Question 1

If an indifference map for a consumer is made up of straight, negatively sloped lines, the goods are

Accepted Answer

A)  perfect complements. 
B)  unrelated. 
C)  perfect substitutes. 
D)  not desirable. 
A)  perfect complements. 
B)  unrelated. 
C)  perfect substitutes. 
D)  not desirable.

Question 2

-Melissa has an income of $240 a month to spend on tennis lessons and concert tickets. The price of a tennis lesson is $20, and the price of a concert ticket is $40. Melissa's real monthly income in terms of concerts is

Accepted Answer

A)  40. 
B)  20. 
C)  6. 
D)  12. 
A)  40. 
B)  20. 
C)  6. 
D)  12.

Question 3

Left shoes and right shoes are perfect complements. An indifference curve for left and right shoes is a line with

Accepted Answer

A)  constant slope. 
B)  a 30-degree angle. 
C)  a 45-degree angle. 
D)  a 90-degree angle. 
A)  constant slope. 
B)  a 30-degree angle. 
C)  a 45-degree angle. 
D)  a 90-degree angle.

Question 4

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

Accepted Answer

A)  $10.00 
B)  $15.00 
C)  $20.00 
D)  $30.00 
A)  $10.00 
B)  $15.00 
C)  $20.00 
D)  $30.00

Question 5

-Preferences depend on

Accepted Answer

A)  income but not relative prices. 
B)  relative prices but not income. 
C)  neither relative prices nor income. 
D)  both relative prices and income. 
A)  income but not relative prices. 
B)  relative prices but not income. 
C)  neither relative prices nor income. 
D)  both relative prices and income.

Question 6

Why is the budget line negatively sloped?

Accepted Answer

Given the consumer's budget and the pric

Question 7

In an indifference curve/budget line diagram, at your consumer equilibrium, that is, your best affordable point, which of the following statements is correct?

Accepted Answer

A)  Any movement upward or downward on your budget line will move you to a less preferred point. 
B)  Any movement upward or downward on your indifference curve will move you to a less preferred point. 
C)  Your marginal rate of substitution is greater than the magnitude of the budget line by as much as possible. 
D)  All of the above are correct. 
A)  Any movement upward or downward on your budget line will move you to a less preferred point. 
B)  Any movement upward or downward on your indifference curve will move you to a less preferred point. 
C)  Your marginal rate of substitution is greater than the magnitude of the budget line by as much as possible. 
D)  All of the above are correct.

Question 8

Which of the following statements about the marginal rate of substitution is NOT correct?

Accepted Answer

A)  It measures the number of units of the good on the horizontal axis that a consumer must be compensated with to give up a unit of the good on the vertical axis, while remaining on the same indifference curve. 
B)  It is measured by the slope of the indifference curve. 
C)  It decreases in value when moving downward along a typical-shaped indifference curve. 
D)  It is constant for goods that are perfect substitutes. 
A)  It measures the number of units of the good on the horizontal axis that a consumer must be compensated with to give up a unit of the good on the vertical axis, while remaining on the same indifference curve. 
B)  It is measured by the slope of the indifference curve. 
C)  It decreases in value when moving downward along a typical-shaped indifference curve. 
D)  It is constant for goods that are perfect substitutes.

Question 9

-The above figure shows one of Sam's indifference curves between gasoline and coffee. Which of the following about a movement along Sam's indifference curve is correct?

Accepted Answer

A)  As he moves leftward along the curve, he likes the combinations of gasoline and coffee better and better. 
B)  As he moves rightward along the curve, he likes the combinations of gasoline and coffee better and better. 
C)  He likes all combinations of gasoline and coffee along the curve equally well. 
D)  None of the above is true. 
A)  As he moves leftward along the curve, he likes the combinations of gasoline and coffee better and better. 
B)  As he moves rightward along the curve, he likes the combinations of gasoline and coffee better and better. 
C)  He likes all combinations of gasoline and coffee along the curve equally well. 
D)  None of the above is true.

Question 10

-Which of the following statements is FALSE?

Accepted Answer

A)  A consumer has only one indifference curve. 
B)  A consumer possesses a preference map. 
C)  An indifference curve is a curve that shows the combination of goods among which a consumer is indifferent. 
D)  The marginal rate of substitution is the rate at which a consumer will give up good y to get more of good x and remain on the same indifference curve. 
A)  A consumer has only one indifference curve. 
B)  A consumer possesses a preference map. 
C)  An indifference curve is a curve that shows the combination of goods among which a consumer is indifferent. 
D)  The marginal rate of substitution is the rate at which a consumer will give up good y to get more of good x and remain on the same indifference curve.

Question 11

-When the price of a normal good rises, the income effect results in ________ in the quantity demanded and the substitution effect results in ________ in the quantity demanded.

Accepted Answer

A)  an increase; an increase 
B)  an increase; a decrease 
C)  a decrease; an increase 
D)  a decrease; a decrease 
A)  an increase; an increase 
B)  an increase; a decrease 
C)  a decrease; an increase 
D)  a decrease; a decrease

Question 12

The point where the indifference curve is tangent to the budget line

Accepted Answer

A)  is the best affordable point. 
B)  is where the marginal rate of substitution exceeds the relative price by as much as possible. 
C)  is a point on consumer's demand curve. 
D)  All of the above answers are correct. 
A)  is the best affordable point. 
B)  is where the marginal rate of substitution exceeds the relative price by as much as possible. 
C)  is a point on consumer's demand curve. 
D)  All of the above answers are correct.

Question 13

-In the above figure, which of the following statements is TRUE? I. The consumer maximizes utility by consuming at point A.
II) The marginal rate of substitution at point B and point A are equal because they are on the same budget line.

Accepted Answer

A)  only I 
B)  only II 
C)  both I and II 
D)  neither I nor II 
A)  only I 
B)  only II 
C)  both I and II 
D)  neither I nor II

Question 14

-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 15

-Inga's graph of her budget line has apples per week on the vertical axis and loaves of bread per week on the horizontal. A fall in the price of an apple shifts the

Accepted Answer

A)  horizontal intercept leftward. 
B)  horizontal intercept rightward. 
C)  vertical intercept downward. 
D)  vertical intercept upward. 
A)  horizontal intercept leftward. 
B)  horizontal intercept rightward. 
C)  vertical intercept downward. 
D)  vertical intercept upward.

Question 16

-The figure above shows Ilene's budget line. If the price of a can of cat food rises, her budget line rotates so that the vertical intercept is

Accepted Answer

A)  unchanged, but the horizontal intercept is closer to the origin. 
B)  unchanged, but the horizontal intercept is farther away from the origin. 
C)  farther away from the origin, but the horizontal intercept is closer to the origin. 
D)  closer to the origin, but the horizontal intercept is farther away from the origin. 
A)  unchanged, but the horizontal intercept is closer to the origin. 
B)  unchanged, but the horizontal intercept is farther away from the origin. 
C)  farther away from the origin, but the horizontal intercept is closer to the origin. 
D)  closer to the origin, but the horizontal intercept is farther away from the origin.

Question 17

-Which of the following statements about the above figure is true?

Accepted Answer

A)  Point A is equally preferred to point C. 
B)  Point B is equally preferred to point C. 
C)  Point C is preferred to point A. 
D)  Point A is preferred to point C. 
A)  Point A is equally preferred to point C. 
B)  Point B is equally preferred to point C. 
C)  Point C is preferred to point A. 
D)  Point A is preferred to point C.

Question 18

-The indifference curves in the figure above (I1, I2, and I3) reflect Peter's consumption preferences. If Peter consumes 24 slices of pizza and 24 chocolate bars per month, he as satisfied as he would be consuming ________ slices of pizza and ________ chocolate bars per month.

Accepted Answer

A)  48; 12 
B)  40; 20 
C)  32; 8 
D)  16; 16 
A)  48; 12 
B)  40; 20 
C)  32; 8 
D)  16; 16

Question 19

-The figure illustrates Elijah's preferences. He is currently at point A. The price of pizza decreases. The move from point A to point ________ is the substitution effect and the move from point ________ to point ________ is the income effect.

Accepted Answer

A)  B; B; C 
B)  E; E; C 
C)  D; D; B 
D)  C; C; B 
A)  B; B; C 
B)  E; E; C 
C)  D; D; B 
D)  C; C; B

Question 20

Sue consumes only sandwiches and soda and is at her best affordable point. The price of a sandwich falls. The substitution effect is that Sue substitutes ________ for ________. The income effect is that Sue ________.

Accepted Answer

A)  sandwiches; soda; buys less of both goods 
B)  soda; sandwiches; buys more soda and fewer sandwiches 
C)  sandwiches; soda; buys more of both goods 
D)  soda; sandwiches; buys less soda and more sandwiches 
A)  sandwiches; soda; buys less of both goods 
B)  soda; sandwiches; buys more soda and fewer sandwiches 
C)  sandwiches; soda; buys more of both goods 
D)  soda; sandwiches; buys less soda and more sandwiches

Exam 9: Possibilities, Preferences, and Choices

If an indifference map for a consumer is made up of straight, negatively sloped lines, the goods are

-Melissa has an income of $240 a month to spend on tennis lessons and concert tickets. The price of a tennis lesson is $20, and the price of a concert ticket is $40. Melissa's real monthly income in terms of concerts is

Left shoes and right shoes are perfect complements. An indifference curve for left and right shoes is a line with

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

-Preferences depend on

Why is the budget line negatively sloped?

In an indifference curve/budget line diagram, at your consumer equilibrium, that is, your best affordable point, which of the following statements is correct?

Which of the following statements about the marginal rate of substitution is NOT correct?

-The above figure shows one of Sam's indifference curves between gasoline and coffee. Which of the following about a movement along Sam's indifference curve is correct?

-Which of the following statements is FALSE?

-When the price of a normal good rises, the income effect results in ________ in the quantity demanded and the substitution effect results in ________ in the quantity demanded.

The point where the indifference curve is tangent to the budget line

-In the above figure, which of the following statements is TRUE? I. The consumer maximizes utility by consuming at point A. II) The marginal rate of substitution at point B and point A are equal because they are on the same budget line.

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

-Inga's graph of her budget line has apples per week on the vertical axis and loaves of bread per week on the horizontal. A fall in the price of an apple shifts the

-The figure above shows Ilene's budget line. If the price of a can of cat food rises, her budget line rotates so that the vertical intercept is

-Which of the following statements about the above figure is true?

-The indifference curves in the figure above (I1, I2, and I3) reflect Peter's consumption preferences. If Peter consumes 24 slices of pizza and 24 chocolate bars per month, he as satisfied as he would be consuming ________ slices of pizza and ________ chocolate bars per month.

-The figure illustrates Elijah's preferences. He is currently at point A. The price of pizza decreases. The move from point A to point ________ is the substitution effect and the move from point ________ to point ________ is the income effect.

Sue consumes only sandwiches and soda and is at her best affordable point. The price of a sandwich falls. The substitution effect is that Sue substitutes ________ for ________. The income effect is that Sue ________.

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 rises, the income effect results in in the quantity demanded and the substitution effect results in in the quantity demanded.

-The indifference curves in the figure above (I₁, I₂, and I₃) reflect Peter's consumption preferences. If Peter consumes 24 slices of pizza and 24 chocolate bars per month, he as satisfied as he would be consuming slices of pizza and chocolate bars per month.

-The figure illustrates Elijah's preferences. He is currently at point A. The price of pizza decreases. The move from point A to point is the substitution effect and the move from point to point is the income effect.

Sue consumes only sandwiches and soda and is at her best affordable point. The price of a sandwich falls. The substitution effect is that Sue substitutes for . The income effect is that Sue .