a measure for well being are false?

A)There is generally a positive relationship between income and utility.
B)It is possible to determine which of two individuals is made happier by consuming a particular market basket.
C)Utility is an abstract representation of an individual's degree of happiness.
D)Cross country studies suggest that citizens in wealthier countries are happier than citizens in poorer countries.

Question 44

A consumer has $100 per day to spend on product A,which has a unit price of $7,and product B,which has a unit price of $15.What is the slope of the budget line if good A is on the horizontal axis and good B is on the vertical axis?

A)-7/15
B)-7/100
C)-15/7
D)7/15

Question 45

An increase in income,holding prices constant,can be represented as:

A)a change in the slope of the budget line.
B)a parallel outward shift in the budget line.
C)an outward shift in the budget line with its slope becoming flatter.
D)a parallel inward shift in the budget line.

Question 46

Suppose a consumer only purchases food and clothing,and food is plotted along the horizontal axis of the consumer's indifference map.If the price of clothing increases and the price of food and income do not change,then the budget line changes by rotating:

A)counter-clockwise about the fixed vertical axis intercept.
B)clockwise about the fixed vertical axis intercept.
C)counter-clockwise about the fixed horizontal axis intercept.
D)clockwise about the fixed horizontal axis intercept.
E)none of the above

Question 47

Use the following two statements to answer this question: I.Consumer theory can determine whether giving an individual a more preferred basket of goods doubles her overall level of satisfaction,less than doubles her satisfaction,or more than doubles her satisfaction.
II)There is not much empirical evidence to support the assumption that higher incomes result in higher levels of satisfaction.

A)Both I and II are true.
B)I is true and II is false.
C)I is false and II is true.
D)Both I and II are false.

Question 48

If Jill's MRS of popcorn for candy is 2 (popcorn is on the horizontal axis),Jill would willingly give up:

A)2,but no more than 2,units of popcorn for an additional unit of candy.
B)2,but no more than 2,units of candy for an additional unit of popcorn.
C)1,but no more than 1,unit of candy for an additional 2 units of popcorn.
D)2,but no more than 2,units of popcorn for an additional 2 units of candy.

Question 49

Assume that food is measured on the horizontal axis and clothing on the vertical axis.If the price of food falls relative to that of clothing,the budget line will:

A)become flatter.
B)become steeper.
C)shift outward.
D)become steeper or flatter depending on the relationship between prices and income.

Question 50

The budget constraint for a consumer who only buys apples (A)and bananas (B)is P_AA + P_BB = I where consumer income is I,the price of apples is P_A,and the price of bananas is P_B.To plot this budget constraint in a figure with apples on the horizontal axis,we should use a budget line represented by the slope-intercept equation:

A)A = -I/P_A + (P_B/P_A)B
B)A = I/P_A - (P_B/P_A)B
C)B = -I/P_B + (P_A/P_B)A
D)B = I/P_B - (P_A/P_B)A

Question 51

Theodore's budget line has changed from A to B.Which of the following explains the change in Theodore's budget line?

A)The price of food and the price of clothing increased.
B)The price of food increased,and the price of clothing decreased.
C)The price of food decreased,and the price of clothing increased.
D)The price of food and the price of clothing decreased.
E)none of the above

Question 52

To simplify our consumption models,suppose U.S.consumers only purchase food and all other goods where food is plotted along the horizontal axis of the indifference map.Also,suppose that all states initially impose state sales taxes on all goods (including food),but then the states exempt food from the state sales tax.How does this tax policy change alter the consumer's budget line?

A)Makes the budget line steeper
B)Makes the budget line flatter
C)Parallel rightward shift
D)Parallel leftward shift
E)none of the above

Question 53

A consumer maximizes satisfaction at the point where his valuation of good X,measured as the amount of good Y he would willingly give up to obtain an additional unit of X,equals:

A)the magnitude of the slope of the indifference curve through that point.
B)one over the magnitude of the slope of the indifference curve through that point.
C)Px/Py
D)Py/Px

Question 54

To simplify our consumption models,suppose U.S.consumers only purchase food and all other goods where food is plotted along the horizontal axis of the indifference map.If the U.S.Congress passes an economic stimulus package that pays $300 to each person,how does this affect the budget line for each consumer?

A)Makes the budget line steeper
B)Makes the budget line flatter
C)Parallel rightward shift
D)Parallel leftward shift
E)none of the above

Question 55

Which of the following will result in a decrease in a consumer's purchasing power?

A)A decrease in the consumer's income
B)An increase in the price of the good on the vertical axis
C)An increase in the price of the good on the horizontal axis
D)all of the above

Question 56

If the quantity of good A (Q_A)is plotted along the horizontal axis,the quantity of good B (Q_B)is plotted along the vertical axis,the price of good A is P_A,the price of good B is P_B and the consumer's income is I,then the slope of the consumer's budget constraint is __________.

A)-Qa/Qb
B)-Qb/Qa
C)-Pa/Pb
D)-Pb/Pa
E)I/Pa or I/Pb

Question 57

The endpoints (horizontal and vertical intercepts)of the budget line:

A)measure its slope.
B)measure the rate at which one good can be substituted for another.
C)measure the rate at which a consumer is willing to trade one good for another.
D)represent the quantity of each good that could be purchased if all of the budget were allocated to that good.
E)indicate the highest level of satisfaction the consumer can achieve.

Question 58

Which of the following statements is true about a consumer's optimal decision when indifference curves are concave?

A)Both goods are consumed.
B)No goods are consumed.
C)Only one of the goods is consumed.
D)It occurs at the point of tangency with the budget line.

Question 59

Suppose that the prices of good A and good B were to suddenly double.If good A is plotted along the horizontal axis,

A)the budget line will become steeper.
B)the budget line will become flatter.
C)the slope of the budget line will not change.
D)the slope of the budget line will change,but in an indeterminate way.

Question 60

Consider the indifference map in the figure below: Which of the four basic assumptions about consumer preferences are violated by this indifference map?

A)More is better than less
B)Transitivity
C)Diminishing MRS
D)A and B are correct.
E)A and C are correct.

Question 61

Please consider the following figure: The consumer chooses A on budget line I1 and B on budget line I2.Which of the following statements is NOT true?

A)B is preferred to C.
B)A is preferred to B.
C)C is preferred to A.
D)All of the statements are correct.

Question 62

Scenario 3.1:
Andy derives utility from two goods,potato chips (Qp)and Cola (Qc).Andy receives zero utility unless he consumes some of at least one good.The marginal utility that he receives from the two goods is given as follows:
Refer to Scenario 3.1.What is the total utility that Andy will receive if he consumes 5 units of potato chips (Qp)and no Cola drink (Qc)?

A)4 utils
B)10 utils
C)30 utils
D)40 utils
E)none of the above

Question 63

The fact that Alice spends no money on travel:

A)implies that she does not derive any satisfaction from travel.
B)implies that she is at a corner solution.
C)implies that her MRS does not equal the price ratio.
D)any of the above are possible.

Question 64

The principle of revealed preference would say that if Xavier chooses market basket A over market basket B then:

A)if A is more expensive than B,then Xavier must prefer A over B.
B)if A is more expensive than B,then Xavier must prefer B over A.
C)if A is less expensive than B,then Xavier must prefer A over B.
D)if A is less expensive than B,then Xavier must prefer B over A.

Question 65

Bob views apples and oranges as perfect substitutes in his consumption,and MRS = 1 for all combinations of the two goods in his indifference map.Suppose the price of apples is $2 per pound,the price of oranges is $3 per pound,and Bob's budget is $30 per week.What is Bob's utility maximizing choice between these two goods?

A)4 pounds of apples and 6 pounds of oranges
B)5 pounds of apples and 5 pounds of oranges
C)10 pounds of oranges and no apples
D)15 pounds of apples and no oranges
E)none of the above

Question 66

Sue views hot dogs and hot dog buns as perfect complements in her consumption,and the corners of her indifference curves follow the 45-degree line.Suppose the price of hot dogs is $5 per package (8 hot dogs),the price of buns is $3 per package (8 hot dog buns),and Sue's budget is $48 per month.What is her optimal choice under this scenario?

A)8 packages of hot dogs and 6 packages of buns
B)8 packages of hot dogs and 8 packages of buns
C)6 packages of hot dogs and 6 packages of buns
D)6 packages of hot dogs and 8 packages of buns

Question 67

If a consumer must spend her entire income on some combination of two commodities and chooses to spend it all on just one of the commodities then:

A)the other commodity is an economic bad.
B)the other commodity must have zero marginal utility.
C)the other commodity generates less utility per dollar spent on the good.
D)the two commodities must be perfect substitutes.

Question 68

Pencils sell for 10 cents and pens sell for 50 cents.Suppose Jack,whose preferences satisfy all of the basic assumptions,buys 5 pens and one pencil each semester.With this consumption bundle,his MRS of pencils for pens is 3.Which of the following is true?

A)Jack could increase his utility by buying more pens and fewer pencils.
B)Jack could increase his utility by buying more pencils and fewer pens.
C)Jack could increase his utility by buying more pencils and more pens.
D)Jack could increase his utility by buying fewer pencils and fewer pens.
E)Jack is at a corner solution and is maximizing his utility.

Question 69

Scenario 3.1:
Andy derives utility from two goods,potato chips (Qp)and Cola (Qc).Andy receives zero utility unless he consumes some of at least one good.The marginal utility that he receives from the two goods is given as follows:
Refer to Scenario 3.1.If the price of potato chips is $0.50 and the price of Cola is $4.00,and Andy has an income of $14.50,how many units of potato chips will he consume?

A)5
B)6
C)7
D)8
E)none of the above

Question 70

Oscar consumes only two goods,X and Y.Assume that Oscar is not at a corner solution,but he is maximizing utility.Which of the following is NOT necessarily true?

A)MRSxy = Px/Py.
B)MUx/MUy = Px/Py.
C)Px/Py = money income.
D)Px/Py = slope of the indifference curve at the optimal choice.
E)MUx/Px = MUy/Py.

Question 71

When Joe maximizes utility,he finds that his MRS of X for Y is greater than Px/Py.It is most likely that:

A)Joe's preferences are incomplete.
B)Joe's preferences are irrational.
C)Joe is not consuming good X.
D)Joe is not consuming good Y.

Question 72

When a person consumes two goods (A and

A)the marginal utility of A equals the marginal utility of B.
B)the marginal utility of A times the price of A equals the marginal utility of B times the price of B
B),that person's utility is maximized when the budget is allocated such that:
C)the ratio of total utility of A to the price of A equals the ratio of the marginal utility of B to the price of A.
D)the ratio of the marginal utility of A to the price of A equals the ratio of the marginal utility of B to the price of B.

Question 73

Please consider the following figure: The consumer chooses A on budget line I1 and B on budget line I2.Which of the following rankings describes the consumer's preferences (first is highest ranked and last is lowest ranked)?

A)A-B-C-D
B)A-D-B-C
C)A-B-D-C
D)We do not have enough information to rank all four bundles.

Question 74

Sue views hot dogs and hot dog buns as perfect complements in her consumption,and the corners of her indifference curves follow the 45-degree line.Initially,the price of hot dogs is $3 per package (8 hot dogs),the price of buns is $3 per package (8 hot dog buns),and Sue's budget is $48 per month.How does her optimal consumption bundle change if the price of hot dog buns increases to $5 per package?

A)Sue does not change her consumption because these goods are perfect complements.
B)She buys the same amount of hot dog buns and buys more hot dogs.
C)She buys the same amount of hot dogs and buys two less packages of hot dog buns.
D)She reduces her consumption by 2 packages of hot dogs and 2 packages of hot dog buns.

Question 75

Denise is shopping for lobsters and eclairs.When she faces budget line b₁,she chooses market basket A over market basket B.When she faces budget line b₂,she chooses basket B over basket C.Which assumption of consumer theory helps us determine Denise's preference ordering over basket A and basket C?

A)Completeness
B)More is better than less
C)Transitivity
D)Convexity

Question 76

The price of lemonade is $0.50; the price of popcorn is $1.00.If Fred has maximized his utility by purchasing lemonade and popcorn,his marginal rate of substitution will be:

A)2 lemonades for each popcorn.
B)1 lemonades for each popcorn.
C)1/2 lemonade for each popcorn.
D)indeterminate unless more information on Fred's marginal utilities is provided.

Question 77

Marginal utility measures:

A)the slope of the indifference curve.
B)the additional satisfaction from consuming one more unit of a good.
C)the slope of the budget line.
D)the marginal rate of substitution.
E)none of the above

Question 78

An individual consumes only two goods,X and Y.Which of the following expressions represents the utility maximizing market basket?

A)MRSxy is at a maximum.
B)Px/Py = money income.
C)MRSxy = money income.
D)MRSxy = Px/Py.
E)all of the above

Question 79

Scenario 3.1:
Andy derives utility from two goods,potato chips (Qp)and Cola (Qc).Andy receives zero utility unless he consumes some of at least one good.The marginal utility that he receives from the two goods is given as follows:
Refer to Scenario 3.1.If the price of potato chips is $0.50 and the price of Cola is $4.00,and Andy has an unlimited income,how many units of potato chips will he consume?

A)5
B)6
C)7
D)8
E)none of the above

Question 80

Please consider the following figure: The consumer chooses A on budget line I1 and B on budget line I2.Which of the following statements is NOT true?

A)A is preferred to B.
B)B is preferred to C.
C)C is preferred to D.
D)A is preferred to C.