Question 1

What is the relationship between goods and the income effect?

Accepted Answer

A) An inferior good has a positive income effect. 
B) A normal good has a positive income effect. 
C) An inferior good has no income effect. 
D) A normal good has no income effect. 
E) A normal good has a negative income effect. 
A) An inferior good has a positive income effect. 
B) A normal good has a positive income effect. 
C) An inferior good has no income effect. 
D) A normal good has no income effect. 
E) A normal good has a negative income effect.

Question 2

Junkfood Jill spends all of her income on jellybeans and Jolt cola.Suppose that Jill's income is $30,the price of a bag of jellybeans is $6,and the price of a bottle of Jolt cola is $2.Which of the following combinations of jellybeans and Jolt cola lies inside Jill's budget line?

Accepted Answer

A) 2 bags of jellybeans and 8 bottles of Jolt 
B) 5 bags of jellybeans and 0 bottles of Jolt 
C) 4 bags of jellybeans and 4 bottles of Jolt 
D) 3 bags of jellybeans and 6 bottles of Jolt 
E) 5 bags of jellybeans and 15 bottles of Jolt 
A) 2 bags of jellybeans and 8 bottles of Jolt 
B) 5 bags of jellybeans and 0 bottles of Jolt 
C) 4 bags of jellybeans and 4 bottles of Jolt 
D) 3 bags of jellybeans and 6 bottles of Jolt 
E) 5 bags of jellybeans and 15 bottles of Jolt

Question 3

If income increases,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 parallels 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 parallels either leftward or rightward depending on whether the goods measured on the axes are normal or inferior.

Question 4

Real income is calculated as

Accepted Answer

A) income divided by the quantity consumed of a good. 
B) income before taxes. 
C) the price of one good divided by the price of another good. 
D) income after taxes. 
E) income divided by the price of a good. 
A) income divided by the quantity consumed of a good. 
B) income before taxes. 
C) the price of one good divided by the price of another good. 
D) income after taxes. 
E) income divided by the price of a good.

Question 5

The effect of a change in income on buying plans is called the

Accepted Answer

A) income effect. 
B) substitution effect. 
C) normal effect. 
D) inferior effect. 
E) price effect. 
A) income effect. 
B) substitution effect. 
C) normal effect. 
D) inferior effect. 
E) price effect.

Question 6

If two consumption points are on different indifference curves,then one point is

Accepted Answer

A) a substitute for the other. 
B) preferred to the other. 
C) a complement of the other. 
D) a normal good and the other point is an inferior good. 
E) more expensive than the other. 
A) a substitute for the other. 
B) preferred to the other. 
C) a complement of the other. 
D) a normal good and the other point is an inferior good. 
E) more expensive than the other.

Question 7

An indifference curve is

Accepted Answer

A) the boundary between what can be produced and what cannot be produced. 
B) the boundary between what a consumer can afford and what he cannot afford. 
C) a curve that shows combinations of goods among which a consumer is indifferent. 
D) the boundary between normal goods and inferior goods. 
E) a curve with a positive slope. 
A) the boundary between what can be produced and what cannot be produced. 
B) the boundary between what a consumer can afford and what he cannot afford. 
C) a curve that shows combinations of goods among which a consumer is indifferent. 
D) the boundary between normal goods and inferior goods. 
E) a curve with a positive slope.

Question 8

Bill consumes apples and bananas.Apples are measured on the vertical axis and bananas are measured on the horizontal axis.Bill's income doubles,the price of apples doubles,and the price of bananas triples.Bill's budget line

Accepted Answer

A) remains unchanged. 
B) shifts rightward and the slope does not change. 
C) shifts rightward and becomes steeper. 
D) shifts rightward and becomes flatter. 
E) becomes steeper. 
A) remains unchanged. 
B) shifts rightward and the slope does not change. 
C) shifts rightward and becomes steeper. 
D) shifts rightward and becomes flatter. 
E) becomes steeper.

Question 9

The price of one good divided by the price of another good is

Accepted Answer

A) an absolute price. 
B) a relative price. 
C) a marginal price. 
D) a demand price. 
E) a money price. 
A) an absolute price. 
B) a relative price. 
C) a marginal price. 
D) a demand price. 
E) a money price.

Question 10

Which one of the following statements is false?

Accepted Answer

A) If the indifference curve is steep,the marginal rate of substitution is high. 
B) A low marginal rate of substitution implies a relatively flat indifference curve. 
C) A relatively flat indifference curve implies a consumer must receive a large amount of good X to compensate for a small decrease in good Y. 
D) A high marginal rate of substitution implies a consumer must receive a large amount of good X to compensate for a small decrease in good Y. 
E) A consumer's marginal rate of substitution decreases as she moves down along her indifference curve. 
A) If the indifference curve is steep,the marginal rate of substitution is high. 
B) A low marginal rate of substitution implies a relatively flat indifference curve. 
C) A relatively flat indifference curve implies a consumer must receive a large amount of good X to compensate for a small decrease in good Y. 
D) A high marginal rate of substitution implies a consumer must receive a large amount of good X to compensate for a small decrease in good Y. 
E) A consumer's marginal rate of substitution decreases as she moves down along her indifference curve.

Question 11

When speaking of the price of the good measured on the horizontal axis relative to the price of the good measured on the vertical axis,which statement is true?

Accepted Answer

A) The steeper the slope of the budget line,the greater the relative price of the good measured on the horizontal axis. 
B) The steeper the slope of the budget line,the smaller the relative price of the good measured on the horizontal axis. 
C) The steeper the slope of the budget line,the greater the relative price of the good measured on the vertical axis. 
D) The slope of the budget line is independent of relative prices. 
E) The flatter the slope of the budget line,the greater the relative price of the good measured on the horizontal axis. 
A) The steeper the slope of the budget line,the greater the relative price of the good measured on the horizontal axis. 
B) The steeper the slope of the budget line,the smaller the relative price of the good measured on the horizontal axis. 
C) The steeper the slope of the budget line,the greater the relative price of the good measured on the vertical axis. 
D) The slope of the budget line is independent of relative prices. 
E) The flatter the slope of the budget line,the greater the relative price of the good measured on the horizontal axis.

Question 12

Use the figure below to answer the following questions.   Figure 9.1.2
-Refer to Figure 9.1.2.Which budget line has the lowest relative price for carrots?

Accepted Answer

A) AD 
B) BD 
C) CD 
D) The relative price is equal for all three budget lines. 
E) Cannot be determined without studying the indifference curves. 
A) AD 
B) BD 
C) CD 
D) The relative price is equal for all three budget lines. 
E) Cannot be determined without studying the indifference curves.

Question 13

David has an income of $60 to buy movie tickets and bus tickets.The price of a movie ticket is $12 and the price of a bus ticket is $4.What is David's real income?

Accepted Answer

A) $60 
B) 5 movie tickets or 15 bus tickets 
C) 15 movie tickets or 5 bus tickets 
D) $16 
E) 12 movie tickets or 4 bus tickets 
A) $60 
B) 5 movie tickets or 15 bus tickets 
C) 15 movie tickets or 5 bus tickets 
D) $16 
E) 12 movie tickets or 4 bus tickets

Question 14

Which of the following is not relevant when calculating the budget line?

Accepted Answer

A) the price of good X 
B) income 
C) the price of good Y 
D) preferences 
E) the relative price of good X in terms of good Y 
A) the price of good X 
B) income 
C) the price of good Y 
D) preferences 
E) the relative price of good X in terms of good Y

Question 15

Which statement is true for a normal good?

Accepted Answer

A) The income effect dominates the substitution effect. 
B) The income effect reinforces the substitution effect. 
C) As income increases,consumption decreases. 
D) As income increases,consumption remains constant. 
E) As price falls,we do not know whether consumption increases or decreases. 
A) The income effect dominates the substitution effect. 
B) The income effect reinforces the substitution effect. 
C) As income increases,consumption decreases. 
D) As income increases,consumption remains constant. 
E) As price falls,we do not know whether consumption increases or decreases.

Question 16

Zarina can afford to buy 3 tomatoes and no toothbrushes,or 2 toothbrushes and no tomatoes.The relative price of a toothbrush is

Accepted Answer

A) 2/3 of a tomato. 
B) 3/2 tomatoes. 
C) 6 tomatoes. 
D) 1/6 of a tomato. 
E) impossible to calculate without additional information. 
A) 2/3 of a tomato. 
B) 3/2 tomatoes. 
C) 6 tomatoes. 
D) 1/6 of a tomato. 
E) impossible to calculate without additional information.

Question 17

Use the figure below to answer the following questions.   Figure 9.1.2
-Refer to Figure 9.1.2.Which budget line has the lowest relative price for music downloads?

Accepted Answer

A) DA 
B) DB 
C) DC 
D) The relative price is equal for all three budget lines. 
E) Cannot be determined without studying the indifference curves. 
A) DA 
B) DB 
C) DC 
D) The relative price is equal for all three budget lines. 
E) Cannot be determined without studying the indifference curves.

Question 18

Which one of the following statements is false?

Accepted Answer

A) Indifference curves are negatively sloped. 
B) A preference map consists of a series of indifference curves. 
C) Indifference curves are bowed out from the origin. 
D) The marginal rate of substitution is the magnitude of the slope of an indifference curve. 
E) The marginal rate of substitution increases as a consumer moves up along an indifference curve for ordinary goods. 
A) Indifference curves are negatively sloped. 
B) A preference map consists of a series of indifference curves. 
C) Indifference curves are bowed out from the origin. 
D) The marginal rate of substitution is the magnitude of the slope of an indifference curve. 
E) The marginal rate of substitution increases as a consumer moves up along an indifference curve for ordinary goods.

Question 19

Use the figure below to answer the following questions.   Figure 9.3.3
-Consider an initial budget line labelled RS in Figure 9.3.3.If the budget line becomes RT,the income effect is illustrated by the move from point

Accepted Answer

A) A to B. 
B) A to C. 
C) A to D. 
D) B to C. 
E) B to D. 
A) A to B. 
B) A to C. 
C) A to D. 
D) B to C. 
E) B to D.

Question 20

Use the figure below to answer the following questions.   Figure 9.3.3
-Consider an initial budget line labelled RT in Figure 9.3.3.If the budget line becomes RS,the income effect is illustrated by the move from point

Accepted Answer

A) A to B. 
B) A to C. 
C) B to D. 
D) C to B. 
E) D to A. 
A) A to B. 
B) A to C. 
C) B to D. 
D) C to B. 
E) D to A.

What is the relationship between goods and the income effect?

Junkfood Jill spends all of her income on jellybeans and Jolt cola.Suppose that Jill's income is $30,the price of a bag of jellybeans is $6,and the price of a bottle of Jolt cola is $2.Which of the following combinations of jellybeans and Jolt cola lies inside Jill's budget line?

If income increases,the budget line

Real income is calculated as

The effect of a change in income on buying plans is called the

If two consumption points are on different indifference curves,then one point is

An indifference curve is

Bill consumes apples and bananas.Apples are measured on the vertical axis and bananas are measured on the horizontal axis.Bill's income doubles,the price of apples doubles,and the price of bananas triples.Bill's budget line

The price of one good divided by the price of another good is

Which one of the following statements is false?

When speaking of the price of the good measured on the horizontal axis relative to the price of the good measured on the vertical axis,which statement is true?

Use the figure below to answer the following questions. Figure 9.1.2 -Refer to Figure 9.1.2.Which budget line has the lowest relative price for carrots?

David has an income of $60 to buy movie tickets and bus tickets.The price of a movie ticket is $12 and the price of a bus ticket is $4.What is David's real income?

Which of the following is not relevant when calculating the budget line?

Which statement is true for a normal good?

Zarina can afford to buy 3 tomatoes and no toothbrushes,or 2 toothbrushes and no tomatoes.The relative price of a toothbrush is

Use the figure below to answer the following questions. Figure 9.1.2 -Refer to Figure 9.1.2.Which budget line has the lowest relative price for music downloads?

Which one of the following statements is false?

Use the figure below to answer the following questions. Figure 9.3.3 -Consider an initial budget line labelled RS in Figure 9.3.3.If the budget line becomes RT,the income effect is illustrated by the move from point

Use the figure below to answer the following questions. Figure 9.3.3 -Consider an initial budget line labelled RT in Figure 9.3.3.If the budget line becomes RS,the income effect is illustrated by the move from point

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

What is the relationship between goods and the income effect?

Junkfood Jill spends all of her income on jellybeans and Jolt cola.Suppose that Jill's income is $30,the price of a bag of jellybeans is $6,and the price of a bottle of Jolt cola is $2.Which of the following combinations of jellybeans and Jolt cola lies inside Jill's budget line?

If income increases,the budget line

Real income is calculated as

The effect of a change in income on buying plans is called the

If two consumption points are on different indifference curves,then one point is

An indifference curve is

Bill consumes apples and bananas.Apples are measured on the vertical axis and bananas are measured on the horizontal axis.Bill's income doubles,the price of apples doubles,and the price of bananas triples.Bill's budget line

The price of one good divided by the price of another good is

Which one of the following statements is false?

When speaking of the price of the good measured on the horizontal axis relative to the price of the good measured on the vertical axis,which statement is true?

Use the figure below to answer the following questions. Figure 9.1.2 -Refer to Figure 9.1.2.Which budget line has the lowest relative price for carrots?

David has an income of $60 to buy movie tickets and bus tickets.The price of a movie ticket is $12 and the price of a bus ticket is $4.What is David's real income?

Which of the following is not relevant when calculating the budget line?

Which statement is true for a normal good?

Zarina can afford to buy 3 tomatoes and no toothbrushes,or 2 toothbrushes and no tomatoes.The relative price of a toothbrush is

Use the figure below to answer the following questions. Figure 9.1.2 -Refer to Figure 9.1.2.Which budget line has the lowest relative price for music downloads?

Which one of the following statements is false?

Use the figure below to answer the following questions. Figure 9.3.3 -Consider an initial budget line labelled RS in Figure 9.3.3.If the budget line becomes RT,the income effect is illustrated by the move from point

Use the figure below to answer the following questions. Figure 9.3.3 -Consider an initial budget line labelled RT in Figure 9.3.3.If the budget line becomes RS,the income effect is illustrated by the move from point

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