Question 1

Explain why the following indifference curve cannot exist:

Accepted Answer

The answer of Explain why the following indifference curve cannot...

Question 2

The maximization point is the location at which an indifference curve and the budget constraint line

Accepted Answer

The maximization point is where the consumer achieves the highest level of utility given their budget constraint. This occurs when the indifference curve and the budget constraint are tangent to each other, meaning that the slope of the indifference curve (MRS) equals the slope of the budget constraint (price ratio). Thus, the correct answer is C.

Question 3

Refer to the following figure:
  
a.What is the marginal utility of the product in dollars?
b.What is the total utility of the product in dollars?

Accepted Answer

The answer of Refer to the following figure:
  
a.What...

Question 4

A typical indifference curve that reflects the trade-off between two goods that are not ________ or ________ has a marginal rate of substitution that falls between these two extremes.

Accepted Answer

Indifference curves for perfect substitutes and perfect complements have distinct shapes and marginal rates of substitution that fall on the extremes of the spectrum. Therefore, a typical indifference curve would reflect the trade-off between two goods that are not perfect substitutes or perfect complements, and would therefore have a marginal rate of substitution that falls between these two extremes.

Question 5

On a single graph,draw the supply and demand curves for both water and diamonds.Make sure the price of diamonds is higher than the price of water.
a.Label the total utility of water.
b.Label the total utility of diamonds.

Accepted Answer

The answer of On a single graph,draw the supply and...

Question 6

Each point along an indifference curve indicates a combination at which a consumer does not have a preference.Two divergent indifference curves can produce at least two points where there are distinct preferences.Therefore,indifference curves CANNOT

Accepted Answer

Indifference curves cannot intersect one another because if they did, it would imply that the same combination of goods can be preferred and not preferred at the same time, which violates the transitivity assumption of consumer preferences. The other choices (A, B, C, and D) are all possible characteristics of indifference curves.

Question 7

A change in price results in a(n)________ of the budget constraint line.

Accepted Answer

A change in price results in a rotation of the budget constraint line, as it changes the slope of the line without altering the consumer's income.

Question 8

Ronnie's favorite dessert is apple pie.After eating apple pie for three days in a row,he decides he wants banana crème pie instead of apple pie for dessert.Using utility theory,explain why Ronnie would make this consumption decision.

Accepted Answer

The answer of Ronnie's favorite dessert is apple pie.After eating...

Question 9

By using consumer choice theory,explain why diamonds,which are not necessary to sustain life,are expensive,whereas water,which is necessary for life,is not.

Accepted Answer

The answer of By using consumer choice theory,explain why diamonds,which...

Question 10

Anon is a graduate student at Lock Haven University studying human behavior.Three subjects,Felicity,Terrance,and Lola,listed their utility for pineapple and watermelon.Anon believes he will be able to tell which subject likes pineapple the most by referring to the levels of utility each one reported.His adviser,Dr.Util,tells him his research is flawed.Explain why Dr.Util feels this way.

Accepted Answer

The answer of Anon is a graduate student at Lock...

Question 11

A consumer cannot be indifferent about two combinations that yield disparate levels of utility.Therefore,an indifference curve cannot be

Accepted Answer

Indifference curves represent combinations of goods between which a consumer is indifferent, meaning they yield the same level of utility. A thick indifference curve would imply that there are different levels of utility on the same curve, which contradicts the definition of an indifference curve. Each point on an indifference curve must represent a combination of goods that provides the same utility level to the consumer, making a thick curve impossible.

Question 12

For a low-priced good,the ________ is generally negligible and the substitution effect tends to ________.

Accepted Answer

For a low-priced good, the real-income effect (the change in purchasing power due to a change in price) is generally more significant than the substitution effect (the change in quantity demanded due to a change in relative prices). As a result, a decrease in price leads to an increase in purchasing power, which dominates the substitution effect, causing the quantity demanded to increase significantly. Therefore, the real-income effect tends to dominate.

Question 13

Explain why the following indifference curve cannot exist:

Accepted Answer

The answer of Explain why the following indifference curve cannot...

Question 14

A new ________ that is parallel to the first one,but just tangent to the new indifference curve,will reveal the real-income effect.

Accepted Answer

The real-income effect is revealed by drawing a new budget constraint line that is parallel to the original one but just tangent to the new indifference curve. This shows how changes in price affect the quantity of goods that a consumer can afford without changing the consumer's level of utility.

Question 15

Draw the indifference curves for two goods that are perfect substitutes.

Accepted Answer

The answer of Draw the indifference curves for two goods...

Question 16

The slope of the indifference curve for perfect substitutes

Accepted Answer

The slope of the indifference curve for perfect substitutes is always negative, reflecting the constant trade-off rate between the two goods.

Question 17

Graphing only a change in price for a good does not distinguish the contribution of the ________ from the ________.

Accepted Answer

Graphing only a change in price for a good does not distinguish the contribution of the substitution effect from the real-income effect. Both effects can lead to a change in quantity demanded, but they have different causes. The substitution effect reflects the change in quantity demanded due to a change in relative prices, while the real-income effect reflects the change in quantity demanded due to a change in purchasing power or real income. Therefore, to understand the total effect of a price change on quantity demanded, we need to consider both effects together.

Question 18

Perfect substitutes produce an indifference curve with a(n)________ marginal rate of substitution.

Accepted Answer

Perfect substitutes have a constant marginal rate of substitution because consumers are willing to give up the same amount of one good to obtain an additional unit of the other good, regardless of the specific quantities or prices of the goods.

Question 19

________ exist(s)when a consumer is completely indifferent between two goods.

Accepted Answer

Perfect substitutes exist when a consumer is completely indifferent between two goods, meaning the consumer views the goods as interchangeable. This contrasts with perfect complements, where two goods are consumed together in fixed proportions.

Question 20

________ exist(s)when a consumer is interested in consuming two goods in fixed proportions.

Accepted Answer

Perfect complements exist when a consumer is interested in consuming two goods in fixed proportions. These goods are always consumed in a specific ratio, and the consumer will only purchase them in the fixed ratio. For example, left and right shoes, or coffee and cream, are perfect complements.

Quiz 16: Consumer Choice

Explain why the following indifference curve cannot exist:

The maximization point is the location at which an indifference curve and the budget constraint line

Refer to the following figure: a.What is the marginal utility of the product in dollars? b.What is the total utility of the product in dollars?

A typical indifference curve that reflects the trade-off between two goods that are not or has a marginal rate of substitution that falls between these two extremes.

On a single graph,draw the supply and demand curves for both water and diamonds.Make sure the price of diamonds is higher than the price of water. a.Label the total utility of water. b.Label the total utility of diamonds.

Each point along an indifference curve indicates a combination at which a consumer does not have a preference.Two divergent indifference curves can produce at least two points where there are distinct preferences.Therefore,indifference curves CANNOT

A change in price results in a(n) ________ of the budget constraint line.

Ronnie's favorite dessert is apple pie.After eating apple pie for three days in a row,he decides he wants banana crème pie instead of apple pie for dessert.Using utility theory,explain why Ronnie would make this consumption decision.

By using consumer choice theory,explain why diamonds,which are not necessary to sustain life,are expensive,whereas water,which is necessary for life,is not.

A consumer cannot be indifferent about two combinations that yield disparate levels of utility.Therefore,an indifference curve cannot be

For a low-priced good,the is generally negligible and the substitution effect tends to .

Explain why the following indifference curve cannot exist:

A new ________ that is parallel to the first one,but just tangent to the new indifference curve,will reveal the real-income effect.

Draw the indifference curves for two goods that are perfect substitutes.

The slope of the indifference curve for perfect substitutes

Graphing only a change in price for a good does not distinguish the contribution of the from the .

Perfect substitutes produce an indifference curve with a(n) ________ marginal rate of substitution.

________ exist(s) when a consumer is completely indifferent between two goods.

________ exist(s) when a consumer is interested in consuming two goods in fixed proportions.