Question 1

-The above figure shows Jane's budget line and two of her indifference curves. How many lobster dinners will Jane purchase each month?

Accepted Answer

A)  4 lobster dinners 
B)  5 lobster dinners 
C)  8 lobster dinners 
D)  10 lobster dinners 
A)  4 lobster dinners 
B)  5 lobster dinners 
C)  8 lobster dinners 
D)  10 lobster dinners

Question 2

When your budget line is just tangent to your indifference curve, you are at the point on the budget line that you least prefer.

Accepted Answer

A) True 
 B)False

Question 3

-In the figure above, which budget line has the lowest relative price of carrots?

Accepted Answer

A)  AD 
B)  BD 
C)  CD 
D)  The relative price is equal for all three budget lines. 
A)  AD 
B)  BD 
C)  CD 
D)  The relative price is equal for all three budget lines.

Question 4

-Kristen has an income of $450 per year to spend on music CDs and movies on DVDs. The price of a CD is $15. The indifference curves in the figure above (I1, I2, and I3) reflect Kristen's preferences. If the price of a DVD is $22.50, then Kristen buys ________ DVDs; if the price of a DVD is $18.00, then Kristen buys ________ DVDs.

Accepted Answer

A)  12; 14 
B)  5; 10 
C)  10; 15 
D)  7.5; 12.5 
A)  12; 14 
B)  5; 10 
C)  10; 15 
D)  7.5; 12.5

Question 5

-The figure above shows Ilene's budget line. The price of a can of cat food is $2. If the price of a can of cat food rises, her budget line will

Accepted Answer

A)  rotate inward toward the origin. 
B)  rotate outward away from the origin. 
C)  shift leftward in a parallel manner. 
D)  shift rightward in a parallel manner. 
A)  rotate inward toward the origin. 
B)  rotate outward away from the origin. 
C)  shift leftward in a parallel manner. 
D)  shift rightward in a parallel manner.

Question 6

If green bikes and brown bikes are perfect substitutes, the corresponding indifference curves

Accepted Answer

A)  are horizontal. 
B)  intersect each other. 
C)  are vertical. 
D)  have constant slope. 
A)  are horizontal. 
B)  intersect each other. 
C)  are vertical. 
D)  have constant slope.

Question 7

Consumption at points on a steeper part of the indifference curve will reflect a higher marginal rate of substitution than consumption points on a flatter part of the indifference curve.

Accepted Answer

A) True 
 B)False

Question 8

In an indifference curve/budget line framework, how does a consumer decide which of all possible combinations of goods to purchase?

Accepted Answer

The consumer will select the combination

Question 9

-The above figure shows Jane's budget line and two of her indifference curves. Which of the following happens to Jane's budget line if there were a decrease in her monthly dining out budget?

Accepted Answer

A)  It would bend toward the origin, becoming more convex. 
B)  It would bend away from the origin, becoming more concave. 
C)  It would shift rightward and not change its slope. 
D)  It would shift leftward and not change its slope. 
A)  It would bend toward the origin, becoming more convex. 
B)  It would bend away from the origin, becoming more concave. 
C)  It would shift rightward and not change its slope. 
D)  It would shift leftward and not change its slope.

Question 10

"If Bill's income increases from $30,000 per year to $41,000 per year and he consumes pickup trucks and lamb chops with his money, Bill's budget line shifts outward and the increase in income means he can consume more trucks and more lamb." Is this statement true or false? Briefly explain your answer.

Accepted Answer

The statement is True. The inc

Question 11

Barth Anderson states that the 2008 "downturn in the economy has really brought a lot of people home. They don't say, 'Well, we're going to order a pizza.' They actually cook." Assuming that restaurant meals and eating at home are substitutes for one another and only consumers' income decreases, what is true?

Accepted Answer

A)  Restaurant meals are an inferior good and eating at home is a normal good. 
B)  Restaurant meals are a normal good and eating at home is an inferior good. 
C)  Restaurant meals are an inferior good and eating at home is an inferior good. 
D)  Restaurant meals are a normal good and eating at home is a normal good. 
A)  Restaurant meals are an inferior good and eating at home is a normal good. 
B)  Restaurant meals are a normal good and eating at home is an inferior good. 
C)  Restaurant meals are an inferior good and eating at home is an inferior good. 
D)  Restaurant meals are a normal good and eating at home is a normal good.

Question 12

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. If travel by car is less expensive, and income remains the same, describe the substitution and income effects that occur for air travel.

Accepted Answer

A)  If air travel is a normal good, the substitution effect would cause an increase and the income effect would cause a decrease in air travel. 
B)  If air travel is a normal good, both the substitution and income effects would cause a decrease in air travel. 
C)  If air travel is a normal good, the substitution effect would cause a decrease and the income effect would cause an increase in air travel. 
D)  If air travel is a normal good, both the substitution and income effects would be cause an increase in air travel. 
A)  If air travel is a normal good, the substitution effect would cause an increase and the income effect would cause a decrease in air travel. 
B)  If air travel is a normal good, both the substitution and income effects would cause a decrease in air travel. 
C)  If air travel is a normal good, the substitution effect would cause a decrease and the income effect would cause an increase in air travel. 
D)  If air travel is a normal good, both the substitution and income effects would be cause an increase in air travel.

Question 13

-Kristen has an income of $450 per year to spend on music CDs and movies on DVDs. 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. What is Kristen's best affordable combination of DVDs and CDs?

Accepted Answer

A)  10 DVDs and 15 CDs per year 
B)  15 DVDs and 12 CDs per year 
C)  12.5 DVDs and 12 CDs per year 
D)  5 DVDs and 18 CDs per year 
A)  10 DVDs and 15 CDs per year 
B)  15 DVDs and 12 CDs per year 
C)  12.5 DVDs and 12 CDs per year 
D)  5 DVDs and 18 CDs per year

Question 14

-In the above figure, the best affordable point is

Accepted Answer

A)  8 hamburgers and 0 magazines. 
B)  0 hamburgers and 6 magazines. 
C)  4 hamburgers and 3 magazines. 
D)  some combination that is not given above. 
A)  8 hamburgers and 0 magazines. 
B)  0 hamburgers and 6 magazines. 
C)  4 hamburgers and 3 magazines. 
D)  some combination that is not given above.

Question 15

-Consider the indifference maps shown above. If eyeglass frames and eyeglass lenses were perfect complements, your indifference curves between them would look like those in

Accepted Answer

A)  Figure A. 
B)  Figure B. 
C)  Figure C. 
D)  Figure D. 
A)  Figure A. 
B)  Figure B. 
C)  Figure C. 
D)  Figure D.

Question 16

-Jane spends her monthly dining-out budget of $300.00 on either steak or lobster dinners. Using the above figure, what is the opportunity cost of a lobster dinner in terms of steak dinners?

Accepted Answer

A)  0.5 steak dinners per lobster dinner 
B)  2.0 steak dinners per lobster dinner 
C)  5.0 steak dinners per lobster dinner 
D)  10.0 steak dinners per lobster dinner 
A)  0.5 steak dinners per lobster dinner 
B)  2.0 steak dinners per lobster dinner 
C)  5.0 steak dinners per lobster dinner 
D)  10.0 steak dinners per lobster dinner

Question 17

-Given the budget line in the above figure, what is the relative price of pizza?

Accepted Answer

A)  10 gallons of milk per pizza 
B)  6 gallons of milk per pizza 
C)  4 gallons of milk per pizza 
D)  2 gallons of milk per pizza 
A)  10 gallons of milk per pizza 
B)  6 gallons of milk per pizza 
C)  4 gallons of milk per pizza 
D)  2 gallons of milk per pizza

Question 18

-If Sam has $60.00 each week to spend on gasoline and coffee, and their respective prices are $1.50 per gallon and $3.00 per pound, which of the following equations represents his budget line?

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 19

Along an indifference curve

Accepted Answer

A)  the marginal rate of substitution is constant but not equal to zero. 
B)  the consumer does not prefer one consumption point to another. 
C)  the marginal rate of substitution is equal to 0. 
D)  the consumer prefers some of the consumption points to others. 
A)  the marginal rate of substitution is constant but not equal to zero. 
B)  the consumer does not prefer one consumption point to another. 
C)  the marginal rate of substitution is equal to 0. 
D)  the consumer prefers some of the consumption points to others.

Question 20

-Bananas in 2008 cost about $1 a pound and ground beef costs about $3 a pound. If Jenna has $18 to spend on groceries and she only buys bananas and beef, which of the following is a possible combination of these goods that could maximize her total utility?

Accepted Answer

A)  18 lbs of bananas and 6 lbs of beef 
B)  10 lbs of bananas and 8 lbs of beef 
C)  8 lbs of bananas and 3 lbs of beef 
D)  3 lbs of bananas and 5 lbs of beef 
A)  18 lbs of bananas and 6 lbs of beef 
B)  10 lbs of bananas and 8 lbs of beef 
C)  8 lbs of bananas and 3 lbs of beef 
D)  3 lbs of bananas and 5 lbs of beef

Exam 9: Possibilities, Preferences, and Choices

-The above figure shows Jane's budget line and two of her indifference curves. How many lobster dinners will Jane purchase each month?

When your budget line is just tangent to your indifference curve, you are at the point on the budget line that you least prefer.

-In the figure above, which budget line has the lowest relative price of carrots?

-The figure above shows Ilene's budget line. The price of a can of cat food is $2. If the price of a can of cat food rises, her budget line will

If green bikes and brown bikes are perfect substitutes, the corresponding indifference curves

Consumption at points on a steeper part of the indifference curve will reflect a higher marginal rate of substitution than consumption points on a flatter part of the indifference curve.

In an indifference curve/budget line framework, how does a consumer decide which of all possible combinations of goods to purchase?

-The above figure shows Jane's budget line and two of her indifference curves. Which of the following happens to Jane's budget line if there were a decrease in her monthly dining out budget?

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. If travel by car is less expensive, and income remains the same, describe the substitution and income effects that occur for air travel.

-Kristen has an income of $450 per year to spend on music CDs and movies on DVDs. 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. What is Kristen's best affordable combination of DVDs and CDs?

-In the above figure, the best affordable point is

-Consider the indifference maps shown above. If eyeglass frames and eyeglass lenses were perfect complements, your indifference curves between them would look like those in

-Jane spends her monthly dining-out budget of $300.00 on either steak or lobster dinners. Using the above figure, what is the opportunity cost of a lobster dinner in terms of steak dinners?

-Given the budget line in the above figure, what is the relative price of pizza?

-If Sam has $60.00 each week to spend on gasoline and coffee, and their respective prices are $1.50 per gallon and $3.00 per pound, which of the following equations represents his budget line?

Along an indifference curve

-Bananas in 2008 cost about $1 a pound and ground beef costs about $3 a pound. If Jenna has $18 to spend on groceries and she only buys bananas and beef, which of the following is a possible combination of these goods that could maximize her total utility?

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

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