Question 1

-Refer to Figure 5.1.Which graph represents an increase in the price of DVDs?

Accepted Answer

A)   A
B)   B
C)   C
D)   D C

Question 2

A curve that shows how the best available consumption bundle changes as income changes (holding the consumer's preferences and all other prices fixed)is called

Accepted Answer

A)   A price-consumption curve
B)   An individual demand curve
C)   An income-consumption curve
D)   A budget line C

Question 3

Suppose a consumer purchases pizza and soft drinks.If pizza is measured on the vertical axis and soft drinks are measured on the horizontal axis,then the slope of the budget line is equal to

Accepted Answer

A)   The price of pizza divided by the price of soft drinks
B)   The price of soft drinks divided by the price of pizza
C)   The price of pizza divided by the price of soft drinks times negative one
D)   The price of soft drinks divided by the price of pizza times negative one D

Question 4

Choices that do not exhaust the consumer's budget line to the ______ of the budget line.

Accepted Answer

A)   Southwest
B)   Northeast
C)   Northwest
D)   Southeast

Question 5

An increase in a consumer's income will cause the budget line to

Accepted Answer

A)   Shift outward
B)   Shift inward
C)   Become steeper
D)   Become flatter

Question 6

Stewie spends all of his income on movie rentals (R)and noodles (N).His marginal rate of substitution for rentals with noodles is given by MRS_RN = 20/ÖR.Suppose that movies rent for $2 and noodles cost $1.Plot his income-consumption curve,his Engle curve for movie rentals and his Engel curve for noodles.

Accepted Answer

The answer of Stewie spends all of his income on...

Question 7

An increase in the price of the good measured along the vertical axis will cause the budget line to

Accepted Answer

A)   Shift outward
B)   Shift inward
C)   Become steeper
D)   Become flatter

Question 8

A consumer's budget constraint is determined by

Accepted Answer

A)   The consumer's income
B)   The consumer's income and preferences
C)   The consumer's income and the prices of the goods they buy
D)   The consumer's preferences and the prices of the goods they buy

Question 9

An increase in the price of the good measured on the vertical axis will cause the budget line to

Accepted Answer

A)   Shift outward
B)   Become steeper
C)   Become flatter
D)   Shift inward

Question 10

At a boundary choice,

Accepted Answer

A)   The tangency condition always applies
B)   There are affordable bundles containing a little bit more of that good and a little bit less of it
C)   The consumer's best choice lies below the budget line
D)   There are no affordable bundles that contain either a little bit more or a little bit less of some good

Question 11

The revealed preference approach refers to

Accepted Answer

A)   Asking consumer to reveal their preferences using survey methods
B)   Estimating demand curves by using data on individual consumers
C)   A statistical method used to estimate demand curves
D)   A method of gathering information about consumer's preferences by observing their actual choices

Question 12

Hailey's income is $40 per week.She spends all of it on coffee (C)and doughnuts (D).Coffee costs $2 per cup and doughnuts cost $1 each.Her marginal rate of substitution for coffee with doughnuts is D/C.How many cups of coffee and how many doughnuts will she purchase each week?

Accepted Answer

A)   15 cups of coffee and 10 doughnuts
B)   10 cups of coffee and 20 doughnuts
C)   20 cups of coffee and 10 doughnuts
D)   5 cups of coffee and 30 doughnuts

Question 13

The price of CDs is $15 and the price of pizzas is $10.Derek spends all of his income buying 2 CDs and 6 pizzas per week (and nothing else).Determine Derek's income,draw his budget line and represent his utility-maximizing point using an indifference curve.

Accepted Answer

The answer of The price of CDs is $15 and...

Question 14

-Refer to Figure 5.1.Which graph most likely represents a doubling of the prices of both Books and DVDs?

Accepted Answer

A)   A
B)   B
C)   C
D)   D

Question 15

-Refer to Figure 5.3.Which of the following statements is false?

Accepted Answer

A)   Points a, b and c all represent best choices for the consumer
B)   Point a violates the No Overlap Rule
C)   Point b satisfies the tangency requirement
D)   Point c violates the No Overlap Rule

Question 16

When indifference curves have ________ marginal rates of substitution,any interior choice that satisfies the tangency condition is the best affordable choice.

Accepted Answer

A)   Constant
B)   Increasing
C)   Declining
D)   Positive

Question 17

If a change in the price of one good does not cause a shift in the demand curve of another good,then the two goods are

Accepted Answer

A)   Substitutes
B)   Complements
C)   Normal
D)   Not related

Question 18

Consumption bundles that lie above the boundary established by the budget line

Accepted Answer

A)   Are affordable for the consumer
B)   Are preferred by the consumer but are not affordable
C)   Are not preferred by the consumer
D)   Do not exhaust the consumer's income

Question 19

If prices and income all change by the same proportion

Accepted Answer

A)   The budget line shifts out
B)   The budget line shifts in
C)   The budget line rotates outward
D)   The budget line doesn't change

Question 20

-Refer to Figure 5.6.Which diagram shows an increase in income with bread being inferior and soup being normal?

Accepted Answer