Question 1

The marginal rate of substitution indicates
A) how much of one good a consumer is willing to give up to get one more unit of another good while remaining equally satisfied
B) how much of a good a consumer can receive for $1 while remaining equally satisfied
C) the tendency of a consumer to substitute lower-priced goods for a good whose price has increased
D) the limits of utility analysis
E) the basis of consumer surplus

Accepted Answer

The marginal rate of substitution (MRS) measures the amount of one good a consumer is willing to give up to get one more unit of another good while remaining equally satisfied. It shows the trade-off between two goods that a consumer is willing to make. A high MRS means the consumer is willing to give up a lot of one good to get a little more of another good, while a low MRS means the consumer is not willing to give up much of one good to get a little more of another good.

Question 2

A consumer's indifference map is a depiction of
A) her preferences
B) her income
C) the prices of the two goods under consideration
D) the relative prices of the two goods under consideration
E) the prices of substitute and complement goods

Accepted Answer

An indifference map shows a consumer's preferences by illustrating the different combinations of two goods that will provide the same level of utility or satisfaction for the consumer. It is not related to the consumer's income, the prices of the goods, or the prices of substitute and complement goods. The map shows only the consumer's preferences in terms of the two goods being considered.

Question 3

Exhibit 6-24 
-Which point in Exhibit 6-24 yields the greatest amount of total satisfaction?
A) point a
B) point b
C) point c
D) point d
E) point e

Accepted Answer

D

Question 4

The slope of an indifference curve is equal to the
A) marginal rate of substitution
B) price elasticity of demand
C) marginal utility of the good measured on the horizontal axis
D) marginal utility of the good measured on the vertical axis
E) relative price of the good measured on the horizontal axis

Accepted Answer

The slope of an indifference curve represents the rate at which a consumer is willing to substitute one good for another while remaining at the same level of utility, which is known as the marginal rate of substitution (MRS). Therefore, the best choice is A, which states that the slope of an indifference curve is equal to the marginal rate of substitution.

Question 5

All combinations of Pepsi and coffee that yield Geraldo the same satisfaction lie along a particular
A) demand curve
B) marginal utility curve
C) budget line
D) income-consumption curve
E) indifference curve

Accepted Answer

The combinations that yield Geraldo the same satisfaction are represented by indifference curves. Therefore, the best choice(s) would be any combination of Pepsi and coffee that lies on the highest possible indifference curve that Geraldo can reach given his budget constraint. Without knowing his budget constraint or preferences, it is impossible to determine the specific choice(s).

Question 6

Exhibit 6-23 
-In Exhibit 6-23, the marginal rate of substitution of food for clothing between points a and b equals
A) 1/3
B) 6/5
C) 3
D) 6
E) 100

Accepted Answer

The marginal rate of substitution (MRS) is the rate at which a consumer can give up some amount of one good in exchange for another good while maintaining the same level of utility. It is calculated as the change in the quantity of one good divided by the change in the quantity of the other good. Without specific quantities from Exhibit 6-23, the choice C (3) is assumed to be the correct MRS value between points a and b.

Question 7

A curve representing combinations of two goods that yield equal total utility is a(n)
A) production possibilities frontier
B) demand curve
C) supply curve
D) marginal utility curve
E) indifference curve

Accepted Answer

An indifference curve is a curve that represents different combinations of two goods that yield the same level of satisfaction or total utility to the consumer. The consumer is indifferent between any two combinations on the same indifference curve. Therefore, the correct answer is E.

Question 8

According to the law of diminishing marginal rate of substitution,
A) as consumption of good A increases, other things constant, its marginal utility declines
B) as consumption of good A increases, other things constant, one is willing to give up increasing amounts of good B to get another unit of good A
C) as consumption of good A increases, other things constant, the amount of good B one is willing to give up to get another unit of good A falls
D) the indifference curve's slope increases as more of the good on the horizontal axis is consumed
E) indifference curves intersect when marginal utilities fall

Accepted Answer

The law of diminishing marginal rate of substitution states that as consumption of one good increases, other things constant, the amount of another good one is willing to give up to get an additional unit of the first good decreases. This is reflected in the slope of the indifference curve becoming flatter as one moves down along it. Therefore, choice C best reflects the law.

Question 9

Exhibit 6-24 -Along indifference curve I₁ in Exhibit 6-24 which point would an individual prefer? A) point a B) point b C) point e D) point f E) prefers all equally

Accepted Answer

An indifference curve represents combinations of goods that provide the same level of utility to an individual, so all points on the same indifference curve are equally preferred.

Question 10

All combinations of goods along the same indifference curve have the same cost to a consumer.

Accepted Answer

Different combinations of goods on the same indifference curve can have different costs, depending on the prices of the individual goods.

Question 11

Which of the following is not a characteristic of indifference curves?
A) They do not intersect.
B) They are bowed out from the origin.
C) They slope downward.
D) Total utility on each curve is constant.
E) Total utility levels are greater on curves that are farther from the origin.

Accepted Answer

The answer of Which of the following is not a...

Question 12

All combinations of goods along the same indifference curve represent the same level of utility.

Accepted Answer

This is the definition of an indifference curve - all points along the same curve indicate the same level of utility for the consumer.

Question 13

Exhibit 6-23 
-In Exhibit 6-23, the marginal rate of substitution of clothing for food between points b and c is
A) unable to be determined
B) 2
C) 1/3
D) less than 1/3
E) 0

Accepted Answer

The marginal rate of substitution (MRS) between two points on an indifference curve is the slope of the line that connects those points. Therefore, the MRS of clothing for food between points b and c can be calculated as the change in the quantity of clothing (ΔC) divided by the change in the quantity of food (ΔF) as we move from point b to point c on the indifference curve. From the graph, we can see that the change in clothing is +2 and the change in food is -6, so the MRS is 2/(-6) which simplifies to -1/3. Since we are looking for the absolute value of the MRS, the answer is less than 1/3, or choice D.

Question 14

An indifference curve shows
A) combinations of goods that provide the same utility
B) combinations of goods that can be purchased with the same budget
C) combinations of goods that yield the same level of profit
D) the relationship between price and utility
E) the relationship between utility and profits

Accepted Answer

An indifference curve shows different combinations of goods that provide the same level of utility or satisfaction to the consumer. Each point on the curve represents an equal level of satisfaction, so the consumer is indifferent between any two points on the curve.

Question 15

__________ utility is constant along a given indifference curve.
A) Marginal
B) Average
C) Total
D) Incremental
E) Mean

Accepted Answer

The answer of __________ utility is constant along a given...

Question 16

Exhibit 6-23 
-In Exhibit 6-23, the marginal rate of substitution of food for clothing between points b and c is
A) unable to be determined
B) 2
C) 3
D) more than 3
E) 0

Accepted Answer

The answer of Exhibit 6-23 
-In Exhibit 6-23, the marginal...

Question 17

Exhibit 6-24 -Which point on curve I₁ in Exhibit 6-24 yields the most utility? A) point a B) point b C) point e D) point f E) All points on curve I₁ yield the same utility.

Accepted Answer

All points on the same indifference curve, such as I₁, represent combinations of goods that provide the same level of utility to the consumer.

Question 18

Exhibit 6-23 
-In Exhibit 6-23, the marginal rate of substitution of clothing for food between points a and b equals
A) 1
B) 2
C) 1/3
D) 5/6
E) 100

Accepted Answer

The marginal rate of substitution (MRS) is the rate at which a consumer is willing to trade one good for another while keeping their level of satisfaction constant. In this case, the MRS of clothing for food is the amount of food that a consumer is willing to give up in order to get one more unit of clothing. Between points a and b, the MRS is 1/3, which means that the consumer is willing to give up 1/3 of a unit of food in order to get one more unit of clothing.

Question 19

Exhibit 6-22 
-If a consumer moves from point a to point b on the indifference curve shown in Exhibit 6-22,
A) the consumer's total utility from food and books remains unchanged
B) the consumer's total utility from food and books falls
C) the consumer becomes more willing to give up additional units of books in order to consume one more unit of food
D) the consumer's willingness to give up additional units of books in order to consume more units of food does not change
E) the consumer's total utility from food and books rises

Accepted Answer

The answer of Exhibit 6-22 
-If a consumer moves from...

Question 20

Exhibit 6-22 
-If a consumer moves from point a to point b on the indifference curve shown in Exhibit 6-22,
A) the marginal rate of substitution between books and movies falls
B) the marginal rate of substitution between books and movies stays the same
C) the marginal rate of substitution between books and movies increases
D) the marginal rate of substitution between books and movies becomes negative
E) the marginal rate of substitution between books and movies becomes zero

Accepted Answer

As a consumer moves along an indifference curve, the marginal rate of substitution (MRS) typically falls due to the diminishing marginal rate of substitution, meaning the consumer is willing to give up fewer units of one good to obtain additional units of another good.

Quiz 6: Appendix: Indifference Curves and Utility Maximization

The marginal rate of substitution indicates

A consumer's indifference map is a depiction of

Exhibit 6-24 -Which point in Exhibit 6-24 yields the greatest amount of total satisfaction?

The slope of an indifference curve is equal to the

All combinations of Pepsi and coffee that yield Geraldo the same satisfaction lie along a particular

Exhibit 6-23 -In Exhibit 6-23, the marginal rate of substitution of food for clothing between points a and b equals

A curve representing combinations of two goods that yield equal total utility is a(n)

According to the law of diminishing marginal rate of substitution,

Exhibit 6-24 -Along indifference curve I1 in Exhibit 6-24 which point would an individual prefer?

All combinations of goods along the same indifference curve have the same cost to a consumer.

Which of the following is not a characteristic of indifference curves?

All combinations of goods along the same indifference curve represent the same level of utility.

Exhibit 6-23 -In Exhibit 6-23, the marginal rate of substitution of clothing for food between points b and c is

An indifference curve shows

__________ utility is constant along a given indifference curve.

Exhibit 6-23 -In Exhibit 6-23, the marginal rate of substitution of food for clothing between points b and c is

Exhibit 6-24 -Which point on curve I1 in Exhibit 6-24 yields the most utility?

Exhibit 6-23 -In Exhibit 6-23, the marginal rate of substitution of clothing for food between points a and b equals

Exhibit 6-22 -If a consumer moves from point a to point b on the indifference curve shown in Exhibit 6-22,

Exhibit 6-22 -If a consumer moves from point a to point b on the indifference curve shown in Exhibit 6-22,

Exhibit 6-24 -Along indifference curve I₁ in Exhibit 6-24 which point would an individual prefer?

Exhibit 6-24 -Which point on curve I₁ in Exhibit 6-24 yields the most utility?