Exam 9: Possibilities, Preferences, and Choices

If consumers buy only gasoline and food, at their best affordable choice the marginal rate of substitution between food and gasoline ________ the relative price of food and gasoline.

-Lizzie's budget line is shown in the figure above. If Lizzie's income is $20, which of the following formulas represents her budget equation?

-A budget line is drawn with automobiles on the vertical axis and boats on the horizontal. Imposing a tax on boats that boosts the price of a boat makes the

-In the above figure, Sheryl's monthly budget line for movies and plays shifted, as shown. The shift in the budget line is parallel, so the shift might be because

-The figure above shows Ilene's budget line. If Ilene's income rises, her budget line will

In an indifference curve/budget line diagram, a consumer will select the combination of goods that is on the budget line and for which the

The assumption that the magnitude of the slope of an indifference curve decreases moving to the right along the indifference curve is known as the assumption of

-In the above figure, Reggie's budget line rotates outward from BL₁ to BL₂. He initially consumes at point A. If his new consumption bundle is at point B, this implies that kiwi fruit and mangoes are

In a budget line/indifference curve figure, how do you identify the best affordable combination of any two goods?

Janelle spends all of her $40 income on songs from iTunes ($1 each) and applications ($4 each) for her iTouch. What is her budget equation?

-In the above figure, if the budget line shifts from RT to RS, the income effect is illustrated by the move from

What is the marginal rate of substitution and how does it relate to an indifference curve?

-Kristen has an income of $450 per year to spend on music CDs and movies on DVDs. Initially the price of a CD is $15 and the price of a DVD is $22.50. The indifference curves in the figure above (I₁, I₂, and I₃) reflect Kristen's preferences. If the price of a DVD falls to $18, Kristen will buy

-The figure above shows Ronald's budget line. He has a weekly income of $20 and he spends it on hot dogs and hamburgers. The relative price of a hamburger is ________.

-Mary has $10 to spend each week on coffee, Q_c and magazines, Q_m. The price of a coffee is $1, and the price of a magazine is $2. Mary's budget equation is ________.

Janelle spends all of her income on songs from iTunes ($1 each) and applications ($5 each) for her iTouch. If she makes her best affordable choice, she purchases 20 songs and 4 applications, what is her income?

-If an individual's income increases,

-The substitution effect from a fall in the price of a gallon of gasoline is shown in the above figure by the movement from

Larry spends all his $800 monthly income on pizza and milk. The price of pizza is $4 a slice, and the price of milk is $2 per quart. The relative price of milk is

All points above the budget line are