Question 1

Exhibit 6-27 
-The rotation of the budget line in Exhibit 6-27 from AC to AB represents a(n)

Accepted Answer

A)  increase in the price of clams 
B)  increase in the price of mussels 
C)  decrease in the price of clams 
D)  decrease in the price of mussels 
E)  increase in the amount the consumer can spend

Question 2

Exhibit 6-30 
-Consider Exhibit 6-30. Assume that you have $600 to spend on books and compact disks. What happens if the price of books falls to $5?

Accepted Answer

A)  The budget line shifts inward along the horizontal axis. 
B)  The budget line shifts inward along the vertical axis. 
C)  The budget line does not move. 
D)  The budget line shifts outward along the vertical axis. 
E)  The budget line shifts outward along the horizontal axis.

Question 3

-At point b in Exhibit 6-25, the consumer's utility is

Accepted Answer

A)  higher than at points a and c, but the total cost of the goods is the same 
B)  the same as at points a and c, but the total cost of the goods is lower 
C)  the same as at points a and c, but the total cost of the goods is higher 
D)  lower than at points a and c, and so is the total cost of the goods 
E)  higher than at points a and c, and so is the total cost of the goods

Question 4

A candy bar sells for 50 cents, video games are 25 cents each, the horizontal (candy) intercept of Ann's budget line is 12, and the vertical (video game) intercept of Ann's budget line is 24. Ann's income must be

Accepted Answer

A)  $3 
B)  $6 
C)  $12 
D)  $24 
E)  $36

Question 5

A candy bar sells for 50 cents, video games are 25 cents each, the horizontal (candy) intercept of Ann's budget line is 12, and the vertical (video game) intercept of Ann's budget line is 24. The slope of the budget line is

Accepted Answer

A)  -50 
B)  -25 
C)  -1/2 
D)  -2 
E)  -$120

Question 6

A line that shows the combinations of two goods that can be purchased with a given income is called a(n)

Accepted Answer

A)  indifference curve 
B)  budget line 
C)  demand curve 
D)  supply curve 
E)  price floor

Question 7

-Which of the following is true of Exhibit 6-25?

Accepted Answer

A)  Points a, c, and e would all cost the same amount to purchase. 
B)  Points a, b, and c all represent the same level of utility, which is higher than that represented by points d, e, and B 
C)  Points a, c, and e all represent the same level of utility, which is lower than that represented by point B 
D)  Points a, c, and e all represent the same level of utility, which is higher than that represented by point b. 
E)  Point d represents a level of utility higher than any other point on the graph.

Question 8

Exhibit 6-27 
-Consider Exhibit 6-27. The rotation of the budget line from AB to AC represents a(n)

Accepted Answer

A)  increase in the price of clams 
B)  increase in the price of mussels 
C)  decrease in the price of clams 
D)  decrease in the price of mussels 
E)  increase in the amount the consumer can spend

Question 9

A curve that shows the combination of goods that a consumer is able to purchase by spending all of her income is called a(n)

Accepted Answer

A)  income-consumption curve 
B)  income-allocation curve 
C)  budget line 
D)  indifference curve 
E)  budget-indifference curve

Question 10

If Hannah considers biscuits an inferior good, then when their price falls, she

Accepted Answer

A)  will definitely buy more biscuits 
B)  will definitely buy fewer biscuits 
C)  may buy more biscuits 
D)  will buy fewer biscuits if the substitution effect is larger than the income effect 
E)  will buy more biscuits if the substitution effect is smaller than the income effect

Question 11

Exhibit 6-28 
-The rotation of the budget line in Exhibit 6-28 from AB to AC represents

Accepted Answer

A)  an increase in the price of clams 
B)  an increase in the price of mussels 
C)  a decrease in the price of clams 
D)  a decrease in the price of mussels 
E)  an increase in the amount the consumer can spend

Question 12

Assume that you divide your food budget between fish and chicken. Which of the following would not alter the position of a budget line drawn with fish on the horizontal axis and chicken on the vertical axis?

Accepted Answer

A)  an increase in the price of fish 
B)  a decrease in the price of chicken 
C)  a change in your preference for fish 
D)  an increase in your food budget 
E)  an increase in the price of fish combined with an increase in your food budget

Question 13

Exhibit 6-23 
-In Exhibit 6-23, the marginal rate of substitution of clothing for food between points a and b equals

Accepted Answer

A)  1 
B)  2 
C)  1/3 
D)  5/6 
E)  100

Question 14

Although some of the statements below are true of both normal goods and inferior goods, only one of the statements defines a normal good. Which one?

Accepted Answer

A)  Normal goods are those for which the income effect is positive. 
B)  Normal goods are those for which the income effect is negative. 
C)  Normal goods are those for which the substitution effect overrides the income effect. 
D)  Normal goods are those for which the income effect overrides the substitution effect. 
E)  Normal goods are those for which demand increases when price increases.

Question 15

The slope of a budget line is positive.

Accepted Answer

A) True 
 B)False

Question 16

What would happen to the budget line when the price of tennis shoes decreases if tennis shoes are measured on the horizontal axis?

Accepted Answer

A)  It would shift to the left. 
B)  It would rotate outward along the horizontal axis. 
C)  It would rotate inward along the horizontal axis. 
D)  It would rotate outward along the vertical axis. 
E)  It would rotate inward along the vertical axis.

Question 17

A family on a trip budgets $200 for restaurant meals and fast food. The family can buy 20 restaurant meals if they don't buy any fast-food meals. What is the vertical intercept of the budget line when fast food is measured on the horizontal axis?

Accepted Answer

A)  1/20 
B)  200 
C)  10 
D)  20 
E)  $400

Question 18

A candy bar sells for 50 cents, video games are 25 cents each, the horizontal (candy) intercept of Ann's budget line is 12, and the vertical (video game) intercept of Ann's budget line is 24. If Ann's income increased to $20, the horizontal intercept would be

Accepted Answer

A)  $4 
B)  $2 
C)  20 
D)  40 
E)  80

Question 19

A family on a trip budgets $800 for restaurant meals and fast food. If the price of a fast-food meal for the whole family is $20, how many meals can the family buy if they don't eat at restaurants?

Accepted Answer

A)  8 
B)  15 
C)  20 
D)  40 
E)  160

Question 20

What would happen to the budget line if the price of compact disks decreased and compact disks are measured on the vertical axis?

Accepted Answer

A)  The budget line would shift to the left. 
B)  The budget line would rotate outward along the horizontal axis. 
C)  The budget line would rotate inward along the horizontal axis. 
D)  The budget line would rotate outward along the vertical axis. 
E)  The budget line would rotate inward along the vertical axis.

Exam 6: Appendix: Indifference Curves and Utility Maximization

Exhibit 6-27 -The rotation of the budget line in Exhibit 6-27 from AC to AB represents a(n)

Exhibit 6-30 -Consider Exhibit 6-30. Assume that you have $600 to spend on books and compact disks. What happens if the price of books falls to $5?