Question 1

The shape of a person's indifference curves between two goods depends on

Accepted Answer

A) the prices of the two goods. 
B) the person's income. 
C) the degree of substitutability between the two goods. 
D) the level of satisfaction for the person. 
E) all of the above. 
A) the prices of the two goods. 
B) the person's income. 
C) the degree of substitutability between the two goods. 
D) the level of satisfaction for the person. 
E) all of the above.

Question 2

Use the figure below to answer the following question.
   
Figure 9.2.4
-Refer to Figure 9.2.4.Rashid buys only books and albums.The figure shows his preferences.Rashid's indifference curves ________ display diminishing marginal rate of substitution because ________.

Accepted Answer

A) do;Rashid is indifferent between consuming 6 albums and 2 books and consuming 2 albums and 3 books 
B) do not;the magnitude of the slope of both indifference curves decreases as Rashid consumes more albums and fewer books 
C) do not;Rashid is indifferent between consuming 6 albums and 2 books and consuming 2 albums and 3 books 
D) do;the magnitude of the slope of both indifference curves decreases as Rashid consumes more albums and fewer books 
E) do;the price of an album decreases as Rashid increases the quantity he buys 
A) do;Rashid is indifferent between consuming 6 albums and 2 books and consuming 2 albums and 3 books 
B) do not;the magnitude of the slope of both indifference curves decreases as Rashid consumes more albums and fewer books 
C) do not;Rashid is indifferent between consuming 6 albums and 2 books and consuming 2 albums and 3 books 
D) do;the magnitude of the slope of both indifference curves decreases as Rashid consumes more albums and fewer books 
E) do;the price of an album decreases as Rashid increases the quantity he buys

Question 3

Use the figure below to answer the following question.
   
Figure 9.2.5
-Refer to Figure 9.2.5.The graphs show indifference curves for various goods.Graph ________ best describes the pair of goods baseballs and baseball bats.Graph ________ best describes the pair of goods desktop computers and laptop computers.

Accepted Answer

A) 2;3 
B) 2;1 
C) 1;1 
D) 1;3 
E) 3;2 
A) 2;3 
B) 2;1 
C) 1;1 
D) 1;3 
E) 3;2

Question 4

A consumer's best affordable point occurs

Accepted Answer

A) inside the budget line. 
B) outside the budget line. 
C) on the budget line. 
D) at a point that cannot be determined. 
E) at a corner on the budget line, with only one good consumed. 
A) inside the budget line. 
B) outside the budget line. 
C) on the budget line. 
D) at a point that cannot be determined. 
E) at a corner on the budget line, with only one good consumed.

Question 5

Which of the following statements is FALSE?

Accepted Answer

A) A consumer possesses a preference map. 
B) An indifference curve is a line that shows combinations of goods among which a consumer is indifferent. 
C) A consumer has only one indifference curve. 
D) The marginal rate of substitution is the rate at which a consumer will give up good y to get an additional unit of good x and remain on the same indifference curve. 
E) If the indifference curve is steep, the marginal rate of substitution is high. 
A) A consumer possesses a preference map. 
B) An indifference curve is a line that shows combinations of goods among which a consumer is indifferent. 
C) A consumer has only one indifference curve. 
D) The marginal rate of substitution is the rate at which a consumer will give up good y to get an additional unit of good x and remain on the same indifference curve. 
E) If the indifference curve is steep, the marginal rate of substitution is high.

Question 6

The magnitude of the slope of an indifference curve is

Accepted Answer

A) the marginal rate of substitution. 
B) the marginal rate of transformation. 
C) the marginal propensity to consume. 
D) the marginal propensity to substitute. 
E) the relative price of good Y. 
A) the marginal rate of substitution. 
B) the marginal rate of transformation. 
C) the marginal propensity to consume. 
D) the marginal propensity to substitute. 
E) the relative price of good Y.

Question 7

Use the figure below to answer the following questions.
   
Figure 9.1.2
-Refer to Figure 9.1.2.Which budget line has the lowest relative price for carrots?

Accepted Answer

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

Question 8

When Jim is at his best affordable point,the budget line

Accepted Answer

A) is steeper than the highest attainable indifference curve. 
B) is flatter than the highest attainable indifference curve. 
C) does not touch the highest attainable indifference curve. 
D) is tangent to the highest attainable indifference curve. 
E) intersects the highest attainable indifference curve. 
A) is steeper than the highest attainable indifference curve. 
B) is flatter than the highest attainable indifference curve. 
C) does not touch the highest attainable indifference curve. 
D) is tangent to the highest attainable indifference curve. 
E) intersects the highest attainable indifference curve.

Question 9

For a normal good,the income effect ________.

Accepted Answer

A) is negative and the substitution effect is positive 
B) reinforces the substitution effect 
C) is positive and the substitution effect is negative 
D) is equal and opposite to the substitution effect 
E) is zero 
A) is negative and the substitution effect is positive 
B) reinforces the substitution effect 
C) is positive and the substitution effect is negative 
D) is equal and opposite to the substitution effect 
E) is zero

Question 10

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.The budget line becomes RT with

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 11

Suppose the price of potatoes falls and there is a decrease in the purchases of potatoes,what can we infer?

Accepted Answer

A) The income effect is negative and exceeds the substitution effect. 
B) The income effect is negative and reinforces the substitution effect. 
C) The income effect is positive and exceeds the substitution effect. 
D) The income effect is positive and reinforces the substitution effect. 
E) The income effect is negative and just about offsets the substitution effect. 
A) The income effect is negative and exceeds the substitution effect. 
B) The income effect is negative and reinforces the substitution effect. 
C) The income effect is positive and exceeds the substitution effect. 
D) The income effect is positive and reinforces the substitution effect. 
E) The income effect is negative and just about offsets the substitution effect.

Question 12

Larry consumes only beer (B)and chips (C).His real income in terms of beer is

Accepted Answer

A) PC/Y. 
B) PC × PB. 
C) Y/PC. 
D) Y/PB. 
E) PC/PB. 
A) PC/Y. 
B) PC × PB. 
C) Y/PC. 
D) Y/PB. 
E) PC/PB.

Question 13

The price of one good divided by the price of another good is

Accepted Answer

A) an absolute price. 
B) a relative price. 
C) a marginal price. 
D) a demand price. 
E) a money price. 
A) an absolute price. 
B) a relative price. 
C) a marginal price. 
D) a demand price. 
E) a money price.

Question 14

Which one of the following is always true of the price effect?

Accepted Answer

A) It leads to a positive income effect. 
B) It is positive. 
C) It decreases consumption. 
D) It leads to a negative income effect. 
E) None of the above. 
A) It leads to a positive income effect. 
B) It is positive. 
C) It decreases consumption. 
D) It leads to a negative income effect. 
E) None of the above.

Question 15

A preference map is

Accepted Answer

A) a series of points that represent levels of equal satisfaction. 
B) a series of demand curves. 
C) a series of supply curves. 
D) a map that shows contour lines. 
E) a series of indifference curves. 
A) a series of points that represent levels of equal satisfaction. 
B) a series of demand curves. 
C) a series of supply curves. 
D) a map that shows contour lines. 
E) a series of indifference curves.

Question 16

Which one of the following is always true of the income effect?

Accepted Answer

A) It leads to a positive income effect. 
B) It is positive. 
C) It decreases consumption. 
D) It leads to a negative income effect. 
E) None of the above. 
A) It leads to a positive income effect. 
B) It is positive. 
C) It decreases consumption. 
D) It leads to a negative income effect. 
E) None of the above.

Question 17

Suppose all prices double and income also doubles.Which statement is true?

Accepted Answer

A) The budget line does not change. 
B) The slope of the budget line increases. 
C) The slope of the budget line decreases. 
D) The budget line shifts rightward. 
E) The budget line shifts leftward. 
A) The budget line does not change. 
B) The slope of the budget line increases. 
C) The slope of the budget line decreases. 
D) The budget line shifts rightward. 
E) The budget line shifts leftward.

Question 18

What is a distinguishing characteristic of goods that are perfect complements?

Accepted Answer

A) straight-line indifference curves 
B) upward-sloping demand curves 
C) L-shaped indifference curves 
D) upward-sloping indifference curves 
E) curved indifference curves, bowed away from the origin 
A) straight-line indifference curves 
B) upward-sloping demand curves 
C) L-shaped indifference curves 
D) upward-sloping indifference curves 
E) curved indifference curves, bowed away from the origin

Question 19

Use the figure below to answer the following questions.
   
Figure 9.1.1
-Shelly's budget line is shown in Figure 9.1.1 Which point is unaffordable given her income and current prices?

Accepted Answer

A) A and B 
B) B only 
C) C only 
D) C and D only 
E) All points are unattainable. 
A) A and B 
B) B only 
C) C only 
D) C and D only 
E) All points are unattainable.

Question 20

Use the figure below to answer the following question.
   
Figure 9.2.5
-An indifference curve slopes downward because ________.

Accepted Answer

A) it shows that people are only happy when they increase consumption of all goods 
B) it shows that when a person gives up some of good X they must increase their consumption of good Y to remain indifferent 
C) it shows that when a person gives up some of good X they can afford to increase their consumption of good Y 
D) it is a demand curve without prices 
E) the quantity demanded increases as the price falls 
A) it shows that people are only happy when they increase consumption of all goods 
B) it shows that when a person gives up some of good X they must increase their consumption of good Y to remain indifferent 
C) it shows that when a person gives up some of good X they can afford to increase their consumption of good Y 
D) it is a demand curve without prices 
E) the quantity demanded increases as the price falls

Exam 9: Possibilities, Preferences, and Choices

The shape of a person's indifference curves between two goods depends on

Use the figure below to answer the following question. Figure 9.2.4 -Refer to Figure 9.2.4.Rashid buys only books and albums.The figure shows his preferences.Rashid's indifference curves ________ display diminishing marginal rate of substitution because ________.

A consumer's best affordable point occurs

Which of the following statements is FALSE?

The magnitude of the slope of an indifference curve is

Use the figure below to answer the following questions. Figure 9.1.2 -Refer to Figure 9.1.2.Which budget line has the lowest relative price for carrots?

When Jim is at his best affordable point,the budget line

For a normal good,the income effect ________.

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.The budget line becomes RT with

Suppose the price of potatoes falls and there is a decrease in the purchases of potatoes,what can we infer?

Larry consumes only beer (B)and chips (C).His real income in terms of beer is

The price of one good divided by the price of another good is

Which one of the following is always true of the price effect?

A preference map is

Which one of the following is always true of the income effect?

Suppose all prices double and income also doubles.Which statement is true?

What is a distinguishing characteristic of goods that are perfect complements?

Use the figure below to answer the following questions. Figure 9.1.1 -Shelly's budget line is shown in Figure 9.1.1 Which point is unaffordable given her income and current prices?

Use the figure below to answer the following question. Figure 9.2.5 -An indifference curve slopes downward because ________.

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

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Use the figure below to answer the following question. Figure 9.2.4 -Refer to Figure 9.2.4.Rashid buys only books and albums.The figure shows his preferences.Rashid's indifference curves display diminishing marginal rate of substitution because .