Question 1

Negatively-sloped,straight-line indifference curves imply:
A)that one of the goods has no effect on utility.
B)that the goods are perfect complements.
C)that the goods are perfect substitutes.
D)that one of the goods is an economic "bad".

Accepted Answer

Negatively-sloped, straight-line indifference curves indicate that the two goods are perfect substitutes, meaning that the consumer is willing to substitute one good for the other at a constant rate and their relative prices do not matter. This implies that the goods have the same level of utility for the consumer, and a change in price will have no effect on the consumer's satisfaction level as long as the substitution rate remains constant.

Question 2

Suppose movie theater tickets are on the vertical axis and books on the horizontal axis.You have a budget allowance of $100,and the price of movie theater passes is $10 and the price of books is $25 each.What is the vertical intercept of your budget constraint?
A)1
B)4
C)10
D)100

Accepted Answer

The vertical intercept of the budget constraint represents the maximum number of movie theater tickets that can be purchased if all of the budget is spent on them. Since the budget is $100 and each movie theater pass costs $10, the maximum number of passes that can be purchased is $100 / $10 = 10. Therefore, the vertical intercept is 10.

To find the best choice(s), we need to look for the point(s) that maximizes our utility within the budget constraint. This will depend on our preferences and cannot be determined solely from the given information.

Question 3

A decline in income is shown on the budget line by:
A)a rotation of the budget line such that its horizontal intercept is larger than its vertical intercept.
B)a parallel shift in the budget constraint toward the origin.
C)a rotation in the budget line so it intersects the vertical axis closer to the origin.
D)a change in the relative price ratio.

Accepted Answer

A decline in income is represented by a decrease in the slope of the budget line. This decrease in income would shift the budget constraint inward toward the origin, parallel to the original budget line. Therefore, Option B is the correct answer.

Question 4

If the prices of two goods,X and Y,increase by 50 percent and the consumer's income rises by 100 percent:
A)the slope of the consumer's budget line will change,becoming flatter to indicate that X and Y are now relatively less expensive.
B)the consumer's budget line will shift out from the origin,with its slope unchanged.
C)the consumer's budget line will shift out from the origin and its slope will also change,reflecting the lower prices for X and Y.
D)the consumer's budget line will remain unchanged as the price and income effects will cancel each other out.

Accepted Answer

The consumer's budget line will shift outward from the origin because the increase in income allows the consumer to afford more of both goods. However, since the prices of both goods increase by the same percentage, the relative price between X and Y remains unchanged, meaning the slope of the budget line stays the same.

Question 5

Perfect complements are associated with _____ indifference curves.
A)U-shaped
B)straight-line
C)convex
D)L-shaped

Accepted Answer

Perfect complements are associated with L-shaped indifference curves because the consumer is equally satisfied at the corner where the two goods are consumed in fixed proportions, reflecting the perfect complementarity between the goods.

Question 6

Jen does not care one way or another about blue jeans.In other words,blue jeans are a(n)_____ for Jen.
A)normal good
B)economic "bad"
C)economic "neuter"
D)inferior good

Accepted Answer

Jen's indifference towards blue jeans means that it does not hold any economic significance or utility for her. This makes blue jeans an economic "neuter" good.

Question 7

Good Y is measured on the vertical axis and good X on the horizontal axis.If the price of Y is zero,the price of X is $10,and the consumer's income $100,the budget line:
A)would coincide with the vertical axis.
B)would be horizontal at $10 on the Y axis.
C)would be vertical at 10 units on the X axis.
D)would coincide with the horizontal axis.

Accepted Answer

If the price of Y is zero, then the entire budget of $100 can be spent on purchasing good X. Therefore, the budget line would be vertical at 10 units on the X axis.

Question 8

Suppose there are two goods,X and Y,with X measured on the horizontal axis and Y measured on the vertical axis.Which of the following statements about a budget line relating the two goods is correct?
A)The budget line shows all the possible combinations of X and Y a consumer can buy given the level of income and prices.
B)The budget line shows all the possible combinations of X and Y a consumer can buy given the level of income,prices,and borrowings.
C)The budget line shows the most preferred combinations of X and Y a consumer can buy given the level of income and prices.
D)The budget line shows the least-cost combinations of X and Y a consumer will buy given the level of income and prices.

Accepted Answer

A budget line shows all the possible combinations of two goods that a consumer can buy given the level of income and prices. It represents the limit of what the consumer can afford, given their income and the prices of the two goods. The slope of the budget line is equal to the ratio of the prices of the two goods, and the intercepts on the axes represent the maximum amount of each good the consumer could buy if they spent all of their income on that good alone. Therefore, option A is correct. Option B is incorrect because borrowings are not taken into account when drawing a budget line. Option C is incorrect because the budget line does not represent the most preferred combinations of goods that a consumer can buy, only the combinations that they can afford. Option D is incorrect because the budget line represents the combinations of goods a consumer can afford, not necessarily the least-cost combinations.

Question 9

Suppose a consumer must pay $P per visit to the local museum for each of the first 10 visits but only $P/2 per visit from the 11^th visit on.With a composite consumption good on the Y-axis and visits to the museum on the X-axis,the budget line: A)is vertical after 10 visits. B)becomes steeper after 10 visits. C)becomes flatter after 10 visits. D)shifts outward after 10 visits.

Accepted Answer

Before 10 visits, the consumer pays $P per visit, so the slope of the budget line is -$P. After 10 visits, the consumer pays $P/2 per visit, so the slope of the budget line is -$P/2. Since -$P/2 is less steep than -$P, the budget line becomes flatter after 10 visits. Therefore, the correct answer is (C). The best choice(s) cannot be determined without additional information about the consumer's preferences and income.

Question 10

Suppose there are two goods,X and Y,with X being measured on the horizontal axis and Y being measured on the vertical axis.The budget line connecting these two goods does not:
A)show all the possible combinations of X and Y a consumer can buy given the level of income and prices.
B)have a positive slope.
C)have a slope that reflects the trade-off of one good for another.
D)reflect the assumption of continuous divisibility if drawn as a straight line.

Accepted Answer

The budget line typically has a negative slope, reflecting the trade-off between two goods. If you spend more on one good, you have less to spend on the other, assuming a fixed budget.

Question 11

Consider a budget line drawn with apples on the vertical axis and oranges on the horizontal axis.The consumer's income is $100,the price of apples is $5,and the price of oranges is $10.Suppose the consumer's income falls to $75.00,but the prices of apples and oranges remain unchanged.The change in income produces a:
A)parallel shift inward of the indifference curves.
B)new budget line which is steeper than the original one.
C)parallel shift inward of the budget line.
D)new budget line which is flatter than the original one.

Accepted Answer

A change in income while prices remain constant will cause the budget line to shift parallel inward, meaning the consumer can afford fewer apples and oranges than before. The slope of the budget line remains the same, as the prices of apples and oranges have not changed. Therefore, neither A nor B can be correct. A change in the slope of the budget line would require a change in the prices of apples and oranges. The budget line cannot shift outward because the income has decreased. Hence, the correct option is C.

Question 12

If the vertical axis measures yams which cost $20 per unit and the horizontal axis measures xylophones which cost $5 a unit,the slope of the budget line is _____.
A)-20
B)-3
C)-0.25
D)-0.33

Accepted Answer

The formula for the slope of the budget line is:

slope = (change in yams)/(change in xylophones)

Since yams cost $20 per unit and xylophones cost $5 per unit, we can set up a ratio:

(change in yams) / (change in xylophones) = $20 / $5 = 4

Rearranging the formula for slope, we get:

slope = 1/4 = -0.25

Note that the slope is negative because the budget line has a negative slope (i.e. as the quantity of xylophones increases, the quantity of yams that can be purchased decreases). Therefore, the answer is choice C.

Without additional information on preferences or income, we cannot determine the best choice.

Question 13

Suppose a consumer must pay $P per visit to the local museum for each of the first 5 visits but $2P per visit from the 6^th visit on.With a composite consumption good on the Y-axis and visits to the museum on the X-axis,the budget line: A)is vertical after 5 visits. B)becomes steeper after 5 visits. C)becomes flatter after 5 visits. D)shifts outward after 5 visits.

Accepted Answer

Before the 6th visit, the budget constraint can be represented as:
Y = 5P + X(P)
where Y is the budget (income), X is the number of visits to the museum, and P is the price per visit.
From the 6th visit, the budget constraint can be represented as:
Y = 5P + 2P(X-5)
Notice that the slope of the budget constraint has increased from P to 2P after the 5th visit as a result of the price increase. Therefore, the budget line becomes steeper after the 5th visit.

Question 14

An example of goods which are perfect complements in consumption is:
A)apples and oranges.
B)left and right shoes.
C)tomatoes and apples.
D)nickels and dimes.

Accepted Answer

Left and right shoes are examples of perfect complements because they must be consumed in fixed proportions (one of each). One shoe without the other is useless, so they are complementary goods.

Question 15

An indifference map shows the optimal consumption bundle of a consumer for two goods A and B.Which of the following factors would lead to a parallel shift of the budget line allowing the consumer to reach a higher indifference curve?
A)A fall in the price of good A
B)A parallel outward shift of the consumer's indifference curve
C)An increase in the consumer's income
D)A fall in the price of good B

Accepted Answer

An increase in the consumer's income would lead to a parallel shift of the budget line outward. This would allow the consumer to reach a higher indifference curve, as they would have more purchasing power to buy more of both goods A and B. The other options listed (A, B, and D) would not lead to a parallel shift of the budget line, and therefore would not allow the consumer to reach a higher indifference curve.

Question 16

Consider a graph with hamburger on the X-axis and cheese crackers on the Y-axis.The outbreak of mad cow disease,which will change the price of hamburgers,will:
A)not change the slope of the budget line.
B)lead to a parallel shift of the budget line depending on the change in price.
C)change the y-intercept of the budget line.
D)change the x-intercept of the budget line.

Accepted Answer

The answer of Consider a graph with hamburger on the...

Question 17

Suppose hamburgers are on the horizontal axis and root beer on the vertical axis.You have a budget allowance of $10,and the price of hamburgers is $4 and root beer is $2.The slope of your budget constraint is _____.
A)0.5
B)2
C)2.5
D)5

Accepted Answer

The slope of the budget constraint is the ratio of the prices of hamburgers to root beer, so in this case, it is 4/2=2. Therefore, the budget constraint equation is: 4h+2r=10, where h is the number of hamburgers and r is the number of root beers. To find the best choice, we need to look for the point on the budget constraint that gives us the highest level of utility. This will be the point that is on the budget constraint and also on the highest possible indifference curve. Without more information about the consumer's preferences, we cannot determine the exact combination of hamburgers and root beer that would be the best choice, but we know that it will be on the budget constraint and have a slope of 2.

Question 18

Suppose you have hamburgers on the horizontal axis and root beer on the vertical axis.If the price of hamburgers increased,how would this be shown using the income constraint?
A)It would shift the constraint outward.
B)It would shift the constraint inward.
C)It would rotate the vertical intercept outward.
D)It would rotate the horizontal intercept inward.

Accepted Answer

When the price of hamburgers increases, the amount of hamburgers that can be purchased with a given income decreases, leading to a rotation of the budget constraint around the vertical intercept (root beer) towards the origin, effectively rotating the horizontal intercept (hamburgers) inward.

Question 19

Suppose initially that the price of X is $5,the price of Y is $10,and the consumer's income is $100.If Y is measured on the vertical axis,X is measured on the horizontal axis,and the price of Y increases to $20:
A)the entire budget line will shift inward toward the origin,with its slope changing from -1/2 to -1/4.
B)the budget line will pivot inward toward the origin along the X axis,with its slope changing from -1/2 to -1/4.
C)the budget line will pivot inward toward the origin along the Y axis,with the slope changing from -1/2 to -1/4.
D)the budget line will pivot inward toward the origin along the Y axis,with the slope changing from -1/4 to -1/2.

Accepted Answer

Initially, the budget line can be represented as:
$100 = 5X + 10Y
Simplifying, we get:
Y = (-1/2)X + 10
When the price of Y increases to $20, the budget line pivots inward towards the origin along the Y-axis, since the consumer can now buy less Y for the same amount of money. The intercept of the new budget line on the Y-axis becomes $100/20 = $5, and the slope of the new budget line becomes:
Y = (-1/4)X + 5
Hence, the correct choice is C.

Question 20

A point lying inside the budget line indicates:
A)an unattainable market basket for the consumer.
B)the consumer is not spending all of his or her income.
C)the consumer has exhausted his income on consumption.
D)that one of the goods consumed is an economic bad.

Accepted Answer

A point inside the budget line indicates that the consumer is not utilizing all of their income, meaning they could still purchase more goods or services without exceeding their budget.

Quiz 1: An Introduction to Microeconomics

Negatively-sloped,straight-line indifference curves imply:

Suppose movie theater tickets are on the vertical axis and books on the horizontal axis.You have a budget allowance of $100,and the price of movie theater passes is $10 and the price of books is $25 each.What is the vertical intercept of your budget constraint?

A decline in income is shown on the budget line by:

If the prices of two goods,X and Y,increase by 50 percent and the consumer's income rises by 100 percent:

Perfect complements are associated with _____ indifference curves.

Jen does not care one way or another about blue jeans.In other words,blue jeans are a(n) _____ for Jen.

Good Y is measured on the vertical axis and good X on the horizontal axis.If the price of Y is zero,the price of X is $10,and the consumer's income $100,the budget line:

Suppose there are two goods,X and Y,with X measured on the horizontal axis and Y measured on the vertical axis.Which of the following statements about a budget line relating the two goods is correct?

Suppose a consumer must pay $P per visit to the local museum for each of the first 10 visits but only $P/2 per visit from the 11^th visit on.With a composite consumption good on the Y-axis and visits to the museum on the X-axis,the budget line:

Suppose there are two goods,X and Y,with X being measured on the horizontal axis and Y being measured on the vertical axis.The budget line connecting these two goods does not:

If the vertical axis measures yams which cost $20 per unit and the horizontal axis measures xylophones which cost $5 a unit,the slope of the budget line is _____.

Suppose a consumer must pay $P per visit to the local museum for each of the first 5 visits but $2P per visit from the 6^th visit on.With a composite consumption good on the Y-axis and visits to the museum on the X-axis,the budget line:

An example of goods which are perfect complements in consumption is:

An indifference map shows the optimal consumption bundle of a consumer for two goods A and B.Which of the following factors would lead to a parallel shift of the budget line allowing the consumer to reach a higher indifference curve?

Consider a graph with hamburger on the X-axis and cheese crackers on the Y-axis.The outbreak of mad cow disease,which will change the price of hamburgers,will:

Suppose hamburgers are on the horizontal axis and root beer on the vertical axis.You have a budget allowance of $10,and the price of hamburgers is $4 and root beer is $2.The slope of your budget constraint is _____.

Suppose you have hamburgers on the horizontal axis and root beer on the vertical axis.If the price of hamburgers increased,how would this be shown using the income constraint?

Suppose initially that the price of X is $5,the price of Y is $10,and the consumer's income is $100.If Y is measured on the vertical axis,X is measured on the horizontal axis,and the price of Y increases to $20:

A point lying inside the budget line indicates: