Question 1

-Given the budget line in the above figure, which of the following combinations of pizza and milk are affordable?

Accepted Answer

A)  0 pizzas, 10 gallons of milk 
B)  2 pizzas, 6 gallons of milk 
C)  4 pizzas, 1 gallon of milk 
D)  All of the above combinations are affordable. 
A)  0 pizzas, 10 gallons of milk 
B)  2 pizzas, 6 gallons of milk 
C)  4 pizzas, 1 gallon of milk 
D)  All of the above combinations are affordable.

Question 2

-In the above figure, the movement from point C to point A is the result of

Accepted Answer

A)  a decrease in the price of coffee. 
B)  an increase in the price of coffee. 
C)  a decrease in the price of gasoline. 
D)  an increase in the price of gasoline. 
A)  a decrease in the price of coffee. 
B)  an increase in the price of coffee. 
C)  a decrease in the price of gasoline. 
D)  an increase in the price of gasoline.

Question 3

-For a person who consumes only steak and lobster, the slope of the budget line is called the marginal rate of substitution between steak and lobster.

Accepted Answer

A) True 
 B)False

Question 4

During October and November 2008, gasoline prices were falling dramatically making travel by car less expensive but air travel prices were as high as ever. How does the fall in gasoline price affect the relative price of air travel in terms of travel by car?

Accepted Answer

A)  Decreases 
B)  Does not change 
C)  Decreases then increases 
D)  Increases 
A)  Decreases 
B)  Does not change 
C)  Decreases then increases 
D)  Increases

Question 5

-The figure above shows Ronald's budget line. He has a weekly income of $20, which he spends on hotdogs and hamburgers. Ronald's real income in terms of hamburgers ________.

Accepted Answer

A)  depends on the quantity of hamburgers consumed 
B)  depends on the quantity of hotdogs consumed 
C)  is $20 
D)  is 10 hamburgers 
A)  depends on the quantity of hamburgers consumed 
B)  depends on the quantity of hotdogs consumed 
C)  is $20 
D)  is 10 hamburgers

Question 6

If the relative price of pizza in terms of movies is 3, this means that

Accepted Answer

A)  the opportunity cost of a pizza is 3 movies. 
B)  3 pizzas can be traded for 9 movies. 
C)  in terms of the dollars that must be spent to buy the product, pizza is more expensive than movies. 
D)  All of the above answers are correct. 
A)  the opportunity cost of a pizza is 3 movies. 
B)  3 pizzas can be traded for 9 movies. 
C)  in terms of the dollars that must be spent to buy the product, pizza is more expensive than movies. 
D)  All of the above answers are correct.

Question 7

-The assumption of diminishing marginal rate of substitution means that

Accepted Answer

A)  the budget line has a negative slope. 
B)  the budget line does not shift when people's preferences change. 
C)  indifference curves might have a positive slope. 
D)  indifference curves will be concave. 
A)  the budget line has a negative slope. 
B)  the budget line does not shift when people's preferences change. 
C)  indifference curves might have a positive slope. 
D)  indifference curves will be concave.

Question 8

-The above figure gives your budget line between CDs and magazines. If the price of a magazine falls, then the budget line

Accepted Answer

A)  shifts outward and the slope does not change. 
B)  rotates inward with no change in the horizontal intercept. 
C)  rotates inward with no change in the vertical intercept. 
D)  rotates outward with no change in the vertical axis. 
A)  shifts outward and the slope does not change. 
B)  rotates inward with no change in the horizontal intercept. 
C)  rotates inward with no change in the vertical intercept. 
D)  rotates outward with no change in the vertical axis.

Question 9

-The relative price of a magazine in the above figure is

Accepted Answer

A)  0.5 of a hamburger per magazine. 
B)  1 hamburger per magazine. 
C)  1.33 hamburgers per magazine. 
D)  8 hamburgers per magazine. 
A)  0.5 of a hamburger per magazine. 
B)  1 hamburger per magazine. 
C)  1.33 hamburgers per magazine. 
D)  8 hamburgers per magazine.

Question 10

-The figure above shows Sam's budget line. Which of the following formulas represents Sam's budget equation?

Accepted Answer

A)  $60.00 = $1.50/Qg + $3.00/Qc 
B)  $60.00 = Qg /$1.50 + Qc /$3.00 
C)  $60.00 = $1.50(Qg) + $3.00(Qc) 
D)  $60.00 = $1.50(Qg) - $3.00(Qc) 
A)  $60.00 = $1.50/Qg + $3.00/Qc 
B)  $60.00 = Qg /$1.50 + Qc /$3.00 
C)  $60.00 = $1.50(Qg) + $3.00(Qc) 
D)  $60.00 = $1.50(Qg) - $3.00(Qc)

Question 11

-Given the budget line in the above figure, which of the following combinations of pizza and milk are affordable?

Accepted Answer

A)  0 pizzas, 12 gallons of milk 
B)  2 pizzas, 2 gallons of milk 
C)  4 pizzas, 4 gallons of milk 
D)  All of the above combinations are affordable. 
A)  0 pizzas, 12 gallons of milk 
B)  2 pizzas, 2 gallons of milk 
C)  4 pizzas, 4 gallons of milk 
D)  All of the above combinations are affordable.

Question 12

-Lizzie's budget line is shown in the figure above. If Lizzie's income increases, her budget line

Accepted Answer

A)  shifts rightward and its slope does not change. 
B)  shifts leftward and its slope does not change. 
C)  becomes flatter. 
D)  becomes steeper. 
A)  shifts rightward and its slope does not change. 
B)  shifts leftward and its slope does not change. 
C)  becomes flatter. 
D)  becomes steeper.

Question 13

Suppose the price of chocolate chip cookies is $4.00 per pound and the price of a slice of cake is $2.00 per slice. The relative price of cake in terms of cookies is

Accepted Answer

A)  1/2 pound of cookies per cake. 
B)  2 pounds of cookies per cake. 
C)  1/2 slice of cake per cookie. 
D)  2 slices of cake per cookie. 
A)  1/2 pound of cookies per cake. 
B)  2 pounds of cookies per cake. 
C)  1/2 slice of cake per cookie. 
D)  2 slices of cake per cookie.

Question 14

-In the above figure, as Brendan's income rises his consumption bundle moves from point A to point B. This implies that for Brendan, compact discs are ________ good and haircuts are ________ good.

Accepted Answer

A)  a normal; an inferior 
B)  a normal; a normal 
C)  an inferior; an inferior 
D)  an inferior; a normal 
A)  a normal; an inferior 
B)  a normal; a normal 
C)  an inferior; an inferior 
D)  an inferior; a normal

Question 15

If two consumption points are not on the same indifference curve, then one point is ________.

Accepted Answer

A)  a substitute for the other point 
B)  unaffordable and the other is affordable 
C)  preferred to the other 
D)  more expensive than the other 
A)  a substitute for the other point 
B)  unaffordable and the other is affordable 
C)  preferred to the other 
D)  more expensive than the other

Question 16

Can the process of consumer choice as illustrated with a budget line/indifference curves approach explain the downward sloping demand curves that consumers have for goods, such as Pepsi?

Accepted Answer

Yes. Measure the quantity of Pepsi consu

Question 17

-The indifference curve in the above figure

Accepted Answer

A)  illustrates two goods that are perfect substitutes. 
B)  illustrates two goods that are perfect complements. 
C)  violates assumptions about preferences. 
D)  None of the above statements is correct. 
A)  illustrates two goods that are perfect substitutes. 
B)  illustrates two goods that are perfect complements. 
C)  violates assumptions about preferences. 
D)  None of the above statements is correct.

Question 18

Real income can be measured by

Accepted Answer

A)  the slope of the budget line. 
B)  the area under the budget line. 
C)  the length of the budget line. 
D)  an intercept of the budget line. 
A)  the slope of the budget line. 
B)  the area under the budget line. 
C)  the length of the budget line. 
D)  an intercept of the budget line.

Question 19

________ on an indifference curve that is farther from the origin ________ on an indifference curve that is closer to the origin.

Accepted Answer

A)  Some combinations; are preferred to some combinations 
B)  Any combination; is preferred to any combination 
C)  Most combinations; are preferred to all combinations 
D)  Combinations; are not as affordable as combinations 
A)  Some combinations; are preferred to some combinations 
B)  Any combination; is preferred to any combination 
C)  Most combinations; are preferred to all combinations 
D)  Combinations; are not as affordable as combinations

Question 20

-Ramen noodles are hotter than ever in 2010. Considered a bargain meal for cash-starved college students... last year, 4 billion individual packets were devoured in the United States, a 4 percent increase over 2006. Once students leave college for that first well-paying job, however, they stop eating Ramen. If the price of ramen falls, and income remains the same, describe the substitution and income effects that occur.

Accepted Answer

A)  Both the substitution and income effects would be positive. 
B)  The substitution effect would be negative and the income effect would be positive. 
C)  Both the substitution and income effects would be negative. 
D)  The substitution effect would be positive and the income effect would be negative. 
A)  Both the substitution and income effects would be positive. 
B)  The substitution effect would be negative and the income effect would be positive. 
C)  Both the substitution and income effects would be negative. 
D)  The substitution effect would be positive and the income effect would be negative.

Exam 9: Possibilities, Preferences, and Choices

-Given the budget line in the above figure, which of the following combinations of pizza and milk are affordable?

-In the above figure, the movement from point C to point A is the result of

-For a person who consumes only steak and lobster, the slope of the budget line is called the marginal rate of substitution between steak and lobster.

During October and November 2008, gasoline prices were falling dramatically making travel by car less expensive but air travel prices were as high as ever. How does the fall in gasoline price affect the relative price of air travel in terms of travel by car?

-The figure above shows Ronald's budget line. He has a weekly income of $20, which he spends on hotdogs and hamburgers. Ronald's real income in terms of hamburgers ________.

If the relative price of pizza in terms of movies is 3, this means that

-The assumption of diminishing marginal rate of substitution means that

-The above figure gives your budget line between CDs and magazines. If the price of a magazine falls, then the budget line

-The relative price of a magazine in the above figure is

-The figure above shows Sam's budget line. Which of the following formulas represents Sam's budget equation?

-Given the budget line in the above figure, which of the following combinations of pizza and milk are affordable?

-Lizzie's budget line is shown in the figure above. If Lizzie's income increases, her budget line

Suppose the price of chocolate chip cookies is $4.00 per pound and the price of a slice of cake is $2.00 per slice. The relative price of cake in terms of cookies is

-In the above figure, as Brendan's income rises his consumption bundle moves from point A to point B. This implies that for Brendan, compact discs are ________ good and haircuts are ________ good.

If two consumption points are not on the same indifference curve, then one point is ________.

Can the process of consumer choice as illustrated with a budget line/indifference curves approach explain the downward sloping demand curves that consumers have for goods, such as Pepsi?

-The indifference curve in the above figure

Real income can be measured by

________ on an indifference curve that is farther from the origin ________ on an indifference curve that is closer to the origin.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

-In the above figure, as Brendan's income rises his consumption bundle moves from point A to point B. This implies that for Brendan, compact discs are good and haircuts are good.

on an indifference curve that is farther from the origin on an indifference curve that is closer to the origin.