Quiz 6: Appendix--Indifference Curves and Utility Maximization
Business
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True False
False
Q 2Q 2
All combinations of goods along the same indifference curve represent the same level of utility.
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True False
True
Q 3Q 3
An indifference curve shows
A)combinations of goods that provide the same utility
B)combinations of goods that can be purchased with the same budget
C)combinations of goods that yield the same level of profit
D)the relationship between price and utility
E)the relationship between utility and profits
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Multiple Choice
A
Q 4Q 4
Which of the following is not a characteristic of indifference curves?
A)They do not intersect.
B)They are bowed out from the origin.
C)They slope downward.
D)Total utility on each curve is constant.
E)Total utility levels are greater on curves that are farther from the origin.
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Multiple Choice
Q 5Q 5
The slope of an indifference curve is equal to the
A)marginal rate of substitution
B)price elasticity of demand
C)marginal utility of the good measured on the horizontal axis
D)marginal utility of the good measured on the vertical axis
E)relative price of the good measured on the horizontal axis
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Multiple Choice
Q 6Q 6
A curve representing combinations of two goods that yield equal total utility is a(n)
A)production possibilities frontier
B)demand curve
C)supply curve
D)marginal utility curve
E)indifference curve
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Multiple Choice
Q 7Q 7
__________ utility is constant along a given indifference curve.
A)Marginal
B)Average
C)Total
D)Incremental
E)Mean
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Multiple Choice
Q 8Q 8
All combinations of Pepsi and coffee that yield Geraldo the same satisfaction lie along a particular
A)demand curve
B)marginal utility curve
C)budget line
D)income-consumption curve
E)indifference curve
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Multiple Choice
Q 9Q 9
The marginal rate of substitution indicates
A)how much of one good a consumer is willing to give up to get one more unit of another good while remaining equally satisfied
B)how much of a good a consumer can receive for $1 while remaining equally satisfied
C)the tendency of a consumer to substitute lower-priced goods for a good whose price has increased
D)the limits of utility analysis
E)the basis of consumer surplus
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Multiple Choice
Q 10Q 10
Exhibit 6-22 If a consumer moves from point a to point b on the indifference curve shown in Exhibit 6-22,
A)the consumer's total utility from food and books remains unchanged
B)the consumer's total utility from food and books falls
C)the consumer becomes more willing to give up additional units of books in order to consume one more unit of food
D)the consumer's willingness to give up additional units of books in order to consume more units of food does not change
E)the consumer's total utility from food and books rises
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Multiple Choice
Q 11Q 11
Exhibit 6-22 If a consumer moves from point a to point b on the indifference curve shown in Exhibit 6-22,
A)the marginal rate of substitution between books and movies falls
B)the marginal rate of substitution between books and movies stays the same
C)the marginal rate of substitution between books and movies increases
D)the marginal rate of substitution between books and movies becomes negative
E)the marginal rate of substitution between books and movies becomes zero
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Multiple Choice
Q 12Q 12
Exhibit 6-23 In Exhibit 6-23, the marginal rate of substitution of clothing for food between points a and b equals
A)1
B)2
C)1/3
D)5/6
E)100
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Multiple Choice
Q 13Q 13
Exhibit 6-23 In Exhibit 6-23, the marginal rate of substitution of food for clothing between points a and b equals
A)1/3
B)6/5
C)3
D)6
E)100
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Multiple Choice
Q 14Q 14
Exhibit 6-23 In Exhibit 6-23, the marginal rate of substitution of clothing for food between points b and c is
A)unable to be determined
B)2
C)1/3
D)less than 1/3
E)0
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Multiple Choice
Q 15Q 15
Exhibit 6-23 In Exhibit 6-23, the marginal rate of substitution of food for clothing between points b and c is
A)unable to be determined
B)2
C)3
D)more than 3
E)0
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Multiple Choice
Q 16Q 16
According to the law of diminishing marginal rate of substitution,
A)as consumption of good A increases, other things constant, its marginal utility declines
B)as consumption of good A increases, other things constant, one is willing to give up increasing amounts of good B to get another unit of good A
C)as consumption of good A increases, other things constant, the amount of good B one is willing to give up to get another unit of good A falls
D)the indifference curve's slope increases as more of the good on the horizontal axis is consumed
E)indifference curves intersect when marginal utilities fall
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Multiple Choice
Q 17Q 17
A consumer's indifference map is a depiction of
A)her preferences
B)her income
C)the prices of the two goods under consideration
D)the relative prices of the two goods under consideration
E)the prices of substitute and complement goods
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Multiple Choice
Q 18Q 18
Exhibit 6-24 Which point in Exhibit 6-24 yields the greatest amount of total satisfaction?
A)point a
B)point b
C)point c
D)point d
E)point e
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Multiple Choice
Q 19Q 19
Exhibit 6-24 Which point on curve I1 in Exhibit 6-24 yields the most utility?
A)point a
B)point b
C)point e
D)point f
E)All points on curve I1 yield the same utility.
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Multiple Choice
Q 20Q 20
Exhibit 6-24 Along indifference curve I1 in Exhibit 6-24 which point would an individual prefer?
A)point a
B)point b
C)point e
D)point f
E)prefers all equally
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Multiple Choice
Q 21Q 21
Exhibit 6-24 Which of the combinations of Good A and Good B in Exhibit 6-24 would an individual prefer?
A)point a
B)point b
C)point d
D)point e
E)point f
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Multiple Choice
Q 22Q 22
Exhibit 6-24 Which of the following represents a correct preference ordering for the indifference map represented in Exhibit 6-24?
A)point a, b, e
B)point b, c, d
C)point d, c, a
D)point d, a, b
E)point c, a, f
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Multiple Choice
Q 23Q 23
An indifference curve slopes downward to the right because
A)more goods are preferable to less
B)goods are substitutes for each other
C)the consumer has a limited income
D)the opportunity costs of goods differ
E)of the budget constraint
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Multiple Choice
Q 24Q 24
Which of the following illustrates the concept of "more is better"?
A)An increase in income shifts the budget line to the right.
B)Consumers moving along an indifference curve.
C)Higher indifference curves yield higher utility.
D)Budget lines closer to the origin represent lower income.
E)Sam's indifference curves are steeper than Frazier's.
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Multiple Choice
Q 25Q 25
Suppose Norm really loves coffee and Diane really loves books.If we drew their indifference curves on a graph with books on the horizontal axis and coffee on the vertical axis, Diane's indifference curves would be
A)the same as Norm's
B)upward sloping, and Norm's would be downward sloping
C)downward sloping, and Norm's would be upward sloping
D)steeper than Norm's
E)flatter than Norm's
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Multiple Choice
Q 26Q 26
Exhibit 6-25 Which of the following is true of Exhibit 6-25?
A)Points a, b, and c all represent the same level of utility, which is lower than that represented by points d, e, and f.
B)Points a, b, and c all represent the same level of utility, which is higher than that represented by points d, e, and f.
C)Points a, c, and e all represent the same level of utility, which is lower than that represented by point b.
D)Points a, c, and e all represent the same level of utility, which is higher than that represented by point b.
E)Point d represents a level of utility higher than any other point on the graph.
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Multiple Choice
Q 27Q 27
Exhibit 6-25 Which of the following is true of Exhibit 6-25?
A)Points a, c, and e would all cost the same amount to purchase.
B)Points a, b, and c all represent the same level of utility, which is higher than that represented by points d, e, and f.
C)Points a, c, and e all represent the same level of utility, which is lower than that represented by point b.
D)Points a, c, and e all represent the same level of utility, which is higher than that represented by point b.
E)Point d represents a level of utility higher than any other point on the graph.
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Multiple Choice
Q 28Q 28
Exhibit 6-25 Which of the following points in Exhibit 6-25 represent combinations of goods that cost the consumer the same amount of money to purchase?
A)points a, b, and c
B)points d, e, and f
C)points a, e, and c
D)points d, b, and f
E)points b and e
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Multiple Choice
Q 29Q 29
Exhibit 6-25 At point b in Exhibit 6-25, the consumer's utility is
A)higher than at points a and c, but the total cost of the goods is the same
B)the same as at points a and c, but the total cost of the goods is lower
C)the same as at points a and c, but the total cost of the goods is higher
D)lower than at points a and c, and so is the total cost of the goods
E)higher than at points a and c, and so is the total cost of the goods
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Multiple Choice
Q 30Q 30
Exhibit 6-25 Point e in Exhibit 6-25 is better than which other point?
A)Point a because e represents the same utility at a lower level of expenditure.
B)Point a because e represents higher utility at the same level of expenditure.
C)Point b because e represents the same utility at a lower level of expenditure.
D)Point b because e represents higher utility at the same level of expenditure.
E)Point a because e represents higher utility at a lower level of expenditure.
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Multiple Choice
Q 31Q 31
Exhibit 6-25 Point b in Exhibit 6-25 is better than which other point(s)?
A)Points a and c because b represents the same utility at a lower level of expenditure.
B)Points a and c because b represents higher utility at the same level of expenditure.
C)Points a and c because b represents higher utility at a lower level of expenditure.
D)Point e only because b represents a lower level of expenditure.
E)All other points on the graph.
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Multiple Choice
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True False
Q 33Q 33
If a consumer purchases only one good, she must be on either the vertical or the horizontal intercept of her budget line.
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True False
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True False
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True False
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True False
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True False
Q 38Q 38
An increase in income is represented by a shift of the budget line outward to a parallel position.
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True False
Q 39Q 39
A line that shows the combinations of two goods that can be purchased with a given income is called a(n)
A)indifference curve
B)budget line
C)demand curve
D)supply curve
E)price floor
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Multiple Choice
Q 40Q 40
A curve that shows the combination of goods that a consumer is able to purchase by spending all of her income is called a(n)
A)income-consumption curve
B)income-allocation curve
C)budget line
D)indifference curve
E)budget-indifference curve
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Multiple Choice
Q 41Q 41
The slope of a budget line equals minus the ratio of the
A)marginal utilities of the goods indicated on the two axes
B)total utilities of the goods indicated on the two axes
C)lowest possible consumption levels for each of the goods indicated on the two axes
D)prices of the goods indicated on the two axes
E)sum of the prices of the goods indicated on the two axes and the budget
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Multiple Choice
Q 42Q 42
Which of the following can be thought of as the consumer's consumption possibilities frontier?
A)the consumer's marginal utility
B)the consumer's total utility
C)the consumer's budget line
D)the consumer's indifference curve
E)the consumer's demand curve
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Multiple Choice
Q 43Q 43
The slope of a budget line with x on the vertical axis and y on the horizontal axis equals
A)(-income/Px)/ (income/Py)
B)(income - Px)/ (income - Py)
C)(income + Px)/ (income + Py)
D)(Px - Py)/ (Px + Py)
E)(Px + Py)/ (Py - Px)
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Multiple Choice
Q 44Q 44
A family on a trip budgets $800 for restaurant meals and fast food.If the price of a fast-food meal for the whole family is $20, how many meals can the family buy if they don't eat at restaurants?
A)8
B)15
C)20
D)40
E)160
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Multiple Choice
Q 45Q 45
A family on a trip budgets $800 for restaurant meals and fast food.The family can buy 16 restaurant meals if they buy no fast-food meals.What is the price of a restaurant meal for the family?
A)$5
B)$16
C)$20
D)$50
E)it is impossible to tell from the information given
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Multiple Choice
Q 46Q 46
Within the framework of indifference curve analysis, what prevents the individual from purchasing more of all goods?
A)Legal prohibitions
B)Budget constraint
C)The slope of the indifference curve
D)Psychological considerations
E)Diminishing marginal utility
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Multiple Choice
Q 47Q 47
A family on a trip budgets $200 for restaurant meals and fast food.If the price of a fast-food meal for the whole family is $20, what is the horizontal intercept of the budget line when fast food is measured on the horizontal axis?
A)100
B)10
C)20
D)400
E)it is impossible to tell from the information given
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Multiple Choice
Q 48Q 48
A family on a trip budgets $200 for restaurant meals and fast food.If the price of a fast-food meal for the whole family is $20, what is the vertical intercept of the budget line when fast food is measured on the horizontal axis?
A)10
B)20
C)200
D)400
E)it is impossible to tell from the information given
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Multiple Choice
Q 49Q 49
A family on a trip budgets $200 for restaurant meals and fast food.The family can buy 20 restaurant meals if they don't buy any fast-food meals.What is the vertical intercept of the budget line when fast food is measured on the horizontal axis?
A)1/20
B)200
C)10
D)20
E)$400
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Multiple Choice
Q 50Q 50
Chris budgets $30 this week for spending on his two favorite things, pizza and movies.The price of a movie is $5.Moreover, he could buy 3 pizzas if he doesn't go to the movies.If pizza is on the horizontal axis, what is the slope of the budget line?
A)2
B)-1/2
C)-1/3
D)1/3
E)-2
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Multiple Choice
Q 51Q 51
If a candy bar sells for 50 cents and video games are 25 cents each, the horizontal (candy)intercept of Ann's budget line is 12 and the vertical (video game)intercept of Ann's budget line is 24.Giving up one candy bar makes it possible for Ann to afford
A)2 fewer video games
B)half an additional video game
C)2 more video games
D)12 more video games
E)24 more video games
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Multiple Choice
Q 52Q 52
If a candy bar sells for 50 cents and video games are 25 cents each, the horizontal (candy)intercept of Ann's budget line is 12 and the vertical (video game)intercept of Ann's budget line is 24.Giving up one video game makes it possible for Ann to afford
A)2 fewer candy bars
B)half of an additional candy bar
C)2 more candy bars
D)12 more candy bars
E)24 more candy bars
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Multiple Choice
Q 53Q 53
A candy bar sells for 50 cents, video games are 25 cents each, the horizontal (candy)intercept of Ann's budget line is 12, and the vertical (video game)intercept of Ann's budget line is 24.Ann's income must be
A)$3
B)$6
C)$12
D)$24
E)$36
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Multiple Choice
Q 54Q 54
A candy bar sells for 50 cents, video games are 25 cents each, the horizontal (candy)intercept of Ann's budget line is 12, and the vertical (video game)intercept of Ann's budget line is 24.The slope of the budget line is
A)-50
B)-25
C)-1/2
D)-2
E)-$120
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Multiple Choice
Q 55Q 55
A candy bar sells for 50 cents, video games are 25 cents each, the horizontal (candy)intercept of Ann's budget line is 12, and the vertical (video game)intercept of Ann's budget line is 24.If Ann's income increased to $20, the vertical intercept would be
A)$4
B)$2
C)20
D)40
E)80
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Multiple Choice
Q 56Q 56
A candy bar sells for 50 cents, video games are 25 cents each, the horizontal (candy)intercept of Ann's budget line is 12, and the vertical (video game)intercept of Ann's budget line is 24.If Ann's income increased to $20, the horizontal intercept would be
A)$4
B)$2
C)20
D)40
E)80
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Multiple Choice
Q 57Q 57
If a consumer's income rises,
A)her indifference curves shift inward
B)her indifference curves shift outward
C)her budget line shifts outward
D)her budget line shifts inward
E)the slope of her budget line increases
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Multiple Choice
Q 58Q 58
A candy bar sells for 50 cents, video games are 25 cents each, the horizontal (candy)intercept of Ann's budget line is 12, and the vertical (video game)intercept of Ann's budget line is 24.Which of the following best describes what would happen to the budget line if Ann's income increased?
A)It would shift rightward to a parallel position.
B)It would shift rightward to a nonparallel position.
C)It would shift leftward to a parallel position.
D)It would shift leftward to a nonparallel position.
E)Nothing.
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Multiple Choice
Q 59Q 59
A candy bar sells for 50 cents, video games are 25 cents each, the horizontal (candy)intercept of Ann's budget line is 12, and the vertical (video game)intercept of Ann's budget line is 24.Which of the following best describes what would happen to the budget line if Ann's income decreased?
A)It would shift rightward to a parallel position.
B)It would shift rightward to a nonparallel position.
C)It would shift leftward to a parallel position.
D)It would shift leftward to a nonparallel position.
E)Nothing.
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Multiple Choice
Q 60Q 60
Assume that you divide your food budget between fish and chicken.Which of the following would not alter the position of a budget line drawn with fish on the horizontal axis and chicken on the vertical axis?
A)an increase in the price of fish
B)a decrease in the price of chicken
C)a change in your preference for fish
D)an increase in your food budget
E)an increase in the price of fish combined with an increase in your food budget
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Multiple Choice
Q 61Q 61
Which of the following would not cause the budget line between books and food to shift?
A)A fall in the price of books.
B)A fall in the price of food.
C)A change in the consumer's preferences.
D)A fall in income.
E)A fall in income coupled with a rise in the price of food.
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Multiple Choice
Q 62Q 62
Exhibit 6-26 Consider Exhibit 6-26.Three budget lines are shown.Which of the following statements is true about the budget lines?
A)Budget line B2 reflects the same income and price for DVDs as budget line B1 but a higher price for books.
B)Budget line B3 reflects a higher income but the same price for both books and DVDs as budget line B2.
C)Budget line B3 reflects higher income and the same prices for both books and DVDs as budget line B1.
D)Budget line B1 reflects lower income than budget line B2.
E)Budget line B3 reflects a lower price ration than budget line B3.
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Multiple Choice
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True False
Q 64Q 64
If the marginal utilities per dollar are not equal among the final set of goods Joe is planning to consume, he can increase his total utility by changing the amounts of what he intends to purchase.
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True False
Q 65Q 65
Economists assume that, within a given budget, consumers will
A)maximize average utility
B)minimize average utility
C)maximize total utility
D)face diminishing total utility after consuming the first unit of a good
E)continue to consume a good until its utility is negative
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Multiple Choice
Q 66Q 66
A consumer maximizes utility where the
A)budget line intersects an indifference curve
B)budget line is tangent to an indifference curve
C)distance between the budget line and an indifference curve is greatest
D)indifference curve farthest from the origin intersects the budget line twice
E)area between the indifference curve and the budget line is the greatest
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Multiple Choice
Q 67Q 67
If a consumer allocates income between goods x and y, consumer equilibrium occurs when
A)the indifference curve farthest from the origin is reached
B)MUx/Px = MUy/Py and the budget is exhausted
C)marginal utility is maximized
D)MUx = MUy for the last unit consumed of each good
E)consumer surplus equals 0
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Multiple Choice
Q 68Q 68
Which of the following statements about indifference curves is not true?
A)The consumer is indifferent among the combinations illustrated along a given curve.
B)Every indifference curve intersects the consumer's budget line at least once.
C)Indifference curves slope downward.
D)Indifference curves are concave (bowed in toward the origin).
E)Indifference curves do not intersect.
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Multiple Choice
Q 69Q 69
At consumer equilibrium between goods F and C, all of the following statements is true except one.Which is the exception?
A)MUF/MUC = PF/PC
B)MRS = -PF/PC
C)MRS = the absolute value of the slope of the budget line
D)utility is maximized subject to the budget constraint
E)PF/PC = TUF/TUC
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Multiple Choice
Q 70Q 70
If a good is offered to a rational individual for free, she will
A)accept unlimited quantities of the good each time period
B)stop consuming it when its marginal utility begins to increase
C)stop consuming it when its marginal utility begins to diminish
D)stop consuming it when its marginal utility equals zero
E)stop consuming it when its total utility equals zero
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Multiple Choice
Q 71Q 71
A rotation of the budget line indicates a change in the price of one of the goods under consideration.
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True False
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True False
Q 73Q 73
If the price of apples falls, the substitution effect will cause a consumer to reduce her consumption of apples.
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True False
Q 74Q 74
Exhibit 6-27 Consider Exhibit 6-27.The rotation of the budget line from AB to AC represents a(n)
A)increase in the price of clams
B)increase in the price of mussels
C)decrease in the price of clams
D)decrease in the price of mussels
E)increase in the amount the consumer can spend
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Multiple Choice
Q 75Q 75
Exhibit 6-27 The rotation of the budget line in Exhibit 6-27 from AC to AB represents a(n)
A)increase in the price of clams
B)increase in the price of mussels
C)decrease in the price of clams
D)decrease in the price of mussels
E)increase in the amount the consumer can spend
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Multiple Choice
Q 76Q 76
Exhibit 6-28 The rotation of the budget line in Exhibit 6-28 from AB to AC represents
A)an increase in the price of clams
B)an increase in the price of mussels
C)a decrease in the price of clams
D)a decrease in the price of mussels
E)an increase in the amount the consumer can spend
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Multiple Choice
Q 77Q 77
Exhibit 6-28 The rotation of the budget line in Exhibit 6-28 from AC to AB represents a(n)
A)increase in the price of clams
B)increase in the price of mussels
C)decrease in the price of clams
D)decrease in the price of mussels
E)increase in the amount the consumer can spend
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Multiple Choice
Q 78Q 78
Exhibit 6-29 Which graph in Exhibit 6-29 shows the effect of a decrease in the price of clothing, other things constant?
A)Graph a
B)Graph b
C)Graph c
D)Graph d
E)Graph e
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Multiple Choice
Q 79Q 79
Exhibit 6-29 Which graph in Exhibit 6-29 shows the effect of an increase in the price of clothing, other things constant?
A)Graph a
B)Graph b
C)Graph c
D)Graph d
E)Graph e
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Multiple Choice
Q 80Q 80
Exhibit 6-29 Which graph in Exhibit 6-29 shows an increase in the price of food?
A)Graph a
B)Graph b
C)Graph c
D)Graph d
E)Graph e
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Multiple Choice
Q 81Q 81
Exhibit 6-29 Which graph in Exhibit 6-29 shows a decrease in the price of food?
A)Graph a
B)Graph b
C)Graph c
D)Graph d
E)Graph e
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Multiple Choice
Q 82Q 82
Exhibit 6-29 Which graph in Exhibit 6-29 shows the effect of an increase in the price of clothing and a decrease in the price of food?
A)Graph a
B)Graph b
C)Graph c
D)Graph d
E)none of these
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Multiple Choice
Q 83Q 83
What would happen if the price of novels increased and novels are measured on the horizontal axis of a budget line diagram?
A)The budget line would shift to the right.
B)The budget line would rotate outward along the horizontal axis.
C)The budget line would rotate inward along the horizontal axis.
D)The budget line would rotate outward along the vertical axis.
E)The budget line would rotate inward along the vertical axis.
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Multiple Choice
Q 84Q 84
What would happen to the budget line if the price of orange juice increased and orange juice is measured on the vertical axis?
A)It would shift to the right.
B)It would rotate outward along the horizontal axis.
C)It would rotate inward along the horizontal axis.
D)It would rotate outward along the vertical axis.
E)It would rotate inward along the vertical axis.
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Multiple Choice
Q 85Q 85
What would happen to the budget line when the price of tennis shoes decreases if tennis shoes are measured on the horizontal axis?
A)It would shift to the left.
B)It would rotate outward along the horizontal axis.
C)It would rotate inward along the horizontal axis.
D)It would rotate outward along the vertical axis.
E)It would rotate inward along the vertical axis.
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Multiple Choice
Q 86Q 86
What would happen to the budget line if the price of compact disks decreased and compact disks are measured on the vertical axis?
A)The budget line would shift to the left.
B)The budget line would rotate outward along the horizontal axis.
C)The budget line would rotate inward along the horizontal axis.
D)The budget line would rotate outward along the vertical axis.
E)The budget line would rotate inward along the vertical axis.
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Multiple Choice
Q 87Q 87
Exhibit 6-30 Consider Exhibit 6-30.Assume that you have $600 to spend on books and compact disks.What happens if the price of books falls to $5?
A)The budget line shifts inward along the horizontal axis.
B)The budget line shifts inward along the vertical axis.
C)The budget line does not move.
D)The budget line shifts outward along the vertical axis.
E)The budget line shifts outward along the horizontal axis.
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Multiple Choice
Q 88Q 88
Exhibit 6-30 Consider Exhibit 6-30.Assume that you initially have $600 to spend on books and compact disks.What happens if the amount you have to spend increases to $800?
A)The budget line shifts inward along the horizontal axis.
B)The budget line shifts inward along the vertical axis.
C)The budget line shifts outward along the horizontal axis and the vertical axis.
D)The budget line shifts outward along the vertical axis.
E)The budget line shifts outward along the horizontal axis.
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Multiple Choice
Q 89Q 89
Exhibit 6-30 Consider Exhibit 6-30.Assume that you have $600 to spend on books and compact disks.What is the current price of books?
A)$1
B)$5
C)$10
D)$60
E)unable to determine
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Multiple Choice
Q 90Q 90
Exhibit 6-30 Consider Exhibit 6-30.Assume that you have $600 to spend on books and compact disks.What is the current price of compact disks?
A)$1
B)$5
C)$10
D)$60
E)unable to determine
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Multiple Choice
Q 91Q 91
What is the effect of a fall in the price of a normal good on the consumer's choice?
A)She will buy more of the good but reach a lower indifference curve.
B)She will buy less of the good but reach a higher indifference curve.
C)She will buy more of the good and reach a higher indifference curve.
D)She will buy the same quantity of the good and stay on the same indifference curve.
E)She will buy more of the good and stay on the same indifference curve.
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Multiple Choice
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True False
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True False
Q 94Q 94
People change their consumption choices in response to changes in price because of
A)the income effect and the substitution effect
B)the substitution effect
C)the utility effect
D)the income effect
E)both the income effect and the utility effect
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Multiple Choice
Q 95Q 95
Exhibit 6-31 Assume that a consumer is initially in equilibrium at point a in Exhibit 6-31.Then the price of good B falls.The movement from point a to point b represents
A)the substitution effect
B)the income effect
C)the substitution effect minus the income effect
D)the sum of the substitution and income effects
E)the income effect minus the substitution effect
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Multiple Choice
Q 96Q 96
Exhibit 6-31 Assume that a consumer is initially in equilibrium at point a in Exhibit 6-31.Then the price of good B falls.The movement from point a to point c represents
A)the substitution effect
B)the income effect
C)the substitution effect minus the income effect
D)the sum of the substitution and income effects
E)the income effect minus the substitution effect
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Multiple Choice
Q 97Q 97
Exhibit 6-31 Assume that a consumer is initially in equilibrium at point a in Exhibit 6-31.Then the price of good B falls.The movement from point c to point b represents
A)the substitution effect
B)the income effect
C)the substitution effect minus the income effect
D)the sum of the substitution and income effects
E)the income effect minus the substitution effect
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Multiple Choice
Q 98Q 98
A consumer allocates income between clams and mussels.If clams are a normal good, then when the price of clams falls, the consumer will definitely buy
A)more clams and more mussels
B)fewer clams and fewer mussels
C)more clams and fewer mussels
D)fewer clams and more mussels
E)more clams, but the effect of the price change on purchases of mussels cannot be predicted
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Multiple Choice
Q 99Q 99
A consumer allocates income between clams and mussels.If clams are a normal good, then when the price of clams rises, the consumer will definitely buy
A)more clams and more mussels
B)fewer clams and fewer mussels
C)more clams and fewer mussels
D)fewer clams and more mussels
E)fewer clams, but the effect of the price change on purchases of mussels cannot be predicted
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Multiple Choice
Q 100Q 100
Although some of the statements below are true of both normal goods and inferior goods, only one of the statements defines a normal good.Which one?
A)Normal goods are those for which the demand curve slopes downward.
B)Normal goods are those for which indifference curves slope downward.
C)Normal goods are those whose demand curves shift rightward when income increases.
D)Normal goods are those whose indifference curves shift rightward when income increases.
E)Normal goods are those for which demand decreases when price increases.
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Multiple Choice
Q 101Q 101
Although some of the statements below are true of both normal goods and inferior goods, only one of the statements defines a normal good.Which one?
A)Normal goods are those for which the income effect is positive.
B)Normal goods are those for which the income effect is negative.
C)Normal goods are those for which the substitution effect overrides the income effect.
D)Normal goods are those for which the income effect overrides the substitution effect.
E)Normal goods are those for which demand increases when price increases.
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Multiple Choice
Q 102Q 102
For inferior goods, a rise in price causes
A)negative income and substitution effects
B)positive income and substitution effects
C)a negative income effect and a positive substitution effect
D)a positive income effect and a negative substitution effect
E)a positive income effect but no substitution effect
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Multiple Choice
Q 103Q 103
If Hannah considers biscuits an inferior good, then when their price falls, she
A)will definitely buy more biscuits
B)will definitely buy fewer biscuits
C)may buy more biscuits
D)will buy fewer biscuits if the substitution effect is larger than the income effect
E)will buy more biscuits if the substitution effect is smaller than the income effect
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Multiple Choice
Q 104Q 104
If clams and mussels are normal goods, then when the amount the consumer can spend increases,
A)purchases of whichever good is preferred will increase, and purchases of the good not preferred will decrease
B)purchases of both goods will increase
C)only purchases of the cheaper good will increase
D)only purchases of the more expensive good will increase
E)it is unclear what will happen to purchases of clams and mussels
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Multiple Choice
Q 105Q 105
Combinations of goods along an indifference curve reflect a level of utility that is
A)constant and measured by a specific number
B)variable along the curve and measured by specific numbers
C)variable along the curve, though unspecified
D)constant, though unspecified
E)inelastic above the midpoint and elastic below the midpoint
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Multiple Choice
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True False
Q 107Q 107
This morning, Yoriko Dazai learned that the price of clams had dropped overnight while the price of mussels and her income stayed constant.Assuming that she must maintain the same level of utility, an increase in Yoriko's quantity demanded of clams would be caused by
A)the income effect
B)the law of supply
C)the substitution effect
D)a perfectly elastic demand curve
E)clams being an inferior good
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Multiple Choice