Question 1

Janella consumes only bananas and passion fruit. It is not possible for Janella's indifference curves to cross one another at any point.

Accepted Answer

A) True 
 B)False

Question 2

Two consumers, Eric and Eli, have the same preferences for good X, a normal good. The only difference is that for Eli there would be no income effect if the price of good X changed. For Eric, there are both income and substitution effects for a price change. What does this tell you about Eric's and Eli's demand for good X? Explain.

Accepted Answer

Suppose the price of good X fell. For bo

Question 3

For a Giffen good, the income effect works in the opposite direction from the substitution effect, and the income effect is larger than the substitution effect.

Accepted Answer

A) True 
 B)False

Question 4

To say that you can't have too much of a good thing means that for any good that you enjoy (for example, pizza):

Accepted Answer

A)  higher consumption will always lead to higher utility. 
B)  higher consumption will cause utility to decrease at an increasing rate. 
C)  higher consumption will increase utility, but only up to a point; after that utility will start to decrease. 
D)  it is valid to measure utility in utils. 
A)  higher consumption will always lead to higher utility. 
B)  higher consumption will cause utility to decrease at an increasing rate. 
C)  higher consumption will increase utility, but only up to a point; after that utility will start to decrease. 
D)  it is valid to measure utility in utils.

Question 5

Use the following to answer question:  
-(Table: Utility from Coffee and Comic Books) Look at the table Utility from Coffee and Comic Books. Your eccentric professor has a daily budget of $40, and he spends it entirely on coffee and comic books. Each comic book is priced at $8 and each cup of coffee is priced at $4. To maximize his utility, how many cups of coffee and how many comic books should he buy? How many total utils will he enjoy?

Accepted Answer

One way to solve this problem is to narr

Question 6

Mikaela is buying a new motorcycle. She has narrowed her choices to a BMW Classic Montauk or a Honda Valkyrie Rune. She likes the Honda exactly twice as much, but it costs about 40% more. If both bikes are in her budget, she should buy the Honda.

Accepted Answer

A) True 
 B)False

Question 7

As a consumer gives up some of good A, which is on the horizontal axis, to get more of good B, which is on the vertical axis, his or her marginal rate of substitution of good A for good B:

Accepted Answer

A)  becomes infinite. 
B)  goes from negative to positive. 
C)  increases. 
D)  decreases. 
A)  becomes infinite. 
B)  goes from negative to positive. 
C)  increases. 
D)  decreases.

Question 8

Use the following to answer questions:
Figure: Consumer Equilibrium II  
-(Figure: Consumer Equilibrium II) Look at the figure Consumer Equilibrium II. Ashyra consumes at point G. Ashyra would be able to realize more total utility by choosing point _____, all other things held equal.

Accepted Answer

A)  J 
B)  K 
C)  I 
D)  H 
A)  J 
B)  K 
C)  I 
D)  H

Question 9

Jie consumes three heads of broccoli and six bowls of rice each week. The price of a head of broccoli is $2 and the price of rice is $4 per bowl. Jie's marginal utility from the last head of broccoli consumed is 4 utils and her marginal utility from her last bowl of rice is 8 utils. If Jie wants to maximize her utility, she should:

Accepted Answer

A)  increase her broccoli consumption and decrease her rice consumption. 
B)  increase her rice consumption and decrease her broccoli consumption. 
C)  not change her consumption of either broccoli or rice. 
D)  stop consuming both goods. 
A)  increase her broccoli consumption and decrease her rice consumption. 
B)  increase her rice consumption and decrease her broccoli consumption. 
C)  not change her consumption of either broccoli or rice. 
D)  stop consuming both goods.

Question 10

An indifference curve is a line showing all of the consumption bundles that:

Accepted Answer

A)  an individual can purchase with a given income. 
B)  yield the same total utility for an individual. 
C)  yield the same marginal utility. 
D)  have the same marginal rate of substitution. 
A)  an individual can purchase with a given income. 
B)  yield the same total utility for an individual. 
C)  yield the same marginal utility. 
D)  have the same marginal rate of substitution.

Question 11

If, for Adam, the marginal utility of ties is greater than the marginal utility of shirts, to maximize utility, Adam should:

Accepted Answer

A)  buy more ties and fewer shirts. 
B)  buy more shirts and fewer ties. 
C)  buy the same amount of each. 
D)  determine the price of ties and the price of shirts before he decides how many of each to buy. 
A)  buy more ties and fewer shirts. 
B)  buy more shirts and fewer ties. 
C)  buy the same amount of each. 
D)  determine the price of ties and the price of shirts before he decides how many of each to buy.

Question 12

If good A is a normal good and its price decreases, the _____ effect will cause a(n) _____ in consumption of it.

Accepted Answer

A)  substitution; decrease 
B)  income; decrease 
C)  income; increase 
D)  substitution effect and the income; decrease 
A)  substitution; decrease 
B)  income; decrease 
C)  income; increase 
D)  substitution effect and the income; decrease

Question 13

An indifference curve shows combinations of two goods that yield:

Accepted Answer

A)  equal prices. 
B)  equal money income. 
C)  equal satisfaction. 
D)  increasing prices. 
A)  equal prices. 
B)  equal money income. 
C)  equal satisfaction. 
D)  increasing prices.

Question 14

Higher indifference curves represent _____ lower curves.

Accepted Answer

A)  less utility than 
B)  more utility than 
C)  the same utility as 
D)  either more or less utility than 
A)  less utility than 
B)  more utility than 
C)  the same utility as 
D)  either more or less utility than

Question 15

Calculating the marginal rate of substitution assumes that _____ remain(s) unchanged.

Accepted Answer

A)  prices 
B)  money income 
C)  satisfaction 
D)  the quantities of both goods 
A)  prices 
B)  money income 
C)  satisfaction 
D)  the quantities of both goods

Question 16

Frank buys only milk and cereal, both of which are normal goods, and he always maximizes his utility. Frank's boss cuts Frank's pay by $200 per month. What happens to Frank's marginal rate of substitution between milk and cereal?

Accepted Answer

A)  It fluctuates randomly. 
B)  It decreases. 
C)  It increases. 
D)  It stays constant. 
A)  It fluctuates randomly. 
B)  It decreases. 
C)  It increases. 
D)  It stays constant.

Question 17

The consumption bundles that Mei CAN afford but that do not use up her entire income lie _____ the budget line.

Accepted Answer

A)  within 
B)  beyond 
C)  on 
D)  at the corner of 
A)  within 
B)  beyond 
C)  on 
D)  at the corner of

Question 18

For most goods, as we move down an indifference curve:

Accepted Answer

A)  the slope gets flatter. 
B)  the slope gets steeper. 
C)  the slope stays the same. 
D)  total utility decreases. 
A)  the slope gets flatter. 
B)  the slope gets steeper. 
C)  the slope stays the same. 
D)  total utility decreases.

Question 19

Higher indifference curves represent:

Accepted Answer

A)  less utility than lower indifference curves. 
B)  more utility than lower indifference curves. 
C)  the same level of utility as lower indifference curves. 
D)  unknown levels of utility compared to lower indifference curves. 
A)  less utility than lower indifference curves. 
B)  more utility than lower indifference curves. 
C)  the same level of utility as lower indifference curves. 
D)  unknown levels of utility compared to lower indifference curves.

Question 20

Consumers buy both alcoholic and nonalcoholic beverages. If the government tries to discourage people from drinking alcoholic beverages by imposing an excise tax on them but gives consumers an income subsidy to keep the consumers on their original indifference curves:

Accepted Answer

A)  the same amount of both goods will be consumed. 
B)  fewer alcoholic and more nonalcoholic beverages will be consumed. 
C)  more alcoholic and fewer nonalcoholic beverages will be consumed. 
D)  it is impossible to determine what will happen to the consumption of alcoholic and more nonalcoholic beverages. 
A)  the same amount of both goods will be consumed. 
B)  fewer alcoholic and more nonalcoholic beverages will be consumed. 
C)  more alcoholic and fewer nonalcoholic beverages will be consumed. 
D)  it is impossible to determine what will happen to the consumption of alcoholic and more nonalcoholic beverages.

Janella consumes only bananas and passion fruit. It is not possible for Janella's indifference curves to cross one another at any point.

For a Giffen good, the income effect works in the opposite direction from the substitution effect, and the income effect is larger than the substitution effect.

To say that you can't have too much of a good thing means that for any good that you enjoy (for example, pizza):

Mikaela is buying a new motorcycle. She has narrowed her choices to a BMW Classic Montauk or a Honda Valkyrie Rune. She likes the Honda exactly twice as much, but it costs about 40% more. If both bikes are in her budget, she should buy the Honda.

As a consumer gives up some of good A, which is on the horizontal axis, to get more of good B, which is on the vertical axis, his or her marginal rate of substitution of good A for good B:

Use the following to answer questions: Figure: Consumer Equilibrium II -(Figure: Consumer Equilibrium II) Look at the figure Consumer Equilibrium II. Ashyra consumes at point G. Ashyra would be able to realize more total utility by choosing point _____, all other things held equal.

An indifference curve is a line showing all of the consumption bundles that:

If, for Adam, the marginal utility of ties is greater than the marginal utility of shirts, to maximize utility, Adam should:

If good A is a normal good and its price decreases, the _ effect will cause a(n) _ in consumption of it.

An indifference curve shows combinations of two goods that yield:

Higher indifference curves represent _____ lower curves.

Calculating the marginal rate of substitution assumes that _____ remain(s) unchanged.

Frank buys only milk and cereal, both of which are normal goods, and he always maximizes his utility. Frank's boss cuts Frank's pay by $200 per month. What happens to Frank's marginal rate of substitution between milk and cereal?

The consumption bundles that Mei CAN afford but that do not use up her entire income lie _____ the budget line.

For most goods, as we move down an indifference curve:

Higher indifference curves represent:

Consumers buy both alcoholic and nonalcoholic beverages. If the government tries to discourage people from drinking alcoholic beverages by imposing an excise tax on them but gives consumers an income subsidy to keep the consumers on their original indifference curves:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 10: The Rational Consumer

Janella consumes only bananas and passion fruit. It is not possible for Janella's indifference curves to cross one another at any point.

For a Giffen good, the income effect works in the opposite direction from the substitution effect, and the income effect is larger than the substitution effect.

To say that you can't have too much of a good thing means that for any good that you enjoy (for example, pizza):

Mikaela is buying a new motorcycle. She has narrowed her choices to a BMW Classic Montauk or a Honda Valkyrie Rune. She likes the Honda exactly twice as much, but it costs about 40% more. If both bikes are in her budget, she should buy the Honda.

As a consumer gives up some of good A, which is on the horizontal axis, to get more of good B, which is on the vertical axis, his or her marginal rate of substitution of good A for good B:

Use the following to answer questions: Figure: Consumer Equilibrium II -(Figure: Consumer Equilibrium II) Look at the figure Consumer Equilibrium II. Ashyra consumes at point G. Ashyra would be able to realize more total utility by choosing point _____, all other things held equal.

An indifference curve is a line showing all of the consumption bundles that:

If, for Adam, the marginal utility of ties is greater than the marginal utility of shirts, to maximize utility, Adam should:

If good A is a normal good and its price decreases, the _____ effect will cause a(n) _____ in consumption of it.

An indifference curve shows combinations of two goods that yield:

Higher indifference curves represent _____ lower curves.

Calculating the marginal rate of substitution assumes that _____ remain(s) unchanged.

Frank buys only milk and cereal, both of which are normal goods, and he always maximizes his utility. Frank's boss cuts Frank's pay by $200 per month. What happens to Frank's marginal rate of substitution between milk and cereal?

The consumption bundles that Mei CAN afford but that do not use up her entire income lie _____ the budget line.

For most goods, as we move down an indifference curve:

Higher indifference curves represent:

Consumers buy both alcoholic and nonalcoholic beverages. If the government tries to discourage people from drinking alcoholic beverages by imposing an excise tax on them but gives consumers an income subsidy to keep the consumers on their original indifference curves:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

If good A is a normal good and its price decreases, the _ effect will cause a(n) _ in consumption of it.