Question 1

Except for perfect substitutes or perfect complements, indifference curves

Accepted Answer

A)  are straight lines with a positive slope. 
B)  slope upward to the right. 
C)  are bowed in toward the origin. 
D)  are bowed out away from the origin. 
A)  are straight lines with a positive slope. 
B)  slope upward to the right. 
C)  are bowed in toward the origin. 
D)  are bowed out away from the origin.

Question 2

-The figure illustrates Elijah's preferences. He is currently at point A. The price of pizza decreases. The move from point A to point ________ is the substitution effect and the move from point ________ to point ________ is the income effect.

Accepted Answer

A)  B; B; C 
B)  E; E; C 
C)  D; D; B 
D)  C; C; B 
A)  B; B; C 
B)  E; E; C 
C)  D; D; B 
D)  C; C; B

Question 3

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

Accepted Answer

A)  2 comic books and 12 cookies; 4 comic books and 8 cookies 
B)  2 comic books and 12 cookies; 8 comic books and 8 cookies 
C)  4 comic books and 8 cookies; 6 comic books and 12 cookies 
D)  6 comic books and 6 cookies; 5 comic books and 13 cookies 
A)  2 comic books and 12 cookies; 4 comic books and 8 cookies 
B)  2 comic books and 12 cookies; 8 comic books and 8 cookies 
C)  4 comic books and 8 cookies; 6 comic books and 12 cookies 
D)  6 comic books and 6 cookies; 5 comic books and 13 cookies

Question 4

Suppose a budget line is drawn between pizza, on the horizontal axis, and tacos, on the vertical axis. How does a change in the price of a pizza affect the budget line?

Accepted Answer

When the price of the good measured on t

Question 5

-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 6

What is the marginal rate of substitution and how does it relate to an indifference curve?

Accepted Answer

The marginal rate of substitution is the

Question 7

When the consumer is at his or her best affordable consumption point, it is the case that the marginal rate of substitution is

Accepted Answer

A)  greater than the price ratio. 
B)  equal to the price ratio. 
C)  less than the price ratio. 
D)  maximized. 
A)  greater than the price ratio. 
B)  equal to the price ratio. 
C)  less than the price ratio. 
D)  maximized.

Question 8

-In the above figure, income is $8, the price of a soft drink is $1, and the initial price of a milkshake is $2. If the price of a milkshake decreases to $1, the income effect is the movement from point ________ to point ________.

Accepted Answer

A)  a; b 
B)  b; d 
C)  b; c 
D)  a; c 
A)  a; b 
B)  b; d 
C)  b; c 
D)  a; c

Question 9

The substitution effect reflects a movement along a given

Accepted Answer

A)  horizontal line. 
B)  vertical line. 
C)  indifference curve. 
D)  budget line. 
A)  horizontal line. 
B)  vertical line. 
C)  indifference curve. 
D)  budget line.

Question 10

All points above the budget line are

Accepted Answer

A)  inferior to every point on the budget line. 
B)  preferred to every point on the budget line. 
C)  unaffordable. 
D)  Both answers B and C are correct. 
A)  inferior to every point on the budget line. 
B)  preferred to every point on the budget line. 
C)  unaffordable. 
D)  Both answers B and C are correct.

Question 11

-In the above figure, the budget line would rotate in the direction indicated as a result of a

Accepted Answer

A)  rise in the price of a book. 
B)  decrease in income. 
C)  rise in the price of a movie. 
D)  fall in the price of a movie. 
A)  rise in the price of a book. 
B)  decrease in income. 
C)  rise in the price of a movie. 
D)  fall in the price of a movie.

Question 12

What is the substitution effect?

Accepted Answer

The substitution effect is the

Question 13

-Consider the budget line in the above figure. If the price of a magazine is $4, then the price of a hamburger is

Accepted Answer

A)  $1.75. 
B)  $3.00. 
C)  $4.00. 
D)  $5.33. 
A)  $1.75. 
B)  $3.00. 
C)  $4.00. 
D)  $5.33.

Question 14

Budget lines are drawn on a diagram with the

Accepted Answer

A)  price of the good on the vertical axis and its quantity on the horizontal axis. 
B)  price of one good on the vertical axis and the price of another good on the horizontal axis. 
C)  quantity of the good on the vertical axis and its price on the horizontal axis. 
D)  quantity of one good on the vertical axis and the quantity of another good on the horizontal axis. 
A)  price of the good on the vertical axis and its quantity on the horizontal axis. 
B)  price of one good on the vertical axis and the price of another good on the horizontal axis. 
C)  quantity of the good on the vertical axis and its price on the horizontal axis. 
D)  quantity of one good on the vertical axis and the quantity of another good on the horizontal axis.

Question 15

The magnitude of the slope of the indifference curve between steak and lobster is called the marginal rate of substitution.

Accepted Answer

A) True 
 B)False

Question 16

The price effect is equal to the

Accepted Answer

A)  substitution effect. 
B)  substitution effect plus the income effect. 
C)  marginal rate of substitution minus relative prices. 
D)  substitution effect minus the income effect. 
A)  substitution effect. 
B)  substitution effect plus the income effect. 
C)  marginal rate of substitution minus relative prices. 
D)  substitution effect minus the income effect.

Question 17

-The above figure shows one of Sam's indifference curves between gasoline and coffee. Which of the following about a movement along Sam's indifference curve is CORRECT?

Accepted Answer

A)  As he moves leftward along the curve, he likes the combinations of gasoline and coffee better and better. 
B)  As he moves rightward along the curve, he likes the combinations of gasoline and coffee better and better. 
C)  He likes all combinations of gasoline and coffee along the curve equally well. 
D)  None of the above is true. 
A)  As he moves leftward along the curve, he likes the combinations of gasoline and coffee better and better. 
B)  As he moves rightward along the curve, he likes the combinations of gasoline and coffee better and better. 
C)  He likes all combinations of gasoline and coffee along the curve equally well. 
D)  None of the above is true.

Question 18

In an indifference curve/budget line diagram, at your consumer equilibrium, that is, your best affordable point, which of the following statements is CORRECT?

Accepted Answer

A)  Any movement upward or downward on your budget line will move you to a less preferred point. 
B)  Any movement upward or downward on your indifference curve will move you to a less preferred point. 
C)  Your marginal rate of substitution is greater than the magnitude of the budget line by as much as possible. 
D)  All of the above are correct. 
A)  Any movement upward or downward on your budget line will move you to a less preferred point. 
B)  Any movement upward or downward on your indifference curve will move you to a less preferred point. 
C)  Your marginal rate of substitution is greater than the magnitude of the budget line by as much as possible. 
D)  All of the above are correct.

Question 19

Gasoline is a normal good. If the price of gasoline falls, a consumer buys more gasoline because of

Accepted Answer

A)  only an income effect. 
B)  only a substitution effect. 
C)  an increase in the marginal rate of substitution. 
D)  both an income effect and a substitution effect. 
A)  only an income effect. 
B)  only a substitution effect. 
C)  an increase in the marginal rate of substitution. 
D)  both an income effect and a substitution effect.

Question 20

Some parents struggling with back-to-school buys. "A couple of years ago, I was able to buy everything practically new," said Charles Lane-Bey, a U.S. Postal Service worker who's struggling to make ends meet. Suppose Charles has $10 to spend on back-to-school clothing for his son, and pants cost 50 cents and the price of shirts has decreased from $1 to 50 cents. What is the effect of the fall in price of shirts on Charles's real income in terms of pants?

Accepted Answer

A)  It increases from 10 to 20. 
B)  It decreases from 10 to 5. 
C)  It does not change. 
D)  It increases from 20 to 40. 
A)  It increases from 10 to 20. 
B)  It decreases from 10 to 5. 
C)  It does not change. 
D)  It increases from 20 to 40.

Except for perfect substitutes or perfect complements, indifference curves

-The figure illustrates Elijah's preferences. He is currently at point A. The price of pizza decreases. The move from point A to point is the substitution effect and the move from point to point is the income effect.

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

Suppose a budget line is drawn between pizza, on the horizontal axis, and tacos, on the vertical axis. How does a change in the price of a pizza affect the budget line?

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

What is the marginal rate of substitution and how does it relate to an indifference curve?

When the consumer is at his or her best affordable consumption point, it is the case that the marginal rate of substitution is

-In the above figure, income is $8, the price of a soft drink is $1, and the initial price of a milkshake is $2. If the price of a milkshake decreases to $1, the income effect is the movement from point to point .

The substitution effect reflects a movement along a given

All points above the budget line are

-In the above figure, the budget line would rotate in the direction indicated as a result of a

What is the substitution effect?

-Consider the budget line in the above figure. If the price of a magazine is $4, then the price of a hamburger is

Budget lines are drawn on a diagram with the

The magnitude of the slope of the indifference curve between steak and lobster is called the marginal rate of substitution.

The price effect is equal to the

-The above figure shows one of Sam's indifference curves between gasoline and coffee. Which of the following about a movement along Sam's indifference curve is CORRECT?

In an indifference curve/budget line diagram, at your consumer equilibrium, that is, your best affordable point, which of the following statements is CORRECT?

Gasoline is a normal good. If the price of gasoline falls, a consumer buys more gasoline because of

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

Except for perfect substitutes or perfect complements, indifference curves

-The figure illustrates Elijah's preferences. He is currently at point A. The price of pizza decreases. The move from point A to point ________ is the substitution effect and the move from point ________ to point ________ is the income effect.

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

Suppose a budget line is drawn between pizza, on the horizontal axis, and tacos, on the vertical axis. How does a change in the price of a pizza affect the budget line?

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

What is the marginal rate of substitution and how does it relate to an indifference curve?

When the consumer is at his or her best affordable consumption point, it is the case that the marginal rate of substitution is

-In the above figure, income is $8, the price of a soft drink is $1, and the initial price of a milkshake is $2. If the price of a milkshake decreases to $1, the income effect is the movement from point ________ to point ________.

The substitution effect reflects a movement along a given

All points above the budget line are

-In the above figure, the budget line would rotate in the direction indicated as a result of a

What is the substitution effect?

-Consider the budget line in the above figure. If the price of a magazine is $4, then the price of a hamburger is

Budget lines are drawn on a diagram with the

The magnitude of the slope of the indifference curve between steak and lobster is called the marginal rate of substitution.

The price effect is equal to the

-The above figure shows one of Sam's indifference curves between gasoline and coffee. Which of the following about a movement along Sam's indifference curve is CORRECT?

In an indifference curve/budget line diagram, at your consumer equilibrium, that is, your best affordable point, which of the following statements is CORRECT?

Gasoline is a normal good. If the price of gasoline falls, a consumer buys more gasoline because of

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 figure illustrates Elijah's preferences. He is currently at point A. The price of pizza decreases. The move from point A to point is the substitution effect and the move from point to point is the income effect.

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

-In the above figure, income is $8, the price of a soft drink is $1, and the initial price of a milkshake is $2. If the price of a milkshake decreases to $1, the income effect is the movement from point to point .