Chapter 6

Question 1

The budget line shows all combinations of two products that the consumer can purchase given money income and the prices of the product

Answer 1

True

Question 2

The slope of the budget line when quantities of Alpha are measured horizontally and quantities of Beta are measured vertically is equal to the price of beta divided by the price of Alpha

Answer 2

False

Question 3

A consumer is unable to purchase any combinations of two products which lie below the consumers budget line

Answer 3

False

Question 4

An increase in the money income of a consmuer shifts the budget line to the right

Answer 4

True

Question 5

An indifference curve is concave to origion

Answer 5

False

Question 6

The marginal rate of subsitution shows the rate, at the margin, at which the consumer is prepared to subsitiute one good for the other so as to remain equally satifiied

Answer 6

True

Question 7

The closer to the origion an indifference curve lies, the smaller the total utility a consumer obtains from the combinations of prouducts on that indifference curve

Answer 7

True

Question 8

On an indifference map, the further from the origion, the lower the level of utility associated with each indifference curve

Answer 8

True

Question 9

If a consumer moves from one combination on an indifference curve to another combination on the same curve the total utility obtained by the consmuer does not change

Answer 9

True

Question 10

There can be an intersection of consumer indifference curves

Answer 10

False

Question 11

A consumer maxamizes total utility whe she or he purchases a combination of two products at which her or his budget crosses the indifference curve

Answer 11

False

Question 12

On an indifference map, the consumers equalibrium position will be where the slope of the highest attainable indifference curve equals the slope of the budget line

Answer 12

True

Question 13

It is assumed in the marginal-utility approach to consumer behavior that utility is cardinal, or numerically measured

Answer 13

True

Question 14

In both the marginal utility and indifference curve, it is assumed that a consumer is able to say wheteher the total utility obtained from combination A is greater than, equal to, or less than the total utility obtained from combination B

Answer 14

True

Question 15

A decrease in the price of a product normally enables a consumer to reach a higher indifference curve

Answer 15

True

Question 16

Suppose a consumer has an income of $8, the price of R is $1 and the price of S is .5. Which of the following combinations is on the budget line

A. 8R and 1S

B. 7R and 1S

C. 6R and 6S

D. 5R and 6S

Answer 16

D. 5R and 6S

Question 17

If a consumer has an income of $100, the price of U is $10 and the price of V is $20, the maxiumum quantitiy of U the consumer can purchase is:

A. 5

B. 10

C. 20

D. 30

Answer 17

B.10

Question 18

WHen the income of a consumer is 20, the price of T is 5 amd the price of Z is 2. The quanttiy of T is measured horizontally, the lope of the budget line is:

A. .4

B. 2.5

C. 4

D. 10

Answer 18

B. 2.5

Question 19

Assume that everything else remains the same, but there is a decrese in a consumers income, The most likely affect:

A. An inward shift in the indifference curves because the consumer can now satisfy fewer wants

B. AN inward shift in the budgelt line becuase the consumer cna now purhcase less of each.

Answer 19

B. AN inward shift in the budgelt line becuase the consumer cna now purhcase less of each.

Question 20

An indifference curve is a curve that shows the differnec combinations of twho products that:

A. give the consumer eqaual marginal utilites

B. Give a consumer equal total utilities

C. Cost a consumer equal ammounts

D. have the same prices

Answer 20

C. Cost the consumer equal ammounts

Question 21

The slope of an indifference curve measures the:

A. slope of budget line

B. Total utility of a good

C. Space on an indiffernce map

D. Marginal rate of subsititon

Answer 21

D. Marginal rate of subsititon

Question 22

Which of the following is charateristic of indiffernce curves:

A. they are concave to orgiion

B. They are convex to origion

C. Curves cloer to the origion have higest level of total utility

D. Curves closer to the origion have the highest level of marginal utility.

Answer 22

B. They are convex to origion

Question 23

The marginal rate of substition may:

A. Rise or fall depending on the slope of budget line

B. Rises as you move downward along an indifference curve

C. Falls as you move downward along an indifference curve

D. Remain the same along a budget line

Answer 23

C. Falls as you move downward along an indifference curve

Question 24

To derrive the demand curve of a product, the price of the product is varried. For the indiferrence curve analyasis, the

A. budget line is held constatnt

B. Money income of the consumer changes

C. Tastes and preferences of the consumer are held constant

D. Prices of other products the consumer may want change.

Answer 24

C. Tastes and preferences of the consumer are held constant

Question 25

In an indifference curve analysis, the consumer will be in equalibrium when the

A. indiffernce curve is concave to origion

B. Budget line crosses axis

C. Two indifferenc curves intersect and are tangent to the budget line

D. The budget line is tangent to an indifference curve.

Answer 25

D. The budget line is tangent to an indifference curve.

Question 26

If a consumer is intiially in equalibrium a decrese in money income will

A. move the consuemer ot a new equilibrium

B. move the consumer

D. Have no effect.

Answer 26

A. move the consuemer ot a new equilibrium