Question 1

The indifference curves for nickels and dimes will be:

Accepted Answer

A)  L-shaped
B)  A straight line with positive slope
C)  A straight line with negative slope
D)  Concave

Question 2

Suppose the budget constraint is given by 200P + 50S = 400, where P is Pizza and S is Spinach.If the prices of S and P increase by 10% each then the budget curve will:

Accepted Answer

A)  Shift the right with the same slope
B)  Shift to the left with the same slope
C)  Shift to the right but the slope will be different than before
D)  Shift to the left but the slope will be different than before

Question 3

The indifference curves for right shoes and left shoes will be:

Accepted Answer

A)  L-shaped
B)  A straight line with positive slope
C)  A straight line with negative slope
D)  Convex

Question 4

If a corner solution exists,

Accepted Answer

A)  Marginal rate of substitution will always be equal to the slope of the budget constraint
B)  Marginal rate of substitution will always be less than the slope of the budget constraint
C)  Marginal rate of substitution will always be greater than the slope of the budget constraint
D)  None of the answer choices is correct

Question 5

If the consumer's budget constraint is given by 10F + 5S = 100 where F is food and S is shelter, how much food can he buy if he purchases 2 units of shelter?

Accepted Answer

A)  10
B)  5
C)  20
D)  9

Question 6

If food is on the vertical axis and shelter on the horizontal axis, the slope of the budget line is given by

Accepted Answer

A)  Pf/Ps
B)  Ps/Pf
C)  -Ps/Pf
D)  -Pf/Ps

Question 7

Which statement is true?

Accepted Answer

A)  The further down a food and shelter budget line a consumer moves, the more of his budget he is spending
B)  When the price of good x (on the horizontal axis)  falls and the price of good y rises, the budget line gets steeper
C)  When Pete adopts a corner solution he is definitely not maximizing utility
D)  The "composite good" is the amount of money the consumer has spent on good X in the two good optimizing model

Question 8

An increase in the price of one good will cause

Accepted Answer

A)  An inward rotation of the budget curve
B)  An outward rotation of the budget curve
C)  A parallel shift in the budget curve
D)  An inside shift of the budget curve

Question 9

I prefer 10 apples and 6 oranges to 9 apples and 3 oranges.This is an example of

Accepted Answer

A)  Transitivity
B)  Completeness
C)  More is better
D)  Convexivity

Question 10

Suppose your parents are thinking of buying you a brand new car as a graduation present.Economists would argue that it would be better if:

Accepted Answer

A)  They gave you a cash gift equal to the value of the car regardless of how much you need a car right now
B)  They gave you a cash gift equal to the value of the car long as you really don't have much use for a car right now
C)  You sell the car to someone else right away in exchange for the cash
D)  They ask you for what kind of car you want first and then buy it for you

Question 11

The "composite good" refers to

Accepted Answer

A)  Large purchases that cannot be incrementally divided
B)  An abstraction requiring more than a three dimensional graph
C)  Income not spent on good X in a two-dimensional graphical presentation
D)  The notion that consumer pleasure cannot be modeled graphically

Question 12

According to the rational choice model developed in this chapter, which statement below is false?

Accepted Answer

A)  People would be unhappier if they exchanged money rather than things at Christmas
B)  Individual preference patterns do not change because prices change
C)  Consumers behave as if they did cost-benefit analysis on every purchase
D)  Cash grants are always better than in-kind gifts

Question 13

You go to a carnival in town intending to purchase rides for your children.When you get there they have an offer where everyone's first two rides are free.They obviously hope that the free rides will end up making them more money in the long run than if they charged for all rides.First, show on an indifference curve and budget line graph a solution that would make the free rides a bad idea for the company.Then, on a second graph, show a possible situation that would make the giveaway a success that should be repeated.

Accepted Answer

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Question 14

A diminishing marginal rate of substitution implies that indifference curves are

Accepted Answer

A)  Convex
B)  Concave
C)  Straight lines
D)  Positively sloped

Question 15

(Appendix) Carl is stranded in the forest and must survive on coconuts and quail.His utility function for those items is U = f(C,Q) = 10C - C2+ 4Q - Q2.
a.If Carl maximizes his utility and has no constraints on how many he can get, what will he do?
b.If Carl is able to get only some combination of 5 coconuts and quail, how many will he get of each if he is doing the best he can?

Accepted Answer

a.By taking the derivative of the utilit...

Question 16

If all consumers are perfectly rational according to microeconomic models they should

Accepted Answer

A)  All have the same marginal rate of substitution
B)  Always buy more of the least expensive good
C)  All end up with the same bundle of goods
D)  All have the same level of satisfaction

Question 17

Say a consumer is choosing between red wine and white wine.The price of red wine is 20 and the price of white wine is 10.If the marginal rate of substitution is 1, and if red wine is on the horizontal axis then the consumer is purchasing:

Accepted Answer

A)  Too much red wine
B)  Too much white wine
C)  Just the right amount of both goods
D)  Purchasing more than what her income would allow

Question 18

The graph of the budget line below has dollars on the vertical axis and food on the horizontal axis.Which statement is false?

Accepted Answer

A)  The vertical intercept represents all money available for purchasing
B)  The distance OA shows the amount of money spent on OD amount of food
C)  If the amount of money available is known in this graph, then the absolute and relative price of food is known also
D)  The horizontal intercept represents all the food the consumer could purchase with the budget available

Question 19

If food is on the vertical axis and shelter on the horizontal axis, then the equation for the budget line can be expressed as

Accepted Answer

A)  PsS + Pf = M
B)  F = Pf - (Ps/Pf) S
C)  S = M/Ps - (Pf/Ps) F
D)  S = M/Ps

Question 20

Say a consumer is choosing between wine and cheese.The price of wine is 10 and the price of cheese is 5.If the marginal rate of substitution is 4, and if wine is on the horizontal axis and cheese is on the vertical axis then the consumer is purchasing:

Accepted Answer

A)  Too much cheese
B)  Too much wine
C)  Just the right amount of both goods
D)  Purchasing more than what her income would allow

Exam 3: Rational Consumer Choice

If all consumers are perfectly rational according to microeconomic models they should

Correct Answer
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Correct Answer
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_TB3720_00 In this graph the customer wo...
View Answer

The graph of the budget line below has dollars on the vertical axis and food on the horizontal axis.Which statement is false?

Correct Answer
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According to the rational choice model developed in this chapter, which statement below is false?

Correct Answer
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If a corner solution exists,

Correct Answer
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If food is on the vertical axis and shelter on the horizontal axis, the slope of the budget line is given by

Correct Answer
verified

I prefer 10 apples and 6 oranges to 9 apples and 3 oranges.This is an example of

Correct Answer
verified

Correct Answer
verified
a.By taking the derivative of the utilit...
View Answer

Suppose the budget constraint is given by 200P + 50S = 400, where P is Pizza and S is Spinach.If the prices of S and P increase by 10% each then the budget curve will:

Correct Answer
verified

Which statement is true?

Correct Answer
verified

Say a consumer is choosing between red wine and white wine.The price of red wine is 20 and the price of white wine is 10.If the marginal rate of substitution is 1, and if red wine is on the horizontal axis then the consumer is purchasing:

Correct Answer
verified

The indifference curves for nickels and dimes will be:

Correct Answer
verified

The indifference curves for right shoes and left shoes will be:

Correct Answer
verified

The "composite good" refers to

Correct Answer
verified

If food is on the vertical axis and shelter on the horizontal axis, then the equation for the budget line can be expressed as

Correct Answer
verified

A diminishing marginal rate of substitution implies that indifference curves are

Correct Answer
verified

Say a consumer is choosing between wine and cheese.The price of wine is 10 and the price of cheese is 5.If the marginal rate of substitution is 4, and if wine is on the horizontal axis and cheese is on the vertical axis then the consumer is purchasing:

Correct Answer
verified

If the consumer's budget constraint is given by 10F + 5S = 100 where F is food and S is shelter, how much food can he buy if he purchases 2 units of shelter?

Correct Answer
verified

An increase in the price of one good will cause

Correct Answer
verified

Suppose your parents are thinking of buying you a brand new car as a graduation present.Economists would argue that it would be better if:

Correct Answer
verified

Exam 3: Rational Consumer Choice

If all consumers are perfectly rational according to microeconomic models they should

Correct AnswerverifiedShow Answer

Correct Answerverified_TB3720_00 In this graph the customer wo...View AnswerShow Answer

The graph of the budget line below has dollars on the vertical axis and food on the horizontal axis.Which statement is false?

Correct AnswerverifiedShow Answer

According to the rational choice model developed in this chapter, which statement below is false?

Correct AnswerverifiedShow Answer

If a corner solution exists,

Correct AnswerverifiedShow Answer

If food is on the vertical axis and shelter on the horizontal axis, the slope of the budget line is given by

Correct AnswerverifiedShow Answer

I prefer 10 apples and 6 oranges to 9 apples and 3 oranges.This is an example of

Correct AnswerverifiedShow Answer

Correct Answerverifieda.By taking the derivative of the utilit...View AnswerShow Answer

Suppose the budget constraint is given by 200P + 50S = 400, where P is Pizza and S is Spinach.If the prices of S and P increase by 10% each then the budget curve will:

Correct AnswerverifiedShow Answer

Which statement is true?

Correct AnswerverifiedShow Answer

Say a consumer is choosing between red wine and white wine.The price of red wine is 20 and the price of white wine is 10.If the marginal rate of substitution is 1, and if red wine is on the horizontal axis then the consumer is purchasing:

Correct AnswerverifiedShow Answer

The indifference curves for nickels and dimes will be:

Correct AnswerverifiedShow Answer

The indifference curves for right shoes and left shoes will be:

Correct AnswerverifiedShow Answer

The "composite good" refers to

Correct AnswerverifiedShow Answer

If food is on the vertical axis and shelter on the horizontal axis, then the equation for the budget line can be expressed as

Correct AnswerverifiedShow Answer

A diminishing marginal rate of substitution implies that indifference curves are

Correct AnswerverifiedShow Answer

Say a consumer is choosing between wine and cheese.The price of wine is 10 and the price of cheese is 5.If the marginal rate of substitution is 4, and if wine is on the horizontal axis and cheese is on the vertical axis then the consumer is purchasing:

Correct AnswerverifiedShow Answer

If the consumer's budget constraint is given by 10F + 5S = 100 where F is food and S is shelter, how much food can he buy if he purchases 2 units of shelter?

Correct AnswerverifiedShow Answer

An increase in the price of one good will cause

Correct AnswerverifiedShow Answer

Suppose your parents are thinking of buying you a brand new car as a graduation present.Economists would argue that it would be better if:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
_TB3720_00 In this graph the customer wo...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
a.By taking the derivative of the utilit...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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