Ngân hàng đề thi câu hỏi trắc nghiệm kinh tế vi mô chương 22 (principle of economics mankiw 2018)

Toàn bộ những gì bạn cần để qua môn kinh tế học, tài liệu này tập hợp những câu hỏi trắc nghiệm mới nhất của kinh tế vi mô năm 2018. Về nội dung tài liệu, với các khái niệm phổ biến và khái quát nhất về kinh tế vi mô cũng như những giải thích về các cơ chế hoạt động của nền kinh tế, bộ giáo trình bao gồm 23 phần cung cấp cho người đọc các kiến thức khá toàn diện và chuyên sâu về các nguyên lý kinh tế học như các lý thuyết cổ điển, các lý thuyết về phát triển: nền kinh tế trong dài hạn, các lý thuyết về vòng tròn kinh tế: nền kinh tế trong ngắn hạn, các yếu tố vi mô ẩn sau kinh tế vĩ mô, các tranh luận về chính sách vĩ mô… Tất cả đều được giải thích và đánh giá bởi một vị giáo sư kinh tế hàng đầu trên thế giới. Các khái niệm trong sách được định nghĩa rất rõ ràng, dễ nắm bắt, dễ hiểu, có tóm tắt các chương tạo điều kiện tốt nhất cho việc ôn tập

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LOC: Utility and consumer choice TOP: Consumer choice

MSC: Definitional

2 A consumer’s budget constraint for goods X and Y is determined by how much the consumer likes good X relative to good Y

LOC: Utility and consumer choice TOP: Budget constraint

MSC: Definitional

3 The slope of the budget constraint reveals the relative price of good X compared to good Y

MSC: Applicative

4 A budget constraint illustrates bundles that a consumer prefers equally, while an indifference curve illustrates bundles that are equally affordable to a consumer

ANS: F DIF: 2 REF: 21-1 | 21-2 NAT: Analytic

MSC: Applicative

5 For a typical consumer, most indifference curves are bowed inward

LOC: Utility and consumer choice TOP: Indifference curves

MSC: Interpretive

6 For a typical consumer, most indifference curves are downward sloping

MSC: Interpretive

7 For a typical consumer, indifference curves can intersect if they satisfy the property of transitivity

MSC: Interpretive

8 When two goods are perfect complements, the indifference curves are right angles

LOC: Utility and consumer choice TOP: Perfect complements

MSC: Interpretive

9 The indifference curves for left shoes and right shoes are right angles

LOC: Utility and consumer choice TOP: Perfect complements

MSC: Applicative

10 The indifference curves for perfect substitutes are straight lines

LOC: Utility and consumer choice TOP: Perfect substitutes

MSC: Applicative

1406

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11 The indifference curves for nickels and dimes are straight lines.

LOC: Utility and consumer choice TOP: Perfect substitutes

MSC: Applicative

12 When two goods are perfect substitutes, the indifference curves are right angles

LOC: Utility and consumer choice TOP: Perfect complements | Perfect substitutes

MSC: Interpretive

13 If goods A and B are perfect substitutes, then the marginal rate of substitution of good A for good B is constant

LOC: Utility and consumer choice TOP: Marginal rate of substitution | Perfect substitutes

MSC: Interpretive

14 The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other

LOC: Utility and consumer choice TOP: Marginal rate of substitution

MSC: Interpretive

15 The marginal rate of substitution between goods A and B measures the price of A relative to the price of B

MSC: Definitional

16 The marginal rate of substitution is the slope of the budget constraint

MSC: Definitional

17 The marginal rate of substitution is the slope of the indifference curve

MSC: Definitional

18 At a consumer’s optimal choice, the consumer chooses the combination of goods that equates the marginal rate of substitution and the price ratio

LOC: Utility and consumer choice TOP: Optimization

MSC: Interpretive

19 At a consumer’s optimal choice, the consumer chooses the combination of goods such that the ratio of the marginal utilities equals the ratio of the prices

LOC: Utility and consumer choice TOP: Optimization

MSC: Interpretive

20 If consumers purchase more of a good when their income rises, the good is a normal good

LOC: Utility and consumer choice TOP: Normal goods | Inferior goods

MSC: Definitional

21 If a consumer purchases more of good B when his income rises, good B is an inferior good

LOC: Utility and consumer choice TOP: Normal goods | Inferior goods

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22 If a consumer purchases more of good A when her income falls, good A is an inferior good.

LOC: Utility and consumer choice TOP: Inferior goods

MSC: Definitional

23 The income effect of a price change is unaffected by whether the good is a normal or inferior good

LOC: Utility and consumer choice TOP: Income effect

MSC: Interpretive

24 The income effect of a price change is the change in consumption that results from the movement to a new indifference curve

LOC: Utility and consumer choice TOP: Income effect

MSC: Interpretive

25 The direction of the substitution effect is not influenced by whether the good is normal or inferior

LOC: Utility and consumer choice KEY: Substitution effect

MSC: Analytical

26 The substitution effect of a price change is the change in consumption that results from the movement to a newindifference curve

LOC: Utility and consumer choice TOP: Substitution effect

MSC: Interpretive

27 All points on a demand curve are optimal consumption points

LOC: Utility and consumer choice TOP: Demand MSC: Analytical

28 Economists use the term Giffen good to describe a good that violates the law of demand

LOC: Utility and consumer choice TOP: Giffen good MSC: Interpretive

29 Giffen goods are inferior goods for which the income effect dominates the substitution effect

LOC: Utility and consumer choice TOP: Giffen good MSC: Definitional

30 Economists have found evidence of a Giffen good when studying the consumption of rice in the Chinese province of Hunan

LOC: Utility and consumer choice TOP: Giffen good MSC: Applicative

31 Katie wins $1 million in her state’s lottery If Katie drastically reduces the number of hours she works after she wins the money, we can infer that the income effect is larger than the substitution effect for her

LOC: Utility and consumer choice TOP: Labor supply

MSC: Interpretive

32 Susie wins $1 million in her state’s lottery If Susie keeps working after she wins the money, we can infer thatthe income effect is larger than the substitution effect for her

MSC: Interpretive

33 A rational person can have a negatively-sloped labor supply curve

MSC: Applicative

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34 The substitution effect in the work-leisure model induces a person to work less in response to higher wages, which tends to make the labor-supply curve slope upward.

MSC: Interpretive

35 The income effect in the work-leisure model induces a person to work less in response to higher wages, which tends to make the labor-supply curve slope backward

MSC: Interpretive

36 Some economists have advocated reducing the taxation of interest and other capital income, arguing that such

a policy change would raise the after-tax interest rate that savers can earn and would thereby encourage people

to save more

LOC: Utility and consumer choice TOP: Consumption-saving decision

MSC: Interpretive

37 A rise in the interest rate will generally result in people consuming more when they are old if the substitution effect outweighs the income effect

MSC: Interpretive

38 A rise in the interest rate will generally result in people consuming less when they are old if the substitution effect outweighs the income effect

MSC: Interpretive

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a How much is this consumer's income?

b Draw a budget constraint given this information Label it B

c Construct a new budget constraint showing the change if the price of rice falls $1 Label this C

d Given the original prices for rice ($2) and beans ($3), construct a new budget constraint if this

consumer's income increased to $48 Label this D

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2 Draw a budget constraint that is consistent with the following prices and income.

Income = 200

PY = 50

PX = 25

a Demonstrate how your original budget constraint would change if income increases to 500

b Demonstrate how your original budget constraint would change if PY decreases to 20

c Demonstrate how your original budget constraint would change if PX increases to 40

ANS:

DIF: 2 REF: 21-1 NAT: Analytic LOC: Utility and consumer choiceTOP: Budget constraint MSC: Applicative

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3 Assume that a consumer faces the following budget constraints.

a Assuming that income is the same on both occasions, describe the difference in relative prices

between Panel A and Panel B

b If income in Panel B is $126, what is the price of good X?

c If income in Panel A is $84, what is the price of good Y?

d Assuming that the price of good X is the same on both occasions, describe the difference in

income and price of good Y between Panel A and Panel B

ANS:

a The price of good Y is relatively higher in Panel A than Panel B Said another way, the price of

X is relatively lower in Panel A than Panel B

b $9

c $12

d Income in Panel A is twice the income in Panel B, and the price of "Y" in Panel B is 1/18 the

price of "Y" in Panel A

DIF: 2 REF: 21-1 NAT: Analytic LOC: Utility and consumer choiceTOP: Budget constraint MSC: Applicative

4 Evaluate the following statement, "Warren Buffet is the second richest person in the world He doesn't face any constraint on his ability to purchase commodities he wants."

ANS:

Everyone faces scarcity of resources, regardless of how rich they are because wants are assumed to be infinite.DIF: 1 REF: 21-1 NAT: Analytic LOC: Utility and consumer choiceTOP: Budget constraint MSC: Interpretive

5 List and briefly explain each of the four properties of indifference curves

ANS:

1: Higher indifference curves are preferred to lower ones, because consumers usually prefer more of something to less of it 2: Indifference curves are downward sloping The slope of an indifference curve reflects the rate at which the consumer is willing to substitute one good for another If the quantity of one good is reduced, the quantity of the other good must increase in order for the consumer to be equally happy 3: Indifference curves do not cross If indifference curves did cross, the same point could be on two different curves, thus contradicting the assumption thatconsumers prefer more of both goods to less 4: Indifference curves are bowed inward This is because people are more willing to trade away goods that they have in abundance and less willing to trade away goods of which they have less

DIF: 1 REF: 21-2 NAT: Analytic LOC: Utility and consumer choiceTOP: Indifference curves MSC: Interpretive

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6 Draw indifference curves that reflect the following preferences.

a pencils with white erasers and pencils with pink erasers

b left shoes and right shoes

c potatoes and rice

d income and polluted water

ANS:

DIF: 2 REF: 21-2 NAT: Analytic LOC: Utility and consumer choiceTOP: Indifference curves MSC: Applicative

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7 Graphically demonstrate the conditions associated with a consumer optimum Carefully label all curves and axes.

at the optimal consumption point

DIF: 1 REF: 21-3 NAT: Analytic LOC: Utility and consumer choiceTOP: Consumer choice MSC: Interpretive

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9 Assume that a person consumes two goods, Coke and Snickers Use a graph to demonstrate how the consumeradjusts his/her optimal consumption bundle when the price of Coke decreases Carefully label all curves and axes What will happen to consumption if Coke is a normal good? What will happen to consumption if Coke is

an inferior good? (Remember to explain the possible change when the income effect dominates and when the substitution effect dominates.)

ANS:

If Coke is a normal good, the consumption of Coke will increase when the price decreases If Coke is an inferior good and the substitution effect dominates, the consumption of Coke will increase when the price decreases If Coke

is an inferior good and the income effect dominates, the consumption of Coke will decrease when the price

decreases If consumption decreases, the demand curve is upward sloping, and Coke would be a Giffen good Giffen goods are very rare in the real world, and Coke is not likely to be one

DIF: 2 REF: 21-3 NAT: Analytic LOC: Utility and consumer choiceTOP: Consumer choice MSC: Applicative

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10 Using the graph shown, construct a demand curve for M&M's given an income of $10.

ANS:

DIF: 3 REF: 21-3 NAT: Analytic LOC: Utility and consumer choiceTOP: Demand MSC: Analytical

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11 Using indifference curves and budget constraints, graphically illustrate the substitution and income effect that would result from a change in the price of a normal good.

ANS:

The graph above illustrates a price decrease for potato chips Moving from point A to point B illustrates the

substitution effect, while moving from point B to point C illustrates the income effect

DIF: 3 REF: 21-3 NAT: Analytic LOC: Utility and consumer choiceTOP: Income effect | Substitution effect MSC: Applicative

12 Explain the difference between inferior and normal goods As a developing economy experiences increases in income (measured by GDP), what would you predict to happen to demand for inferior goods?

ANS:

Normal goods are those for which consumption increases as income rises Inferior goods are those for which consumption decreases as income rises We would expect the demand for inferior goods to decrease as developing countries experience increases in income

DIF: 2 REF: 21-3 NAT: Analytic LOC: Utility and consumer choiceTOP: Inferior goods | Normal goods MSC: Interpretive

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13 Janet knows that she will ultimately face retirement Assume that Janet will experience two periods

in her life, one in which she works and earns income, and one in which she is retired and earns no income Janet can earn $250,000 during her working period and nothing in her retirement period She must both save and consume in her work period and can earn 10 percent interest on her savings

a Use a graph to demonstrate Janet's budget constraint

b On your graph, show Janet at an optimal level of consumption in the work period equal to

$150,000 What is the implied optimal level of consumption in her retirement period?

c Now, using your graph from part b above, demonstrate how Janet will be affected by an increase

in the interest rate on savings to 14 percent Discuss the role of income and substitution effects in determining whether Janet will increase, or decrease her savings in the work period

ANS:

a see graph below

b see graph below

c see graph below

Substitution effect: Retirement spending becomes less costly, so she should increase saving

Income effect: As income increases she should increase consumption in both periods (thus reducing her saving in the work period.)

DIF: 3 REF: 21-4 NAT: Analytic LOC: Utility and consumer choiceTOP: Consumption-saving decision MSC: Applicative

Sec 00 - The Theory of Consumer Choice

MULTIPLE CHOICE

1 Which of the following does not represent a tradeoff facing a consumer?

a choosing to purchase more of all goods

b choosing to spend more leisure time and less working time

c choosing to spend more now and consume less in the future

d choosing to purchase less of one good in order to purchase more of another good

MSC: Applicative

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2 How are the following three questions related: 1) Do all demand curves slope downward? 2) How

do wages affect labor supply? 3) How do interest rates affect household saving?

a They all relate to macroeconomics

b They all relate to monetary economics

c They all relate to the theory of consumer choice

d They are not related to each other in any way

MSC: Interpretive

4 Which of the following statements is correct?

a The theory of consumer choice provides a more complete understanding of supply, just as the

theory of the competitive firm provides a more complete understanding of demand

b The theory of consumer choice provides a more complete understanding of demand, just as the

theory of the competitive firm provides a more complete understanding of supply

c Monetary theory provides a more complete understanding of demand, just as the theory of the

competitive firm provides a more complete understanding of supply

d The theory of public choice provides a more complete understanding of supply, just as the theory ofthe competitive firm provides a more complete understanding of demand

MSC: Interpretive

5 When a consumer spends less time enjoying leisure and more time working, she has

a lower income and therefore cannot afford more consumption

b lower income and therefore can afford more consumption

c higher income and therefore cannot afford more consumption

d higher income and therefore can afford more consumption

MSC: Interpretive

6 The theory of consumer choice provides the foundation for understanding the

a structure of a firm

b profitability of a firm

c demand for a firm's product

d supply of a firm's product

MSC: Definitional

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7 The theory of consumer choice examines

a the determination of output in competitive markets

b the tradeoffs inherent in decisions made by consumers

c how consumers select inputs into manufacturing production processes

d the determination of prices in competitive markets

MSC: Definitional

8 The theory of consumer choice most closely examines which of the following Ten Principles of

Economics?

a People face trade-offs

b The cost of something is what you give up to get it

c Trade can make everyone better off

d Markets are usually a good way to organize economic activity

a Karen, Tara, and Chelsea

b Karen only

c Tara and Chelsea but not Karen

d none of the women

MSC: Applicative

2 Karen, Tara, and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days Ice cream costs $5 per gallon, and paperback novels cost $8 each Karen has a budget of $80, Tara has a budget of $60, and Chelsea has a budget of $40 to spend on ice cream and paperback novels Who can afford to purchase 5 gallons of ice cream and 8 paperback novels?

b Karen only

c Tara and Chelsea but not Karen

d none of the women

MSC: Applicative

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3 Karen, Tara, and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days Ice cream costs $5 per gallon, and paperback novels cost $8 each Karen has a budget of $80, Tara has a budget of $60, and Chelsea has a budget of $40 to spend on ice cream and paperback novels Who can afford to purchase 4 gallons of ice cream and 5 paperback novels?

b Karen only

c Karen and Tara but not Chelsea

d none of the women

MSC: Applicative

4 Karen, Tara, and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days Ice cream costs $5 per gallon, and paperback novels cost $8 each Karen has a budget of $80, Tara has a budget of $60, and Chelsea has a budget of $40 to spend on ice cream and paperback novels Which of the following statements is correct?

a Each woman faces the same budget constraint

b The slope of the budget constraint is the same for each woman

c The area underneath the budget constraint is larger for Chelsea than for Karen

d All of the above are correct

MSC: Applicative

5 Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst The price of a pint of beer is $5, and the price of a bratwurst is $4 Which of the following combinations of beers and bratwursts represents a point that would lie to the

interior of the consumer’s budget constraint?

a 160 beers and 200 bratwursts

b 40 beers and 50 bratwursts

c 80 beers and 100 bratwursts

d 160 beers and 0 bratwursts

MSC: Analytical

6 Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst The price of a pint of beer is $5, and the price of a bratwurst is $4 Which of the following combinations of beers and bratwursts represents a point that would lie to the

exterior of the consumer’s budget constraint?

MSC: Analytical

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7 Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst The price of a pint of beer is $5, and the price of a bratwurst is $4 Which of the following combinations of beers and bratwursts represents a point that would lie

directly on the consumer’s budget constraint?

MSC: Analytical

8 Consider two goods, books and hamburgers The slope of the consumer's budget constraint is measured by the

a consumer's income divided by the price of hamburgers

b relative price of books and hamburgers

c consumer's marginal rate of substitution

d number of books purchased divided by the number of hamburgers purchased

MSC: Interpretive

9 Suppose a consumer spends his income on CDs and DVDs If his income decreases, the budget constraint for CDs and DVDs will

a shift outward, parallel to the original budget constraint

b shift inward, parallel to the original budget constraint

c rotate outward along the CD axis because he can afford more CDs

d rotate outward along the DVD axis because he can afford more DVDs

MSC: Analytical

10 When the price of a shirt falls, the

a quantity of shirts demanded falls

b quantity of shirts demanded rises

c quantity of shirts supplied rises

d demand for shirts falls

LOC: Utility and consumer choice TOP: Demand MSC: Analytical

11 A budget constraint illustrates the

a prices that a consumer chooses to pay for products he consumes

b purchases made by consumers

c consumption bundles that a consumer can afford

d consumption bundles that give a consumer equal satisfaction

MSC: Definitional

12 Assume that a college student spends her income on books and pizza The price of a pizza is $8, and the price of a book is $15 If she has $100 of income, she could choose to consume

a 8 pizzas and 4 books

b 4 pizzas and 5 books

c 9 pizzas and 3 books

d 4 pizzas and 3 books

MSC: Applicative

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13 Assume that a college student spends her income on mac-n-cheese and CDs The price of one box ofmac-n-cheese is $1, and the price of one CD is $12 If she has $100 of income, she could choose to consume

a 15 boxes of mac-n-cheese and 6 CDs

b 20 boxes of mac-n-cheese and 7 CDs

c 10 boxes of mac-n-cheese and 8 CDs

d 30 boxes of mac-n-cheese and 6 CDs

MSC: Applicative

14 A consumer who doesn't spend all of her income

a would be at a point outside of her budget constraint

b would be at a point inside her budget constraint

c must not be consuming positive quantities of all goods

d must be consuming at a point where her budget constraint touches one of the axes

MSC: Interpretive

15 An increase in income will cause a consumer's budget constraint to

a shift outward, parallel to its initial position

b shift inward, parallel to its initial position

c pivot around the horizontal axis

d pivot around the vertical axis

MSC: Analytical

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Figure 21-1

16 Refer to Figure 21-1 Which point in the figure showing a consumer’s budget constraint represents

the consumer's income divided by the price of a CD?

a point A

b point C

c point D

d point E

MSC: Applicative

17 Refer to Figure 21-1 A consumer that chooses to spend all of her income could be at which

point(s) on the budget constraint?

a A only

b E only

c B, C, or D only

d A, B, C, or D only

MSC: Applicative

18 Refer to Figure 21-1 All of the points identified in the figure represent affordable consumption

options with the exception of

a A

b E

c A and E

d None All points are affordable

MSC: Applicative

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Figure 21-2

W V

X

Y Z

Pizza Pepsi

19 Refer to Figure 21-2 A consumer that chooses to spend all of her income could be at which

point(s) on the budget constraint?

a V only

b Z only

c V, W, X, or Y only

d W, X, or Y only

MSC: Applicative

21 Refer to Figure 21-2 Which of the following statements is not correct?

a Points W, X, and Y all cost the consumer the same amount of money

b Point Z is unaffordable for the consumer given his budget constraint

c Point V costs less than point Z

d Points W, X, and Y give the consumer the same level of satisfaction

MSC: Analytical

22 Refer to Figure 21-2 Which of the following statements is correct?

a Points W, X, and Y all cost the consumer the same amount of money

b Point V is unaffordable for the consumer given his budget constraint

c Point Z costs less than point V

d Points W, X, and Y give the consumer the same level of satisfaction

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Figure 21-3

In each case, the budget constraint moves from BC-1 to BC-2

BC-1 BC-2

(a)

x

y

BC-2 BC-1

(b)

x y

23 Refer to Figure 21-3 Which of the graphs in the figure reflects a decrease in the price of good X

d None of the above is correct

MSC: Analytical

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26 The following diagram shows two budget lines: A and B.

Which of the following could explain the change in the budget line from A to B?

a a decrease in the price of X

b an increase in the price of Y

c a decrease in the price of Y

d More than one of the above could explain this change

MSC: Analytical

27 The following diagram shows two budget lines: A and B

a a simultaneous decrease in the price of X and the price of Y

b an increase in income

c an increase in income and a decrease in the price of Y

d Both a and b are correct

MSC: Analytical

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28 The following diagram shows two budget lines: A and B.

a a decrease in income and a decrease in the price of X

b a decrease in income and an increase in the price of X

c an increase in income and a decrease in the price of X

d an increase in income and an increase in the price of X

MSC: Analytical

29 The slope of the budget constraint is determined by the

a relative price of the goods measured on the axes

b relative price of the goods measured on the axes and the consumer’s income

c endowment of productive resources

d preferences of the consumer

MSC: Definitional

30 The slope of the budget constraint is all of the following except

a the relative price of two goods

b the rate at which a consumer can trade one good for another

c the marginal rate of substitution

d constant

MSC: Definitional

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MSC: Applicative

34 Refer to Figure 21-4 Assume that a consumer faces both budget constraints in graph (a) and graph

(b) on two different occasions If her income has remained constant, what has happened to prices?

a The price of X in graph (a) is higher than the price of X in graph (b)

b The price of Y in graph (a) is higher than the price of Y in graph (b)

c The prices of both X and Y are lower in graph (a)

d None of the above is true

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35 Suppose a consumer spends her income on two goods: music CDs and DVDs The consumer has

$200 to allocate to these two goods, the price of a CD is $10, and the price of a DVD is $20 What

is the maximum number of CDs the consumer can purchase?

a 10

b 20

c 40

d 50

MSC: Applicative

36 Suppose a consumer spends her income on two goods: iTunes music downloads and books The consumer has $100 to allocate to these two goods, the price of a downloaded song is $1, and the price of a book is $20 What is the maximum number of books the consumer can purchase?

a 100

b 20

c 10

d 5

MSC: Applicative

37 Suppose a consumer spends her income on two goods: music CDs and DVDs The price of a CD is

$8, and the price of a DVD is $20 If we graph the budget constraint by placing the quantity of CDs purchased on the horizontal axis, what is the slope of the budget constraint?

MSC: Applicative

38 Suppose a consumer is currently spending all of her available income on two goods: music CDs and DVDs If the price of a CD is $9, the price of a DVD is $18, and she is currently consuming 10 CDs and 5 DVDs, what is the consumer's income?

a $90

b $180

c $270

d $360

MSC: Applicative

39 A consumer is currently spending all of her available income on two goods: music CDs and DVDs

At her current consumption bundle she is spending twice as much on CDs as she is on DVDs If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs, what is the price of a CD?

a $4

b $8

c $12

d $20

MSC: Analytical

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40 The following diagram shows a budget constraint for a particular consumer.

If the price of X is $10, what is the price of Y?

a $15

b $25

c $35

d $70

MSC: Analytical

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42 The following diagram shows a budget constraint for a particular consumer.

MSC: Analytical

43 Budget constraints exist for consumers because

a their utility from consuming goods eventually reaches a maximum level

b even with unlimited incomes they have to pay for each good they consume

c they have to pay for goods, and they have limited incomes

d prices and incomes are inversely related

MSC: Applicative

45 A family on a trip budgets $800 for meals and hotel accommodations Suppose the price of a meal is

$40 In addition, suppose the family could afford a total of 8 nights in a hotel if they don’t buy any meals How many meals could the family afford if they gave up two nights in the hotel?

a 1

b 2

c 5

d 8

MSC: Applicative

46 If the price of bread is zero, the budget constraint between bread (on the vertical axis) and cheese (on the horizontal axis) would

a be vertical

b coincide with the vertical axis

c coincide with the horizontal axis

d be horizontal

MSC: Analytical

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Scenario 21-1

Suppose the price of hot wings is $10, the price of beer is $1, and the consumer’s income is $50 In addition, suppose the consumer’s budget constraint illustrates hot wings on the horizontal axis and beer on the vertical axis

47 Refer to Scenario 21-1 If the price of beer doubles to $2, then the

a budget constraint intersects the vertical axis at 25 beers

b slope of the budget constraint rises to -2

c budget constraint intersects the vertical axis at 100 beers

d budget constraint shifts inward in a parallel fashion

MSC: Applicative

48 Refer to Scenario 21-1 If the consumer's income rises to $60, then the budget line for hot wings

and beer would

a now intersect the horizontal axis at 6 orders of hot wings and the vertical axis at 60 beers

b not change

c now intersect the horizontal axis at 4 orders of hot wings and the vertical axis at 16 beers

d rotate outward along the beer axis

MSC: Applicative

49 An increase in a consumer's income

a increases the slope of the consumer's budget constraint

b has no effect on the slope of the consumer's budget constraint

c decreases the slope of the consumer's budget constraint

d has no effect on the consumer's budget constraint

MSC: Analytical

50 A decrease in a consumer's income

a increases the slope of the consumer's budget constraint

b has no effect on the consumer's budget constraint

c decreases the slope of the consumer's budget constraint

d has no effect on the slope of the consumer's budget constraint

MSC: Analytical

51 Mark spends his weekly income on gin and cocktail olives The price of gin has risen from $7 to $9 per bottle, the price of cocktail olives has fallen from $6 to $5 per jar, and Mark's income has stayed fixed at $46 per week Since the price changes, Mark has been buying 4 bottles of gin and 2 jars of cocktail olives per week At the original prices, 4 bottles of gin and 2 jars of cocktail olives would have

a exactly exhausted his income

b cost more than his income

c cost less than his income

d could have maximized his satisfaction given his budget constraint

MSC: Applicative

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52 Mark spends his weekly income on gin and cocktail olives The price of gin has risen from $7 to $9 per bottle, the price of cocktail olives has fallen from $6 to $5 per jar, and Mark's income has stayed fixed at $46 per week If you illustrate gin on the vertical axis and cocktail olives on the horizontal axis, then the budget constraint

a is steeper after the price changes

b is flatter after the price changes

c is the same after the price changes

d shifts in a parallel fashion to the old budget constraint after the price changes

MSC: Applicative

53 Suppose the only two goods that Brett consumes are wine and cheese When wine sells for $10 a bottle and cheese sell for $10 a pound, he buys 6 bottles of wine and 4 pounds of cheese — spendinghis entire income of $100 One day the price of wine falls to $5 a bottle and the price of cheese increases to $20 a pound, while his income does not change The bundle of wine and cheese that he purchased at the old prices now costs

a the same amount at the new prices

b less than Brett's income at the new prices

c more than Brett's income at the new prices

d We do not have enough information to answer the question

MSC: Applicative

54 Suppose the only two goods that Brett consumes are wine and cheese When wine sells for $10 a bottle and cheese sell for $10 a pound, he buys 6 bottles of wine and 4 pounds of cheese — spendinghis entire income of $100 One day the price of wine falls to $5 a bottle, and the price of cheese increases to $20 a pound, while his income does not change If you illustrate wine on the vertical axis and cheese on the horizontal axis, then

a the slope of Brett's budget has not changed

b the slope of Brett's budget constraint is flatter at the new prices

c the slope of Brett's budget constraint is steeper at the new prices

d Brett's budget constraint has shifted in a parallel fashion to the budget constraint with the old prices

MSC: Applicative

55 If the relative price of a concert ticket is three times the price of a meal at a good restaurant, then theopportunity cost of a concert ticket can be measured by the

a slope of the budget constraint

b slope of an indifference curve

c marginal rate of substitution

d income effect

MSC: Analytical

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56 Refer to Figure 21-5 Suppose a consumer has $100 in income, the price of popcorn is $2, and the

value of B is 100 What is the price of Mt Dew?

a $1

b $2

c $5

d $100

MSC: Analytical

57 Refer to Figure 21-5 Suppose a consumer has $200 in income, the price of popcorn is $1, and the

price of Mt Dew is $2 What is the value of A?

a 200

b 100

c 50

d 25

MSC: Analytical

58 Refer to Figure 21-5 Suppose the price of popcorn is $2, the price of Mt Dew is $4, the value of

A is 30, and the value of B is 15 How much income does the consumer have?

a $120

b $80

c $60

d $30

MSC: Analytical

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Figure 21-6

A

B

Books DVDs

59 Refer to Figure 21-6 Suppose a consumer has $500 in income, the price of a book is $10, and the

value of B is 50 What is the price of a DVD?

a $5

b $10

c $50

d $100

MSC: Analytical

60 Refer to Figure 21-6 Suppose a consumer has $200 in income, the price of a book is $5, and the

price of a DVD is $10 What is the value of A?

a 40

b 20

c 10

d 2

MSC: Analytical

61 Refer to Figure 21-6 Suppose the price of a book is $15, the price of a DVD is $10, the value of A

is 5, and the value of B is 7.5 How much income does the consumer have?

a $150

b $100

c $75

d $37.50

MSC: Analytical

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Sec 02 - The Theory of Consumer Choice - Preferences: What the Consumer WantsMULTIPLE CHOICE

1 An indifference curve illustrates

a a firm’s profits

b a consumer’s budget

c a consumer’s preferences

d the prices of two goods

MSC: Definitional

3 If two bundles of goods give a consumer the same satisfaction, the consumer must be

a on her budget constraint

b in a position of equilibrium

c indifferent between the bundles

d Both a and c are correct

MSC: Interpretive

4 Indifference curves graphically represent

a an income level sufficient to allow an individual to achieve a given level of satisfaction

b the constraints faced by individuals

c an individual's preferences

d the relative price of commodities

MSC: Definitional

5 A consumer

a is equally satisfied with any indifference curve

b prefers indifference curves with positive slopes

c prefers higher indifference curves to lower indifference curves

d prefers indifference curves that are straight lines to indifference curves that are right angles

MSC: Interpretive

6 A consumer's preferences provide a

a ranking of the set of bundles that happen to fall on indifference curves

b relative ranking of bundles that provide more of all goods

c framework for evaluating market equilibriums

d complete ranking of all possible consumption bundles

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7 If Walter has one hour of leisure time in which to watch a sporting event on television, his

preferences are as follows: Walter prefers watching football to watching baseball, but he prefers watching baseball to watching basketball He is indifferent between watching baseball and watchinghockey Bundle A contains one hour of football and zero hours of all other sports Bundle B contains one hour of baseball and zero hours of all other sports Bundle C contains one hour of basketball and zero hours of all other sports Bundle D contains one hour of hockey and zero hours

of all other sports If we were to graph Walter’s preferences using indifference curves, which of the following bundles would be on the same indifference curve?

a A, B, and C only

b B and D only

c A and D only

d There is no combination of the sports that could be drawn on the same indifference curve

MSC: Definitional

8 Diana and Sarah each like jewelry and music by the Rolling Stones If we were to graph an

indifference curve with jewelry on the horizontal axis and cd’s by the Rolling Stones on the vertical axis, then

a Diana and Sarah would have identical indifference curves

b Diana’s indifference curve would be higher than Sarah’s indifference curve

c Sarah’s indifference curve would be higher than Diana’s indifference curve

d Because we do not know the intensity of each woman’s preferences, we do not have enough

information to compare their indifference curves

a Diana and Sarah would have identical indifference curves

b Diana’s indifference curve would be steeper than Sarah’s indifference curve

c Sarah’s indifference curve would be steeper than Diana’s indifference curve

d We do not have enough information to compare their indifference curves

MSC: Analytical

10 Alicia is a vegetarian, so she does not eat beef That is, beef provides no additional utility to Alicia She loves potatoes, however If we illustrate Alicia’s indifference curves by drawing beef on the horizontal axis and potatoes on the vertical axis, her indifference curves will

a slope downward

b be vertical straight lines

c slope upward

d be horizontal straight lines

MSC: Analytical

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11 Irene is a vegetarian, so she does not eat pork That is, pork provides no additional utility to Irene She loves broccoli, however If we illustrate Irene’s indifference curves by drawing broccoli on the horizontal axis and pork on the vertical axis, her indifference curves will

a slope downward

b be vertical straight lines

c slope upward

d be horizontal straight lines

MSC: Analytical

Figure 21-7

D B A

C E

Indifference Curve 1 Indifference Curve 2 Indifference Curve 3

Cake Donuts

12 Refer to Figure 21-7 When comparing bundle A to bundle E, the consumer

a prefers bundle A because it contains more donuts

b prefers bundle E because it lies on a higher indifference curve

c prefers bundle E because it contains more donuts

d is indifferent between the two bundles

MSC: Analytical

13 Refer to Figure 21-7 When comparing bundle B to bundle C, the consumer

a prefers bundle B because it contains more donuts

b is indifferent between the two bundles

c prefers bundle C because it contains more cake

d In order to compare bundle B to bundle C, we must know the prices of cake and donuts

MSC: Analytical

14 Refer to Figure 21-7 A person that chooses to consume bundle C is likely to

a receive higher total satisfaction at bundle C than at bundle A

b spend more on bundle C than bundle A

c receive higher marginal utility from cake than from donuts

d receive higher marginal utility from donuts than from cake

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a Bundle A is preferred equally to bundle E

b Bundle A is preferred equally to bundle C

c Bundle B contains more cake than bundle C

d The bundles along indifference curve Indifference Curve 2 are preferred to those along indifferencecurve Indifference Curve 3

MSC: Analytical

a If a consumer moves from bundle C to bundle A, her loss of cake cannot be compensated for by an increase in donuts

b Bundle E is preferred to all other points identified in the figure

c Since more is preferred to less, bundle C may be preferred to bundle E in some circumstances for this consumer

d Even though bundle E has more of both goods than bundle B, we could draw a different set of

indifference curves in which bundle B is preferred to bundle E

MSC: Analytical

17 Refer to Figure 21-7 Which of the following statements is not true for a consumer who moves

from bundle B to bundle C?

a At bundle C the consumer would be willing to give up a larger amount of cake in exchange for a

donut than at bundle B

b The marginal rate of substitution at bundles B and C are the same since the points lie on the same indifference curve

c The consumer is willing to sacrifice donuts to obtain cake

d The consumer receives the same level of satisfaction at bundles B and C

MSC: Analytical

18 Refer to Figure 21-7 Which of the following statements is not correct?

a Bundles on Indifference Curve 3 are preferred to bundles on Indifference Curve 1

b The consumer is indifferent between bundles A and E because they contain the same number of

donuts

c The consumer is indifference between bundles B and C

d The consumer prefers bundle C to bundle D

MSC: Analytical

19 Refer to Figure 21-7 Which of the following comparisons is correct regarding the marginal rate of

substitution (MRS) of donuts for cake?

a The MRS is greater between bundles A and B than between bundles B and C

b The MRS is greater between bundles B and C than between bundles A and B

c The MRS is the same between bundles A and B and bundles B and C because all three bundles lie

on the same indifference curve

d The MRS is greater between bundles E and B than between bundles B and D

MSC: Analytical

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20 Each of the following are characteristics of an indifference curve map except

a moving northeast to a new indifference curve will increase utility

b points on the same indifference curve yield equal utility

c the axes represent levels of utility for each of the goods

d indifference curves cannot cross

a The consumer must prefer bundle C to either bundle A or B

b Bundle A and bundle B lie on the same indifference curve

c The consumer must prefer bundle B to bundle C

d Both a) and b) are correct

MSC: Applicative

22 A consumer has preferences over two goods: books and movies The two bundles shown in the table below lie

on the same indifference curve for the consumer

Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the

four properties of indifference curves?

a 1 movie and 5 books

b 3 movies and 3 books

c 5 movies and 1 book

d 1 movie and 7 books

Which of the following properties of indifference curves would this consumer's preferences violate?

a Indifference curves are downward sloping

b Indifference curves do not cross

c Indifference curves are bowed inward

d These bundles do not violate any of the properties of indifference curves

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24 Laura consumes only beer and chips Her indifference curves are all bowed inward Consider the bundles (2,6), (4,4), and (6,2) If Laura is indifferent between (2,6) and (6,2), then Laura must

a prefer (4,4) to (6,2)

b be indifferent between (4,4) and (6,2)

c prefer (6,2) to (4,4)

d prefer (2,6) to (4,4)

MSC: Analytical

25 Which of the following is a property of indifference curves?

a Indifference curves usually intersect

b Indifference curves have positive slopes

c Indifference curves are downward sloping and always linear

d Indifference curves are bowed in toward the origin

MSC: Interpretive

26 All of the following are properties of indifference curves except

a higher indifference curves are preferred to lower ones

b indifference curves are downward sloping

c indifference curves do not cross

d indifference curves are bowed outward

d lower ones are preferred to higher ones

MSC: Interpretive

28 Which of the following is a property of a typical indifference curve?

a upward sloping

b bowed away from the origin

c they often intersect

d higher ones are preferred to lower ones

MSC: Interpretive

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30 Higher indifference curves are preferred to lower ones as long as the

a marginal rate of substitution is diminishing

b products in the bundle are “bads” not “goods.”

c products in the bundle are “goods” not “bads.”

d budget constraint does not shift

MSC: Interpretive

31 Janet prefers cashews to almonds She prefers macadamia nuts to peanuts, but she is indifferent between almonds and peanuts Which of the following statements can we say for sure?

a Janet prefers cashews to macadamia nuts

b Janet prefers peanuts to cashews

c Janet prefers macadamia nuts to almonds

d Janet prefers almonds to macadamia nuts

LOC: Utility and consumer choice TOP: Transitivity MSC: Applicative

32 Indifference curves that cross would suggest that

a the consumer does not prefer more to less

b the consumer is likely to prefer a redistribution of income from rich to poor

c different individuals have different preferences for the same goods

d the marginal rate of substitution is the same for both indifference curves

LOC: Utility and consumer choice TOP: Transitivity MSC: Analytical

33 Which of the following is not correct?

a Indifference curves are downward sloping

b Indifference curves that are closer to the origin are preferred to indifference curves that are further from the origin

c Indifference curves are bowed in toward the origin

d Indifference curves do not cross

MSC: Interpretive

34 When indifference curves are bowed in toward the origin,

a consumers are less inclined to trade away goods they are lacking

b consumers' willingness to trade away goods they have in abundance diminishes

c an increase in income will shift the indifference curve away from the origin

d a decrease in income will shift the indifference curve away from the origin

MSC: Analytical

35 Indifference curves tend to be bowed inward because of diminishing

a marginal rates of substitution

b demand for the good as prices rise

c income

MSC: Interpretive

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36 The slope of an indifference curve is

a the rate of change of consumer's preferences

b the marginal rate of preference

c the marginal rate of substitution

d always equal to the slope of the budget constraint

MSC: Definitional

37 The rate at which a consumer is willing to exchange one good for another, and maintain a constant level of satisfaction, is called the

a relative expenditure ratio

b value of marginal product

c marginal rate of substitution

d relative price ratio

MSC: Definitional

38 The marginal rate of substitution is

a the slope of a budget constraint

b always constant

c the slope of an indifference curve

d the point at which the budget constraint and the indifference curve are tangent

MSC: Definitional

39 The rate at which a consumer is willing to trade one good for another to maintain the same level of satisfaction is affected by the

a prices of the products

b amount of each good the consumer is currently consuming

c consumer’s income

d marginal value product

MSC: Analytical

40 Bob enjoys fishing and hunting He divides his leisure hours between the two outdoor activities Suppose we were to draw Bob’s indifference curves for the two activities, placing fishing on the horizontal axis and hunting on the vertical axis If Bob’s indifference curves are bowed inward, then

a the rate at which he is willing to give up an hour of hunting for an hour of fishing changes

depending on how many hours of each activity he has done For example, if Bob has already fished

a lot in one week, he will be more willing to give up an hour of fishing for an hour of hunting than

if he has only fished a little that week

b the rate at which he is willing to give up an hour of hunting for an hour of fishing is constant

because he must derive the same enjoyment out of each activity

c the rate at which he is willing to give up an hour of hunting for an hour of fishing changes

depending on how many hours of each activity he has done For example, if Bob has already fished

a lot in one week, he will be less willing to give up an hour of fishing for an hour of hunting than if

he has only fished a little that week

d Bob’s indifference curves will not cross When indifference curves are bowed outward, the

indifference curves must cross

MSC: Analytical

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41 The marginal rate of substitution

a varies along an indifference curve if the curve is bowed inward

b is constant along an indifference curve if the curve is a straight line

c is greater when a consumer has more of two goods rather than less of two goods

MSC: Analytical

42 Bundle L contains 10 units of good X and 20 units of good Y Bundle M contains 8 units of good Xand 21 units of good Y The consumer is indifferent between bundle L and bundle M Assume that the consumer’s preferences satisfy the four properties of indifference curves Which of the

following correctly expresses the marginal rate of substitution of good X for good Y between these two points?

a The consumer will give up 1 unit of good X to gain 2 units of good Y

b The consumer will give up 2 units of good X to gain 1 unit of good Y

c The price of good X is twice as large as the price of good Y

d The price of good X is half as large as the price of good Y

MSC: Applicative

43 Assume that a consumer’s indifference curve is bowed inward and satisfies the other three properties

of indifference curves As the consumer moves from left to right along the horizontal axis, the consumer’s marginal rate of substitution

a increases

b decreases

c remains constant

d increases, then decreases

MSC: Analytical

44 Assume that a consumer’s indifference curve is bowed outward but satisfies the other three

properties of indifference curves As the consumer moves from left to right along the horizontal axis, the consumer’s marginal rate of substitution

a increases

b decreases

c remains constant

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