Question 1

If a consumer's marginal rate of substitution is greater than the relative price of the goods,the consumer is

Accepted Answer

A)  at his or her best affordable point. 
B)  perhaps at his or her best affordable point. 
C)  not at his or her best affordable point and should move along his or her indifference curve to a higher budget line. 
D)  not at his or her best affordable point and should move along his or her budget line to a higher indifference curve. 
E)  More information is needed to determine if the consumer is or is not at his or her best affordable point. 
A)  at his or her best affordable point. 
B)  perhaps at his or her best affordable point. 
C)  not at his or her best affordable point and should move along his or her indifference curve to a higher budget line. 
D)  not at his or her best affordable point and should move along his or her budget line to a higher indifference curve. 
E)  More information is needed to determine if the consumer is or is not at his or her best affordable point.

Question 2

In the indifference curve/budget line framework,at the consumer equilibrium,the consumer

Accepted Answer

A)  is on the budget line. 
B)  is on the highest attainable indifference curve. 
C)  has a marginal rate of substitution equal to the relative price of the goods. 
D)  Only answers A and B are correct. 
E)  Answers A, B, and C are correct. 
A)  is on the budget line. 
B)  is on the highest attainable indifference curve. 
C)  has a marginal rate of substitution equal to the relative price of the goods. 
D)  Only answers A and B are correct. 
E)  Answers A, B, and C are correct.

Question 3

Along an indifference curve,if the marginal rate of substitution is 3,then the consumer is willing to

Accepted Answer

A)  give up 1 unit of the good measured along the y-axis for 3 units of the good measured along the x-axis. 
B)  give up 3 units of the good measured along the y-axis for 1 unit of the good measured along the x-axis. 
C)  pay $3 for one unit of the good measured along the y-axis. 
D)  pay $3 for one unit of the good measured along the x-axis. 
E)  give up 3 units of the good measured along the y-axis for 1 unit of income, that is, $1 of income. 
A)  give up 1 unit of the good measured along the y-axis for 3 units of the good measured along the x-axis. 
B)  give up 3 units of the good measured along the y-axis for 1 unit of the good measured along the x-axis. 
C)  pay $3 for one unit of the good measured along the y-axis. 
D)  pay $3 for one unit of the good measured along the x-axis. 
E)  give up 3 units of the good measured along the y-axis for 1 unit of income, that is, $1 of income.

Question 4

A budget line

Accepted Answer

A)  shows the limits to what can be consumed. 
B)  has a slope equal to a relative price. 
C)  rotates or shifts only when the consumer's budget changes. 
D)  Answers B and C are both correct. 
E)  Answers A and B are both correct. 
A)  shows the limits to what can be consumed. 
B)  has a slope equal to a relative price. 
C)  rotates or shifts only when the consumer's budget changes. 
D)  Answers B and C are both correct. 
E)  Answers A and B are both correct.

Question 5

Suppose Lizzie consumes soda and pizza.If the last bottle of soda she drinks provides 100 units of utility per dollar while the last slice of pizza she eats provides 300 units of utility per dollar,

Accepted Answer

A)  the demand curve for soda must have shifted outward. 
B)  the demand curve for pizza must have shifted inward. 
C)  Lizzie should buy more pizza and less soda to maximize her utility. 
D)  the indifference curve for soda and pizza must have rotated inward. 
E)  the marginal rate of substitution between soda and pizza equals 3. 
A)  the demand curve for soda must have shifted outward. 
B)  the demand curve for pizza must have shifted inward. 
C)  Lizzie should buy more pizza and less soda to maximize her utility. 
D)  the indifference curve for soda and pizza must have rotated inward. 
E)  the marginal rate of substitution between soda and pizza equals 3.

Question 6

Diminishing marginal utility means that

Accepted Answer

A)  marginal utility decreases as consumption decreases. 
B)  marginal utility increases as consumption increases. 
C)  marginal utility decreases as consumption increases. 
D)  total utility decreases as marginal utility decreases. 
E)  total utility decreases as marginal utility increases. 
A)  marginal utility decreases as consumption decreases. 
B)  marginal utility increases as consumption increases. 
C)  marginal utility decreases as consumption increases. 
D)  total utility decreases as marginal utility decreases. 
E)  total utility decreases as marginal utility increases.

Question 7

Sarah earns $500 per week selling baskets made out of tree vines.With this money she buys sushi and rose bushes.Each piece of sushi costs $1 and each rose bush costs $10.If Sarah spends $170 per week on sushi,the maximum quantity of rose bushes can she buy each week is ________ bushes.

Accepted Answer

A)  33 
B)  330 
C)  3 
D)  17 
E)  None of the above answers is correct. 
A)  33 
B)  330 
C)  3 
D)  17 
E)  None of the above answers is correct.

Question 8

Which of the following is true if Clarice is at her consumer equilibrium?
i.Clarice is on her budget line.
ii.Clarice is on her highest attainable indifference curve.
iii.Clarice is dividing her budget equally across all goods.

Accepted Answer

A)  i only 
B)  i and ii 
C)  i and iii 
D)  ii and iii 
E)  iii only 
A)  i only 
B)  i and ii 
C)  i and iii 
D)  ii and iii 
E)  iii only

Question 9

Kevin allocates his budget according to rules of utility maximization.What are the rules of utility maximization and how do they explain the paradox of value,which is that diamonds are expensive but useless,while water is inexpensive but essential?

Accepted Answer

The rules of utility maximization are to

Question 10

As Shaniq drinks additional cups of tea at breakfast,Shaniq's

Accepted Answer

A)  marginal utility from tea decreases. 
B)  total utility from tea increases. 
C)  total utility from tea decreases. 
D)  Both answers A and B are correct. 
E)  Both answers B and C are correct. 
A)  marginal utility from tea decreases. 
B)  total utility from tea increases. 
C)  total utility from tea decreases. 
D)  Both answers A and B are correct. 
E)  Both answers B and C are correct.

Question 11

-The figure above contains several budget lines for Sarah,who uses her income to purchase two goods,cheese and crackers.
a.A movement between which two budget lines represents an increase in Sarah's budget for cheese and crackers?
b.A movement between which two budget lines represents an increase in the price of a pound of cheese?
c.A movement between which two budget lines represents an increase in the price of a box of crackers?

Accepted Answer

a.A movement from BL₁ to BL₃ shows an in

Question 12

Billy has a $20 budget to spend on yogurt and cereal.Yogurt cost $2 each and cereal costs $4 each.Suppose that the quantity of yogurt is on the vertical axis and the quantity of cereal is on the horizontal axis.If the price of yogurt increases,which of the following is true?
i.The budget line rotates outward.
ii.Yogurt's marginal utility per dollar decreases.
iii.The relative price of yogurt increases.

Accepted Answer

A)  i and ii 
B)  i and iii 
C)  ii and iii 
D)  i, ii, and iii 
E)  Only i 
A)  i and ii 
B)  i and iii 
C)  ii and iii 
D)  i, ii, and iii 
E)  Only i

Question 13

-The table above has different combinations of egg rolls and sushi rolls that Richard can buy.Richard's budget for egg rolls and sushi rolls is $120 per week.What are the prices of an egg roll and a sushi roll?

Accepted Answer

If Richard spends all his budget on egg

Question 14

-The figure above shows Sarah's budget line.Sarah earns $500 per week selling baskets made out of tree vines.With this money she buys sushi and rose bushes.Each piece of sushi costs $1 and each rose bush costs $10.Sarah will be at what point on her budget line if she spends $500 per week on rose bushes?

Accepted Answer

A)  Point a 
B)  Point c 
C)  Point e 
D)  Point f 
E)  Point b 
A)  Point a 
B)  Point c 
C)  Point e 
D)  Point f 
E)  Point b

Question 15

-The figure above shows one of Bob's indifference curves for CDs and books.
a.Is the indifference curve steeper at point a or point b?
b.What is Bob's marginal rate of substitution at point a?
c.What is Bob's marginal rate of substitution at point b?

Accepted Answer

a.The indifference curve is steeper at p

Question 16

Related to the paradox of value,which of the following statements is correct?

Accepted Answer

A)  The marginal utility of water is enormous but the total utility is small. 
B)  We consume so much water so its marginal utility is enormous. 
C)  The marginal utility of water is small but the total utility is enormous. 
D)  The consumer surplus from water is small. 
E)  The total utility of water is equal to the marginal utility of water. 
A)  The marginal utility of water is enormous but the total utility is small. 
B)  We consume so much water so its marginal utility is enormous. 
C)  The marginal utility of water is small but the total utility is enormous. 
D)  The consumer surplus from water is small. 
E)  The total utility of water is equal to the marginal utility of water.

Question 17

Suppose you have one point on a demand curve.To plot another point for this demand curve using a group of indifference curves,

Accepted Answer

A)  transfer all points from the indifference curve to the corresponding demand curve. 
B)  horizontally sum the indifference curves. 
C)  change the price of a good, rotate the budget line, and find the new best affordable point. This new price and quantity is another point on the demand curve. 
D)  calculate the marginal rates of substitution from the indifference curve and transfer these values to the demand curve. 
E)  transfer the budget line so that it becomes the demand curve. 
A)  transfer all points from the indifference curve to the corresponding demand curve. 
B)  horizontally sum the indifference curves. 
C)  change the price of a good, rotate the budget line, and find the new best affordable point. This new price and quantity is another point on the demand curve. 
D)  calculate the marginal rates of substitution from the indifference curve and transfer these values to the demand curve. 
E)  transfer the budget line so that it becomes the demand curve.

Question 18

John likes to spend Thursday nights playing pool and drinking soda.John's budget for Thursday nights is $10,a soda costs $2,and one game of pool costs $1.
a.Draw a graph of John's budget line in the figure below.
b.In your graph,label the affordable and unaffordable areas.

Accepted Answer

@#IMG-DLM& 
a.The budget line is in the

Question 19

A budget line will shift outward and not change its slope if

Accepted Answer

A)  there is an increase in the consumer's budget. 
B)  the consumer's preferences change. 
C)  the price of one good changes. 
D)  the price of both goods increase by the same percentage. 
E)  None of the above shift the budget line outward. 
A)  there is an increase in the consumer's budget. 
B)  the consumer's preferences change. 
C)  the price of one good changes. 
D)  the price of both goods increase by the same percentage. 
E)  None of the above shift the budget line outward.

Question 20

What does the slope of the budget line equal?

Accepted Answer

The slope of the budget line equals an o

If a consumer's marginal rate of substitution is greater than the relative price of the goods,the consumer is

In the indifference curve/budget line framework,at the consumer equilibrium,the consumer

Along an indifference curve,if the marginal rate of substitution is 3,then the consumer is willing to

A budget line

Suppose Lizzie consumes soda and pizza.If the last bottle of soda she drinks provides 100 units of utility per dollar while the last slice of pizza she eats provides 300 units of utility per dollar,

Diminishing marginal utility means that

Sarah earns $500 per week selling baskets made out of tree vines.With this money she buys sushi and rose bushes.Each piece of sushi costs $1 and each rose bush costs $10.If Sarah spends $170 per week on sushi,the maximum quantity of rose bushes can she buy each week is ________ bushes.

Which of the following is true if Clarice is at her consumer equilibrium? i.Clarice is on her budget line. ii.Clarice is on her highest attainable indifference curve. iii.Clarice is dividing her budget equally across all goods.

Kevin allocates his budget according to rules of utility maximization.What are the rules of utility maximization and how do they explain the paradox of value,which is that diamonds are expensive but useless,while water is inexpensive but essential?

As Shaniq drinks additional cups of tea at breakfast,Shaniq's

-The table above has different combinations of egg rolls and sushi rolls that Richard can buy.Richard's budget for egg rolls and sushi rolls is $120 per week.What are the prices of an egg roll and a sushi roll?

-The figure above shows one of Bob's indifference curves for CDs and books. a.Is the indifference curve steeper at point a or point b? b.What is Bob's marginal rate of substitution at point a? c.What is Bob's marginal rate of substitution at point b?

Related to the paradox of value,which of the following statements is correct?

Suppose you have one point on a demand curve.To plot another point for this demand curve using a group of indifference curves,

John likes to spend Thursday nights playing pool and drinking soda.John's budget for Thursday nights is $10,a soda costs $2,and one game of pool costs $1. a.Draw a graph of John's budget line in the figure below. b.In your graph,label the affordable and unaffordable areas.

A budget line will shift outward and not change its slope if

What does the slope of the budget line equal?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 13: Consumer Choice and Demand

If a consumer's marginal rate of substitution is greater than the relative price of the goods,the consumer is

In the indifference curve/budget line framework,at the consumer equilibrium,the consumer

Along an indifference curve,if the marginal rate of substitution is 3,then the consumer is willing to

A budget line

Suppose Lizzie consumes soda and pizza.If the last bottle of soda she drinks provides 100 units of utility per dollar while the last slice of pizza she eats provides 300 units of utility per dollar,

Diminishing marginal utility means that

Sarah earns $500 per week selling baskets made out of tree vines.With this money she buys sushi and rose bushes.Each piece of sushi costs $1 and each rose bush costs $10.If Sarah spends $170 per week on sushi,the maximum quantity of rose bushes can she buy each week is ________ bushes.

Which of the following is true if Clarice is at her consumer equilibrium? i.Clarice is on her budget line. ii.Clarice is on her highest attainable indifference curve. iii.Clarice is dividing her budget equally across all goods.

Kevin allocates his budget according to rules of utility maximization.What are the rules of utility maximization and how do they explain the paradox of value,which is that diamonds are expensive but useless,while water is inexpensive but essential?

As Shaniq drinks additional cups of tea at breakfast,Shaniq's

-The table above has different combinations of egg rolls and sushi rolls that Richard can buy.Richard's budget for egg rolls and sushi rolls is $120 per week.What are the prices of an egg roll and a sushi roll?

-The figure above shows one of Bob's indifference curves for CDs and books. a.Is the indifference curve steeper at point a or point b? b.What is Bob's marginal rate of substitution at point a? c.What is Bob's marginal rate of substitution at point b?

Related to the paradox of value,which of the following statements is correct?

Suppose you have one point on a demand curve.To plot another point for this demand curve using a group of indifference curves,

John likes to spend Thursday nights playing pool and drinking soda.John's budget for Thursday nights is $10,a soda costs $2,and one game of pool costs $1. a.Draw a graph of John's budget line in the figure below. b.In your graph,label the affordable and unaffordable areas.

A budget line will shift outward and not change its slope if

What does the slope of the budget line equal?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters