Question 1

The magnitude of the slope of an indifference curve is the

Accepted Answer

A)  marginal rate of substitution. 
B)  rate of relative prices. 
C)  marginal utility of substitution. 
D)  marginal rate of utility of income. 
E)  rate of increasing opportunity cost. 
A)  marginal rate of substitution. 
B)  rate of relative prices. 
C)  marginal utility of substitution. 
D)  marginal rate of utility of income. 
E)  rate of increasing opportunity cost.

Question 2

The figure above shows three budget lines.
-Based on the figure above,which of the following would lead the consumer's budget line to shift from BL? to BL??

Accepted Answer

A)  a rise in the price of water 
B)  a fall in the price of water 
C)  a rise in the price of water and the price of gum 
D)  a decrease in the consumer's budget 
E)  an increase in the consumer's budget 
A)  a rise in the price of water 
B)  a fall in the price of water 
C)  a rise in the price of water and the price of gum 
D)  a decrease in the consumer's budget 
E)  an increase in the consumer's budget

Question 3

Suppose the price of a pair of jeans is $25 and the price of a T-shirt is $15.The consumer's budget is entirely allocated.If the marginal utility from a pair of jeans is 100 units and the marginal utility from a T-shirt is 75 units,the consumer is

Accepted Answer

A)  in equilibrium because his or her utility is maximized. 
B)  not in equilibrium and should purchase fewer jeans and more T-shirts. 
C)  not in equilibrium and should purchase fewer T-shirts and more jeans. 
D)  not in equilibrium but should maintain the current level of purchases. 
E)  not in equilibrium and should purchase more T-shirts and more jeans. 
A)  in equilibrium because his or her utility is maximized. 
B)  not in equilibrium and should purchase fewer jeans and more T-shirts. 
C)  not in equilibrium and should purchase fewer T-shirts and more jeans. 
D)  not in equilibrium but should maintain the current level of purchases. 
E)  not in equilibrium and should purchase more T-shirts and more jeans.

Question 4

What is "marginal utility"?

Accepted Answer

Marginal utility is the change in total

Question 5

A budget line will shift outward and not change its slope if

Accepted Answer

A)  there is an increase in the consumer's budget. 
B)  the consumer's preferences change. 
C)  the price of one good changes. 
D)  the price of both goods increase by the same percentage. 
E)  None of the above shift the budget line outward. 
A)  there is an increase in the consumer's budget. 
B)  the consumer's preferences change. 
C)  the price of one good changes. 
D)  the price of both goods increase by the same percentage. 
E)  None of the above shift the budget line outward.

Question 6

To derive a demand curve using the indifference curve model,you must change the

Accepted Answer

A)  consumer's preferences. 
B)  consumer's income. 
C)  price of one good, holding the price of the other good and income constant. 
D)  price of both goods simultaneously but by different amounts. 
E)  price of both goods simultaneously but by the same percentage. 
A)  consumer's preferences. 
B)  consumer's income. 
C)  price of one good, holding the price of the other good and income constant. 
D)  price of both goods simultaneously but by different amounts. 
E)  price of both goods simultaneously but by the same percentage.

Question 7

The paradox of value refers to the

Accepted Answer

A)  utility maximizing rule. 
B)  fact that water is vital but cheap while diamonds are relatively useless but expensive. 
C)  fact that consumers have different preferences and utility schedules. 
D)  law of demand. 
E)  issue of why the consumer surplus from water equals the consumer surplus from diamonds. 
A)  utility maximizing rule. 
B)  fact that water is vital but cheap while diamonds are relatively useless but expensive. 
C)  fact that consumers have different preferences and utility schedules. 
D)  law of demand. 
E)  issue of why the consumer surplus from water equals the consumer surplus from diamonds.

Question 8

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

Question 9

For a consumer to maximize utility,in part the consumer must

Accepted Answer

A)  allocate the entire available budget. 
B)  make the marginal utility per dollar from each good as much different as possible for all goods. 
C)  make the marginal utility per dollar from each good as small as possible for all goods. 
D)  spend as little of the budget as possible. 
E)  Answers A and B are both correct. 
A)  allocate the entire available budget. 
B)  make the marginal utility per dollar from each good as much different as possible for all goods. 
C)  make the marginal utility per dollar from each good as small as possible for all goods. 
D)  spend as little of the budget as possible. 
E)  Answers A and B are both correct.

Question 10

When the indifference curve is steep,the consumer has a

Accepted Answer

A)  high marginal rate of substitution for the good on the horizontal axis. 
B)  low marginal rate of substitution for the good on the horizontal axis. 
C)  large budget. 
D)  small budget. 
E)  steep budget line. 
A)  high marginal rate of substitution for the good on the horizontal axis. 
B)  low marginal rate of substitution for the good on the horizontal axis. 
C)  large budget. 
D)  small budget. 
E)  steep budget line.

Question 11

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 12

If Mark's marginal utility per dollar from the last taco is 15 and his marginal utility per dollar from the last burrito is 20 units,what should Mark do to increase his total utility?

Accepted Answer

Mark should buy more burritos and fewer

Question 13

-Sam's total utility for bananas is in the table above.Sam's total utility shows that the law of diminishing marginal utility

Accepted Answer

A)  holds because his marginal utility from bananas decreases as Sam eats more bananas. 
B)  does not hold because Sam's total utility does not reach its maximum. 
C)  does not hold because Sam's marginal utility does not decrease to zero. 
D)  holds because Sam's total utility from bananas increases as Sam eats more bananas. 
E)  None of the above answers is correct because there are no data for marginal utility with which to answer the question. 
A)  holds because his marginal utility from bananas decreases as Sam eats more bananas. 
B)  does not hold because Sam's total utility does not reach its maximum. 
C)  does not hold because Sam's marginal utility does not decrease to zero. 
D)  holds because Sam's total utility from bananas increases as Sam eats more bananas. 
E)  None of the above answers is correct because there are no data for marginal utility with which to answer the question.

Question 14

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

Accepted Answer

A consumer equilibrium occurs when the c

Question 15

The consumption of bottled water increased dramatically during the 1990s.If consumers' utility schedules for water remained constant over this time period,in order for consumers to stay in equilibrium,the price of bottled water must have

Accepted Answer

A)  risen because marginal utility increased since people consumed more bottled water. 
B)  fallen. 
C)  remained constant because the marginal utility schedule did not change. 
D)  risen because the supply of water must have increased. 
E)  We don't have enough information to say what happened to the price. 
A)  risen because marginal utility increased since people consumed more bottled water. 
B)  fallen. 
C)  remained constant because the marginal utility schedule did not change. 
D)  risen because the supply of water must have increased. 
E)  We don't have enough information to say what happened to the price.

Question 16

If a budget line rotates inward and becomes steeper,then the

Accepted Answer

A)  consumer's budget decreased. 
B)  consumer's budget increased. 
C)  price of one of the goods decreased. 
D)  price of one of the goods increased. 
E)  price of both of the goods must have decreased. 
A)  consumer's budget decreased. 
B)  consumer's budget increased. 
C)  price of one of the goods decreased. 
D)  price of one of the goods increased. 
E)  price of both of the goods must have decreased.

Question 17

When the relative price of computers falls,consumption possibilities ________ because ________.

Accepted Answer

A)  will not change; people don't need to buy multiple computers at one time 
B)  will not change; changes in technology will always lower computer prices 
C)  will change; consumers respond to lower relative prices by buying larger quantities of the good 
D)  will change; greater quantities of computers will be produced 
E)  None of the above answers is correct. 
A)  will not change; people don't need to buy multiple computers at one time 
B)  will not change; changes in technology will always lower computer prices 
C)  will change; consumers respond to lower relative prices by buying larger quantities of the good 
D)  will change; greater quantities of computers will be produced 
E)  None of the above answers is correct.

Question 18

"As Mike consumes more dates over the course of a day,it is likely that his marginal rate of substitution of dates for other goods will rise." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect.The principle

Question 19

In an indifference curve/budget line diagram,generally when the price of a good increases,the consumer purchases

Accepted Answer

A)  less of the good and moves to a lower indifference curve. 
B)  less of the good and moves to a higher indifference curve. 
C)  more of the good and moves to a higher indifference curve. 
D)  more of the good and moves to a lower indifference curve. 
E)  the same amount of the good and moves to a higher indifference curve. 
A)  less of the good and moves to a lower indifference curve. 
B)  less of the good and moves to a higher indifference curve. 
C)  more of the good and moves to a higher indifference curve. 
D)  more of the good and moves to a lower indifference curve. 
E)  the same amount of the good and moves to a higher indifference curve.

Question 20

If one of the products a consumer buys rises in price,the consumer's budget line will

Accepted Answer

A)  shift farther away from the origin of the graph and not change its slope. 
B)  rotate inward, closer to the origin. 
C)  vanish. 
D)  undergo no change. 
E)  shift farther away from the origin of the graph and become steeper. 
A)  shift farther away from the origin of the graph and not change its slope. 
B)  rotate inward, closer to the origin. 
C)  vanish. 
D)  undergo no change. 
E)  shift farther away from the origin of the graph and become steeper.

The magnitude of the slope of an indifference curve is the

The figure above shows three budget lines. -Based on the figure above,which of the following would lead the consumer's budget line to shift from BL? to BL??

Suppose the price of a pair of jeans is $25 and the price of a T-shirt is $15.The consumer's budget is entirely allocated.If the marginal utility from a pair of jeans is 100 units and the marginal utility from a T-shirt is 75 units,the consumer is

What is "marginal utility"?

A budget line will shift outward and not change its slope if

To derive a demand curve using the indifference curve model,you must change the

The paradox of value refers to the

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?

For a consumer to maximize utility,in part the consumer must

When the indifference curve is steep,the consumer has a

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

If Mark's marginal utility per dollar from the last taco is 15 and his marginal utility per dollar from the last burrito is 20 units,what should Mark do to increase his total utility?

-Sam's total utility for bananas is in the table above.Sam's total utility shows that the law of diminishing marginal utility

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

The consumption of bottled water increased dramatically during the 1990s.If consumers' utility schedules for water remained constant over this time period,in order for consumers to stay in equilibrium,the price of bottled water must have

If a budget line rotates inward and becomes steeper,then the

When the relative price of computers falls,consumption possibilities because .

"As Mike consumes more dates over the course of a day,it is likely that his marginal rate of substitution of dates for other goods will rise." Is the previous statement correct or incorrect?

In an indifference curve/budget line diagram,generally when the price of a good increases,the consumer purchases

If one of the products a consumer buys rises in price,the consumer's budget line will

Getting Started

The U.S.and 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

The magnitude of the slope of an indifference curve is the

The figure above shows three budget lines. -Based on the figure above,which of the following would lead the consumer's budget line to shift from BL? to BL??

Suppose the price of a pair of jeans is $25 and the price of a T-shirt is $15.The consumer's budget is entirely allocated.If the marginal utility from a pair of jeans is 100 units and the marginal utility from a T-shirt is 75 units,the consumer is

What is "marginal utility"?

A budget line will shift outward and not change its slope if

To derive a demand curve using the indifference curve model,you must change the

The paradox of value refers to the

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?

For a consumer to maximize utility,in part the consumer must

When the indifference curve is steep,the consumer has a

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

If Mark's marginal utility per dollar from the last taco is 15 and his marginal utility per dollar from the last burrito is 20 units,what should Mark do to increase his total utility?

-Sam's total utility for bananas is in the table above.Sam's total utility shows that the law of diminishing marginal utility

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

The consumption of bottled water increased dramatically during the 1990s.If consumers' utility schedules for water remained constant over this time period,in order for consumers to stay in equilibrium,the price of bottled water must have

If a budget line rotates inward and becomes steeper,then the

When the relative price of computers falls,consumption possibilities ________ because ________.

"As Mike consumes more dates over the course of a day,it is likely that his marginal rate of substitution of dates for other goods will rise." Is the previous statement correct or incorrect?

In an indifference curve/budget line diagram,generally when the price of a good increases,the consumer purchases

If one of the products a consumer buys rises in price,the consumer's budget line will

Getting Started

The U.S.and 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

When the relative price of computers falls,consumption possibilities because .