Question 1

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

Accepted Answer

The answer of Explain how changes in the price of...

Question 2

-The figure above shows Sarah's budget line.Sarah earns $500 per week selling baskets made out of tree vines.With this money she buys sushi and rose bushes.Each piece of sushi costs $1 and each rose bush costs $10.Sarah will be at what point on her budget line if she spends $300 per week on rose bushes?

Accepted Answer

A)  Point a 
B)  Point b 
C)  Point c 
D)  Point f 
E)  Point e

Question 3

-Which of the above figures reflects an increase in the price of chicken?

Accepted Answer

A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D 
E)  Both Figure B and Figure C

Question 4

Moving down along an indifference curve,

Accepted Answer

A)  the price of the good measured on the vertical axis decreases. 
B)  total utility decreases. 
C)  the marginal rate of substitution for the good on the horizontal axis decreases. 
D)  the slope of the budget line decreases. 
E)  the consumer increasingly prefers the new consumption points to the old consumption points.

Question 5

The figure above shows two budget lines.
-Based on the figure above,which of the following would lead the budget line to change from BL₀ to BL₁?

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

Question 6

Explain the paradox of value.

Accepted Answer

The answer of Explain the paradox of value....

Question 7

On a budget line,sub sandwiches are measured on the x-axis and sodas are measured on the y-axis.The price of a sub is $5 and the price of a soda is $1.If the price of a sub decreases to $4,the relative price of ________.

Accepted Answer

A)  sub sandwiches falls and the budget line becomes less steep 
B)  sub sandwiches rises and the budget line becomes flatter 
C)  sodas falls and the budget line becomes flatter 
D)  both sub sandwiches and soda falls and the budget line shifts outward 
E)  sodas does not change and neither does the budget line

Question 8

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

Accepted Answer

The answer of What is the marginal rate of substitution...

Question 9

-Which of the following are true?
i.Points C and G are equally preferred because they lie on the same indifference curve.
ii.Points C and J are equally preferred because on them the consumption of chewing gum is equal.
iii.Points G and J are equally preferred because on them the consumption of water is equal.

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i, ii, and iii

Question 10

An indifference curve is a line that shows combinations of goods among which a consumer

Accepted Answer

A)  prefers one over the other. 
B)  places no value on any of the items. 
C)  can afford to buy all the combinations. 
D)  is indifferent. 
E)  believes that all combinations have the same marginal rate of substitution.

Question 11

If a person consumes only two goods,which of the following is NOT  necessary for a consumer to be at his or her best affordable point of consumption?

Accepted Answer

A)  The consumer chooses a bundle of goods that lies on his or her budget line. 
B)  The consumer is on his or her highest attainable indifference curve. 
C)  The consumer chooses equal amounts of both goods. 
D)  The marginal rate of substitution between the two goods is equal to the relative price of those two goods. 
E)  The indifference curve is tangent to the budget line.

Question 12

-The figure above shows Sarah's budget line.Sarah earns $500 per week selling baskets made out of tree vines.With this money she buys sushi and rose bushes.Each piece of sushi costs $1 and each rose bush costs $10.Sarah will be at what point on her budget line if she spends $500 per week on rose bushes?

Accepted Answer

A)  Point a 
B)  Point b 
C)  Point c 
D)  Point f 
E)  Point e

Question 13

In an indifference curve/budget line diagram,a consumer's equilibrium consumption combination will occur

Accepted Answer

A)  always inside the budget line. 
B)  always outside the budget line. 
C)  always on the budget line. 
D)  sometimes on and sometimes inside the budget line, depending on the indifference curves. 
E)  at the origin.

Question 14

Suppose that Misty likes pizza and hotdogs.If her marginal utility per dollar from pizza is 6 and from hotdogs it is 5,Misty

Accepted Answer

A)  is maximizing her total utility. 
B)  could increase her total utility by buying more hotdogs and less pizza. 
C)  could increase her total utility by buying more pizza and fewer hotdogs. 
D)  is maximizing her marginal utility. 
E)  must obtain more income in order to reach her consumer equilibrium.

Question 15

Gertrude has a $15 budget to spend on soda and crackers.Soda costs $1 per bottle and crackers cost 50¢ each.The quantity of soda is measured on the vertical axis.If the price of soda increases to $2 per bottle and the price of crackers increase to $1 each,the

Accepted Answer

A)  indifference curves shift inward. 
B)  indifference curves shift outward. 
C)  budget line shifts inward. 
D)  budget line shifts outward. 
E)  demand curve for soda shifts leftward.

Question 16

$$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { pizza }
\end{array} & \begin{array} { c } 
\text { Total utility } \
\text { from pizza }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Diet Pepsi }
\end{array} & \begin{array} { c } 
\text { Total utility } \
\text { from Diet } \
\text { Pepsi }
\end{array} \
\hline 0 & 0 & 0 & 0 \
\hline 1 & 24 & 1 & 14 \
\hline 2 & 44 & 2 & 26 \
\hline 3 & 60 & 3 & 36 \
\hline 4 & 72 & 4 & 44 \
\hline 5 & 76 & 5 & 50 \
\hline 6 & 79 & 6 & 54 \
\hline 7 & 80 & 7 & 56 \
\hline
\end{array}$$
-Suppose that you consume only pizza,which costs $4 per slice,and Diet Pepsi,which costs $2 each.The table above gives your utility from consuming these two goods.If your income is $20,which of the following consumption combinations will you choose?

Accepted Answer

A)  5 slices of pizza and no Diet Pepsi 
B)  4 slices of pizza and 2 Diet Pepsis 
C)  3 slices of pizza and 4 Diet Pepsis 
D)  2 slice of pizza and 6 Diet Pepsis 
E)  None of the above answers is correct.

Question 17

Using Gabriel's budget line and his indifference curves between horseback riding lessons and baseball lessons,and then changing the prices of each activity holding his income constant,which of the following can be derived?

Accepted Answer

A)  Gabriel's demand curve for each activity 
B)  Gabriel's supply curve for each activity 
C)  Gabriel's marginal benefit for each activity 
D)  Gabriel's net gain for each activity 
E)  Both answers A and B are correct.

Question 18

-The table above shows Buffy's utility from wooden stakes and cloves of garlic.The total utility Buffy gets from 5 wooden stakes is

Accepted Answer

A)  7. 
B)  65. 
C)  222. 
D)  122. 
E)  None of the above answers is correct.

Question 19

If a consumer has allocated his or her budget and found the combination of goods where all marginal utilities divided by price are equal,what would happen if the consumer were forced to consume some other combination of goods? The consumer

Accepted Answer

A)  will definitely have higher total utility. 
B)  will definitely have lower total utility. 
C)  will definitely not experience any change in total utility. 
D)  might be have higher, lower, or the same total utility, but more information is needed to determine which. 
E)  None of the above answers is correct.

Question 20

We have asked Mac to rank his preferences between three market baskets,A,B,and C.If Mac prefers B to C but does not care if he gets A or B,then

Accepted Answer

A)  A is on a higher indifference curve than B. 
B)  B and C are on the same indifference curve. 
C)  both A and B are on a higher indifference curve than C. 
D)  C is on a higher indifference curve than A. 
E)  B is on a higher indifference curve than C, but it is not possible to determine whether C is on a higher, lower, or the same indifference curve as A.

Exam 13: Consumer Choice and Demand