Question 1

What does the term "indifferent" mean and what is its relationship to an indifference curve?

Accepted Answer

Indifferent means that the consumer does

Question 2

How can restaurants offer all-you-can-eat specials without fear of going bankrupt?

Accepted Answer

The restaurants that engage in this busi

Question 3

The paradox of value with respect to water and diamonds can be explained using consumer surplus because

Accepted Answer

A)  water is cheap but provides a large consumer surplus, while diamonds are expensive with a small consumer surplus. 
B)  diamonds are in large supply relative to their demand, while water is scarce in supply relative to its demand. 
C)  water is cheap but provides a small consumer surplus, while diamonds are expensive but provide a large consumer surplus. 
D)  the total consumer surplus from diamonds is greater than the total consumer surplus from water. 
E)  None of the above answers is correct. 
A)  water is cheap but provides a large consumer surplus, while diamonds are expensive with a small consumer surplus. 
B)  diamonds are in large supply relative to their demand, while water is scarce in supply relative to its demand. 
C)  water is cheap but provides a small consumer surplus, while diamonds are expensive but provide a large consumer surplus. 
D)  the total consumer surplus from diamonds is greater than the total consumer surplus from water. 
E)  None of the above answers is correct.

Question 4

In order to maximize his or her utility,a consumer must allocate his or her entire budget and

Accepted Answer

A)  buy the combination of goods that makes the marginal utility per dollar from all goods as small as possible. 
B)  buy the combination of goods that equalizes the total utility per dollar from all goods. 
C)  do nothing else because when the entire budget is allocated, utility is maximized. 
D)  buy the combination of goods that equalizes the marginal utility per dollar from all goods. 
E)  buy the combination of goods that makes the marginal utility per dollar from all goods as large as possible. 
A)  buy the combination of goods that makes the marginal utility per dollar from all goods as small as possible. 
B)  buy the combination of goods that equalizes the total utility per dollar from all goods. 
C)  do nothing else because when the entire budget is allocated, utility is maximized. 
D)  buy the combination of goods that equalizes the marginal utility per dollar from all goods. 
E)  buy the combination of goods that makes the marginal utility per dollar from all goods as large as possible.

Question 5

Why is the budget line negatively sloped?

Accepted Answer

Given the consumer's budget and the pric

Question 6

Moving down along an indifference curve,

Accepted Answer

A)  the price of the good measured on the vertical axis decreases. 
B)  total utility decreases. 
C)  the marginal rate of substitution for the good on the horizontal axis decreases. 
D)  the slope of the budget line decreases. 
E)  the consumer increasingly prefers the new consumption points to the old consumption points. 
A)  the price of the good measured on the vertical axis decreases. 
B)  total utility decreases. 
C)  the marginal rate of substitution for the good on the horizontal axis decreases. 
D)  the slope of the budget line decreases. 
E)  the consumer increasingly prefers the new consumption points to the old consumption points.

Question 7

-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 $300 per week on rose bushes?

Accepted Answer

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

Question 8

Sushi costs $3 per piece.Cynthia's total utility after eating one piece is 30 and her total utility after eating 2 pieces is 51,so her marginal utility per dollar from the second piece is

Accepted Answer

A)  17. 
B)  10. 
C)  51. 
D)  7. 
E)  21. 
A)  17. 
B)  10. 
C)  51. 
D)  7. 
E)  21.

Question 9

Mary likes to consume either pizza or spaghetti.She has $48 to spend on these meals.
a.One week the price of pizza is $8 and the price of spaghetti is $6.Mary uses the indifference curve analysis she learned in microeconomics to decide how much of each type of meal to buy.She puts pizza on the vertical axis and spaghetti on the horizontal axis.What is the marginal rate of substitution at the combination of pizza and spaghetti that Mary chooses?
b.The next week,the price of pizza is $6 and the price of spaghetti is $8 so Mary adjusts her consumption combination to maximize her total utility.What is her marginal rate of substitution now?

Accepted Answer

a.The marginal rate of substitution is e

Question 10

Marginal utility is the change in total utility that results from

Accepted Answer

A)  an increase in the price of the good. 
B)  a change in the budget line. 
C)  a one-unit change in the quantity of a good consumed. 
D)  a decrease in the price of the good. 
E)  an increase in the consumer's income. 
A)  an increase in the price of the good. 
B)  a change in the budget line. 
C)  a one-unit change in the quantity of a good consumed. 
D)  a decrease in the price of the good. 
E)  an increase in the consumer's income.

Question 11

-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?

Accepted Answer

a.Tom is indifferent between consuming a

Question 12

The marginal rate of substitution of one good for another is measured by moving

Accepted Answer

A)  along an indifference curve. 
B)  among different indifference curves. 
C)  along a budget line. 
D)  among different budget lines. 
E)  along a demand curve. 
A)  along an indifference curve. 
B)  among different indifference curves. 
C)  along a budget line. 
D)  among different budget lines. 
E)  along a demand curve.

Question 13

Moving along an indifference curve,if a consumer requires a large amount of the good measured along the y-axis to make up for one unit less of the good measured on the x-axis,then

Accepted Answer

A)  total utility is increasing. 
B)  the marginal rate of substitution is low and the indifference curve is flat. 
C)  the marginal rate of substitution is low and the indifference curve is steep. 
D)  the marginal rate of substitution is high and the indifference curve is steep. 
E)  the marginal rate of substitution is high and the indifference curve is flat. 
A)  total utility is increasing. 
B)  the marginal rate of substitution is low and the indifference curve is flat. 
C)  the marginal rate of substitution is low and the indifference curve is steep. 
D)  the marginal rate of substitution is high and the indifference curve is steep. 
E)  the marginal rate of substitution is high and the indifference curve is flat.

Question 14

Carter spends his entire budget on pizza and Pepsi.He maximizes his utility when he allocates his entire available budget and buys pizza and Pepsi so that the

Accepted Answer

A)  marginal utility from pizza is equal to the marginal utility from Pepsi. 
B)  total utility from both pizza and Pepsi is maximized. 
C)  marginal utility per dollar from pizza is equal to the marginal utility per dollar from Pepsi. 
D)  total utility per dollar from both pizza and Pepsi are equal. 
E)  None of the above answers is correct. 
A)  marginal utility from pizza is equal to the marginal utility from Pepsi. 
B)  total utility from both pizza and Pepsi is maximized. 
C)  marginal utility per dollar from pizza is equal to the marginal utility per dollar from Pepsi. 
D)  total utility per dollar from both pizza and Pepsi are equal. 
E)  None of the above answers is correct.

Question 15

-The table gives the total utility Jamal derives from the consumption of eclairs and cream puffs.Jamal has $12 to spend on these two confectionery goods.The price of an eclair is $3 and the price of a cream puff is $1.50.
a.Jamal's budget is $12.In order for Jamal to maximize his utility,how many eclairs and cream puffs should he buy?
b.Suppose the price of an eclair increase to $6.Jamal's income does not change and neither does the price of a cream puff.What combination of eclairs and cream puffs will Jamal buy now?
c.Using your answers to parts (a)and (b),derive two points on Jamal's demand curve for eclairs.

Accepted Answer

a.Jamal's utility maximizing combination

Question 16

-The table above gives Jessie's marginal utility and total utility from tacos.Complete the table.

Accepted Answer

@#IMG-DLM& The compl

Question 17

Suppose the quantity of burgers is measured on the horizontal axis and the quantity of bags of French fries is measured on the vertical axis.The marginal rate of substitution for burgers is

Accepted Answer

A)  the ratio of burgers consumed to bags of fries consumed. 
B)  the ratio of bags of fries consumed to burgers consumed. 
C)  the rate at which a person is willing to give up burgers to get more bags of fries while staying on the same indifference curve. 
D)  the rate at which a person is willing to give up bags of fries to get more burgers while staying on the same indifference curve. 
E)  the number of burgers consumed minus the number of bags of fries consumed. 
A)  the ratio of burgers consumed to bags of fries consumed. 
B)  the ratio of bags of fries consumed to burgers consumed. 
C)  the rate at which a person is willing to give up burgers to get more bags of fries while staying on the same indifference curve. 
D)  the rate at which a person is willing to give up bags of fries to get more burgers while staying on the same indifference curve. 
E)  the number of burgers consumed minus the number of bags of fries consumed.

Question 18

Timmy makes $100 per week as a taxidermist.He spends all this income to buy pizza and hair gel.The price of a pizza is $10 and the price of a bottle of hair gel is $4.If Timmy buys 6 pizzas per week,how many bottles of gel can he purchase?

Accepted Answer

A)  10 
B)  60 
C)  20 
D)  40 
E)  None of the above answers is correct. 
A)  10 
B)  60 
C)  20 
D)  40 
E)  None of the above answers is correct.

Question 19

Bobby buys cat food for his cat,Pearl.If the price of cat food falls,then Bobby's budget line will

Accepted Answer

A)  rotate outward and its slope will change. 
B)  rotate inward and its slope will change. 
C)  shift outward and its slope will not change. 
D)  shift inward and its slope will not change. 
E)  either rotate or shift outward depending on whether cat food has positive or negative marginal utility. 
A)  rotate outward and its slope will change. 
B)  rotate inward and its slope will change. 
C)  shift outward and its slope will not change. 
D)  shift inward and its slope will not change. 
E)  either rotate or shift outward depending on whether cat food has positive or negative marginal utility.

Question 20

Linda has $10 a month to spend on ice cream cones and chocolate bars.If the price of an ice cream cone is $2 a cone and the price of a chocolate bar is $1 a bar,which of the following is a point on Linda's budget line?

Accepted Answer

A)  4 cones and 0 chocolate bars 
B)  1 cone and 8 chocolate bars 
C)  3 cones and 1 chocolate bar 
D)  5 cones and 10 chocolate bars 
E)  0 cones and 0 chocolate bars 
A)  4 cones and 0 chocolate bars 
B)  1 cone and 8 chocolate bars 
C)  3 cones and 1 chocolate bar 
D)  5 cones and 10 chocolate bars 
E)  0 cones and 0 chocolate bars

What does the term "indifferent" mean and what is its relationship to an indifference curve?

How can restaurants offer all-you-can-eat specials without fear of going bankrupt?

The paradox of value with respect to water and diamonds can be explained using consumer surplus because

In order to maximize his or her utility,a consumer must allocate his or her entire budget and

Why is the budget line negatively sloped?

Moving down along an indifference curve,

Sushi costs $3 per piece.Cynthia's total utility after eating one piece is 30 and her total utility after eating 2 pieces is 51,so her marginal utility per dollar from the second piece is

Marginal utility is the change in total utility that results from

The marginal rate of substitution of one good for another is measured by moving

Moving along an indifference curve,if a consumer requires a large amount of the good measured along the y-axis to make up for one unit less of the good measured on the x-axis,then

Carter spends his entire budget on pizza and Pepsi.He maximizes his utility when he allocates his entire available budget and buys pizza and Pepsi so that the

-The table above gives Jessie's marginal utility and total utility from tacos.Complete the table.

Suppose the quantity of burgers is measured on the horizontal axis and the quantity of bags of French fries is measured on the vertical axis.The marginal rate of substitution for burgers is

Timmy makes $100 per week as a taxidermist.He spends all this income to buy pizza and hair gel.The price of a pizza is $10 and the price of a bottle of hair gel is $4.If Timmy buys 6 pizzas per week,how many bottles of gel can he purchase?

Bobby buys cat food for his cat,Pearl.If the price of cat food falls,then Bobby's budget line will

Linda has $10 a month to spend on ice cream cones and chocolate bars.If the price of an ice cream cone is $2 a cone and the price of a chocolate bar is $1 a bar,which of the following is a point on Linda's budget line?

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

What does the term "indifferent" mean and what is its relationship to an indifference curve?

How can restaurants offer all-you-can-eat specials without fear of going bankrupt?

The paradox of value with respect to water and diamonds can be explained using consumer surplus because

In order to maximize his or her utility,a consumer must allocate his or her entire budget and

Why is the budget line negatively sloped?

Moving down along an indifference curve,

Sushi costs $3 per piece.Cynthia's total utility after eating one piece is 30 and her total utility after eating 2 pieces is 51,so her marginal utility per dollar from the second piece is

Marginal utility is the change in total utility that results from

The marginal rate of substitution of one good for another is measured by moving

Moving along an indifference curve,if a consumer requires a large amount of the good measured along the y-axis to make up for one unit less of the good measured on the x-axis,then

Carter spends his entire budget on pizza and Pepsi.He maximizes his utility when he allocates his entire available budget and buys pizza and Pepsi so that the

-The table above gives Jessie's marginal utility and total utility from tacos.Complete the table.

Suppose the quantity of burgers is measured on the horizontal axis and the quantity of bags of French fries is measured on the vertical axis.The marginal rate of substitution for burgers is

Timmy makes $100 per week as a taxidermist.He spends all this income to buy pizza and hair gel.The price of a pizza is $10 and the price of a bottle of hair gel is $4.If Timmy buys 6 pizzas per week,how many bottles of gel can he purchase?

Bobby buys cat food for his cat,Pearl.If the price of cat food falls,then Bobby's budget line will

Linda has $10 a month to spend on ice cream cones and chocolate bars.If the price of an ice cream cone is $2 a cone and the price of a chocolate bar is $1 a bar,which of the following is a point on Linda's budget line?

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