Question 1

A consumer's indifference curves will be influenced by all the following except:

Accepted Answer

A)  age.
B)  income.
C)  household size.
D)  other consumers.
E)  none of the above. B

Question 2

The slope of an indifference curve is:

Accepted Answer

A)  the sum of a consumer's demand curves for the goods they purchase.
B)  derived from the supply curves of two different goods.
C)  the measure of the goods' relative marginal utilities, or of the substitution terms on which the consumer would be willing to exchange a little less of one good in return for a little more of the other.
D)  the same for all consumers.
E)  none of the above. C

Question 3

The slope at any point on an indifference curve measures the relative marginal utilities of the two goods at that point.

Accepted Answer

A) True 
 B)False  True

Question 4

As the price of food changes, the budget line shifts out to the right.

Accepted Answer

A) True 
 B)False

Question 5

When MUl/Pl = MU2/P2, the indifference curve and budget line are necessarily tangent.

Accepted Answer

A) True 
 B)False

Question 6

In the figure below, a rise in income will (ceteris paribus)shift utility-maximizing consumption from E to:

Accepted Answer

A)  F
B)  G
C)  H
D)  I
E)  no shift will occur.

Question 7

The elasticity of the budget line equals the price ratio of the two goods.

Accepted Answer

A) True 
 B)False

Question 8

As the price of food changes, the budget line for clothing and food pivots about a single point on the clothing axis.

Accepted Answer

A) True 
 B)False

Question 9

If your income is halved, your budget line will shift twice as far from the origin in a parallel way.

Accepted Answer

A) True 
 B)False

Question 10

Use the following to answer questions :
Figure 5A-2 
-In Figure 5A-2, U(3)is unattainable if the household's budget constraint is BD.

Accepted Answer

A) True 
 B)False

Question 11

Use the following to answer questions :
Figure 5A-2 
-If the household's budget constraint in Figure 5A-2 is AC, then the household will purchase 1.5 units of X and 4.5 units of Y in order to maximize utility.

Accepted Answer

A) True 
 B)False

Question 12

In the figure below, a shift in the budget line from AC to BC represents:

Accepted Answer

A)  a decrease in income.
B)  an increase in good 2's price.
C)  an increase in good 1's price.
D)  a decrease in good 2's price.
E)  a decrease in good 1's price.

Question 13

What is the straight line that sums up all the possible combinations of two goods that would exhaust a consumer's income called ?

Accepted Answer

A)  budget line.
B)  income line.
C)  combination line.
D)  economics line.
E)  none of the above.

Question 14

As shown in the figure below a shift in the budget line from AB to AC represents:

Accepted Answer

A)  an increase in the price of good 1.
B)  an increase in the price of good 2.
C)  a decrease in the price of good 1.
D)  a decrease in the price of good 2
E)  none of the above.

Question 15

Which of the following statements concerning indifference curves is correct?

Accepted Answer

A)  An indifference curve is the locus of points describing proportional price levels of the two goods.
B)  Indifference curves presuppose the measurement of total utility and marginal utility.
C)  An indifference curve is the locus of points representing various combinations of two goods about which the consumer is indifferent.
D)  Indifference curves presuppose the validity of the "law of diminishing returns."
E)  None of the above.

Question 16

Equilibrium in the consumption of food (F)and clothing (C)occurs at which point in the figure below?

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D.
E)  none of the above.

Question 17

Use the following to answer questions :
Figure 5A-2 
-Refer to Figure 5A-2.If the budget line is AB and X costs $6 and Y costs $4, then income = $24.

Accepted Answer

A) True 
 B)False

Question 18

A purpose of indifference-curve analysis is to:

Accepted Answer

A)  derive a theory of producer behavior.
B)  prove the law of diminishing utility.
C)  derive a theory of consumer behavior without requiring absolute utility measurement.
D)  prove that the demand curve for all commodities is negatively sloped.
E)  describe market phenomena.

Question 19

Use the following to answer questions :
Figure 5A-2 
-Refer to Figure 5A-2.Assuming income is held constant, the shift outward to the budget line AC is caused by an increase in the price of Y.

Accepted Answer

A) True 
 B)False

Question 20

If all prices double, your budget line will shift halfway back to the origin.

Accepted Answer

A) True 
 B)False

Exam 19: Geometrical Analysis of Consumer Equilibrium

A consumer's indifference curves will be influenced by all the following except:

The slope of an indifference curve is:

The slope at any point on an indifference curve measures the relative marginal utilities of the two goods at that point.

As the price of food changes, the budget line shifts out to the right.

When MU_l/P_l = MU₂/P₂, the indifference curve and budget line are necessarily tangent.

In the figure below, a rise in income will (ceteris paribus) shift utility-maximizing consumption from E to:

The elasticity of the budget line equals the price ratio of the two goods.

As the price of food changes, the budget line for clothing and food pivots about a single point on the clothing axis.

If your income is halved, your budget line will shift twice as far from the origin in a parallel way.

Use the following to answer questions : Figure 5A-2 -In Figure 5A-2, U(3)is unattainable if the household's budget constraint is BD.

Use the following to answer questions : Figure 5A-2 -If the household's budget constraint in Figure 5A-2 is AC, then the household will purchase 1.5 units of X and 4.5 units of Y in order to maximize utility.

In the figure below, a shift in the budget line from AC to BC represents:

What is the straight line that sums up all the possible combinations of two goods that would exhaust a consumer's income called ?

As shown in the figure below a shift in the budget line from AB to AC represents:

Which of the following statements concerning indifference curves is correct?

Equilibrium in the consumption of food (F) and clothing (C) occurs at which point in the figure below?

Use the following to answer questions : Figure 5A-2 -Refer to Figure 5A-2.If the budget line is AB and X costs $6 and Y costs $4, then income = $24.

A purpose of indifference-curve analysis is to:

Use the following to answer questions : Figure 5A-2 -Refer to Figure 5A-2.Assuming income is held constant, the shift outward to the budget line AC is caused by an increase in the price of Y.

If all prices double, your budget line will shift halfway back to the origin.