Question 1

Suppose that the price of good x triples and the price of good y doubles while income remains constant.On a graph where the budget line is drawn with x on the horizontal axis and y on the vertical axis, the new budget line
A)is flatter than the old one and lies below it.
B)is flatter than the old one and lies above it.
C)crosses the old budget line.
D)is steeper than the old one and lies below it.
E)is steeper than the old one and lies above it.

Accepted Answer

When the price of good x triples and the price of good y doubles while income remains constant, the budget line becomes steeper because the relative price of good x (on the horizontal axis) increases more than the price of good y (on the vertical axis). The budget line also lies below the old one because the consumer can now afford less of both goods with the same income.

Question 2

Bella's budget line for x and y depends on all of the following except
A)the amount of money she has to spend on x and y.
B)the price of x.
C)her preferences between x and y.
D)the price of y.
E)None of the above.

Accepted Answer

Bella's budget line depends on the price of x and y and the amount of money she has to spend on them, as these factors determine how much of each good she can purchase. Bella's preferences between x and y do not directly affect her budget line.

Question 3

Lars consumes only potatoes and herring.When the price of potatoes was 9 crowns per sack and the price of herring was 5 crowns per crock, he spent his entire income to buy 5 sacks of potatoes and 10 crocks of herring per month.Now the government subsidizes potatoes.Market prices haven't changed, but consumers get a subsidy of 5 crowns for every sack of potatoes consumed.To pay for this subsidy, the government introduced an income tax.Lars pays an income tax of 20 crowns per month.If s is the number of sacks of potatoes and c is the number of crocks of herring, what is Lars's new budget equation?
A)9s + 5c = 100.
B)14s + 5c = 95.
C)4s + 5c = 95.
D)4s + 5c = 75.
E)14s + 5c = 120.

Accepted Answer

The answer of Lars consumes only potatoes and herring.When the...

Question 4

Georgina thrives on two goods: pears and bananas.The cost of pears is 30 pesos each and the cost of bananas is 15 pesos each.If her income is 180 pesos, how many pears can she buy if she spends all of her income on pears?
A)9
B)12
C)4
D)6
E)None of the above.

Accepted Answer

If Georgina spends all her income on pears, she can buy 180 pesos / 30 pesos per pear = 6 pears.

Question 5

Your budget constraint for the two goods A and B is 12A + 4B = I, where I is your income.You are currently consuming more than 27 units of B.In order to get 3 more units of A, how many units of B would you have to give up?
A)0.33
B)0.11
C)3
D)9
E)None of the above.

Accepted Answer

To find out how many units of B need to be given up to get 3 more units of A, we need to calculate the marginal rate of substitution (MRS) between A and B, which is the ratio of their coefficients in the budget constraint. The MRS is 12/4 = 3. Therefore, for every additional unit of A, you need to give up 3 units of B. To get 3 more units of A, you need to give up 3 * 3 = 9 units of B.

Question 6

Your budget constraint for the two goods A and B is 8A + 4B = I, where I is your income.You are currently consuming more than 18 units of B.In order to get 3 more units of A, how many units of B would you have to give up?
A)6
B)0.50
C)0.17
D)2
E)None of the above.

Accepted Answer

To find out how many units of B you would have to give up to get 3 more units of A, we need to look at the budget constraint equation given: 8A + 4B = I. This equation tells us that the price of A is 8 units of income and the price of B is 4 units of income. To get 3 more units of A, you would need 3 * 8 = 24 units of income. Since the price of B is 4 units of income, you would have to give up 24 / 4 = 6 units of B to afford 3 more units of A.

Question 7

Will spends his entire income on 8 sacks of acorns and 8 crates of butternuts.The price of acorns is 9 dollars per sack and his income is 88 dollars.He can just afford a commodity bundle with A sacks of acorns and B crates of butternuts that satisfies the budget equation
A)9A + 4B = 88.
B)18A + 4B = 176.
C)11A + 2B = 88.
D)9A + 6B = 90.
E)None of the above.

Accepted Answer

The answer of Will spends his entire income on 8...

Question 8

If she spends her entire budget, Heidi can afford 39 peaches and 12 pears.She can also just afford 24 peaches and 17 pears.The price of peaches is 9 cents.What is the price of pears in cents?
A)12 cents
B)37 cents
C)27 cents
D)3 cents
E)None of the above.

Accepted Answer

Let the price of pears be x cents. From the given information, we can set up the following equations:
39(9) + 12x = budget
24(9) + 17x = budget
Solving for x, we get x = 27 cents.

Question 9

If you spent your entire income, you could afford either 6 units of x and 13 units of y or 13 units of x and 6 units of y.If you spent your entire income on x, how many units of x could you buy?
A)19
B)32
C)24
D)There is not enough information to determine the number of x.
E)None of the above.

Accepted Answer

The problem can be solved by setting up equations based on the given information. Let the price of one unit of x be Px and the price of one unit of y be Py. The total income can be represented in two ways: 6Px + 13Py or 13Px + 6Py. Since both expressions equal the total income, they can be set equal to each other. However, to find how many units of x can be bought with the total income, we don't need to solve for the prices. We can observe that the total number of units (x and y combined) that can be bought in either scenario is 19. Since the question asks for the number of units of x that can be bought with the entire income (assuming the price of x remains constant), and we know the total units of x and y combined that can be bought is 19, the answer is 19 units of x if all income is spent on x.

Question 10

Billy Bob wants to gain some weight so that he can play football.Billy consumes only milk shakes and spinach.Milk shakes cost him $1 each and spinach costs $2 per serving.A milk shake has 850 calories and a serving of spinach has 200 calories.Billy Bob never spends more than $20 a day on food and he always consumes at least 8,000 calories per day.Which of the following is necessarily true?
A)Billy Bob consumes at least 9 milk shakes a day.
B)Billy Bob never consumes more than 6 servings of spinach a day.
C)Billy Bob never consumes positive amounts of both goods.
D)Billy Bob consumes only milk shakes.
E)None of the above.

Accepted Answer

We know that Billy Bob never spends more than $20 a day on food. Let the number of milk shakes he consumes be M and the number of servings of spinach be S.

The cost of M milk shakes is $M, and the cost of S servings of spinach is $2S. So, we can write:

M + 2S ≤ 20

We also know that Billy Bob always consumes at least 8,000 calories per day. One milk shake has 850 calories, so M milk shakes would have 850M calories. One serving of spinach has 200 calories, so S servings of spinach would have 200S calories. So, we can write:

850M + 200S ≥ 8,000

To maximize his calorie intake, Billy Bob would want to consume as much of the cheaper item (milk shakes) as possible. The maximum number of milk shakes he can consume is 11, which would cost $11 and provide 9,350 calories. The maximum number of servings of spinach he can consume is 5, which would cost $10 and provide 1,000 calories. This satisfies both of the constraints above, and provides a total of 10,350 calories.

Therefore, Billy Bob never consumes more than 6 servings of spinach a day is necessarily true.

Question 11

Suppose that the prices of good x and good y both double and income triples.On a graph where the budget line is drawn with x on the horizontal axis and y on the vertical axis,
A)the budget line becomes steeper and shifts inward.
B)the budget line becomes flatter and shifts outward.
C)the budget line becomes flatter and shifts inward.
D)the new budget line is parallel to the old budget line and lies below it.
E)None of the above.

Accepted Answer

When both the prices of good x and good y double, and income triples, the budget line does not change its slope because the relative price of good x in terms of good y remains the same. The budget line shifts outward because the consumer can now afford more of both goods with the tripled income, despite the prices doubling. None of the provided options accurately describe this scenario.

Question 12

The Chuzzlewits have an income of $m per week.Let x be food and let y be all other goods.Let p_x be the price of food and p_y be the price of other goods.They can use food stamps to buy food at a price of p_x(1 - s)for up to x* units of food per week.If they buy more food than x*, they have to pay the full price p_x for additional units.Their weekly income is greater than p_x(1 - s)x*.The maximum amount of food that they can buy per week is A)x* + (m/p_x). B)(m + x*)/p_x. C)(m/p_x)+ sx*. D)m/(1 - s)p_x. E)(m + p_x)/(1 - s)p_x.

Accepted Answer

The Chuzzlewits can buy x* units of food at the discounted price and then use the remaining income to buy additional food at the full price. The maximum amount of food they can buy is x* at the discounted price plus the amount they can buy with the remaining income, which is (m - p_x(1 - s)x*)/p_x. Simplifying this gives (m/p_x) + sx*.

Question 13

Isabella thrives on two goods: lemons and tangerines.The cost of lemons is 40 guineas each and the cost of tangerines is 20 guineas each.If her income is 320 guineas, how many lemons can she buy if she spends all of her income on lemons?
A)6
B)8
C)16
D)11
E)None of the above.

Accepted Answer

Isabella can buy 320 guineas / 40 guineas per lemon = 8 lemons if she spends all her income on lemons.

Question 14

Edmund must pay $6 each for punk rock video cassettes, V.If Edmund is paid $24 per sack for accepting garbage, G, and if his relatives send him an allowance of $96, then his budget line is described by the equation
A)6V = 24G.
B)6V + 24G = 96.
C)6V = 96 - G.
D)6V - 24G = 96.
E)None of the above.

Accepted Answer

Let's break down the information in the problem:
- Edmund pays $6 for each punk rock video cassette, V
- Edmund earns $24 for each sack of garbage he accepts, G
- Edmund receives an allowance of $96 from his relatives, which is not tied to his purchases or earnings
We can create a budget equation using these variables:
6V + 24G + 96 = total budget
Simplifying the equation, we get:
6V + 24G = total budget - 96
This matches the equation in choice D, so that is the best choice.

Question 15

Edmund must pay $6 each for punk rock video cassettes, V.If Edmund is paid $24 per sack for accepting garbage, G, and if his relatives send him an allowance of $48, then his budget line is described by the equation
A)6V = 24G.
B)6V + 24G = 48.
C)6V - 24G = 48.
D)6V = 48 - G
E)None of the above.

Accepted Answer

The equation for Edmund's budget line can be represented as income = expenditure. Edmund's income includes the garbage income ($24G) and allowance from relatives ($48). His expenditure includes the cost of purchasing punk rock video cassettes (6V). However, since Edmund is spending his allowance and garbage income, they should be subtracted from the expenditure. Hence, the final equation becomes 6V - 24G + 48 = 0, which is equivalent to option C.

Question 16

Young Alasdair loves lollipops and hates oatmeal.To induce him to eat enough oatmeal and to restrain him from eating too many lollipops, his mum pays him 10 pence for every quart of oatmeal that he eats.The only way that he can get lollipops is to buy them at the sweet shop, where lollipops cost 5 pence each.Besides what he earns from eating oatmeal, Alasdair gets an allowance of 10 pence per week.If Alasdair consumes only oatmeal and lollipops and if his consumption bundles are graphed with quarts of oatmeal on the horizontal axis and lollipops on the vertical axis, then Alasdair's budget line has a slope
A)of 2.
B)of less than -2.
C)of -2.
D)of 1/2.
E)greater than 2.

Accepted Answer

Since Alasdair earns 10 pence for every quart of oatmeal he eats, the slope of his budget line would be -2 (10pence/5pence). This means for every quart of oatmeal he consumes, he can buy two lollipops. Therefore, the slope is 2 (negative because it is a decrease in lollipops as oatmeal increases).

Question 17

Eduardo spends his entire income on 9 sacks of acorns and 4 crates of butternuts.The price of acorns is 6 dollars per sack and his income is 90 dollars.He can just afford a commodity bundle with A sacks of acorns and B crates of butternuts that satisfies the budget equation
A)6A + 13B = 92.
B)12A + 18B = 180.
C)8A + 9B = 90.
D)6A + 11B = 90.
E)None of the above.

Accepted Answer

The answer of Eduardo spends his entire income on 9...

Question 18

While traveling abroad, Tammy spent all of the money in her purse to buy 5 plates of spaghetti and 6 oysters.Spaghetti costs 8 units of the local currency per plate and she had 82 units of currency in her purse.If s denotes the number of plates of spaghetti and o denotes the number of oysters purchased, the set of commodity bundles that she could just afford with the money in her purse is described by the equation
A)8s + 6o = 82.
B)6s + 8o = 82.
C)8s + 7o = 82.
D)5s + 6o = 82.
E)There is not enough information to determine the answer.

Accepted Answer

The equation that represents the commodity bundles that Tammy could just afford is given by 8s + 7o = 82. This is because Tammy spent all of the money in her purse to buy 5 plates of spaghetti and 6 oysters, which cost 8 units/plate and some unknown number of units/oyster. Therefore, C is the correct choice as it matches this equation. None of the other choices have the correct coefficients or constants to represent the equation.

Question 19

If you spent your entire income, you could afford either 3 units of x and 9 units of y or 9 units of x and 3 units of y.If you spent your entire income on x, how many units of x could you buy?
A)21
B)16
C)12
D)There is not enough information to determine the number of x.
E)None of the above.

Accepted Answer

Let's assume that the income is $1. 
If you spend it on 3 units of x and 9 units of y, the cost of unit x would be 1/3 and the cost of unit y would be 1/9. 
Similarly, if you spend it on 9 units of x and 3 units of y, the cost of unit x would be 1/9 and the cost of unit y would be 1/3. 
Now, if you spend the entire income on x only, the cost of unit x would be the same as the cost of the x unit in the scenario where you spent the entire income on 9 units of x and 3 units of y. So, the cost of one unit of x would be 1/9. 
Therefore, you could buy 9 units of x if you spend your entire income on x.

Question 20

Harry thrives on two goods, paperback novels and bananas.The cost of paperback novels is 4 dollars each and the cost of bananas is 3 dollars per bunch.If Harry spent all of his income on bananas, he could afford 12 bunches of bananas per week.How many paperback novels could he buy if he spent all of his income on paperback novels?
A)36
B)48
C)9
D)16
E)None of the above.

Accepted Answer

Since Harry can afford 12 bunches of bananas with his entire income, we can set up an equation: 3x = y where x is the number of bunches of bananas and y is Harry's income. Solving for y, we get y = 36. Therefore, if Harry spends all of his income on paperback novels, he can buy y/4 = 9 novels.

Quiz 1: Budget Constraint-Part A

Suppose that the price of good x triples and the price of good y doubles while income remains constant.On a graph where the budget line is drawn with x on the horizontal axis and y on the vertical axis, the new budget line

Bella's budget line for x and y depends on all of the following except

Georgina thrives on two goods: pears and bananas.The cost of pears is 30 pesos each and the cost of bananas is 15 pesos each.If her income is 180 pesos, how many pears can she buy if she spends all of her income on pears?

Your budget constraint for the two goods A and B is 12A + 4B = I, where I is your income.You are currently consuming more than 27 units of B.In order to get 3 more units of A, how many units of B would you have to give up?

Your budget constraint for the two goods A and B is 8A + 4B = I, where I is your income.You are currently consuming more than 18 units of B.In order to get 3 more units of A, how many units of B would you have to give up?

Will spends his entire income on 8 sacks of acorns and 8 crates of butternuts.The price of acorns is 9 dollars per sack and his income is 88 dollars.He can just afford a commodity bundle with A sacks of acorns and B crates of butternuts that satisfies the budget equation

If she spends her entire budget, Heidi can afford 39 peaches and 12 pears.She can also just afford 24 peaches and 17 pears.The price of peaches is 9 cents.What is the price of pears in cents?

If you spent your entire income, you could afford either 6 units of x and 13 units of y or 13 units of x and 6 units of y.If you spent your entire income on x, how many units of x could you buy?

Suppose that the prices of good x and good y both double and income triples.On a graph where the budget line is drawn with x on the horizontal axis and y on the vertical axis,

Isabella thrives on two goods: lemons and tangerines.The cost of lemons is 40 guineas each and the cost of tangerines is 20 guineas each.If her income is 320 guineas, how many lemons can she buy if she spends all of her income on lemons?

Edmund must pay $6 each for punk rock video cassettes, V.If Edmund is paid $24 per sack for accepting garbage, G, and if his relatives send him an allowance of $96, then his budget line is described by the equation

Edmund must pay $6 each for punk rock video cassettes, V.If Edmund is paid $24 per sack for accepting garbage, G, and if his relatives send him an allowance of $48, then his budget line is described by the equation

Eduardo spends his entire income on 9 sacks of acorns and 4 crates of butternuts.The price of acorns is 6 dollars per sack and his income is 90 dollars.He can just afford a commodity bundle with A sacks of acorns and B crates of butternuts that satisfies the budget equation

If you spent your entire income, you could afford either 3 units of x and 9 units of y or 9 units of x and 3 units of y.If you spent your entire income on x, how many units of x could you buy?