Question 1

The magnitude of the slope of an indifference curve

Accepted Answer

A)  is equal to the marginal rate of substitution. 
B)  always equals the relative price of the product measured along the horizontal axis. 
C)  increases as income increases. 
D)  decreases when income increases. 
A)  is equal to the marginal rate of substitution. 
B)  always equals the relative price of the product measured along the horizontal axis. 
C)  increases as income increases. 
D)  decreases when income increases.

Question 2

The change in consumption that results from a change in the relative price of goods while staying on the same indifference curve is the

Accepted Answer

A)  income effect. 
B)  substitution effect. 
C)  indifference effect. 
D)  price effect. 
A)  income effect. 
B)  substitution effect. 
C)  indifference effect. 
D)  price effect.

Question 3

-Waldo buys only two items, pretzels and ham sandwiches. Waldo has $24 in income, pretzels cost $0.60 per bag and ham sandwiches cost $2.40 each. If Waldo's budget line is constructed with ham sandwiches along the horizontal axis and bags of pretzels along the vertical axis, then

Accepted Answer

A)  the horizontal intercept of the budget line will be 40 ham sandwiches. 
B)  the vertical intercept of the budget line will be 10 bags of pretzels. 
C)  the slope of the budget line will be -4 bags of pretzels per ham sandwich. 
D)  All of the above answers are correct. 
A)  the horizontal intercept of the budget line will be 40 ham sandwiches. 
B)  the vertical intercept of the budget line will be 10 bags of pretzels. 
C)  the slope of the budget line will be -4 bags of pretzels per ham sandwich. 
D)  All of the above answers are correct.

Question 4

The price of one good changes and Sue is now at a point on her indifference curve where the marginal rate of substitution exceeds the relative price. Sue will now choose to buy ________ of the good that is measured on the ________.

Accepted Answer

A)  more; x-axis 
B)  more; y-axis 
C)  the same quantity; x-axis 
D)  less; x-axis 
A)  more; x-axis 
B)  more; y-axis 
C)  the same quantity; x-axis 
D)  less; x-axis

Question 5

-Consider the change in the price of a book depicted in the above figure. The original budget line is BC. The new budget line is BD. As a result of this price change, the income effect can be represented by a movement from

Accepted Answer

A)  point E to point F. 
B)  point G to point A. 
C)  point G to point F. 
D)  point A to point F. 
A)  point E to point F. 
B)  point G to point A. 
C)  point G to point F. 
D)  point A to point F.

Question 6

Bananas cost about $1 a pound and ground beef costs about $3 a pound. If Jenna has $18 to spend on groceries and she only buys bananas and beef, which of the following is a possible combination of these goods that could maximize her total utility?

Accepted Answer

A)  18 lbs of bananas and 6 lbs of beef 
B)  10 lbs of bananas and 8 lbs of beef 
C)  8 lbs of bananas and 3 lbs of beef 
D)  3 lbs of bananas and 5 lbs of beef 
A)  18 lbs of bananas and 6 lbs of beef 
B)  10 lbs of bananas and 8 lbs of beef 
C)  8 lbs of bananas and 3 lbs of beef 
D)  3 lbs of bananas and 5 lbs of beef

Question 7

Hilda buys only cauliflower, Qc, and geraniums, Qg. The equation for Hilda's initial budget line is $40 = $2 × Qc + $4 × Qg. If Hilda's income increases by $20, the price of cauliflower decreases by $1, and the price of geraniums increases by $1, the equation of her new budget line is ________.

Accepted Answer

A)  $60 = $1 × Qc + $5 × Qg 
B)  $60 + $1 × Qc = $5 × Qg 
C)  $0 = $60 + $1 × Qc + $5 × Qg 
D)  $60 = $5 × Qc - $1 × Qg 
A)  $60 = $1 × Qc + $5 × Qg 
B)  $60 + $1 × Qc = $5 × Qg 
C)  $0 = $60 + $1 × Qc + $5 × Qg 
D)  $60 = $5 × Qc - $1 × Qg

Question 8

Suppose the price of a good rises. The income effect

Accepted Answer

A)  shows the change in consumption that results from the change in relative price while staying on the same indifference curve. 
B)  shows the change in consumption that results from the change in relative price while keeping income constant. 
C)  is shown by decreasing income at the new relative price in order to move from the old indifference curve to the new indifference curve after the price change. 
D)  is shown by increasing income at the new relative price in order to move from the old indifference curve to the new indifference curve after the price change. 
A)  shows the change in consumption that results from the change in relative price while staying on the same indifference curve. 
B)  shows the change in consumption that results from the change in relative price while keeping income constant. 
C)  is shown by decreasing income at the new relative price in order to move from the old indifference curve to the new indifference curve after the price change. 
D)  is shown by increasing income at the new relative price in order to move from the old indifference curve to the new indifference curve after the price change.

Question 9

-Given the budget line in the above figure, what is the household's real income in terms of pizzas per month?

Accepted Answer

A)  5 pizzas per month 
B)  4 pizzas per month 
C)  3 pizzas per month 
D)  All of above represent the household's real income. 
A)  5 pizzas per month 
B)  4 pizzas per month 
C)  3 pizzas per month 
D)  All of above represent the household's real income.

Question 10

Goods that can be bought in any quantity desired are called

Accepted Answer

A)  divisible goods. 
B)  indivisible goods. 
C)  invisible goods. 
D)  inferior goods. 
A)  divisible goods. 
B)  indivisible goods. 
C)  invisible goods. 
D)  inferior goods.

Question 11

-The above figure shows Jane's budget line and two of her indifference curves. Which of the following happens to Jane's budget line if the price of a steak dinner fell?

Accepted Answer

A)  It would rotate inward around the vertical intercept, 10 lobster dinners. 
B)  It would rotate outward around the vertical intercept, 10 lobster dinners. 
C)  It would rotate inward around the horizontal intercept, 20 steak dinners. 
D)  It would rotate outward around the horizontal intercept, 20 steak dinners. 
A)  It would rotate inward around the vertical intercept, 10 lobster dinners. 
B)  It would rotate outward around the vertical intercept, 10 lobster dinners. 
C)  It would rotate inward around the horizontal intercept, 20 steak dinners. 
D)  It would rotate outward around the horizontal intercept, 20 steak dinners.

Question 12

-Given the indifference curve in the above figure, which point is preferred to point a?

Accepted Answer

A)  point b 
B)  point c 
C)  point d 
D)  point e 
A)  point b 
B)  point c 
C)  point d 
D)  point e

Question 13

A consumer will maximize utility, given income and prices, when the marginal rate of substitution is equal to the ratio of the prices of the two goods.

Accepted Answer

A) True 
 B)False

Question 14

-Lizzie's preferences are shown in the figure above. Lizzie is just as happy to have ________ as she is to have ________.

Accepted Answer

A)  4 comic books and 12 cookies; 6 comic books and 12 cookies 
B)  2 comic books and 12 cookies; 11 comic books and 8 cookies 
C)  2 comic books and 8 cookies; 3 comic books and 5 cookies 
D)  4 comic books and 12 cookies; 8 comic books and 8 cookies 
A)  4 comic books and 12 cookies; 6 comic books and 12 cookies 
B)  2 comic books and 12 cookies; 11 comic books and 8 cookies 
C)  2 comic books and 8 cookies; 3 comic books and 5 cookies 
D)  4 comic books and 12 cookies; 8 comic books and 8 cookies

Question 15

An indifference curve shows combinations of goods ________.

Accepted Answer

A)  which the consumer prefers equally 
B)  that are affordable 
C)  that are inside or on the budget line 
D)  that have the same relative price 
A)  which the consumer prefers equally 
B)  that are affordable 
C)  that are inside or on the budget line 
D)  that have the same relative price

Question 16

Jake plans to spend $100 on fried chicken and Pepsi. The price of a fried chicken is $5 and Pepsi is $2 per bottle. If Jake buys 10 fried chickens how many bottles of Pepsi can he buy?

Accepted Answer

A)  50 
B)  10 
C)  25 
D)  75 
A)  50 
B)  10 
C)  25 
D)  75

Question 17

-In the table above, in terms of units of hamburgers, real income is

Accepted Answer

A)  lower in case A than in cases B and C. 
B)  lower in case B than in cases A and C. 
C)  lower in case C than in cases A and B. 
D)  equal in all three cases. 
A)  lower in case A than in cases B and C. 
B)  lower in case B than in cases A and C. 
C)  lower in case C than in cases A and B. 
D)  equal in all three cases.

Question 18

Hermione and Ron are at a sweet shop in London. Hermione looks at the prices of ice cream and chocolate bars and says to Ron: "I can tell you what your marginal rate of substitution between ice cream and chocolate bars is at your best affordable point." "No, you can't," says Ron. "You don't know my preferences and how much money I have." "I don't need to know all this because I know the prices," Hermione replies. Is she right? Explain.

Accepted Answer

Yes, Hermione is correct. All informatio

Question 19

-Lizzie's budget line is shown in the figure above. The slope of the budget line is ________ cookies per magazine.

Accepted Answer

A)  2 
B)  -2 
C)  0.5 
D)  -0.5 
A)  2 
B)  -2 
C)  0.5 
D)  -0.5

Question 20

If your income increases, what is the effect on your budget line?

Accepted Answer

Your budget line wil

The magnitude of the slope of an indifference curve

The change in consumption that results from a change in the relative price of goods while staying on the same indifference curve is the

-Waldo buys only two items, pretzels and ham sandwiches. Waldo has $24 in income, pretzels cost $0.60 per bag and ham sandwiches cost $2.40 each. If Waldo's budget line is constructed with ham sandwiches along the horizontal axis and bags of pretzels along the vertical axis, then

The price of one good changes and Sue is now at a point on her indifference curve where the marginal rate of substitution exceeds the relative price. Sue will now choose to buy of the good that is measured on the .

-Consider the change in the price of a book depicted in the above figure. The original budget line is BC. The new budget line is BD. As a result of this price change, the income effect can be represented by a movement from

Bananas cost about $1 a pound and ground beef costs about $3 a pound. If Jenna has $18 to spend on groceries and she only buys bananas and beef, which of the following is a possible combination of these goods that could maximize her total utility?

Suppose the price of a good rises. The income effect

-Given the budget line in the above figure, what is the household's real income in terms of pizzas per month?

Goods that can be bought in any quantity desired are called

-The above figure shows Jane's budget line and two of her indifference curves. Which of the following happens to Jane's budget line if the price of a steak dinner fell?

-Given the indifference curve in the above figure, which point is preferred to point a?

A consumer will maximize utility, given income and prices, when the marginal rate of substitution is equal to the ratio of the prices of the two goods.

-Lizzie's preferences are shown in the figure above. Lizzie is just as happy to have as she is to have .

An indifference curve shows combinations of goods ________.

Jake plans to spend $100 on fried chicken and Pepsi. The price of a fried chicken is $5 and Pepsi is $2 per bottle. If Jake buys 10 fried chickens how many bottles of Pepsi can he buy?

-In the table above, in terms of units of hamburgers, real income is

-Lizzie's budget line is shown in the figure above. The slope of the budget line is ________ cookies per magazine.

If your income increases, what is the effect on your budget line?

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

The magnitude of the slope of an indifference curve

The change in consumption that results from a change in the relative price of goods while staying on the same indifference curve is the

-Waldo buys only two items, pretzels and ham sandwiches. Waldo has $24 in income, pretzels cost $0.60 per bag and ham sandwiches cost $2.40 each. If Waldo's budget line is constructed with ham sandwiches along the horizontal axis and bags of pretzels along the vertical axis, then

The price of one good changes and Sue is now at a point on her indifference curve where the marginal rate of substitution exceeds the relative price. Sue will now choose to buy ________ of the good that is measured on the ________.

-Consider the change in the price of a book depicted in the above figure. The original budget line is BC. The new budget line is BD. As a result of this price change, the income effect can be represented by a movement from

Bananas cost about $1 a pound and ground beef costs about $3 a pound. If Jenna has $18 to spend on groceries and she only buys bananas and beef, which of the following is a possible combination of these goods that could maximize her total utility?

Hilda buys only cauliflower, Qc, and geraniums, Qg. The equation for Hilda's initial budget line is $40 = $2 × Qc + $4 × Qg. If Hilda's income increases by $20, the price of cauliflower decreases by $1, and the price of geraniums increases by $1, the equation of her new budget line is ________.

Suppose the price of a good rises. The income effect

-Given the budget line in the above figure, what is the household's real income in terms of pizzas per month?

Goods that can be bought in any quantity desired are called

-The above figure shows Jane's budget line and two of her indifference curves. Which of the following happens to Jane's budget line if the price of a steak dinner fell?

-Given the indifference curve in the above figure, which point is preferred to point a?

A consumer will maximize utility, given income and prices, when the marginal rate of substitution is equal to the ratio of the prices of the two goods.

-Lizzie's preferences are shown in the figure above. Lizzie is just as happy to have ________ as she is to have ________.

An indifference curve shows combinations of goods ________.

Jake plans to spend $100 on fried chicken and Pepsi. The price of a fried chicken is $5 and Pepsi is $2 per bottle. If Jake buys 10 fried chickens how many bottles of Pepsi can he buy?

-In the table above, in terms of units of hamburgers, real income is

-Lizzie's budget line is shown in the figure above. The slope of the budget line is ________ cookies per magazine.

If your income increases, what is the effect on your budget line?

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

The price of one good changes and Sue is now at a point on her indifference curve where the marginal rate of substitution exceeds the relative price. Sue will now choose to buy of the good that is measured on the .

-Lizzie's preferences are shown in the figure above. Lizzie is just as happy to have as she is to have .