Question 1

Moving along an indifference curve, if a consumer requires a large amount of the good measured along the y-axis to make up for one unit less of the good measured on the x-axis, then

Accepted Answer

A) total utility is increasing. 
B) the marginal rate of substitution is low and the indifference curve is flat. 
C) the marginal rate of substitution is low and the indifference curve is steep. 
D) the marginal rate of substitution is high and the indifference curve is steep. 
E) the marginal rate of substitution is high and the indifference curve is flat.

Question 2

Total utility ________ as a person consumes more of one good and marginal utility ________.

Accepted Answer

A) increases; increases 
B) increases; decreases 
C) remains constant; decreases 
D) fluctuates; decreases 
E) decreases; increases

Question 3

Mary likes to consume either pizza or spaghetti.She has $48 to spend on these meals.
a∙One week the price of pizza is $8 and the price of spaghetti is $6.Mary uses the indifference curve analysis she learned in microeconomics to decide how much of each type of meal to buy.She puts pizza on the vertical axis and spaghetti on the horizontal axis.What is the marginal rate of substitution at the combination of pizza and spaghetti that Mary chooses?
b∙The next week, the price of pizza is $6 and the price of spaghetti is $8 so Mary adjusts her consumption combination to maximize her total utility.What is her marginal rate of substitution now?

Accepted Answer

The answer of Mary likes to consume either pizza or...

Question 4

As more of a good is consumed, total utility

Accepted Answer

A) increases. 
B) decreases. 
C) remains the same. 
D) becomes negative and then turns positive. 
E) might change but whether or not it changes depends on why more of the good is consumed.

Question 5

In a budget line/indifference curve diagram, at the consumer's equilibrium at the best affordable point,

Accepted Answer

A) any movement upward or downward on the budget line will move the consumer to a less preferred point. 
B) any movement to the northeast to higher indifference curves moves the consumer to a less preferred point. 
C) the slope of the budget line exceeds the marginal rate of substitution by as much as possible. 
D) the budget line has a positive slope and the indifference curve has a negative slope. 
E) the budget line has a negative slope and the indifference curve has a positive slope.

Question 6

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 7

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

Accepted Answer

The answer of Describe the consumer equilibrium in the indifference...

Question 8

The benefit that John gets from eating an additional grape is called the ________ the grape.

Accepted Answer

A) net gain from 
B) demand for 
C) quantity demanded of 
D) total utility from 
E) marginal utility from

Question 9

Sam's budget is $60.00.The combinations of gasoline and coffee along one of Sam's indifference curves are combinations

Accepted Answer

A) that require the same total expenditure. 
B) that he can afford with his $60.00 budget. 
C) among which he is indifferent. 
D) that give him the same marginal rate of substitution. 
E) None of the above answers are correct.

Question 10

Luke enjoys eating tuna sashimi and drinking Pepsi.His consumer equilibrium occurs where his budget line

Accepted Answer

A) just touches the lowest indifference curve at one point. 
B) just touches the highest indifference curve at one point. 
C) touches every indifference curve. 
D) is below every indifference curve. 
E) More information about Luke's budget is needed to determine his consumer equilibrium.

Question 11

When a consumer's budget increases, the budget line

Accepted Answer

A) becomes steeper. 
B) becomes flatter. 
C) shifts outward. 
D) shifts inward. 
E) does not change.

Question 12

If the total utility of 2 bags of chips is 25, the total utility of 3 bags is 33, and the total utility of 4 bags is 40 units, then the marginal utility of the 3rd and 4th bags are

Accepted Answer

A) 8 and 7, respectively. 
B) 12.5 and 11, respectively. 
C) 11 and 10, respectively. 
D) 58 and 73, respectively. 
E) 33 and 40, respectively.

Question 13

What is the difference between a budget line and an indifference curve?

Accepted Answer

A) One is measured in dollars while the other in units of goods. 
B) One shows what is possible while the other shows what is preferred. 
C) One shows a positive relationship and the other shows a negative relationship. 
D) The budget line is bowed in toward the origin and the indifference curves are linear. 
E) There is no difference.

Question 14

-Tris is shopping for pants and belts.He has a budget of $100.The price of a pair of pants is $20 and the price of a belt is $5.His marginal utility schedules are above.What combination of pants and belts does Tris buy? Explain your answer.

Accepted Answer

The answer of 
-Tris is shopping for pants and belts.He...

Question 15

In order to draw Lucky's budget line, we need to know

Accepted Answer

A) only Lucky's budget. 
B) only the prices of the goods Lucky consumes. 
C) both Lucky's budget and the prices of the goods Lucky consumes. 
D) Lucky's budget, the prices of the goods lucky consumes, and the utilities of the goods Lucky does not consume. 
E) the utilities of the goods Lucky consumes.

Question 16

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

Accepted Answer

The answer of If your budget increases, what is the...

Question 17

Why is the budget line negatively sloped?

Accepted Answer

The answer of Why is the budget line negatively sloped?...

Question 18

-Which of the above figures reflects an increase in the consumer's budget?

Accepted Answer

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

Question 19

If Tommy is consuming a combination of goods and services on his budget line, has he allocated his entire budget?

Accepted Answer

The answer of If Tommy is consuming a combination of...

Question 20

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.If Sarah spends $170 per week on sushi, the maximum quantity of rose bushes can she buy each week is ________ bushes.

Accepted Answer

A) 33 
B) 330 
C) 3 
D) 17 
E) None of the above answers is correct.

Exam 13: Consumer Choice and Demand