Question 1

Describe the consumer equilibrium in the indifference curve/budget line model.

Accepted Answer

A consumer equilibrium occurs when the c

Question 2

What is a household's real income?

Accepted Answer

A household's real income is the househo

Question 3

If an indifference map for a consumer is made up of straight, negatively sloped lines, the goods are

Accepted Answer

A)  perfect complements. 
B)  unrelated. 
C)  perfect substitutes. 
D)  not desirable. 
A)  perfect complements. 
B)  unrelated. 
C)  perfect substitutes. 
D)  not desirable.

Question 4

-In the above figure, Reggie's budget line rotates outward from BL1 to BL2. He initially consumes at point A. If his new consumption bundle is at point B, this implies that kiwi fruit and mangoes are

Accepted Answer

A)  both lower in price. 
B)  both inferior goods. 
C)  neither substitutes nor complements. 
D)  None of the above answers is correct. 
A)  both lower in price. 
B)  both inferior goods. 
C)  neither substitutes nor complements. 
D)  None of the above answers is correct.

Question 5

-Kristen has an income of $450 per year to spend on music CDs and movies on DVDs. The price of a CD is $15. The indifference curves in the figure above (I1, I2, and I3) reflect Kristen's preferences. If the price of a DVD is $22.50, then Kristen buys ________ DVDs; if the price of a DVD is $18.00, then Kristen buys ________ DVDs.

Accepted Answer

A)  12; 14 
B)  5; 10 
C)  10; 15 
D)  7.5; 12.5 
A)  12; 14 
B)  5; 10 
C)  10; 15 
D)  7.5; 12.5

Question 6

When a consumer is at his or her best affordable point, the budget line

Accepted Answer

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

Question 7

-To draw your budget line between steak and lobster, all you need to know is your income.

Accepted Answer

A) True 
 B)False

Question 8

The marginal rate of substitution is equal to the

Accepted Answer

A)  slope of the demand curve. 
B)  marginal cost of each good. 
C)  magnitude of the slope of the indifference curve. 
D)  relative prices of the two goods. 
A)  slope of the demand curve. 
B)  marginal cost of each good. 
C)  magnitude of the slope of the indifference curve. 
D)  relative prices of the two goods.

Question 9

-Julie's demand curve for video downloads is downward sloping because as the price of a download decreases, ________ and she watches ________ videos.

Accepted Answer

A)  the slope of her budget line changes; fewer 
B)  her budget line shifts inward; fewer 
C)  the slope of her budget line changes; more 
D)  her budget line shifts outward; more 
A)  the slope of her budget line changes; fewer 
B)  her budget line shifts inward; fewer 
C)  the slope of her budget line changes; more 
D)  her budget line shifts outward; more

Question 10

All points below a given indifference curve are

Accepted Answer

A)  less preferred to any point on the indifference curve. 
B)  preferred to any point on the indifference curve. 
C)  definitely affordable. 
D)  Both answers A and C are correct. 
A)  less preferred to any point on the indifference curve. 
B)  preferred to any point on the indifference curve. 
C)  definitely affordable. 
D)  Both answers A and C are correct.

Question 11

Which of the following factors is NOT part of the budget equation?

Accepted Answer

A)  relative prices 
B)  real income 
C)  quantities of goods 
D)  preferences 
A)  relative prices 
B)  real income 
C)  quantities of goods 
D)  preferences

Question 12

-The indifference curves in the figure above (I1, I2, and I3) reflect Peter's consumption preferences. Peter prefers consuming ________ to consuming ________.

Accepted Answer

A)  48 slices of pizza and 12 chocolate bars; 24 slices of pizza and 24 chocolate bars 
B)  40 slices of pizza and 20 chocolate bars; 48 slices of pizza and 12 chocolate bars 
C)  24 slices of pizza and 24 chocolate bars; 40 slices of pizza and 20 chocolate bars 
D)  32 slices of pizza and 8 chocolate bars; 16 slices of pizza and 16 chocolate bars 
A)  48 slices of pizza and 12 chocolate bars; 24 slices of pizza and 24 chocolate bars 
B)  40 slices of pizza and 20 chocolate bars; 48 slices of pizza and 12 chocolate bars 
C)  24 slices of pizza and 24 chocolate bars; 40 slices of pizza and 20 chocolate bars 
D)  32 slices of pizza and 8 chocolate bars; 16 slices of pizza and 16 chocolate bars

Question 13

-Joe spends $72 on gasoline and sandwiches. The price of a gallon of gasoline is $3 and a sandwich is $4. Placing the quantity of sandwiches on the left side, what is Joe's budget equation? If sandwiches are measured on the vertical axis, what is the slope of Joe's budget line?

Accepted Answer

The budget equation is Q_S = 18 - 0.75Q_G, w

Question 14

If the price of peanuts increases by 10 percent and the price of potato chips does not change, then the relative price of peanuts with respect to potato chips will ________ and the relative price of potato chips with respect to peanuts will ________.

Accepted Answer

A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall 
A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall

Question 15

Explain how changes in the price of goods and the consumer's budget affect the budget line.

Accepted Answer

If the price of the good measured on the

Question 16

During October and November 2008, gasoline prices were falling dramatically, making travel by car less expensive but air travel prices were as high as ever. What is TRUE about consumer preferences, possibilities, or choices?

Accepted Answer

A)  The relative price of air travel in terms of travelling by car decreases. 
B)  If travelling by car is a normal good, both the substitution and income effects would lead to a decrease in travelling by car. 
C)  The consumers' budget line would shift outward and its slope would not change. 
D)  If air travel is a normal good, both the substitution and income effects would lead to an increase in air travel. 
A)  The relative price of air travel in terms of travelling by car decreases. 
B)  If travelling by car is a normal good, both the substitution and income effects would lead to a decrease in travelling by car. 
C)  The consumers' budget line would shift outward and its slope would not change. 
D)  If air travel is a normal good, both the substitution and income effects would lead to an increase in air travel.

Question 17

-In the table above, which case has the lowest relative price for a hamburger?

Accepted Answer

A)  case A 
B)  case B 
C)  case C 
D)  All three cases have an equal relative price for a hamburger. 
A)  case A 
B)  case B 
C)  case C 
D)  All three cases have an equal relative price for a hamburger.

Question 18

If consumers buy only gasoline and food, at their best affordable choice the marginal rate of substitution between food and gasoline ________ the relative price of food and gasoline.

Accepted Answer

A)  must exceed 
B)  must be less than the 
C)  must equal 
D)  might exceed or be less than but not equal to 
A)  must exceed 
B)  must be less than the 
C)  must equal 
D)  might exceed or be less than but not equal to

Question 19

As Sam moves rightward along his indifference curve, his marginal rate of substitution

Accepted Answer

A)  is diminishing. 
B)  is increasing. 
C)  remains constant. 
D)  shows the change in his income. 
A)  is diminishing. 
B)  is increasing. 
C)  remains constant. 
D)  shows the change in his income.

Question 20

When your budget line is just tangent to your indifference curve, you are at the point on the budget line that you least prefer.

Accepted Answer

A) True 
 B)False

Describe the consumer equilibrium in the indifference curve/budget line model.

What is a household's real income?

If an indifference map for a consumer is made up of straight, negatively sloped lines, the goods are

-In the above figure, Reggie's budget line rotates outward from BL₁ to BL₂. He initially consumes at point A. If his new consumption bundle is at point B, this implies that kiwi fruit and mangoes are

When a consumer is at his or her best affordable point, the budget line

-To draw your budget line between steak and lobster, all you need to know is your income.

The marginal rate of substitution is equal to the

-Julie's demand curve for video downloads is downward sloping because as the price of a download decreases, and she watches videos.

All points below a given indifference curve are

Which of the following factors is NOT part of the budget equation?

-The indifference curves in the figure above (I₁, I₂, and I₃) reflect Peter's consumption preferences. Peter prefers consuming to consuming .

-Joe spends $72 on gasoline and sandwiches. The price of a gallon of gasoline is $3 and a sandwich is $4. Placing the quantity of sandwiches on the left side, what is Joe's budget equation? If sandwiches are measured on the vertical axis, what is the slope of Joe's budget line?

If the price of peanuts increases by 10 percent and the price of potato chips does not change, then the relative price of peanuts with respect to potato chips will and the relative price of potato chips with respect to peanuts will .

Explain how changes in the price of goods and the consumer's budget affect the budget line.

During October and November 2008, gasoline prices were falling dramatically, making travel by car less expensive but air travel prices were as high as ever. What is TRUE about consumer preferences, possibilities, or choices?

-In the table above, which case has the lowest relative price for a hamburger?

If consumers buy only gasoline and food, at their best affordable choice the marginal rate of substitution between food and gasoline ________ the relative price of food and gasoline.

As Sam moves rightward along his indifference curve, his marginal rate of substitution

When your budget line is just tangent to your indifference curve, you are at the point on the budget line that you least prefer.

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

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 9: Possibilities, Preferences, and Choices

Describe the consumer equilibrium in the indifference curve/budget line model.

What is a household's real income?

If an indifference map for a consumer is made up of straight, negatively sloped lines, the goods are

-In the above figure, Reggie's budget line rotates outward from BL1 to BL2. He initially consumes at point A. If his new consumption bundle is at point B, this implies that kiwi fruit and mangoes are

When a consumer is at his or her best affordable point, the budget line

-To draw your budget line between steak and lobster, all you need to know is your income.

The marginal rate of substitution is equal to the

-Julie's demand curve for video downloads is downward sloping because as the price of a download decreases, ________ and she watches ________ videos.

All points below a given indifference curve are

Which of the following factors is NOT part of the budget equation?

-The indifference curves in the figure above (I1, I2, and I3) reflect Peter's consumption preferences. Peter prefers consuming ________ to consuming ________.

-Joe spends $72 on gasoline and sandwiches. The price of a gallon of gasoline is $3 and a sandwich is $4. Placing the quantity of sandwiches on the left side, what is Joe's budget equation? If sandwiches are measured on the vertical axis, what is the slope of Joe's budget line?

If the price of peanuts increases by 10 percent and the price of potato chips does not change, then the relative price of peanuts with respect to potato chips will ________ and the relative price of potato chips with respect to peanuts will ________.

Explain how changes in the price of goods and the consumer's budget affect the budget line.

During October and November 2008, gasoline prices were falling dramatically, making travel by car less expensive but air travel prices were as high as ever. What is TRUE about consumer preferences, possibilities, or choices?

-In the table above, which case has the lowest relative price for a hamburger?

If consumers buy only gasoline and food, at their best affordable choice the marginal rate of substitution between food and gasoline ________ the relative price of food and gasoline.

As Sam moves rightward along his indifference curve, his marginal rate of substitution

When your budget line is just tangent to your indifference curve, you are at the point on the budget line that you least prefer.

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

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

-In the above figure, Reggie's budget line rotates outward from BL₁ to BL₂. He initially consumes at point A. If his new consumption bundle is at point B, this implies that kiwi fruit and mangoes are

-Julie's demand curve for video downloads is downward sloping because as the price of a download decreases, and she watches videos.

-The indifference curves in the figure above (I₁, I₂, and I₃) reflect Peter's consumption preferences. Peter prefers consuming to consuming .

If the price of peanuts increases by 10 percent and the price of potato chips does not change, then the relative price of peanuts with respect to potato chips will and the relative price of potato chips with respect to peanuts will .