Question 1

If two consumption points are on different indifference curves,then one point is

Accepted Answer

A) a substitute for the other. 
B) preferred to the other. 
C) a complement of the other. 
D) a normal good and the other point is an inferior good. 
E) more expensive than the other. 
A) a substitute for the other. 
B) preferred to the other. 
C) a complement of the other. 
D) a normal good and the other point is an inferior good. 
E) more expensive than the other. B

Question 2

The substitution effect

Accepted Answer

A) always dominates the income effect. 
B) is always dominated by the income effect. 
C) results in an increase in the quantity of the good consumed when the price rises. 
D) results in a decrease in the quantity of the good consumed when the price falls. 
E) is greater than the price effect. 
A) always dominates the income effect. 
B) is always dominated by the income effect. 
C) results in an increase in the quantity of the good consumed when the price rises. 
D) results in a decrease in the quantity of the good consumed when the price falls. 
E) is greater than the price effect. D

Question 3

Leah consumes at a point on her budget line where her marginal rate of substitution is less than the magnitude of the slope of her budget line.As Leah moves along her budget line toward her best affordable point,she will move

Accepted Answer

A) down and left. 
B) down and right. 
C) up and left. 
D) up and right. 
E) straight up. 
A) down and left. 
B) down and right. 
C) up and left. 
D) up and right. 
E) straight up. C

Question 4

Use the figure below to answer the following questions.
   
Figure 9.2.3
-Refer to Figure 9.2.3.Rashid buys only books and albums.The figure shows his preferences.When Rashid chooses the consumption point of 3 books and 2 albums,his marginal rate of substitution is ________.

Accepted Answer

A) 1 book per album 
B) zero 
C) 3/2 books per album 
D) 2/3 books per album 
E) 0.5 books per album 
A) 1 book per album 
B) zero 
C) 3/2 books per album 
D) 2/3 books per album 
E) 0.5 books per album

Question 5

Use the figure below to answer the following questions.
   
Figure 9.3.3
-Consider an initial budget line labelled RT in Figure 9.3.3.What would rotate 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 decrease in the preference for good X 
E) an increase in real income 
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 decrease in the preference for good X 
E) an increase in real income

Question 6

When speaking of the price of the good measured on the horizontal axis relative to the price of the good measured on the vertical axis,which statement is true?

Accepted Answer

A) The steeper the slope of the budget line, the more expensive the good measured on the horizontal axis. 
B) The steeper the slope of the budget line, the less expensive the good measured on the horizontal axis. 
C) The steeper the slope of the budget line, the more expensive the good measured on the vertical axis. 
D) The slope of the budget line is independent of relative prices. 
E) The flatter the slope of the budget line, the more expensive the good measured on the horizontal axis. 
A) The steeper the slope of the budget line, the more expensive the good measured on the horizontal axis. 
B) The steeper the slope of the budget line, the less expensive the good measured on the horizontal axis. 
C) The steeper the slope of the budget line, the more expensive the good measured on the vertical axis. 
D) The slope of the budget line is independent of relative prices. 
E) The flatter the slope of the budget line, the more expensive the good measured on the horizontal axis.

Question 7

Which one of the following statements is false?

Accepted Answer

A) If the indifference curve is steep, the marginal rate of substitution is high. 
B) A low marginal rate of substitution implies a flat indifference curve. 
C) A flat indifference curve implies a consumer must receive a large amount of good X to compensate for a small decrease in good Y. 
D) A high marginal rate of substitution implies a consumer must receive a large amount of good X to compensate for a small decrease in good Y. 
E) A high marginal rate of substitution implies a consumer must receive a small amount of good X to compensate for a large decrease in good Y. 
A) If the indifference curve is steep, the marginal rate of substitution is high. 
B) A low marginal rate of substitution implies a flat indifference curve. 
C) A flat indifference curve implies a consumer must receive a large amount of good X to compensate for a small decrease in good Y. 
D) A high marginal rate of substitution implies a consumer must receive a large amount of good X to compensate for a small decrease in good Y. 
E) A high marginal rate of substitution implies a consumer must receive a small amount of good X to compensate for a large decrease in good Y.

Question 8

The effect of a change in income on buying plans is called the

Accepted Answer

A) income effect. 
B) substitution effect. 
C) normal effect. 
D) inferior effect. 
E) price effect. 
A) income effect. 
B) substitution effect. 
C) normal effect. 
D) inferior effect. 
E) price effect.

Question 9

Use the figure below to answer the following questions.
   
Figure 9.1.2
-Refer to Figure 9.1.2.Which budget line shows the greatest real income in terms of compact discs?

Accepted Answer

A) AD 
B) BD 
C) CD 
D) Real income is equal for all three budget lines. 
E) Cannot be determined without studying the indifference curves. 
A) AD 
B) BD 
C) CD 
D) Real income is equal for all three budget lines. 
E) Cannot be determined without studying the indifference curves.

Question 10

Which one of the following statements is true about the indifference curves for two goods that are perfect substitutes?

Accepted Answer

A) The indifference curves are negatively-sloped straight lines. 
B) The indifference curves are L-shaped. 
C) The marginal rate of substitution is zero. 
D) The indifference curves are positively-sloped straight lines. 
E) The marginal rate of substitution is infinity. 
A) The indifference curves are negatively-sloped straight lines. 
B) The indifference curves are L-shaped. 
C) The marginal rate of substitution is zero. 
D) The indifference curves are positively-sloped straight lines. 
E) The marginal rate of substitution is infinity.

Question 11

David has an income of $30 to buy movie tickets and bus tickets.The price of a movie ticket is $6 and the price of a bus ticket is $2.What is David's real income?

Accepted Answer

A) $30 
B) 5 movie tickets or 15 bus tickets 
C) 15 movie tickets or 5 bus tickets 
D) $38 
E) $32 
A) $30 
B) 5 movie tickets or 15 bus tickets 
C) 15 movie tickets or 5 bus tickets 
D) $38 
E) $32

Question 12

Which statement is true for a normal good?

Accepted Answer

A) The income effect dominates the substitution effect. 
B) The income effect reinforces the substitution effect. 
C) As income increases, consumption decreases. 
D) As income increases, consumption remains constant. 
E) As price falls, we cannot tell whether consumption increases or decreases. 
A) The income effect dominates the substitution effect. 
B) The income effect reinforces the substitution effect. 
C) As income increases, consumption decreases. 
D) As income increases, consumption remains constant. 
E) As price falls, we cannot tell whether consumption increases or decreases.

Question 13

At the best affordable point,which statement is true?

Accepted Answer

A) The slope of the indifference curve equals the slope of the budget line. 
B) The marginal rate of substitution between two goods equals their absolute price. 
C) The highest affordable indifference curve has the same intercept as the budget line. 
D) Other points on the same indifference curve are affordable but not preferred. 
E) Some income is not spent. 
A) The slope of the indifference curve equals the slope of the budget line. 
B) The marginal rate of substitution between two goods equals their absolute price. 
C) The highest affordable indifference curve has the same intercept as the budget line. 
D) Other points on the same indifference curve are affordable but not preferred. 
E) Some income is not spent.

Question 14

The initial budget equation for pop (p)and movies (m)is Qp = 20 - 4Qm,and the price of a pop is $5.If the price of a pop falls to $4,what is the new budget equation?

Accepted Answer

A) Qp = 25 - 2Qm 
B) Qp = 25 - 4Qm 
C) Qp = 25 - 5Qm 
D) Qp = 20 - 5Qm 
E) none of the above 
A) Qp = 25 - 2Qm 
B) Qp = 25 - 4Qm 
C) Qp = 25 - 5Qm 
D) Qp = 20 - 5Qm 
E) none of the above

Question 15

Use the figure below to answer the following questions.
   
Figure 9.2.1
-Which of the graphs in Figure 9.2.1 shows perfect complements?

Accepted Answer

A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) (c)and (d) 
A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) (c)and (d)

Question 16

A change in the price of a good has

Accepted Answer

A) an income effect only. 
B) a substitution effect only. 
C) a substitution effect and an income effect. 
D) an income effect that exceeds the substitution effect. 
E) a substitution effect that exceeds the income effect. 
A) an income effect only. 
B) a substitution effect only. 
C) a substitution effect and an income effect. 
D) an income effect that exceeds the substitution effect. 
E) a substitution effect that exceeds the income effect.

Question 17

Use the figure below to answer the following questions.
   
Figure 9.3.3
-Consider an initial budget line labelled RS in Figure 9.3.3.If the budget line becomes RT,the substitution effect is illustrated by the move from point

Accepted Answer

A) A to B. 
B) A to C. 
C) A to D. 
D) B to D. 
E) D to C. 
A) A to B. 
B) A to C. 
C) A to D. 
D) B to D. 
E) D to C.

Question 18

If the price of the good measured on the vertical axis increases,the budget line

Accepted Answer

A) becomes steeper. 
B) becomes flatter. 
C) shifts leftward and parallel to the original budget line. 
D) shifts rightward and parallel to the original budget line. 
E) shifts leftward and becomes steeper. 
A) becomes steeper. 
B) becomes flatter. 
C) shifts leftward and parallel to the original budget line. 
D) shifts rightward and parallel to the original budget line. 
E) shifts leftward and becomes steeper.

Question 19

If the price of the good measured on the horizontal axis increases,the budget line

Accepted Answer

A) becomes steeper. 
B) shifts leftward and becomes steeper. 
C) shifts leftward and parallel to the original budget line. 
D) shifts rightward and parallel to the original budget line. 
E) becomes flatter. 
A) becomes steeper. 
B) shifts leftward and becomes steeper. 
C) shifts leftward and parallel to the original budget line. 
D) shifts rightward and parallel to the original budget line. 
E) becomes flatter.

Question 20

Use the information below to answer the following questions.
Fact 9.3.1
Marc has an income of $20 and spends it on two goods, root beer (measured on the vertical axis)and chips (measured on the horizontal axis).The price of root beer is $1 a can.The price of chips is $0.50 a bag.Initially, Marc chooses to consume 10 cans of root beer and 20 bags of chips.Then the price of root beer rises to $1.50 per can and the price of chips falls to $0.25 a bag.
-Refer to Fact 9.3.1.When the price of a bag of chips falls,Marc

Accepted Answer

A) will consume more beer, more chips, and be better off. 
B) will consume less beer, more chips, and be better off. 
C) will consume less beer, more chips, and be worse off. 
D) will consume less beer, less chips, and be worse off. 
E) consume more beer, less chips, and be better off. 
A) will consume more beer, more chips, and be better off. 
B) will consume less beer, more chips, and be better off. 
C) will consume less beer, more chips, and be worse off. 
D) will consume less beer, less chips, and be worse off. 
E) consume more beer, less chips, and be better off.

Exam 9: Possibilities, Preferences, and Choices

If two consumption points are on different indifference curves,then one point is

The substitution effect

Leah consumes at a point on her budget line where her marginal rate of substitution is less than the magnitude of the slope of her budget line.As Leah moves along her budget line toward her best affordable point,she will move

Use the figure below to answer the following questions. Figure 9.2.3 -Refer to Figure 9.2.3.Rashid buys only books and albums.The figure shows his preferences.When Rashid chooses the consumption point of 3 books and 2 albums,his marginal rate of substitution is ________.

Use the figure below to answer the following questions. Figure 9.3.3 -Consider an initial budget line labelled RT in Figure 9.3.3.What would rotate the budget line to RS?

When speaking of the price of the good measured on the horizontal axis relative to the price of the good measured on the vertical axis,which statement is true?

Which one of the following statements is false?

The effect of a change in income on buying plans is called the

Use the figure below to answer the following questions. Figure 9.1.2 -Refer to Figure 9.1.2.Which budget line shows the greatest real income in terms of compact discs?

Which one of the following statements is true about the indifference curves for two goods that are perfect substitutes?

David has an income of $30 to buy movie tickets and bus tickets.The price of a movie ticket is $6 and the price of a bus ticket is $2.What is David's real income?

Which statement is true for a normal good?

At the best affordable point,which statement is true?

The initial budget equation for pop (p)and movies (m)is Qp = 20 - 4Qm,and the price of a pop is $5.If the price of a pop falls to $4,what is the new budget equation?

Use the figure below to answer the following questions. Figure 9.2.1 -Which of the graphs in Figure 9.2.1 shows perfect complements?

A change in the price of a good has

Use the figure below to answer the following questions. Figure 9.3.3 -Consider an initial budget line labelled RS in Figure 9.3.3.If the budget line becomes RT,the substitution effect is illustrated by the move from point

If the price of the good measured on the vertical axis increases,the budget line

If the price of the good measured on the horizontal axis increases,the budget line

What Is Economics?

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Government Actions in Markets

Global Markets in Action

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Perfect Competition

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Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring GDP and Economic Growth

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Economic Growth

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Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

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