Question 1

Albert is consuming at a point where his budget line is not as steep as indifference curve.To reach consumer equilibrium,Albert

Accepted Answer

A) consumes less of the good that is measured on the horizontal axis. 
B) consumes none of the good that is measured on the horizontal axis. 
C) must increase his income. 
D) must shop at stores that have lower prices. 
E) consumes more of the good that is measured on the horizontal axis.

Question 2

Guy has an income (Y)of $50 with which he can purchase DVDs (D)at $10 each and haircuts (H)at $20 each.Which one of the following represents Guy's budget line?

Accepted Answer

A) Y = 10QD - 20QH 
B) 50 = QD + QH 
C) Y = 50 + QD + QH 
D) 20Y = QD + 10QH 
E) 50 = 10QD + 20QH

Question 3

Let Y = $100,QX = quantity of good X,and QW = quantity of good W,PX = $4 and PW = $5.The budget equation is

Accepted Answer

A) 100 = 4QX + 5QW. 
B) 100 = QX + (4/5)QW. 
C) QX = 100 + (4/5)QW. 
D) QX = QW + (4/5)Y. 
E) QW = QX + (4/5)Y.

Question 4

Use the figure below to answer the following questions.
  
Figure 9.2.1
-Which one of the graphs in Figure 9.2.1 shows perfect substitutes?

Accepted Answer

A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) (c)and (d)

Question 5

The budget line depends on

Accepted Answer

A) income only. 
B) prices only. 
C) income and prices. 
D) preferences only. 
E) preferences and prices.

Question 6

A constant marginal rate of substitution between two goods implies

Accepted Answer

A) the goods are perfect complements. 
B) the goods are imperfect substitutes. 
C) the goods are both inferior. 
D) one good is normal and one good is inferior. 
E) the goods are perfect substitutes.

Question 7

Peter's income increases and so does his consumption of both movies and pop,but his consumption of pop increases by less than his consumption of movies increases.Which one of the following statements is true for Peter?

Accepted Answer

A) A movie is an inferior good;pop is a normal good. 
B) A movie is a normal good;pop is an inferior good. 
C) A movie is an inferior good;pop is an inferior good. 
D) Movies and pop are both normal goods. 
E) A movie is a normal good;we cannot tell whether pop is a normal good or an inferior good.

Question 8

Which one of the following statements about the budget line is false? The budget line

Accepted Answer

A) separates affordable consumption points from unaffordable consumption points. 
B) is based on fixed prices. 
C) is based on fixed income. 
D) is based on fixed quantities. 
E) constrains consumer choices.

Question 9

A change in the price of the good measured on the vertical axis changes ________ of the budget line.

Accepted Answer

A) the slope and y-intercept 
B) the slope and x-intercept 
C) the x- and y-intercepts but not the slope 
D) only the slope 
E) only the y-intercept

Question 10

Use the figure below to answer the following questions.
  
Figure 9.3.4
Original equilibrium at A, new equilibrium at B
-Refer to Figure 9.3.4.Which graphs show the case where good Y is an inferior good?

Accepted Answer

A) (a)and (b) 
B) (c)and (d) 
C) (a)and (c) 
D) (b)and (d) 
E) none of the graphs

Question 11

Larry consumes only beer (B)and chips (C).The magnitude of the slope of his budget line (with beer measured on the vertical axis)is

Accepted Answer

A) PC/Y. 
B) PC × PB. 
C) Y/PC. 
D) Y/PB. 
E) PC/PB.

Question 12

A consumer considers Coke and Pepsi to be perfect substitutes for each other.What would the consumer's indifference curves for these two goods look like?

Accepted Answer

A) L-shaped 
B) horizontal along the entire length 
C) vertical along the entire length 
D) upward sloping 
E) downward sloping with a constant slope

Question 13

Use the figure below to answer the following question.
  
Figure 9.2.2
-Figure 9.2.2 shows three indifference curves for Brenda.Which one of the following is not true?

Accepted Answer

A) Brenda would be equally happy consuming at either point B or point C. 
B) Brenda prefers consuming at point B to consuming at point A. 
C) Brenda prefers consuming at point D to consuming at either point B or point C. 
D) The marginal rate of substitution is higher at point C than at point B. 
E) Brenda prefers consuming at point D to consuming at point A.

Question 14

Use the figure below to answer the following questions.
  
Figure 9.3.1
-Consider the budget line and indifference curve in Figure 9.3.1.At the best affordable point,the marginal rate of substitution is

Accepted Answer

A) 1/2. 
B) 2. 
C) 4/3. 
D) 3/4. 
E) 4.

Question 15

A change in income changes ________ of the budget line.

Accepted Answer

A) the slope and y-intercept 
B) the slope and x-intercept 
C) the x- and y-intercepts but not the slope 
D) only the slope 
E) only the y-intercept

Question 16

Jay has an income of $10 to buy peanuts and popcorn.The price of peanuts is $1 a bag and the price of popcorn is $2 a bag.He chooses to consume 5 bags of peanuts and 2 bags of popcorn.What can we say about this consumption choice?

Accepted Answer

A) It is not the best affordable choice.He should consume more peanuts, more popcorn, or more of both. 
B) It is the best affordable choice, and his marginal rate of substitution equals the slope of the budget line. 
C) The consumption choice is on the budget line. 
D) The consumption choice is outside the budget line. 
E) both B and C

Question 17

If the price of the good measured on the horizontal axis falls,the substitution effect is indicated by movement to a

Accepted Answer

A) higher indifference curve. 
B) lower indifference curve. 
C) steeper part of the same indifference curve. 
D) flatter part of the same indifference curve. 
E) flatter part of a higher indifference curve.

Question 18

Use the figure below to answer the following questions.
  
Figure 9.2.3
-Refer to Figure 9.2.3.When Rashid chooses the consumption point of 2 books and 6 albums,his marginal rate of substitution is ________.

Accepted Answer

A) 1/3 books per album 
B) 0.5 books per album 
C) 3 books per album 
D) 1 book per album 
E) 2 books per album

Question 19

The substitution effect is the effect of

Accepted Answer

A) a change in income on the quantity bought. 
B) a change in price on the quantity bought when the consumer moves to a higher indifference curve. 
C) a change in income on the quantity bought when the consumer moves to a higher indifference curve. 
D) a change in the best affordable point. 
E) a change in price on the quantity bought when the consumer hypothetically remains on the same indifference curve.

Question 20

Sarah has an income of $100.She purchases 5 pizzas at $10 each and 10 subs at $5 each.Then the government taxes subs,and the price rises to $10 each.Simultaneously,the government gives Sarah a grant of $50 in income to make up for this change.As a result,Sarah's budget line

Accepted Answer

A) becomes steeper. 
B) becomes flatter. 
C) shifts leftward and parallel to the original budget line. 
D) shifts rightward and parallel to the original budget line. 
E) swivels around the original consumption choice.

Exam 9: Possibilities, Preferences, and Choices

Albert is consuming at a point where his budget line is not as steep as indifference curve.To reach consumer equilibrium,Albert

Guy has an income (Y) of $50 with which he can purchase DVDs (D) at $10 each and haircuts (H) at $20 each.Which one of the following represents Guy's budget line?

Let Y = $100,QX = quantity of good X,and QW = quantity of good W,PX = $4 and PW = $5.The budget equation is

Use the figure below to answer the following questions. Figure 9.2.1 -Which one of the graphs in Figure 9.2.1 shows perfect substitutes?

The budget line depends on

A constant marginal rate of substitution between two goods implies

Peter's income increases and so does his consumption of both movies and pop,but his consumption of pop increases by less than his consumption of movies increases.Which one of the following statements is true for Peter?

Which one of the following statements about the budget line is false? The budget line

A change in the price of the good measured on the vertical axis changes ________ of the budget line.

Use the figure below to answer the following questions. Figure 9.3.4 Original equilibrium at A, new equilibrium at B -Refer to Figure 9.3.4.Which graphs show the case where good Y is an inferior good?

Larry consumes only beer (B) and chips (C) .The magnitude of the slope of his budget line (with beer measured on the vertical axis) is

A consumer considers Coke and Pepsi to be perfect substitutes for each other.What would the consumer's indifference curves for these two goods look like?

Use the figure below to answer the following question. Figure 9.2.2 -Figure 9.2.2 shows three indifference curves for Brenda.Which one of the following is not true?

Use the figure below to answer the following questions. Figure 9.3.1 -Consider the budget line and indifference curve in Figure 9.3.1.At the best affordable point,the marginal rate of substitution is

A change in income changes ________ of the budget line.

Jay has an income of $10 to buy peanuts and popcorn.The price of peanuts is $1 a bag and the price of popcorn is $2 a bag.He chooses to consume 5 bags of peanuts and 2 bags of popcorn.What can we say about this consumption choice?

If the price of the good measured on the horizontal axis falls,the substitution effect is indicated by movement to a

Use the figure below to answer the following questions. Figure 9.2.3 -Refer to Figure 9.2.3.When Rashid chooses the consumption point of 2 books and 6 albums,his marginal rate of substitution is ________.

The substitution effect is the effect of

Sarah has an income of $100.She purchases 5 pizzas at $10 each and 10 subs at $5 each.Then the government taxes subs,and the price rises to $10 each.Simultaneously,the government gives Sarah a grant of $50 in income to make up for this change.As a result,Sarah's budget line