Question 1

Which of the following statements is FALSE?

Accepted Answer

A) A consumer has only one indifference curve. 
B) A consumer possesses a preference map. 
C) An indifference curve is a curve that shows the combination of goods among which a consumer is indifferent. 
D) The marginal rate of substitution is equal to the magnitude of the slope of the indifference curve. 
E) Diminishing marginal rate of substitution means that the marginal rate of substitution decreases as more of the good is consumed. 
A) A consumer has only one indifference curve. 
B) A consumer possesses a preference map. 
C) An indifference curve is a curve that shows the combination of goods among which a consumer is indifferent. 
D) The marginal rate of substitution is equal to the magnitude of the slope of the indifference curve. 
E) Diminishing marginal rate of substitution means that the marginal rate of substitution decreases as more of the good is consumed.

Question 2

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 3

-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 4

To resolve the paradox of value, you must

Accepted Answer

A) compare price elasticities of demand across goods. 
B) distinguish between marginal and total utility. 
C) sacrifice efficiency. 
D) minimize consumer surplus. 
E) distinguish between marginal utility and price. 
A) compare price elasticities of demand across goods. 
B) distinguish between marginal and total utility. 
C) sacrifice efficiency. 
D) minimize consumer surplus. 
E) distinguish between marginal utility and price.

Question 5

-George has a $600 annual entertainment budget that he uses to buy trips to the movies and dinners at local restaurants.The figure above shows indifference curves and budget lines for these two goods.The price of a movie is $15.
a∙Along budget line BL₁, what is the price of a dinner?
b∙What combination of dinners and movies will George select along budget line BL₁?
c∙Budget line BL₂ represents a change in the price of dinners from that along BL₁.What is the new price of dinners along this budget line?
d∙What combination of dinners and movies will George select along budget line BL₂?
e∙Use the information in this problem to give two points on George's demand curve for dinners.

Accepted Answer

a∙George can buy 20 dinners and his inco

Question 6

In an indifference curve/budget line diagram, a consumer's equilibrium consumption combination will occur

Accepted Answer

A) always inside the budget line. 
B) always outside the budget line. 
C) always on the budget line. 
D) sometimes on and sometimes inside the budget line depending on the indifference curves. 
E) at the origin. 
A) always inside the budget line. 
B) always outside the budget line. 
C) always on the budget line. 
D) sometimes on and sometimes inside the budget line depending on the indifference curves. 
E) at the origin.

Question 7

The fact that diamonds have a much higher price than water

Accepted Answer

A) violates the rules of utility maximization because water is necessary for life. 
B) does not violate the rules of utility maximization because globally, fresh water is actually very rare. 
C) does not violate the rules of utility maximization because water's marginal utility is low. 
D) violates the rules of utility maximization because diamonds are not necessities. 
E) violates the rules of utility maximization because the consumer actually consumes a large amount of water. 
A) violates the rules of utility maximization because water is necessary for life. 
B) does not violate the rules of utility maximization because globally, fresh water is actually very rare. 
C) does not violate the rules of utility maximization because water's marginal utility is low. 
D) violates the rules of utility maximization because diamonds are not necessities. 
E) violates the rules of utility maximization because the consumer actually consumes a large amount of water.

Question 8

Mary is currently buying apples and oranges such that the last unit of apples has 30 units of utility and the last unit of oranges has 40 units of utility.She has allocated her entire budget.If the price of an apple is 10 cents and the price of an orange is 20 cents, to maximize her utility, what should Mary do?

Accepted Answer

A) buy more apples and fewer oranges 
B) buy more oranges and fewer apples 
C) continue to buy the same amounts of both goods 
D) buy fewer apples and fewer oranges 
E) None of the above answers is correct. 
A) buy more apples and fewer oranges 
B) buy more oranges and fewer apples 
C) continue to buy the same amounts of both goods 
D) buy fewer apples and fewer oranges 
E) None of the above answers is correct.

Question 9

How is a budget line similar to a production possibilities frontier? How do they differ?

Accepted Answer

Both the budget line and the production

Question 10

As Sam moves rightward along his indifference curve, his marginal rate of substitution for the good on the horizontal axis

Accepted Answer

A) is diminishing. 
B) is increasing. 
C) remains constant. 
D) shows the change in his income. 
E) first increases and then diminishes. 
A) is diminishing. 
B) is increasing. 
C) remains constant. 
D) shows the change in his income. 
E) first increases and then diminishes.

Question 11

Marginal utility per dollar is calculated by ________ the price of the good.

Accepted Answer

A) multiplying the marginal utility from a good by 
B) dividing the marginal utility from a good by 
C) multiplying the total utility from a good by 
D) dividing the total utility from a good by 
E) averaging the marginal utility from the good with 
A) multiplying the marginal utility from a good by 
B) dividing the marginal utility from a good by 
C) multiplying the total utility from a good by 
D) dividing the total utility from a good by 
E) averaging the marginal utility from the good with

Question 12

-The above table shows Homer's total utility from boxes of doughnuts.As Homer's consumption of doughnuts increases,

Accepted Answer

A) both his total utility and his marginal utility increase. 
B) his total utility increases, but his marginal utility decreases. 
C) his total utility decreases, but his marginal utility increases. 
D) both his total utility and his marginal utility decrease. 
E) None of the above answers are correct. 
A) both his total utility and his marginal utility increase. 
B) his total utility increases, but his marginal utility decreases. 
C) his total utility decreases, but his marginal utility increases. 
D) both his total utility and his marginal utility decrease. 
E) None of the above answers are correct.

Question 13

An indifference curve shows all combinations of two goods

Accepted Answer

A) that can be purchased with a given income. 
B) that can be purchased if relative prices are constant. 
C) among which the consumer is indifferent. 
D) that have the same marginal rate of substitution. 
E) that have the same opportunity cost. 
A) that can be purchased with a given income. 
B) that can be purchased if relative prices are constant. 
C) among which the consumer is indifferent. 
D) that have the same marginal rate of substitution. 
E) that have the same opportunity cost.

Question 14

-Amy has the total utility values given above for video rentals a week.Complete the table by calculating her marginal utilities.

Accepted Answer

@#IMG-DLM& The compl

Question 15

A preference map is a

Accepted Answer

A) series of indifference curves. 
B) positively sloped series of curves, which reflect a consumer's preferences. 
C) contour map of a consumer's budget. 
D) map showing how much a consumer prefers one good for another. 
E) None of the above answers is correct. 
A) series of indifference curves. 
B) positively sloped series of curves, which reflect a consumer's preferences. 
C) contour map of a consumer's budget. 
D) map showing how much a consumer prefers one good for another. 
E) None of the above answers is correct.

Question 16

If the budget line rotates inward and becomes steeper, there is a

Accepted Answer

A) higher opportunity cost of the good measured on the x-axis. 
B) lower opportunity cost of the good measured on the x-axis. 
C) larger budget. 
D) higher price for the good measured on the y-axis. 
E) lower price for the good measured on the x-axis. 
A) higher opportunity cost of the good measured on the x-axis. 
B) lower opportunity cost of the good measured on the x-axis. 
C) larger budget. 
D) higher price for the good measured on the y-axis. 
E) lower price for the good measured on the x-axis.

Question 17

An increase in a consumer's budget

Accepted Answer

A) changes the relative prices of the goods. 
B) changes the slope of the budget line. 
C) decreases consumption possibilities. 
D) increases consumption possibilities. 
E) has no effect on the consumer's budget line. 
A) changes the relative prices of the goods. 
B) changes the slope of the budget line. 
C) decreases consumption possibilities. 
D) increases consumption possibilities. 
E) has no effect on the consumer's budget line.

Question 18

A budget line shows the

Accepted Answer

A) limits to production possibilities. 
B) limits to production opportunities. 
C) slope of the demand curve. 
D) limits to consumption possibilities. 
E) way the demand curve shifts if the consumer's budget changes. 
A) limits to production possibilities. 
B) limits to production opportunities. 
C) slope of the demand curve. 
D) limits to consumption possibilities. 
E) way the demand curve shifts if the consumer's budget changes.

Question 19

For Jack, the total utility from three shirts is 50 units and the marginal utility of one more shirt is 5.The total utility of four shirts is

Accepted Answer

A) 45. 
B) 55. 
C) 55/4. 
D) 55/5. 
E) None of the above answers is correct. 
A) 45. 
B) 55. 
C) 55/4. 
D) 55/5. 
E) None of the above answers is correct.

Question 20

Suppose Alice spends her budget on books and downloaded movies.If her budget does not change and the price of a book stays the same but the price of a downloaded movie falls, her budget line

Accepted Answer

A) shifts outward and its slope does not change. 
B) shifts inward and its slope does not change. 
C) rotates inward and its slope changes. 
D) rotates outward and its slope changes. 
E) does not change because her budget has not changed. 
A) shifts outward and its slope does not change. 
B) shifts inward and its slope does not change. 
C) rotates inward and its slope changes. 
D) rotates outward and its slope changes. 
E) does not change because her budget has not changed.

Which of the following statements is FALSE?

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

To resolve the paradox of value, you must

In an indifference curve/budget line diagram, a consumer's equilibrium consumption combination will occur

The fact that diamonds have a much higher price than water

How is a budget line similar to a production possibilities frontier? How do they differ?

As Sam moves rightward along his indifference curve, his marginal rate of substitution for the good on the horizontal axis

Marginal utility per dollar is calculated by ________ the price of the good.

-The above table shows Homer's total utility from boxes of doughnuts.As Homer's consumption of doughnuts increases,

An indifference curve shows all combinations of two goods

-Amy has the total utility values given above for video rentals a week.Complete the table by calculating her marginal utilities.

A preference map is a

If the budget line rotates inward and becomes steeper, there is a

An increase in a consumer's budget

A budget line shows the

For Jack, the total utility from three shirts is 50 units and the marginal utility of one more shirt is 5.The total utility of four shirts is

Suppose Alice spends her budget on books and downloaded movies.If her budget does not change and the price of a book stays the same but the price of a downloaded movie falls, her 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

Which of the following statements is FALSE?

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

To resolve the paradox of value, you must

In an indifference curve/budget line diagram, a consumer's equilibrium consumption combination will occur

The fact that diamonds have a much higher price than water

How is a budget line similar to a production possibilities frontier? How do they differ?

As Sam moves rightward along his indifference curve, his marginal rate of substitution for the good on the horizontal axis

Marginal utility per dollar is calculated by ________ the price of the good.

-The above table shows Homer's total utility from boxes of doughnuts.As Homer's consumption of doughnuts increases,

An indifference curve shows all combinations of two goods

-Amy has the total utility values given above for video rentals a week.Complete the table by calculating her marginal utilities.

A preference map is a

If the budget line rotates inward and becomes steeper, there is a

An increase in a consumer's budget

A budget line shows the

For Jack, the total utility from three shirts is 50 units and the marginal utility of one more shirt is 5.The total utility of four shirts is

Suppose Alice spends her budget on books and downloaded movies.If her budget does not change and the price of a book stays the same but the price of a downloaded movie falls, her 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