Question 1

Sue consumes oysters and clams.Pounds of oysters are measured on the y-axis and pounds of clams on the x-axis.If the slope of Sue's budget line is 5 pounds of oysters per pound of clams,Sue must

Accepted Answer

A)  give up 5 pounds of clams to obtain 1 pound of oysters. 
B)  give up 5 pounds of oysters to obtain 1 pound of clams. 
C)  pay $5 for a pound of clams only. 
D)  pay $5 for a pound of oysters only. 
E)  pay $5 for a pound of clams and pay $5 for a pound of oysters.

Question 2

"Every point on a budget line has an indifference curve passing through it." Explain if the previous statement is correct or not.

Accepted Answer

The answer of "Every point on a budget line has...

Question 3

Gertrude has a $15 budget to spend on soda and crackers.Soda costs $1 per bottle and crackers cost 50¢ each.If the price of soda increases to $2 per bottle,the ________ rotates inward and there is a movement along the ________.

Accepted Answer

A)  budget line; demand curve for crackers 
B)  demand curve; indifference curve for crackers 
C)  budget line; demand curve for soda 
D)  demand curve; indifference curve for soda 
E)  indifference curves; demand curve for soda

Question 4

In the paradox of value between expensive diamonds and inexpensive water,we see that

Accepted Answer

A)  the consumer surpluses are very high for both goods. 
B)  diamonds have a low consumer surplus while water has a high consumer surplus. 
C)  diamonds have a high consumer surplus while water has a low consumer surplus. 
D)  the consumer surpluses are very low for both goods. 
E)  the consumer surpluses for the two goods cannot be compared.

Question 5

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 is correct.

Question 6

An indifference curve is a line that shows

Accepted Answer

A)  what the consumer can afford to buy. 
B)  how the quantity demanded of a good changes as its price changes. 
C)  combinations of goods among which the consumer is indifferent. 
D)  combinations of goods that have the same marginal rate of substitution. 
E)  combinations of goods that are affordable.

Question 7

-The figure above shows one of Bob's indifference curves for CDs and books.
a.Is the indifference curve steeper at point a or point b?
b.What is Bob's marginal rate of substitution at point a?
c.What is Bob's marginal rate of substitution at point b?

Accepted Answer

The answer of 
-The figure above shows one of Bob's...

Question 8

The budget line is the boundary between

Accepted Answer

A)  preferred and nonpreferred consumption combinations. 
B)  affordable and unaffordable consumption combinations. 
C)  goods and bads. 
D)  income and expenditure. 
E)  income and consumption.

Question 9

When the price of a good a consumer buys rises,the consumer's budget line

Accepted Answer

A)  shifts inward and its slope does not change. 
B)  shifts outward and its slope does not change. 
C)  rotates inward and its slope changes. 
D)  rotates outward and its slope changes. 
E)  does not change.

Question 10

How are total utility and marginal utility related?

Accepted Answer

The answer of How are total utility and marginal utility...

Question 11

A budget line shows the

Accepted Answer

A)  quantities of goods a buyer can purchase with given income and prices. 
B)  relationship between price and quantity demanded. 
C)  total utility a consumer realizes from consuming different quantities of a good. 
D)  quantities of consumption that maximizes marginal utility. 
E)  the prices of the two goods a buyer can purchase.

Question 12

Sushi costs $3 per piece.Cynthia's total utility after eating one piece is 30 and her total utility after eating 2 pieces is 51,so her marginal utility per dollar from the second piece is

Accepted Answer

A)  17. 
B)  10. 
C)  51. 
D)  7. 
E)  21.

Question 13

Does the fact that diamonds,which we do not need to survive,are more expensive than water,which is a necessity,constitute a violation of utility maximization?

Accepted Answer

The answer of Does the fact that diamonds,which we do...

Question 14

-Given the data in the above table,what is the marginal utility of the fourth quart of ice cream?

Accepted Answer

A)  210 
B)  50 
C)  60 
D)  65 
E)  260

Question 15

Paula is currently spending all of her budget and she finds that the marginal utility per dollar from dresses exceeds the marginal utility per dollar from hats.To maximize her utility,Paula should therefore buy

Accepted Answer

A)  more dresses and fewer hats. 
B)  more hats and fewer dresses. 
C)  more dresses and hats. 
D)  fewer dresses and hats. 
E)  probably change her purchases but more information is needed to determine if she should buy more or fewer dresses and hats.

Question 16

Which of the following statements is FALSE?

Accepted Answer

A)  A consumer has only one indifference curve. 
B)  A consumer possesses a preference map. 
C)  An indifference curve is a curve that shows the combination of goods among which a consumer is indifferent. 
D)  The marginal rate of substitution is equal to the magnitude of the slope of the indifference curve. 
E)  Diminishing marginal rate of substitution means that the marginal rate of substitution decreases as more of the good is consumed.

Question 17

Normally shaped indifference curves are bowed towards the origin of the graph.The reason for this shape is

Accepted Answer

A)  that indifference curves farther away from the origin represent higher levels of utility. 
B)  diminishing marginal rate of substitution. 
C)  the law of demand. 
D)  that the marginal rate of substitution is constant along an indifference curve. 
E)  the principle of diminishing marginal rate of relative price.

Question 18

Which of the following is shown by a budget line?
i.The combinations of goods a person can afford
ii.The production possibilities for a person
iii.The combinations of goods a person cannot afford

Accepted Answer

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

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

-In the above figure,I is an indifference curve.Moving from point a to point b,

Accepted Answer

A)  the marginal rate of substitution for books decreases. 
B)  the budget line rotates inward. 
C)  the budget line rotates outward. 
D)  there is diminishing total utility. 
E)  the marginal rate of substitution for books increases.

Exam 13: Consumer Choice and Demand