Question 1

When the price of a normal good decreases, people buy ________ of the good due to ________.

Accepted Answer

A)  more; the substitution effect only 
B)  more; the substitution and income effects 
C)  less; the substitution effect only 
D)  less; the income effect only 
A)  more; the substitution effect only 
B)  more; the substitution and income effects 
C)  less; the substitution effect only 
D)  less; the income effect only

Question 2

-The figure above shows Sam's budget line. Which of the following combinations of gasoline and coffee are available to Sam?

Accepted Answer

A)  40 gallons of gasoline and 1 pound of coffee 
B)  1 gallon of gasoline and 20 pounds of coffee 
C)  16 gallons of gasoline and 12 pounds of coffee 
D)  12 gallons of gasoline and 16 pounds of coffee 
A)  40 gallons of gasoline and 1 pound of coffee 
B)  1 gallon of gasoline and 20 pounds of coffee 
C)  16 gallons of gasoline and 12 pounds of coffee 
D)  12 gallons of gasoline and 16 pounds of coffee

Question 3

-The indifference curves in the above figure could represent your indifference curves between

Accepted Answer

A)  Coke and Pepsi, which you consider perfect substitutes. 
B)  eyeglass frames and eyeglass lenses, which you think are perfect complements. 
C)  hot dogs and textbooks, which you think are neither perfect substitutes nor perfect complements. 
D)  none of the above 
A)  Coke and Pepsi, which you consider perfect substitutes. 
B)  eyeglass frames and eyeglass lenses, which you think are perfect complements. 
C)  hot dogs and textbooks, which you think are neither perfect substitutes nor perfect complements. 
D)  none of the above

Question 4

-The figure above shows Ilene's budget line. If her dog, Muffin, runs away and she adopts another cat, named Sphynx, the budget line shown in the figure will

Accepted Answer

A)  become flatter. 
B)  become steeper. 
C)  shift outward (because cats eat less). 
D)  not move. 
A)  become flatter. 
B)  become steeper. 
C)  shift outward (because cats eat less). 
D)  not move.

Question 5

An indifference curve shows

Accepted Answer

A)  different combinations of two goods among which the consumer is indifferent. 
B)  consumption possibilities that a consumer faces at different prices and income. 
C)  affordable combinations of goods. 
D)  the opportunity cost of one good relative to another. 
A)  different combinations of two goods among which the consumer is indifferent. 
B)  consumption possibilities that a consumer faces at different prices and income. 
C)  affordable combinations of goods. 
D)  the opportunity cost of one good relative to another.

Question 6

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

Accepted Answer

A)  a to b. 
B)  a to c. 
C)  b to c. 
D)  T to S. 
A)  a to b. 
B)  a to c. 
C)  b to c. 
D)  T to S.

Question 7

-The indifference curve in the above figure

Accepted Answer

A)  could illustrate a person's preferences for identical computer disks made by two different companies. 
B)  could illustrate a person's preferences for right-handed and left-handed gloves. 
C)  has a marginal rate of substitution that at first decreases and then increases. 
D)  None of the above statements is correct. 
A)  could illustrate a person's preferences for identical computer disks made by two different companies. 
B)  could illustrate a person's preferences for right-handed and left-handed gloves. 
C)  has a marginal rate of substitution that at first decreases and then increases. 
D)  None of the above statements is correct.

Question 8

A budget line shows the

Accepted Answer

A)  consumption possibilities of a consumer at a given level of income and prices. 
B)  complete set of preferences for a household at various incomes. 
C)  consumption possibilities for several sets of relative prices at a level of income. 
D)  rate at which consumers wish to substitute one good for another. 
A)  consumption possibilities of a consumer at a given level of income and prices. 
B)  complete set of preferences for a household at various incomes. 
C)  consumption possibilities for several sets of relative prices at a level of income. 
D)  rate at which consumers wish to substitute one good for another.

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 the price of a lobster dinner increased?

Accepted Answer

A)  It would rotate inward around the vertical intercept, 10 lobster dinners. 
B)  It would rotate outward around the vertical intercept, 10 lobster dinners. 
C)  It would rotate inward around the horizontal intercept, 20 steak dinners. 
D)  It would rotate outward around the horizontal intercept, 20 steak dinners. 
A)  It would rotate inward around the vertical intercept, 10 lobster dinners. 
B)  It would rotate outward around the vertical intercept, 10 lobster dinners. 
C)  It would rotate inward around the horizontal intercept, 20 steak dinners. 
D)  It would rotate outward around the horizontal intercept, 20 steak dinners.

Question 10

-Julie's demand curve for video downloads is downward sloping because as the price of a download decreases, ________ and she watches ________ videos.

Accepted Answer

A)  the slope of her budget line changes; fewer 
B)  her budget line shifts inward; fewer 
C)  the slope of her budget line changes; more 
D)  her budget line shifts outward; more 
A)  the slope of her budget line changes; fewer 
B)  her budget line shifts inward; fewer 
C)  the slope of her budget line changes; more 
D)  her budget line shifts outward; more

Question 11

"Every point on a budget line has an indifference curve passing through it." Explain whether the previous statement is correct or not.

Accepted Answer

The statement is correct. The consumer h

Question 12

-Consider the budget line in the above figure. If the price of a magazine is $4, then the price of a hamburger is

Accepted Answer

A)  $1.75. 
B)  $3.00. 
C)  $4.00. 
D)  $5.33. 
A)  $1.75. 
B)  $3.00. 
C)  $4.00. 
D)  $5.33.

Question 13

Tunitra consumes at a point on her budget line where her marginal rate of substitution exceeds the magnitude of the slope of her budget line. As Tunitra moves toward her consumer equilibrium point, she will move to a

Accepted Answer

A)  lower budget line. 
B)  higher budget line. 
C)  lower indifference curve. 
D)  higher indifference curve. 
A)  lower budget line. 
B)  higher budget line. 
C)  lower indifference curve. 
D)  higher indifference curve.

Question 14

-The figure above shows Tanya's consumption possibilities. Tanya spends $100 per month on movies and restaurant meals. The price of a movie ticket is ________ and the price of a restaurant meal is ________.

Accepted Answer

A)  $7; $15 
B)  $10; $10 
C)  $20; $5 
D)  $5; $20 
A)  $7; $15 
B)  $10; $10 
C)  $20; $5 
D)  $5; $20

Question 15

-Lizzie's budget line is shown in the figure above. If the price of a cookie falls, the 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 16

-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 initial 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, the income effect on Kristen's consumption of DVDs ________ the substitution effect, so a DVD is ________ good.

Accepted Answer

A)  partly offsets; an inferior 
B)  partly offsets; a normal 
C)  reinforces; an inferior 
D)  reinforces; a normal 
A)  partly offsets; an inferior 
B)  partly offsets; a normal 
C)  reinforces; an inferior 
D)  reinforces; a normal

Question 17

-Consider the budget line labeled RT in the above figure. What would shift the budget line to RS?

Accepted Answer

A)  a rise in the price of good X 
B)  a fall in the price of good X 
C)  a rise in the price of good Y 
D)  a fall in the price of good Y 
A)  a rise in the price of good X 
B)  a fall in the price of good X 
C)  a rise in the price of good Y 
D)  a fall in the price of good Y

Question 18

-If Sam has $80.00 each week to spend on tacos and magazines, and their respective prices are $.50 per taco and $4.00 per magazine, which of the following equations represents his budget line?

Accepted Answer

A)  $80.00 = $.50/Qt + $4.00/Qm 
B)  $80.00 = Qt/Qm + $.50 /$4.00 
C)  $80.00 = $.50(Qm) + $4.00(Qt) 
D)  $80.00 = $.50(Qt) + $4.00(Qm) 
A)  $80.00 = $.50/Qt + $4.00/Qm 
B)  $80.00 = Qt/Qm + $.50 /$4.00 
C)  $80.00 = $.50(Qm) + $4.00(Qt) 
D)  $80.00 = $.50(Qt) + $4.00(Qm)

Question 19

The magnitude of the slope of the budget line is equal to the ________ or ________ of the good plotted on the ________ in terms of the other good.

Accepted Answer

A)  relative price; marginal cost; y-axis 
B)  relative price; total cost; y-axis 
C)  relative price; opportunity cost; x-axis 
D)  price; opportunity cost; x-axis 
A)  relative price; marginal cost; y-axis 
B)  relative price; total cost; y-axis 
C)  relative price; opportunity cost; x-axis 
D)  price; opportunity cost; x-axis

Question 20

-Consider the budget line in the above figure. If the consumer's income is $240, then the price of a book is

Accepted Answer

A)  $20 per book. 
B)  $24 per book. 
C)  $12 per book. 
D)  More information is needed to determine the price of a book. 
A)  $20 per book. 
B)  $24 per book. 
C)  $12 per book. 
D)  More information is needed to determine the price of a book.

Exam 9: Possibilities, Preferences, and Choices

When the price of a normal good decreases, people buy ________ of the good due to ________.

-The figure above shows Sam's budget line. Which of the following combinations of gasoline and coffee are available to Sam?

-The indifference curves in the above figure could represent your indifference curves between

-The figure above shows Ilene's budget line. If her dog, Muffin, runs away and she adopts another cat, named Sphynx, the budget line shown in the figure will

An indifference curve shows

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

-The indifference curve in the above figure

A budget line shows the

-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 the price of a lobster dinner increased?

-Julie's demand curve for video downloads is downward sloping because as the price of a download decreases, ________ and she watches ________ videos.

"Every point on a budget line has an indifference curve passing through it." Explain whether the previous statement is correct or not.

-Consider the budget line in the above figure. If the price of a magazine is $4, then the price of a hamburger is

Tunitra consumes at a point on her budget line where her marginal rate of substitution exceeds the magnitude of the slope of her budget line. As Tunitra moves toward her consumer equilibrium point, she will move to a

-The figure above shows Tanya's consumption possibilities. Tanya spends $100 per month on movies and restaurant meals. The price of a movie ticket is ________ and the price of a restaurant meal is ________.

-Lizzie's budget line is shown in the figure above. If the price of a cookie falls, the budget line

-Consider the budget line labeled RT in the above figure. What would shift the budget line to RS?

-If Sam has $80.00 each week to spend on tacos and magazines, and their respective prices are $.50 per taco and $4.00 per magazine, which of the following equations represents his budget line?

The magnitude of the slope of the budget line is equal to the ________ or ________ of the good plotted on the ________ in terms of the other good.

-Consider the budget line in the above figure. If the consumer's income is $240, then the price of a book is

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

When the price of a normal good decreases, people buy of the good due to .

-Julie's demand curve for video downloads is downward sloping because as the price of a download decreases, and she watches videos.

-The figure above shows Tanya's consumption possibilities. Tanya spends $100 per month on movies and restaurant meals. The price of a movie ticket is and the price of a restaurant meal is .

The magnitude of the slope of the budget line is equal to the or of the good plotted on the in terms of the other good.