Related Topics
Take Another Quiz

Microeconomics [Ch. 21]

17 Questions
Microeconomics Quizzes & Trivia

The Theory of Consumer Choice

Please wait...
Questions and Answers
  • 1. 
    If we measure the quantity of French fries on the horizontal axis and the quantity of hamburgers on the vertical axis, and if the price of French fries is $0.60 and the price of a hamburger is $2.40, then the slope of the budget constraint is 1/4 (and it is negative).
    • A. 

      True

    • B. 

      False

  • 2. 
    • A. 

      True

    • B. 

      False

  • 3. 
    • A. 

      True

    • B. 

      False

  • 4. 
    When drawn on a graph that measures the quantity of a good on each axis, indifference curves are usually straight lines that slope downward (negatively).
    • A. 

      True

    • B. 

      False

  • 5. 
    Indifference curves tend to be bowed inward because a consumer is willing to trade a greater amount of a good for another if they have an abundance of the good they are trading away
    • A. 

      True

    • B. 

      False

  • 6. 
    The limit on the consumption bundles that a consumer can afford is known as
    • A. 

      An indifference curve

    • B. 

      The marginal rate of substitution

    • C. 

      The budget constraint

    • D. 

      The consumption limit

  • 7. 
    • A. 

      5

    • B. 

      10

    • C. 

      2

    • D. 

      1/2

  • 8. 
    The slope at any point on an indifference curve is known as
    • A. 

      The trade-off rate

    • B. 

      The marginal rate of substitution

    • C. 

      The marginal rate of trade-off

    • D. 

      The marginal rate of indifference

  • 9. 
    Which of the following statements is not true with regard to the standard properties of indifference curves?
    • A. 

      Indifference curves are downward sloping

    • B. 

      Indifference curves do not cross each other

    • C. 

      Higher indifference curves are preferred to lower ones

    • D. 

      Indifference curves are bowed outward

  • 10. 
    The consumer's optimal purchase of any two goods is the point where
    • A. 

      The consumer reaches the highest indifference curve subject to remaining on the budget constraint

    • B. 

      The consumer has reached the highest indifference curve

    • C. 

      The two highest indifference curves cross

    • D. 

      The budget constraint crosses the indifference curve

  • 11. 
    Which of the following is true about the consumer's optimum consumption bundle? At the optimum,
    • A. 

      The indifference curve is tangent to the budget constraint

    • B. 

      The slope of the indifference curve equals the slope of the budget constraint

    • C. 

      The relative prices of the two goods equals the marginal rate of substitution

    • D. 

      All of the above are true

    • E. 

      None of the above are true

  • 12. 
    • A. 

      Rises

    • B. 

      Falls

    • C. 

      Stays the same

    • D. 

      Could rise or fall depending on the relative prices of the two goods

  • 13. 
    If an increase in a consumer's income causes the consumer to increase his quantity demanded of a good, then the good is
    • A. 

      An inferior good

    • B. 

      A normal good

    • C. 

      A substitute good

    • D. 

      A complementary good

  • 14. 
    If an increase in a consumer's income causes the consumer to decrease her quantity demanded of a good, then the good is
    • A. 

      An inferior good

    • B. 

      A normal good

    • C. 

      A substitute good

    • D. 

      A complementary good

  • 15. 
    If an increase in a consumer's income causes the consumer to increase her quantity demanded of a good, then the good is
    • A. 

      An inferior good

    • B. 

      A normal good

    • C. 

      A substitute good

    • D. 

      A complementary good

  • 16. 
    If income and prices were both to double, the budget line would 
    • A. 

      Shift outward in a parallel fashion

    • B. 

      Shift inward in a parallel fashion

    • C. 

      Stay the same

    • D. 

      Rotate inward

    • E. 

      Rotate outward

  • 17. 
    Which of the following is not true regarding the outcome of a consumer's optimization process? 
    • A. 

      The consumer has reached his highest indifference curves subject to his budget constraint

    • B. 

      The marginal utility per dollar spent on each good is the same

    • C. 

      The consumer is indifferent between any two points on his budget constraint

    • D. 

      The marginal rate of substitution between goods is equal to the ratio of the prices between goods

    • E. 

      The consumer's indifference curve is tangent to his budget constraint