Deck 3: Utilities Indifference Curves

Question 1

Two goods are perfect substitutes if they have right-angle indifference curves.

Answer 1

False

Question 2

An indifference curve is a curve or locus of bundles in the consumption set for a consumer among which the consumer is indifferent.

Answer 2

True

Question 3

A locus of bundles in the consumption set for a consumer, all of which are equally preferred, is called a(n)

A) difference curve
B) budget line
C) indifference curve

Answer 3

indifference curve

Question 4

A set of indifference curves for a consumer is called a convex map.

Question 5

At a particular point on the indifference map, the ratio at which a consumer would be willing to exchange one good for another is the marginal rate of substitution.

Question 6

Indifference curves cannot slope

A) downward
B) horizontally
C) upward

Question 7

The rule that indifference curves cannot cross each other follows from

A) both the transitivity and nonsatiation assumptions
B) the nonsatiation assumption only
C) both the selfishness and nonsatiation assumptions

Question 8

The Weak Axiom of Revealed Preference (WARP) states that, if bundle x is ever directly revealed to be preferred to bundle y when the two bundles are not identical, then y can never be directly revealed to be preferred to x.

Question 9

The only theory of the economics of tipping considers just the customer's income, while ignoring the server's income.

Question 10

The axiom that states that, if bundle x is revealed to be preferred to bundle y (either directly or indirectly) and bundle y is different from x, then bundle y cannot be directly or indirectly revealed to be preferred to x is called the Strong Axiom of Revealed Preference (SARP).

Question 11

Because of the convexity assumption and the fact that indifference curves farther from the origin contain higher levels of utility, indifference curves

A) are bowed out from the origin
B) are bowed in toward the origin
C) all pass through the origin

Question 12

Stemming from convexity, as we move along an indifference curve, the marginal rate of substitution

A) decreases
B) increases
C) stays constant

Question 13

The optimal consumption bundle is the bundle the consumer chooses in order to maximize utility within the economically feasible set.

Question 14

Given a student's indifference map, we will always find that the optimal allocation of time for studying for final exams is situated at a tangency point between an indifference curve and the time constraint line.

Question 15

Refer to Exhibit 3-1. The indifference curves violate the

A) selfishness assumption
B) convexity of preferences
C) rationality principle

Question 16

Refer to Exhibit 3-2. Which figure illustrates goods that yield no utility?

A) (a)
B) (b)
C) (c)
D) (d)

Question 17

Indifference curves farther from the origin contain

A) unknown levels of utility
B) higher levels of utility
C) lower levels of utility

Question 18

The rate of exchange that would just maintain the consumer's original utility is called the marginal rate of

A) multiplication
B) additivity
C) substitution

Question 19

If a consumer satisfies a version of the SARP, then the consumer will make the types of choices that would be made by a decision maker with convex preferences and a continuous, nonsatiated utility function.

Question 20

Refer to Exhibit 3-2. Which figure illustrates goods that are perfect substitutes?

A) (a)
B) (b)
C) (c)
D) (d)

Question 21

Why is it true that indifference curves farther from the origin contain higher levels of utility?

Question 22

Refer to Exhibit 3-2. Which figure illustrates goods for which the consumer has nonconvex preferences?

A) (a)
B) (b)
C) (c)
D) (d)

Question 23

Understanding tipping requires analysis of

A) only the customer's utility
B) both the customer's and the server's utilities
C) only the server's utility

Question 24

What is the name of the axiom that states that, if bundle x is ever directly revealed to be preferred to bundle y when the two bundles are not identical, then y can never be directly revealed to be preferred to x?

A) Weak Axiom of Revealed Preference (WARP)
B) Strong Axiom of Revealed Preference (SARP)
C) Generalized Axiom of Revealed Preference (GARP)

Question 25

Give the tip that, if left by all other customers, would provide the server with the income that you feel is best, considering your preferences and your income. This is known as the

A) categorical imperative tipping rule
B) unselfishness assumption tipping rule
C) irrationality complex

Question 26

What is the name of the axiom that modifies SARP to allow for the possibility that the person making choices may have convex indifference curves, but not strictly convex ones?

A) Weak Axiom of Revealed Preference (WARP)
B) Strong Axiom of Revealed Preference (SARP)
C) Generalized Axiom of Revealed Preference (GARP)

Question 27

Explain what convexity of preferences implies about marginal rates of substitution.

Question 28

A server can increase a tip by the greatest amount by

A) giving a positive weather forecast when presenting the bill
B) wearing something unique and with flair
C) putting a smiling face on a bill

Question 29

Describe the shape of indifference curves for a good that yields no utility.

Question 30

Refer to Exhibit 3-4. Interpret the relationship between the two goods.

Question 31

Tipping violates the psychological assumption of

A) nonsatiation
B) selfishness
C) convexity of preferences

Question 32

What is the name of the axiom that states that, if bundle x is revealed to be preferred to bundle y (either directly or indirectly) and bundle y is different from x, then bundle y cannot be directly or indirectly revealed to be preferred to x?

A) Weak Axiom of Revealed Preference (WARP)
B) Strong Axiom of Revealed Preference (SARP)
C) Generalized Axiom of Revealed Preference (GARP)

Question 33

Refer to Exhibit 3-2. Which figure illustrates goods that are perfect complements?

A) (a)
B) (b)
C) (c)
D) (d)

Question 34

A microeconomic method that a student could use to decide how to study for final exams is

A) the selfishness assumption
B) optimal allocation of time
C) the concavity principle

Question 35

Research shows ________________ connection between the size of tips and the quality of service.

A) a very weak
B) no
C) a very strong

Question 36

Assume an indifference map of convex indifference curve. What is the significance of the optimal consumption bundle being at a point where one indifference curve is tangent to the budget line?

Question 37

Refer to Exhibit 3-3. Which point is the optimal consumption bundle?

A) (a)
B) (b)
C) (c)

Question 38

Refer to Exhibit 3-3. Which point is not within the economically feasible set?

A) (a)
B) (b)
C) (c)

Question 39

The optimal allocation of time for studying for final exams is always situated at a tangency point between an indifference curve and the

A) time constraint line
B) origin
C) indifference curve with the maximum value of utility

Question 40

Refer to Exhibit 3-3. At Point (b) the slope of the indifference curve is equal to the slope of the

A) vertical axis
B) budget line
C) horizontal axis