Exam 9: Possibilities, Preferences, and Choices

-Waldo buys only two items, pretzels and ham sandwiches. Waldo has $24 in income, pretzels cost $0.60 per bag and ham sandwiches cost $2.40 each. Which of the following statements is true for the information given above?

-The figure above shows Sam's budget line. The vertical intercept of Sam's budget line is equal to

-Tom is stranded on a deserted island where he can only consume coconuts and crabs. Two of his indifference curves are in the figure above. a) Would Tom prefer his consumption to be at point a or at point b? At point b or at point c? Explain your answers. b) Between points a and b, what is Tom's marginal rate of substitution for a crab?

"As Jake consumes more sodas over the course of a day, it is likely that his marginal rate of substitution of sodas for other goods will rise." Is the previous statement correct or incorrect?

In a budget line/indifference curve diagram, at the consumer equilibrium

-Lizzie's budget line is shown in the figure above. The relative price of a magazine is ________ per magazine.

-The indifference curve in the above figure

Real income is ________.

-Olivia's income is $216 a year and she spends all of it on music CDs and movies on DVDs. The price of a music CD is $18 and the price of a DVD is $18. The figure above illustrates Olivia's preferences. a) What quantities of CDs and DVDs does Olivia buy? Explain your solution. b) What is Olivia's marginal rate of substitution at the point at which she consumes? Explain.

The magnitude of the slope of the budget line is the ratio of

Suppose the price of coffee is $3 each, the price of bagels is $2 each and a person's budget is $40. The person's real income is

John has $40 to spend on pizza and tacos. Pizza costs $10 each and tacos are $1 per taco. John's real income ________.

-The above figure shows your budget line and indifference curves. What quantities of gasoline and movie rentals would you choose?

The income effect for an inferior good

-In the figure above, real income in terms of bags of corn chips is shown by point

-The substitution effect reflects a movement along a given

-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. If the price of a tennis lesson rises to $30, Melissa's budget line, with tennis lessons on the horizontal axis,

-The magnitude of the slope of the indifference curve between steak and lobster is called the marginal rate of substitution.

An indifference curve shows combinations of goods ________.

-Indifference curves shift or rotate