Question 1

Which of the following illustrates the concept of "more is better"?

Accepted Answer

A) An increase in income shifts the budget line to the right. 
B) Consumers moving along an indifference curve. 
C) Higher indifference curves yield higher utility. 
D) Budget lines closer to the origin represent lower income. 
E) Sam's indifference curves are steeper than Frazier's. 
A) An increase in income shifts the budget line to the right. 
B) Consumers moving along an indifference curve. 
C) Higher indifference curves yield higher utility. 
D) Budget lines closer to the origin represent lower income. 
E) Sam's indifference curves are steeper than Frazier's.

Question 2

The slope of an indifference curve is equal to the

Accepted Answer

A) marginal rate of substitution 
B) price elasticity of demand 
C) marginal utility of the good measured on the horizontal axis 
D) marginal utility of the good measured on the vertical axis 
E) relative price of the good measured on the horizontal axis 
A) marginal rate of substitution 
B) price elasticity of demand 
C) marginal utility of the good measured on the horizontal axis 
D) marginal utility of the good measured on the vertical axis 
E) relative price of the good measured on the horizontal axis

Question 3

Exhibit 6-29   Which graph in Exhibit 6-29 shows a decrease in the price of food?

Accepted Answer

A) Graph a 
B) Graph b 
C) Graph c 
D) Graph d 
E) Graph e 
A) Graph a 
B) Graph b 
C) Graph c 
D) Graph d 
E) Graph e

Question 4

All combinations of goods along the same indifference curve have the same cost to a consumer.

Accepted Answer

A) True 
 B)False

Question 5

At consumer equilibrium between goods F and C, all of the following statements is true except one.Which is the exception?

Accepted Answer

A) MUF/MUC = PF/PC 
B) MRS = -PF/PC 
C) MRS = the absolute value of the slope of the budget line 
D) utility is maximized subject to the budget constraint 
E) PF/PC = TUF/TUC 
A) MUF/MUC = PF/PC 
B) MRS = -PF/PC 
C) MRS = the absolute value of the slope of the budget line 
D) utility is maximized subject to the budget constraint 
E) PF/PC = TUF/TUC

Question 6

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

Question 7

The slope of a budget line equals minus the ratio of the

Accepted Answer

A) marginal utilities of the goods indicated on the two axes 
B) total utilities of the goods indicated on the two axes 
C) lowest possible consumption levels for each of the goods indicated on the two axes 
D) prices of the goods indicated on the two axes 
E) sum of the prices of the goods indicated on the two axes and the budget 
A) marginal utilities of the goods indicated on the two axes 
B) total utilities of the goods indicated on the two axes 
C) lowest possible consumption levels for each of the goods indicated on the two axes 
D) prices of the goods indicated on the two axes 
E) sum of the prices of the goods indicated on the two axes and the budget

Question 8

The slope of a budget line is positive.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 6-31   Assume that a consumer is initially in equilibrium at point a in Exhibit 6-31.Then the price of good B falls.The movement from point c to point b represents

Accepted Answer

A) the substitution effect 
B) the income effect 
C) the substitution effect minus the income effect 
D) the sum of the substitution and income effects 
E) the income effect minus the substitution effect 
A) the substitution effect 
B) the income effect 
C) the substitution effect minus the income effect 
D) the sum of the substitution and income effects 
E) the income effect minus the substitution effect

Question 10

A consumer's indifference map is a depiction of

Accepted Answer

A) her preferences 
B) her income 
C) the prices of the two goods under consideration 
D) the relative prices of the two goods under consideration 
E) the prices of substitute and complement goods 
A) her preferences 
B) her income 
C) the prices of the two goods under consideration 
D) the relative prices of the two goods under consideration 
E) the prices of substitute and complement goods

Question 11

Only a change in income can affect a consumer's budget line.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 6-31   Assume that a consumer is initially in equilibrium at point a in Exhibit 6-31.Then the price of good B falls.The movement from point a to point b represents

Accepted Answer

A) the substitution effect 
B) the income effect 
C) the substitution effect minus the income effect 
D) the sum of the substitution and income effects 
E) the income effect minus the substitution effect 
A) the substitution effect 
B) the income effect 
C) the substitution effect minus the income effect 
D) the sum of the substitution and income effects 
E) the income effect minus the substitution effect

Question 13

Exhibit 6-26   Consider Exhibit 6-26.Three budget lines are shown.Which of the following statements is true about the budget lines?

Accepted Answer

A) Budget line B2 reflects the same income and price for DVDs as budget line B1 but a higher price for books. 
B) Budget line B3 reflects a higher income but the same price for both books and DVDs as budget line B2. 
C) Budget line B3 reflects higher income and the same prices for both books and DVDs as budget line B1. 
D) Budget line B1 reflects lower income than budget line B2. 
E) Budget line B3 reflects a lower price ration than budget line B3. 
A) Budget line B2 reflects the same income and price for DVDs as budget line B1 but a higher price for books. 
B) Budget line B3 reflects a higher income but the same price for both books and DVDs as budget line B2. 
C) Budget line B3 reflects higher income and the same prices for both books and DVDs as budget line B1. 
D) Budget line B1 reflects lower income than budget line B2. 
E) Budget line B3 reflects a lower price ration than budget line B3.

Question 14

If the price of an inferior good falls, there will be no income effect.

Accepted Answer

A) True 
 B)False

Question 15

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 
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 16

All combinations of Pepsi and coffee that yield Geraldo the same satisfaction lie along a particular

Accepted Answer

A) demand curve 
B) marginal utility curve 
C) budget line 
D) income-consumption curve 
E) indifference curve 
A) demand curve 
B) marginal utility curve 
C) budget line 
D) income-consumption curve 
E) indifference curve

Question 17

Exhibit 6-30   Consider Exhibit 6-30.Assume that you initially have $600 to spend on books and compact disks.What happens if the amount you have to spend increases to $800?

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 shifts outward along the horizontal axis and the vertical axis. 
D) The budget line shifts outward along the vertical axis. 
E) The budget line shifts outward along the horizontal axis. 
A) The budget line shifts inward along the horizontal axis. 
B) The budget line shifts inward along the vertical axis. 
C) The budget line shifts outward along the horizontal axis and the vertical axis. 
D) The budget line shifts outward along the vertical axis. 
E) The budget line shifts outward along the horizontal axis.

Question 18

Exhibit 6-24   Which of the following represents a correct preference ordering for the indifference map represented in Exhibit 6-24?

Accepted Answer

A) point a, b, e 
B) point b, c, d 
C) point d, c, a 
D) point d, a, b 
E) point c, a, f 
A) point a, b, e 
B) point b, c, d 
C) point d, c, a 
D) point d, a, b 
E) point c, a, f

Question 19

What is the effect of a fall in the price of a normal good on the consumer's choice?

Accepted Answer

A) She will buy more of the good but reach a lower indifference curve. 
B) She will buy less of the good but reach a higher indifference curve. 
C) She will buy more of the good and reach a higher indifference curve. 
D) She will buy the same quantity of the good and stay on the same indifference curve. 
E) She will buy more of the good and stay on the same indifference curve. 
A) She will buy more of the good but reach a lower indifference curve. 
B) She will buy less of the good but reach a higher indifference curve. 
C) She will buy more of the good and reach a higher indifference curve. 
D) She will buy the same quantity of the good and stay on the same indifference curve. 
E) She will buy more of the good and stay on the same indifference curve.

Question 20

Exhibit 6-22   If a consumer moves from point a to point b on the indifference curve shown in Exhibit 6-22,

Accepted Answer

A) the marginal rate of substitution between books and movies falls 
B) the marginal rate of substitution between books and movies stays the same 
C) the marginal rate of substitution between books and movies increases 
D) the marginal rate of substitution between books and movies becomes negative 
E) the marginal rate of substitution between books and movies becomes zero 
A) the marginal rate of substitution between books and movies falls 
B) the marginal rate of substitution between books and movies stays the same 
C) the marginal rate of substitution between books and movies increases 
D) the marginal rate of substitution between books and movies becomes negative 
E) the marginal rate of substitution between books and movies becomes zero

Exam 6: Appendix--Indifference Curves and Utility Maximization

Which of the following illustrates the concept of "more is better"?

The slope of an indifference curve is equal to the

Exhibit 6-29 Which graph in Exhibit 6-29 shows a decrease in the price of food?

All combinations of goods along the same indifference curve have the same cost to a consumer.

At consumer equilibrium between goods F and C, all of the following statements is true except one.Which is the exception?

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)

The slope of a budget line equals minus the ratio of the

The slope of a budget line is positive.

Exhibit 6-31 Assume that a consumer is initially in equilibrium at point a in Exhibit 6-31.Then the price of good B falls.The movement from point c to point b represents

A consumer's indifference map is a depiction of

Only a change in income can affect a consumer's budget line.

Exhibit 6-31 Assume that a consumer is initially in equilibrium at point a in Exhibit 6-31.Then the price of good B falls.The movement from point a to point b represents

Exhibit 6-26 Consider Exhibit 6-26.Three budget lines are shown.Which of the following statements is true about the budget lines?

If the price of an inferior good falls, there will be no income effect.

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

All combinations of Pepsi and coffee that yield Geraldo the same satisfaction lie along a particular

Exhibit 6-30 Consider Exhibit 6-30.Assume that you initially have $600 to spend on books and compact disks.What happens if the amount you have to spend increases to $800?

Exhibit 6-24 Which of the following represents a correct preference ordering for the indifference map represented in Exhibit 6-24?

What is the effect of a fall in the price of a normal good on the consumer's choice?

Exhibit 6-22 If a consumer moves from point a to point b on the indifference curve shown in Exhibit 6-22,

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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