# A Consumer Choice In Microeconomics Quiz

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| By Emy_2
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Emy_2
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Quizzes Created: 18 | Total Attempts: 47,156
Questions: 17 | Attempts: 2,150

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A Consumer Choice In Microeconomics Quiz; Microeconomics is a branch of economics that looks at how to allocate resources that are scarcer than others. It forces a firm or individual to think strategically and efficiently so that nothing goes to waste. In the following quiz, we’ll be taking a look at the subject of consumer choice within the overarching study of microeconomics and seeing just how much you can tell us about it.

• 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

A. True
Explanation
The slope of the budget constraint represents the rate at which one good can be traded for another. In this case, the slope is calculated by dividing the change in the quantity of hamburgers by the change in the quantity of French fries. Since the price of a hamburger is four times the price of French fries (\$2.40/\$0.60 = 4), the slope of the budget constraint is 1/4. Additionally, the negative sign indicates that as the quantity of one good increases, the quantity of the other good decreases in order to maintain the same level of expenditure. Therefore, the statement is true.

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• 2.

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

• A.

True

• B.

False

B. False
Explanation
The statement is false because a budget constraint represents the combinations of goods and services that a consumer can afford given their income and the prices of the goods. It does not necessarily provide the consumer with the same level of satisfaction. The consumer's preferences and utility function determine the level of satisfaction they derive from different commodity bundles.

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• 3.

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

• A.

True

• B.

False

A. True
Explanation
Indifference curves represent the different combinations of two goods that provide the consumer with the same level of satisfaction. They show the consumer's preferences and willingness to trade one good for another while keeping their satisfaction constant. As the consumer moves along the indifference curve, they are willing to give up some of one good to obtain more of the other, as long as their overall satisfaction remains the same. Therefore, the statement that indifference curves measure the consumer's willingness to trade one good for another while maintaining a constant level of satisfaction is true.

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• 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

B. False
Explanation
Indifference curves are not usually straight lines that slope downward. Instead, they are typically curved lines that represent different combinations of goods that provide the same level of satisfaction or utility to an individual. These curves can be convex or concave, but they do not have a consistent downward slope. Therefore, the correct answer is False.

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• 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

A. True
Explanation
Indifference curves are typically bowed inward because of the concept of diminishing marginal rate of substitution. This means that as a consumer has more of one good, they are willing to trade less of it for additional units of another good. In other words, the consumer values the first units of a good more than the later units, leading to the bowed shape of the indifference curve. This behavior reflects the idea that consumers are willing to trade a greater amount of a good for another if they already have an abundance of the good they are giving up.

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• 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

C. The budget constraint
Explanation
The correct answer is the budget constraint. The budget constraint refers to the limit on the consumption bundles that a consumer can afford. It represents the various combinations of goods and services that a consumer can purchase given their income and the prices of the goods. The budget constraint is typically represented graphically as a line that shows the different combinations of goods that can be purchased within the consumer's budget.

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• 7.

### 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

• A.

5

• B.

10

• C.

2

• D.

1/2

C. 2
Explanation
The slope of the budget constraint represents the rate at which the consumer can trade one good for another while keeping their total expenditure constant. In this case, the price of pizza is \$10 and the price of a sandwich is \$5. The slope of the budget constraint is determined by the ratio of the prices of the two goods, which is 10/5 = 2. This means that for every one unit increase in the quantity of pizza consumed, the consumer must give up 2 units of sandwiches to maintain the same level of expenditure. Therefore, the correct answer is 2.

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• 8.

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

• A.

• B.

The marginal rate of substitution

• C.

The marginal rate of trade-off

• D.

The marginal rate of indifference

B. The marginal rate of substitution
Explanation
The slope at any point on an indifference curve represents the rate at which one good can be substituted for another while maintaining the same level of satisfaction. This is known as the marginal rate of substitution. It indicates the amount of one good that a consumer is willing to give up in order to obtain an additional unit of another good, while remaining indifferent or equally satisfied. Therefore, the correct answer is the marginal rate of substitution.

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• 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

D. Indifference curves are bowed outward
Explanation
The statement that indifference curves are bowed outward is not true. Indifference curves are typically convex to the origin, meaning that they are bowed inward. This is because individuals generally prefer a combination of goods that includes some of both, rather than extreme amounts of one or the other. As a result, indifference curves are typically bowed inward, reflecting the diminishing marginal rate of substitution between the two goods.

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• 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

A. The consumer reaches the highest indifference curve subject to remaining on the budget constraint
Explanation
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. This means that the consumer maximizes their satisfaction by choosing a combination of goods that brings them to the highest possible indifference curve, indicating their preferred level of utility. However, this choice must also be within the limits of their budget constraint, ensuring that they can afford the chosen combination of goods. Therefore, the consumer's optimal purchase is the point where these two conditions are simultaneously met.

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• 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

D. All of the above are true
Explanation
At the consumer's optimum consumption bundle, all of the statements are true. The indifference curve is tangent to the budget constraint, which means that the consumer is allocating their income in such a way that they cannot increase their satisfaction by reallocating their spending. The slope of the indifference curve equals the slope of the budget constraint, indicating that the consumer is willing to trade off one good for another at the same rate as the market price ratio. Additionally, the relative prices of the two goods equals the marginal rate of substitution, which represents the rate at which the consumer is willing to substitute one good for another while maintaining the same level of satisfaction.

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• 12.

### 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)

• A.

Rises

• B.

Falls

• C.

Stays the same

• D.

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

A. Rises
Explanation
When indifference curves are bowed inward, it indicates that the consumer has a diminishing marginal rate of substitution. This means that as the consumer moves from having an abundance of good X to having an abundance of good Y, the consumer is willing to give up less and less of good X in exchange for more units of good Y. Therefore, the marginal rate of substitution of good Y for good X, which is measured by the slope of the indifference curve, rises.

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• 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

B. A normal good
Explanation
If an increase in a consumer's income causes the consumer to increase his quantity demanded of a good, then the good is a normal good. This means that as the consumer's income rises, they are willing and able to purchase more of the good. Normal goods are typically higher-quality products or luxury items that people tend to buy more of as their income increases.

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• 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

A. An inferior good
Explanation
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. This is because inferior goods are those for which demand decreases as income increases. In other words, as the consumer's income rises, she can afford to switch to higher-quality or more expensive alternatives, leading to a decrease in demand for the inferior good.

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• 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

B. A normal good
Explanation
If an increase in a consumer's income causes the consumer to increase her quantity demanded of a good, then the good is a normal good. This means that as the consumer's income increases, her demand for the good also increases. Normal goods are typically considered to be higher quality goods or luxury items that consumers desire more of as their income rises.

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• 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

C. Stay the same
Explanation
If income and prices were both to double, the budget line would stay the same. This is because doubling both income and prices would result in the same ratio between the two, meaning that the purchasing power of the consumer remains unchanged. As a result, the budget line, which represents the different combinations of goods that can be purchased with a given income and prices, would not shift or rotate.

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• 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

C. The consumer is indifferent between any two points on his budget constraint
Explanation
The statement "The consumer is indifferent between any two points on his budget constraint" is not true regarding the outcome of a consumer's optimization process. In reality, the consumer is not indifferent between any two points on the budget constraint. The consumer aims to reach the highest indifference curve possible while staying within the budget constraint. The optimal point is where the indifference curve is tangent to the budget constraint, indicating the consumer's highest level of satisfaction given the budget constraint.

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• Current Version
• Mar 22, 2023
Quiz Edited by
ProProfs Editorial Team
• Jan 19, 2011
Quiz Created by
Emy_2

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