Question 1

Suppose hamburgers are on the horizontal axis and root beer on the vertical axis.Your budget allowance is $10 and the price of hamburgers is $4 each and root beer $2 each.If at your present consumption of hamburger and root beer your marginal rate of substitution of hamburger for root beer is 4,to maximize utility you should:

Accepted Answer

A)  consume more hamburger and fewer root beers.
B)  consume fewer hamburgers and more root beers.
C)  continue consuming the same quantity of both hamburgers and root beers.
D)  continue consuming the same quantity of hamburgers but consume more root beer. A

Question 2

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 C

Question 3

Good Y is measured on the vertical axis and good X on the horizontal axis.If the price of Y is zero,the price of X is $10,and the consumer's income $100,the budget line:

Accepted Answer

A)  would coincide with the vertical axis.
B)  would be horizontal at $10 on the Y axis.
C)  would be vertical at 10 units on the X axis.
D)  would coincide with the horizontal axis. C

Question 4

Along an indifference curve,if the MRS of food (F)for clothing (C)is 1F/2C,this means the consumer:

Accepted Answer

A)  has a stronger preference for clothes than for food.
B)  would be willing to give up 1 unit of food for 2 units of clothing,and would be better off with the exchange.
C)  would be willing to give up 1 unit of food for 2 units of clothing,but his or her total utility will not increase.
D)  would be willing to give up 2 units of food for 1 unit of clothing.

Question 5

When a consumer's optimal consumption choice is a corner equilibrium it implies:

Accepted Answer

A)  the consumer has highly diversified preferences.
B)  the goods are economic "neuters".
C)  consumers spend all of their income on one good.
D)  the goods are pure complements.

Question 6

Suppose hamburger is on the horizontal axis and pizza on the vertical axis.If you were consuming at a point on a convex indifference curve such that the slope at that point was -4,which of the following best describes your consumption bundle?

Accepted Answer

A)  Your marginal utility of hamburger is 20 and for pizza it is 20.
B)  Your marginal utility of hamburger is 5 and for pizza it is 10.
C)  Your marginal utility of hamburger is 20 and for pizza it is 5.
D)  Your marginal utility of hamburger is one-fifth that of pizza.

Question 7

The consumption of the composite good is measured by:

Accepted Answer

A)  total outlays on all goods included in the group.
B)  adding up the quantities of all goods included in the group.
C)  adding up the prices of all goods included in the group.
D)  the relative prices of the goods included in the group.

Question 8

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

Question 9

A set of indifference curves showing that the consumer is indifferent between market baskets A and B,and market baskets A and C,but that market basket C is preferred to B must be _____.

Accepted Answer

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

Question 10

An indifference map shows the optimal consumption bundle of a consumer for two goods A and B.Which of the following factors would lead to a parallel shift of the budget line allowing the consumer to reach a higher indifference curve?

Accepted Answer

A)  A fall in the price of good A
B)  A parallel outward shift of the consumer's indifference curve
C)  An increase in the consumer's income
D)  A fall in the price of good B

Question 11

In deriving an income-consumption curve,it is assumed that:

Accepted Answer

A)  nominal income is constant.
B)  the prices of all but one good are held constant.
C)  the consumer's preferences may change.
D)  the consumer's income changes.

Question 12

An income consumption curve (shown on an indifference map with Ben's income on the horizontal axis and Jerry's income on the vertical axis)is positively sloped.Given that the indifference curves on the map are downward sloping,which of the followings statements is true?

Accepted Answer

A)  Jerry views charitable donations to Ben as an inferior good.
B)  Altruism cannot be accurately captured using indifference curves.
C)  Charitable giving to Ben is a normal good for Jerry.
D)  Jerry views Ben's income as an economic bad.

Question 13

Perfect complements are associated with _____ indifference curves.

Accepted Answer

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

Question 14

How do inferior goods differ from economic "bads"?

Accepted Answer

A)  The demand for economic "bads" falls at higher levels of income whereas the demand for inferior goods falls at higher prices.
B)  Economic "bads" are commodities for which demand falls as price falls whereas for inferior goods,quantity demanded falls as more is consumed.
C)  Economic "bads" are commodities for which less is preferred to more under all conditions whereas for inferior goods,demand falls only when income increases.
D)  For economic "bads" marginal utility is positive but gradually diminishes whereas for inferior goods,utility is negative from the first unit of consumption.

Question 15

Indifference curves consistent with one good being an economic "neuter" are:

Accepted Answer

A)  convex.
B)  straight lines with a slope of -1.
C)  straight lines with a slope of 0.
D)  L-shaped.

Question 16

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.

Question 17

The Lagrangian method of optimization results in a new variable,$\lambda$,called the Lagrangian multiplier,which shows the additional to total utility from an additional unit of income.In other words,$\lambda$ expresses the:

Accepted Answer

A)  the budget constraint.
B)  the cost of acquiring an additional util of satisfaction.
C)  the marginal utility of income.
D)  the optimal level of utility.

Question 18

A low-fat decaf vanilla latte is more likely to be an inferior good than coffee in general because:

Accepted Answer

A)  the demand for low fat coffees is generally low.
B)  as prices go up,the demand for low-fat decaf vanilla lattes decreases.
C)  it is a relatively narrowly defined category of coffee.
D)  the price of coffee is negatively correlated to its price.

Question 19

When the income-consumption curve is backward-bending to the left,the good represented on the X-axis must be _____.

Accepted Answer

A)  a normal good
B)  an inferior good
C)  a Giffen good
D)  an economic bad

Question 20

Intersecting indifference curves violate the assumption of _____.

Accepted Answer

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

Exam 1: An Introduction to Microeconomics

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?

Good Y is measured on the vertical axis and good X on the horizontal axis.If the price of Y is zero,the price of X is $10,and the consumer's income $100,the budget line:

Along an indifference curve,if the MRS of food (F) for clothing (C) is 1F/2C,this means the consumer:

When a consumer's optimal consumption choice is a corner equilibrium it implies:

Suppose hamburger is on the horizontal axis and pizza on the vertical axis.If you were consuming at a point on a convex indifference curve such that the slope at that point was -4,which of the following best describes your consumption bundle?

The consumption of the composite good is measured by:

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 _____.

A set of indifference curves showing that the consumer is indifferent between market baskets A and B,and market baskets A and C,but that market basket C is preferred to B must be _____.

An indifference map shows the optimal consumption bundle of a consumer for two goods A and B.Which of the following factors would lead to a parallel shift of the budget line allowing the consumer to reach a higher indifference curve?

In deriving an income-consumption curve,it is assumed that:

An income consumption curve (shown on an indifference map with Ben's income on the horizontal axis and Jerry's income on the vertical axis) is positively sloped.Given that the indifference curves on the map are downward sloping,which of the followings statements is true?

Perfect complements are associated with _____ indifference curves.

How do inferior goods differ from economic "bads"?

Indifference curves consistent with one good being an economic "neuter" are:

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

The Lagrangian method of optimization results in a new variable, $\lambda$ ,called the Lagrangian multiplier,which shows the additional to total utility from an additional unit of income.In other words, $\lambda$ expresses the:

A low-fat decaf vanilla latte is more likely to be an inferior good than coffee in general because:

When the income-consumption curve is backward-bending to the left,the good represented on the X-axis must be _____.

Intersecting indifference curves violate the assumption of _____.

Exam 1: An Introduction to Microeconomics

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?

Good Y is measured on the vertical axis and good X on the horizontal axis.If the price of Y is zero,the price of X is $10,and the consumer's income $100,the budget line:

Along an indifference curve,if the MRS of food (F) for clothing (C) is 1F/2C,this means the consumer:

When a consumer's optimal consumption choice is a corner equilibrium it implies:

Suppose hamburger is on the horizontal axis and pizza on the vertical axis.If you were consuming at a point on a convex indifference curve such that the slope at that point was -4,which of the following best describes your consumption bundle?

The consumption of the composite good is measured by:

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 _____.

A set of indifference curves showing that the consumer is indifferent between market baskets A and B,and market baskets A and C,but that market basket C is preferred to B must be _____.

An indifference map shows the optimal consumption bundle of a consumer for two goods A and B.Which of the following factors would lead to a parallel shift of the budget line allowing the consumer to reach a higher indifference curve?

In deriving an income-consumption curve,it is assumed that:

An income consumption curve (shown on an indifference map with Ben's income on the horizontal axis and Jerry's income on the vertical axis) is positively sloped.Given that the indifference curves on the map are downward sloping,which of the followings statements is true?

Perfect complements are associated with _____ indifference curves.

How do inferior goods differ from economic "bads"?

Indifference curves consistent with one good being an economic "neuter" are:

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

The Lagrangian method of optimization results in a new variable, λ\lambdaλ ,called the Lagrangian multiplier,which shows the additional to total utility from an additional unit of income.In other words, λ\lambdaλ expresses the:

A low-fat decaf vanilla latte is more likely to be an inferior good than coffee in general because:

When the income-consumption curve is backward-bending to the left,the good represented on the X-axis must be _____.

Intersecting indifference curves violate the assumption of _____.

The Lagrangian method of optimization results in a new variable, $\lambda$ ,called the Lagrangian multiplier,which shows the additional to total utility from an additional unit of income.In other words, $\lambda$ expresses the: