MULTIPLE 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.
ANS: C DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves MSC: Definitional
2. Economists represent a consumer's preferences using a. demand curves.
b. budget constraints.
c. indifference curves.
d. supply curves.
ANS: C DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
ANS: C DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
ANS: C DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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..
ANS: C DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
ANS: D DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves MSC: Definitional
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 watching hockey. 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.
ANS: B DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
ANS: D DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves MSC: Analytical
9. Both Diana and Sarah like jazz music and music by the Beatles. Diana likes music by the Beatles much better than jazz music, whereas Sarah prefers jazz music to music by the Beatles. If we were to graph an indifference curve with cd’s by the Beatles on the horizontal axis and jazz cd’s on the vertical axis, then
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.
ANS: B DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: 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.
ANS: D DIF: 3 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves MSC: Analytical
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.
ANS: B DIF: 3 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
ANS: B DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
ANS: B DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
ANS: D DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves MSC: Analytical
15. Refer to Figure 21-7. Which of the following statements is correct?
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 indifference curve Indifference Curve 3.
ANS: B DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves MSC: Analytical
16. Refer to Figure 21-7. Which of the following statements is correct?
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.
ANS: B DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
ANS: B DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
ANS: B DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
ANS: A DIF: 3 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Marginal rate of substitution MSC: Analytical
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.
ANS: C DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves MSC: Applicative
21. Bundle A contains 10 units of good X and 5 units of good Y. Bundle B contains 5 units of good X and 10 units of good Y. Bundle C contains 10 units of good X and 10 units of good Y. The consumer is indifferent between bundle A and bundle B. Assume that the consumer’s preferences satisfy the four properties of indifference curves. Which of the following statements is correct?
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.
ANS: D DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
Bundle Books Movies
A 2 3
B 3 2
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
ANS: B DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves MSC: Analytical
23. A consumer has preferences over two goods: books and movies. The three bundles shown in the table below lie on the same indifference curve for the consumer.
Bundle Books Movies
A 2 4
B 4 2
C 3 3
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.
ANS: C DIF: 3 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves MSC: Analytical
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).
ANS: A DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
ANS: D DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
ANS: D DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves MSC: Interpretive
27. Which of the following is a property of a typical indifference curve?
a. upward sloping
b. bowed away from the origin c. do not intersect
d. lower ones are preferred to higher ones
ANS: C DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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
ANS: D DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves MSC: Interpretive
29. Which of the following is not a property of a typical indifference curve?
a. downward sloping
b. bowed away from the origin c. do not intersect
d. higher ones are preferred to lower ones
ANS: B DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves MSC: Interpretive
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.
ANS: C DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
ANS: C DIF: 2 REF: 21-2 NAT: Analytic
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.
ANS: A DIF: 2 REF: 21-2 NAT: Analytic
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.
ANS: B DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
ANS: A DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Indifference curves 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.
d. Both a and b are correct.
ANS: A DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Marginal rate of substitution MSC: Interpretive
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.
ANS: C DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Marginal rate of substitution 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.
ANS: C DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Marginal rate of substitution 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.
ANS: C DIF: 1 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Marginal rate of substitution 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.
ANS: B DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Marginal rate of substitution 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.
ANS: A DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Marginal rate of substitution MSC: Analytical
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.
d. Both a and b are correct.
ANS: D DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Marginal rate of substitution MSC: Analytical
42. Bundle L contains 10 units of good X and 20 units of good Y. Bundle M contains 8 units of good X and 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.
ANS: B DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Marginal rate of substitution 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.
ANS: B DIF: 2 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Marginal rate of substitution 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.
d. increases, then decreases.
ANS: A DIF: 3 REF: 21-2 NAT: Analytic
LOC: Utility and consumer choice TOP: Marginal rate of substitution MSC: Analytical