Question 1

If income decreases,the budget line

Accepted Answer

A) becomes steeper. 
B) becomes flatter. 
C) shifts leftward and parallel to the original budget line. 
D) shifts rightward and parallel to the original budget line. 
E) shifts parallel either leftward or rightward depending on whether the goods measured on the axes are normal or inferior. 
A) becomes steeper. 
B) becomes flatter. 
C) shifts leftward and parallel to the original budget line. 
D) shifts rightward and parallel to the original budget line. 
E) shifts parallel either leftward or rightward depending on whether the goods measured on the axes are normal or inferior.

Question 2

Larry consumes only beer (B)and chips (C).The magnitude of the slope of his budget line (with beer measured on the vertical axis)is

Accepted Answer

A) PC/Y. 
B) PC × PB. 
C) Y/PC. 
D) Y/PB. 
E) PC/PB. 
A) PC/Y. 
B) PC × PB. 
C) Y/PC. 
D) Y/PB. 
E) PC/PB.

Question 3

Marie-Louise has an income of $10 to buy peanuts and popcorn.The price of a bag of peanuts is $1 and the price of a bag of popcorn is $2.What is Marie-Louise's real income in terms of popcorn?

Accepted Answer

A) 1/2 bag of popcorn 
B) $2 per bag of popcorn 
C) 2 bags of popcorn 
D) 5 bags of popcorn 
E) 10 bags of popcorn 
A) 1/2 bag of popcorn 
B) $2 per bag of popcorn 
C) 2 bags of popcorn 
D) 5 bags of popcorn 
E) 10 bags of popcorn

Question 4

A change in the price of a good has

Accepted Answer

A) an income effect only. 
B) a substitution effect only. 
C) a substitution effect and an income effect. 
D) an income effect that exceeds the substitution effect. 
E) a substitution effect that exceeds the income effect. 
A) an income effect only. 
B) a substitution effect only. 
C) a substitution effect and an income effect. 
D) an income effect that exceeds the substitution effect. 
E) a substitution effect that exceeds the income effect.

Question 5

Use the information below to answer the following questions.
Fact 9.3.2 Hamptons Glamour Finds a Humbler Home
Lucy Martin collected and sold vintage clothing in the wealthy Hamptons,but in the recession of 2008,her sales fell.She eventually moved her shop to Tannersville,N.Y. ,where her expenses are 70 percent less than they were in the Hamptons.
Source: The New York Times,December 22,2016
-Refer to Fact 9.3.2.According to the news clip,vintage clothing is ________ good.If the price of vintage clothing falls and income remains the same,the quantity of used clothing bought ________.

Accepted Answer

A) an inferior;decreases 
B) an inferior;increases 
C) a normal;increases 
D) a normal;decreases 
E) a substitute;decreases 
A) an inferior;decreases 
B) an inferior;increases 
C) a normal;increases 
D) a normal;decreases 
E) a substitute;decreases

Question 6

Which one of the following is true at the best affordable choice of a consumer?

Accepted Answer

A) Marginal rate of substitution exceeds the slope of the budget line. 
B) Marginal rate of substitution is less than the relative price of the good measured on the x-axis. 
C) All income is spent. 
D) The consumption choice is outside the budget line. 
E) Other consumption points along the consumer's budget line lie on higher indifference curves. 
A) Marginal rate of substitution exceeds the slope of the budget line. 
B) Marginal rate of substitution is less than the relative price of the good measured on the x-axis. 
C) All income is spent. 
D) The consumption choice is outside the budget line. 
E) Other consumption points along the consumer's budget line lie on higher indifference curves.

Question 7

At the best affordable point,which statement is true?

Accepted Answer

A) The slope of the indifference curve equals the slope of the budget line. 
B) The marginal rate of substitution between two goods equals their absolute price. 
C) The highest affordable indifference curve has the same intercept as the budget line. 
D) Other points on the same indifference curve are affordable but not preferred. 
E) Some income is not spent. 
A) The slope of the indifference curve equals the slope of the budget line. 
B) The marginal rate of substitution between two goods equals their absolute price. 
C) The highest affordable indifference curve has the same intercept as the budget line. 
D) Other points on the same indifference curve are affordable but not preferred. 
E) Some income is not spent.

Question 8

Which one of the following statements is true about the indifference curves for two goods that are close but not perfect substitutes?

Accepted Answer

A) The indifference curves are negatively-sloped straight lines. 
B) The indifference curves are L-shaped. 
C) The marginal rate of substitution is constant. 
D) The marginal rate of substitution decreases as more of the good measured on the x-axis and less of the good measured on the y-axis are consumed. 
E) The marginal rate of substitution is negative. 
A) The indifference curves are negatively-sloped straight lines. 
B) The indifference curves are L-shaped. 
C) The marginal rate of substitution is constant. 
D) The marginal rate of substitution decreases as more of the good measured on the x-axis and less of the good measured on the y-axis are consumed. 
E) The marginal rate of substitution is negative.

Question 9

If the price of the good measured on the horizontal axis increases,the budget line

Accepted Answer

A) becomes steeper. 
B) shifts leftward and becomes steeper. 
C) shifts leftward and parallel to the original budget line. 
D) shifts rightward and parallel to the original budget line. 
E) becomes flatter. 
A) becomes steeper. 
B) shifts leftward and becomes steeper. 
C) shifts leftward and parallel to the original budget line. 
D) shifts rightward and parallel to the original budget line. 
E) becomes flatter.

Question 10

If the price of an inferior good rises,the income effect

Accepted Answer

A) will have an uncertain effect on consumption of the good,and the substitution effect will decrease consumption. 
B) will decrease consumption of the good,and the substitution effect will decrease consumption. 
C) and the substitution effect will both increase consumption of the good. 
D) and the substitution effect will both decrease consumption of the good. 
E) will increase consumption of the good and the substitution effect will decrease consumption. 
A) will have an uncertain effect on consumption of the good,and the substitution effect will decrease consumption. 
B) will decrease consumption of the good,and the substitution effect will decrease consumption. 
C) and the substitution effect will both increase consumption of the good. 
D) and the substitution effect will both decrease consumption of the good. 
E) will increase consumption of the good and the substitution effect will decrease consumption.

Question 11

Use the figure below to answer the following question.   Figure 9.3.2
-Which one of the following statements about Figure 9.3.2 is true?

Accepted Answer

A) Point S is preferred to point Q,but S is not affordable. 
B) Point R is not affordable. 
C) Point T is preferred to point Q,but T is not affordable. 
D) Points Q and S cost the same,but Q is preferred to S. 
E) Point R is the best affordable point. 
A) Point S is preferred to point Q,but S is not affordable. 
B) Point R is not affordable. 
C) Point T is preferred to point Q,but T is not affordable. 
D) Points Q and S cost the same,but Q is preferred to S. 
E) Point R is the best affordable point.

Question 12

The price of potatoes falls,and the quantity of potatoes purchased decreases.What can we infer?

Accepted Answer

A) The income effect is negative and exceeds the substitution effect. 
B) The income effect is negative and reinforces the substitution effect. 
C) The income effect is positive and exceeds the substitution effect. 
D) The income effect is positive and reinforces the substitution effect. 
E) The income effect is negative and just about offsets the substitution effect. 
A) The income effect is negative and exceeds the substitution effect. 
B) The income effect is negative and reinforces the substitution effect. 
C) The income effect is positive and exceeds the substitution effect. 
D) The income effect is positive and reinforces the substitution effect. 
E) The income effect is negative and just about offsets the substitution effect.

Question 13

The marginal rate of substitution

Accepted Answer

A) is the amount of good Y substituted for good X as a consumer moves along his budget line. 
B) is the rate at which a person gives up the good measured on the y-axis to get an additional unit of the good measured on the x-axis while remaining on the same indifference curve. 
C) increases as a consumer moves along her indifference curve and consumes more of the good measured on the x-axis. 
D) is greater than the magnitude of the slope of the budget line. 
E) is equal to the slope of the budget line. 
A) is the amount of good Y substituted for good X as a consumer moves along his budget line. 
B) is the rate at which a person gives up the good measured on the y-axis to get an additional unit of the good measured on the x-axis while remaining on the same indifference curve. 
C) increases as a consumer moves along her indifference curve and consumes more of the good measured on the x-axis. 
D) is greater than the magnitude of the slope of the budget line. 
E) is equal to the slope of the budget line.

Question 14

Use the figure below to answer the following questions.   Figure 9.3.4
Original equilibrium at A,new equilibrium at B
-Refer to Figure 9.3.4.Which graphs show the case where good Y is a normal good?

Accepted Answer

A) (a)and (b) 
B) (c)and (d) 
C) (a)and (c) 
D) (b)and (d) 
E) none of the graphs 
A) (a)and (b) 
B) (c)and (d) 
C) (a)and (c) 
D) (b)and (d) 
E) none of the graphs

Question 15

A consumer always has a cup of coffee with a tablespoon of sugar.What would the consumer's indifference curves for these two goods look like?

Accepted Answer

A) curved slightly toward the origin 
B) horizontal along the entire length 
C) downward sloping with a constant slope 
D) vertical along the entire length 
E) L-shaped 
A) curved slightly toward the origin 
B) horizontal along the entire length 
C) downward sloping with a constant slope 
D) vertical along the entire length 
E) L-shaped

Question 16

What is a distinguishing characteristic of goods that are perfect complements?

Accepted Answer

A) straight-line indifference curves 
B) upward-sloping demand curves 
C) L-shaped indifference curves 
D) upward-sloping indifference curves 
E) curved indifference curves,bowed away from the origin 
A) straight-line indifference curves 
B) upward-sloping demand curves 
C) L-shaped indifference curves 
D) upward-sloping indifference curves 
E) curved indifference curves,bowed away from the origin

Question 17

When price rises,the substitution effect

Accepted Answer

A) always increases consumption. 
B) increases consumption for normal goods only. 
C) decreases consumption for normal goods only. 
D) decreases consumption for inferior goods only. 
E) does none of the above. 
A) always increases consumption. 
B) increases consumption for normal goods only. 
C) decreases consumption for normal goods only. 
D) decreases consumption for inferior goods only. 
E) does none of the above.

Question 18

Sarah has an income of $100.She purchases 5 pizzas at $10 each and 10 subs at $5 each.Then the government taxes subs,and the price rises to $10 each.Simultaneously,the government gives Sarah a grant of $50 in income to make up for this change.As a result,Sarah's budget line

Accepted Answer

A) has fewer affordable combinations of pizzas and subs. 
B) does not change. 
C) shifts leftward and parallel to the original budget line. 
D) shifts rightward and parallel to the original budget line. 
E) swivels around the original consumption choice. 
A) has fewer affordable combinations of pizzas and subs. 
B) does not change. 
C) shifts leftward and parallel to the original budget line. 
D) shifts rightward and parallel to the original budget line. 
E) swivels around the original consumption choice.

Question 19

Sam buys gasoline and coffee each week.To draw his budget line for gasoline and coffee,Sam needs to know

Accepted Answer

A) how much income he has to spend on gasoline and coffee,the price of a litre of gasoline,and the price of a cup of coffee. 
B) only the price of a litre of gasoline and the price of a cup of coffee. 
C) only how much coffee he wants to drink and how much gasoline he needs. 
D) only how much income he has to spend on coffee and gasoline. 
E) his preferences for gasoline and coffee. 
A) how much income he has to spend on gasoline and coffee,the price of a litre of gasoline,and the price of a cup of coffee. 
B) only the price of a litre of gasoline and the price of a cup of coffee. 
C) only how much coffee he wants to drink and how much gasoline he needs. 
D) only how much income he has to spend on coffee and gasoline. 
E) his preferences for gasoline and coffee.

Question 20

The magnitude of the slope of the budget line is the

Accepted Answer

A) relative price of the good measured on the vertical axis. 
B) relative price of the good measured on the horizontal axis. 
C) money price of the good measured on the horizontal axis. 
D) real price of the good measured on the vertical axis. 
E) money price of the good measured on the vertical axis. 
A) relative price of the good measured on the vertical axis. 
B) relative price of the good measured on the horizontal axis. 
C) money price of the good measured on the horizontal axis. 
D) real price of the good measured on the vertical axis. 
E) money price of the good measured on the vertical axis.

If income decreases,the budget line

Larry consumes only beer (B)and chips (C).The magnitude of the slope of his budget line (with beer measured on the vertical axis)is

Marie-Louise has an income of $10 to buy peanuts and popcorn.The price of a bag of peanuts is $1 and the price of a bag of popcorn is $2.What is Marie-Louise's real income in terms of popcorn?

A change in the price of a good has

Which one of the following is true at the best affordable choice of a consumer?

At the best affordable point,which statement is true?

Which one of the following statements is true about the indifference curves for two goods that are close but not perfect substitutes?

If the price of the good measured on the horizontal axis increases,the budget line

If the price of an inferior good rises,the income effect

Use the figure below to answer the following question. Figure 9.3.2 -Which one of the following statements about Figure 9.3.2 is true?

The price of potatoes falls,and the quantity of potatoes purchased decreases.What can we infer?

The marginal rate of substitution

Use the figure below to answer the following questions. Figure 9.3.4 Original equilibrium at A,new equilibrium at B -Refer to Figure 9.3.4.Which graphs show the case where good Y is a normal good?

A consumer always has a cup of coffee with a tablespoon of sugar.What would the consumer's indifference curves for these two goods look like?

What is a distinguishing characteristic of goods that are perfect complements?

When price rises,the substitution effect

Sarah has an income of $100.She purchases 5 pizzas at $10 each and 10 subs at $5 each.Then the government taxes subs,and the price rises to $10 each.Simultaneously,the government gives Sarah a grant of $50 in income to make up for this change.As a result,Sarah's budget line

Sam buys gasoline and coffee each week.To draw his budget line for gasoline and coffee,Sam needs to know

The magnitude of the slope of the budget line is the

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

Exam 9: Possibilities, preferences, and Choices

If income decreases,the budget line

Larry consumes only beer (B)and chips (C).The magnitude of the slope of his budget line (with beer measured on the vertical axis)is

Marie-Louise has an income of $10 to buy peanuts and popcorn.The price of a bag of peanuts is $1 and the price of a bag of popcorn is $2.What is Marie-Louise's real income in terms of popcorn?

A change in the price of a good has

Which one of the following is true at the best affordable choice of a consumer?

At the best affordable point,which statement is true?

Which one of the following statements is true about the indifference curves for two goods that are close but not perfect substitutes?

If the price of the good measured on the horizontal axis increases,the budget line

If the price of an inferior good rises,the income effect

Use the figure below to answer the following question. Figure 9.3.2 -Which one of the following statements about Figure 9.3.2 is true?

The price of potatoes falls,and the quantity of potatoes purchased decreases.What can we infer?

The marginal rate of substitution

Use the figure below to answer the following questions. Figure 9.3.4 Original equilibrium at A,new equilibrium at B -Refer to Figure 9.3.4.Which graphs show the case where good Y is a normal good?

A consumer always has a cup of coffee with a tablespoon of sugar.What would the consumer's indifference curves for these two goods look like?

What is a distinguishing characteristic of goods that are perfect complements?

When price rises,the substitution effect

Sarah has an income of $100.She purchases 5 pizzas at $10 each and 10 subs at $5 each.Then the government taxes subs,and the price rises to $10 each.Simultaneously,the government gives Sarah a grant of $50 in income to make up for this change.As a result,Sarah's budget line

Sam buys gasoline and coffee each week.To draw his budget line for gasoline and coffee,Sam needs to know

The magnitude of the slope of the budget line is the

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters