Question 1

When the price of a good increases, all else held equal, which of the following does not occur?

Accepted Answer

A)   The slope of the budget line changes.
B)   The consumer's indifference curves shift.
C)   Utility decreases.
D)   Quantity demanded decreases.
E)   The budget line shifts inward along that good's axis.

Question 2

The slope of a budget line for two goods, A and B, with A on the vertical axis and B on the horizontal axis, is equal to

Accepted Answer

A)   -PA/PB.
B)   PB/PA.
C)   -PB/PA.
D)   -MUA/PB.
E)   PA/PB.

Question 3

Exhibit 5A-2 
-Refer to Exhibit 5A-2. If the individual starts at point A and moves to point B as a result of an increase in the price of Y, then the income effect

Accepted Answer

A)   decreases the consumption of both X and Y.
B)   has no effect on the consumption of either X or Y.
C)   increases the consumption of both X and Y.
D)   decreases the consumption of X but increases the consumption of Y.
E)   increases the consumption of X but decreases the consumption of Y. E

Question 4

The slope of an indifference curve is equal to the

Accepted Answer

A)   degree of responsiveness of demand to a change in price.
B)   price elasticity of demand for a good.
C)   rate of substitution between two goods.
D)   marginal utility of a good measured on the horizontal axis.
E)   marginal utility of a good measured on the vertical axis.

Question 5

For every point along a demand curve, utility is being maximized.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 5A-3 
-Refer to Exhibit 5A-3. Calculate the maximum quantity of good Y and the maximum quantity of good X that the consumer can purchase if the price of good Y is $3 and the price of good X is $5.

Accepted Answer

51; 30.6
Consumer in...

Question 7

Exhibit 5A-1 X/MUY > PX/PY. B)  Curve I2 represents a greater level of utility than I1. C)  If the individual started at point A and moved to point B, the most likely cause was a decrease in the price of X. D)  In moving from point A to point B, the individual is moving down along his or her demand curve for good Y. E)  At point B, MUX/PX = MUY/PY." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 5A-1. Which of the following statements is false?

Accepted Answer

A)   At point C, MUX/MUY > PX/PY.
B)   Curve I2 represents a greater level of utility than I1.
C)   If the individual started at point A and moved to point B, the most likely cause was a decrease in the price of X.
D)   In moving from point A to point B, the individual is moving down along his or her demand curve for good Y.
E)   At point B, MUX/PX = MUY/PY.

Question 8

As you move down your indifference curve, total utility decreases.

Accepted Answer

A) True 
 B)False

Question 9

An indifference curve shows

Accepted Answer

A)   various combinations of two goods that give the consumer the same amount of utility.
B)   the quantities of a good that give the consumer maximum utility when compared directly to price.
C)   the relationship between the price and quantity of a good that a consumer is able to purchase.
D)   the relationship between the quantity of a good and maximum utility.
E)   the relationship between total and marginal utility.

Question 10

The budget line rotates when a consumer's budget increases.

Accepted Answer

A) True 
 B)False

Question 11

When income decreases, all else held constant, which of the following occurs?

Accepted Answer

A)   Demand for an inferior good decreases.
B)   The slope of the highest attainable indifference curve changes.
C)   The budget line shifts out from the origin.
D)   Total utility decreases.
E)   Total utility increases.

Question 12

As you move down an indifference curve, your

Accepted Answer

A)   budget must decrease.
B)   budget must increase.
C)   total utility increases.
D)   total utility remains the same.
E)   total utility decreases. D

Question 13

Exhibit 5A-2 
-Refer to Exhibit 5A-2. If the individual starts at point A and moves to point B as a result of an increase in the price of Y, then the amount of reduction in the consumption of Y is

Accepted Answer

A)   45 due to the substitution effect and 25 due to the income effect.
B)   25 due to the substitution effect and 20 due to the income effect.
C)   25 due to both the substitution effect and income effect.
D)   20 due to the substitution effect and 25 due to the income effect.
E)   25 due to the substitution effect and 45 due to the income effect.

Question 14

Exhibit 5A-3 
-Refer to Exhibit 5A-3. Calculate the income of the consumer with this budget line if the price of good Y is $3 and the price of good X is $5.

Accepted Answer

$153
To buy 26 units of Y and ...

Question 15

In terms of indifference curve analysis, equilibrium occurs at the point of tangency of the indifference curve and the demand curve.

Accepted Answer

A) True 
 B)False

Question 16

Along an indifference curve, different combinations of a good represent the same cost to a consumer.

Accepted Answer

A) True 
 B)False

Question 17

A curve showing different combinations of two products that give a consumer the same satisfaction is

Accepted Answer

A)   a paradox of value.
B)   an indifference curve.
C)   total utility.
D)   an indifference map.
E)   a utility curve.

Question 18

If the price of video games falls, then the substitution effect will cause a consumer to reduce her consumption of video games.

Accepted Answer

A) True 
 B)False  False

Question 19

Suppose a consumer allocates a budget to apples and oranges. Now, the prices of apples and oranges are increased by the same percentage. What change will happen to the budget line? What change will happen to the consumer's indifference curves? What will happen to the consumption of the two goods?

Accepted Answer

This causes the budget line to make a pa...

Question 20

Which of the following will most likely happen when a person's income increases, other things being equal?

Accepted Answer

A)   The budget line will shift outward.
B)   The indifference curves will shift downward.
C)   The indifference curves will shift outward.
D)   The budget line will become steeper.
E)   The budget line will become flatter.

Exam 18: Consumer Theory With Indifference Curves

When the price of a good increases, all else held equal, which of the following does not occur?

Correct AnswerverifiedShow Answer

The slope of a budget line for two goods, A and B, with A on the vertical axis and B on the horizontal axis, is equal to

Correct AnswerverifiedShow Answer

Exhibit 5A-2 -Refer to Exhibit 5A-2. If the individual starts at point A and moves to point B as a result of an increase in the price of Y, then the income effect

Correct AnswerverifiedE

The slope of an indifference curve is equal to the

Correct AnswerverifiedShow Answer

For every point along a demand curve, utility is being maximized.

Correct AnswerverifiedShow Answer

Exhibit 5A-3 -Refer to Exhibit 5A-3. Calculate the maximum quantity of good Y and the maximum quantity of good X that the consumer can purchase if the price of good Y is $3 and the price of good X is $5.

Correct Answerverified51; 30.6Consumer in...View AnswerShow Answer

Exhibit 5A-1 -Refer to Exhibit 5A-1. Which of the following statements is false?

Correct AnswerverifiedShow Answer

As you move down your indifference curve, total utility decreases.

Correct AnswerverifiedShow Answer

An indifference curve shows

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The budget line rotates when a consumer's budget increases.

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When income decreases, all else held constant, which of the following occurs?

Correct AnswerverifiedShow Answer

As you move down an indifference curve, your

Correct AnswerverifiedD

Exhibit 5A-2 -Refer to Exhibit 5A-2. If the individual starts at point A and moves to point B as a result of an increase in the price of Y, then the amount of reduction in the consumption of Y is

Correct AnswerverifiedShow Answer

Exhibit 5A-3 -Refer to Exhibit 5A-3. Calculate the income of the consumer with this budget line if the price of good Y is $3 and the price of good X is $5.

Correct Answerverified$153To buy 26 units of Y and ...View AnswerShow Answer

In terms of indifference curve analysis, equilibrium occurs at the point of tangency of the indifference curve and the demand curve.

Correct AnswerverifiedShow Answer

Along an indifference curve, different combinations of a good represent the same cost to a consumer.

Correct AnswerverifiedShow Answer

A curve showing different combinations of two products that give a consumer the same satisfaction is

Correct AnswerverifiedShow Answer

If the price of video games falls, then the substitution effect will cause a consumer to reduce her consumption of video games.

Correct AnswerverifiedFalse

Suppose a consumer allocates a budget to apples and oranges. Now, the prices of apples and oranges are increased by the same percentage. What change will happen to the budget line? What change will happen to the consumer's indifference curves? What will happen to the consumption of the two goods?

Correct AnswerverifiedThis causes the budget line to make a pa...View AnswerShow Answer

Which of the following will most likely happen when a person's income increases, other things being equal?

Correct AnswerverifiedShow Answer

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E

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51; 30.6
Consumer in...
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D

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$153
To buy 26 units of Y and ...
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False

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This causes the budget line to make a pa...
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