Consumer Choice

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

An inferior good

A normal good

A substitute good

A complementary good

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

An inferior good

A normal good

A substitute good

A complementary good

3. Indifference curves measure the consumer's willingness to trade one good for another good while maintaining a constant level of satisfaction

True

False

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

An inferior good

A normal good

A substitute good

A complementary good

5. The limit on the consumption bundles that a consumer can afford is known as

An indifference curve

The marginal rate of substitution

The budget constraint

The consumption limit

6. 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

True

False

7. The slope at any point on an indifference curve is known as

The trade-off rate

The marginal rate of substitution

The marginal rate of trade-off

The marginal rate of indifference

8. 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).

True

False

9. 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).

True

False

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

Indifference curves are downward sloping

Indifference curves do not cross each other

Higher indifference curves are preferred to lower ones

Indifference curves are bowed outward

11. A budget constraint is a set of commodity bundles that provide the consumer with the same level of satisfaction

True

False

12. The consumer's optimal purchase of any two goods is the point where

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

The consumer has reached the highest indifference curve

The two highest indifference curves cross

The budget constraint crosses the indifference curve

13. If income and prices were both to double, the budget line would

Shift outward in a parallel fashion

Shift inward in a parallel fashion

Stay the same

Rotate inward

Rotate outward

14. Suppose a consumer must choose between the consumption of sandwiches and pizza. If we measure the quantity of pizza on the horizontal axis and the quantity of sandwiches on the vertical axis, and if the price of pizza is $10 and the price of a sandwich is $5, then the slope of the budget constraint is

5

10

2

1/2

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

The indifference curve is tangent to the budget constraint

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

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

All of the above are true

None of the above are true

16. Suppose we measure the quantity of good X on the horizontal axis and the quantity of good Y on the vertical axis. If indifference curves are bowed inward, as we move from having an abundance of good X to having an abundance of good Y, the marginal rate of substitution of good Y for good X (the slope of the indifference curve)

Rises

Falls

Stays the same

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

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

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

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

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

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

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

Consumer Choice

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

2.

What first name or nickname would you like us to use?

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

3. Indifference curves measure the consumer's willingness to trade one good for another good while maintaining a constant level of satisfaction

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

5. The limit on the consumption bundles that a consumer can afford is known as

6. 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

7. The slope at any point on an indifference curve is known as

8. 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).

9. 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).

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

11. A budget constraint is a set of commodity bundles that provide the consumer with the same level of satisfaction

12. The consumer's optimal purchase of any two goods is the point where

13. If income and prices were both to double, the budget line would

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

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