Question 1

-Refer to Figure 4.4.Which diagram most likely represents the indifference map for Sony PlayStation and Nintendo GameCube?
A) A
B) B
C) C
D) D

Accepted Answer

Indifference maps for substitute goods like Sony PlayStation and Nintendo GameCube typically show straight, downward-sloping lines. This is because consumers are willing to substitute one product for another at a constant rate, which is represented by choice C.

Question 2

As we move down and to the right along an indifference curve,the marginal rate of substitution
A) Increases
B) Decreases
C) Remains constant
D) Increases, then decreases

Accepted Answer

The marginal rate of substitution (MRS) measures the rate at which a consumer is willing to trade off one good for another while still maintaining the same level of utility. As we move down and to the right along an indifference curve, the consumer is consuming more of the good on the horizontal axis and less of the good on the vertical axis, so the marginal utility of the horizontal good is decreasing while the marginal utility of the vertical good is increasing. Therefore, the consumer requires a greater quantity of the vertical good to be willing to give up one unit of the horizontal good. This results in a decrease in the MRS as we move down and to the right along the indifference curve.

Question 3

-Refer to Figure 4.2.The marginal rate of substitution for economics books with CDs is highest at point
A) A
B) B
C) C
D) D

Accepted Answer

The marginal rate of substitution (MRS) is highest at point A because it represents the steepest part of the curve, indicating the consumer must give up a large amount of one good to gain an additional unit of the other good, reflecting a high MRS.

Question 4

Suppose Joe's MRS for cookies with crackers is 6 crackers per cookie.Also assume that Mary's MRS for cookies with crackers is 3 crackers per cookie.Assuming that these rates of substitution don't depend on the amounts consumed,which of the following trades would make Joe and Mary better off?
A) Joe gives Mary 5 crackers in exchange for a cookie
B) Joe gives Mary 2 crackers in exchange for a cookie
C) Joe gives Mary 6 crackers in exchange for a cookie
D) There is not enough information to answer the question

Accepted Answer

Joe values a cookie at 6 crackers, meaning he is willing to give up 6 crackers for a cookie. Mary values a cookie at 3 crackers, meaning she is willing to give up 3 crackers for a cookie. If Joe gives Mary 5 crackers in exchange for a cookie, Joe is giving up less than he values a cookie (5 instead of 6 crackers), and Mary is receiving more than she values a cookie (5 instead of 3 crackers). This trade makes both Joe and Mary better off.

Question 5

Suppose Bart's MRS for sodas with chips is 6 bags of chips per soda.Also assume that Lisa's MRS for sodas with chips is 8 bags of chips per soda.Assuming that these rates of substitution don't depend on the amounts consumed,which of the following trades would make Bart and Lisa better off?
A) Bart gives Lisa 9 bags of chips in exchange for a soda
B) Bart gives Lisa 7 bags of chips in exchange for a soda
C) Bart gives Lisa 6 bags of chips in exchange for a soda
D) No mutually beneficial trade can occur here

Accepted Answer

The answer of Suppose Bart's MRS for sodas with chips...

Question 6

Two products are perfect substitutes if
A) A consumer is willing to swap one for another at a fixed rate
B) They are valuable only when used together in fixed proportions
C) Their indifference curves are "L-shaped"
D) An increase in the price of one good causes a decrease in the demand for the other good

Accepted Answer

Two products are perfect substitutes if a consumer is willing to swap one for another at a fixed rate, meaning that the consumer is indifferent between the two products and will purchase whichever one is cheaper. This is typically represented by a straight-line indifference curve.

Question 7

-Refer to Figure 4.3,which relates to two consumers shopping for a new car.Which of the following statements is true?
A) Fuel efficiency is more important to Gina than it is to Greg
B) Horsepower is just as important to Gina as it is to Greg
C) Fuel efficiency is more important to Greg than it is to Gina
D) Indifference curves cannot be used to compare consumers' tastes

Accepted Answer

Without Figure 4.3, the correct answer is based on the assumption that the question is about comparing the importance of fuel efficiency between Gina and Greg. The statement "Fuel efficiency is more important to Greg than it is to Gina" is likely true if Greg's indifference curves show a higher preference for fuel efficiency compared to Gina's.

Question 8

The marginal rate of substitution between two goods is given by
A) The inverse of the slope of an indifference curve
B) The slope of a line tangent to an indifference curve
C) Negative one times the inverse of the slope of an indifference curve
D) Negative one times the slope of a line tangent to an indifference curve

Accepted Answer

The marginal rate of substitution (MRS) is the negative of the slope of the tangent to the indifference curve, representing the rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility.

Question 9

A marginal rate of substitution formula tells us
A) The rate at which the consumer is willing to exchange one good for another, given the level of utility
B) The rate at which the consumer is willing to exchange one good for another, given the amounts consumed
C) The rate at which the consumer is willing to exchange one good for another, given the consumer's income
D) The rate at which the consumer is willing to exchange one good for another, given the prices of the goods

Accepted Answer

The answer of A marginal rate of substitution formula tells...

Question 10

For any given family of indifference curves,a consumer would prefer to be at a point
A) On the indifference curve that is closest to the origin
B) That is far to the right on an indifference curve
C) That is far to the left on an indifference curve
D) On the indifference curve that is farthest from the origin

Accepted Answer

The consumer would prefer to be on the indifference curve that is farthest from the origin because indifference curves represent different levels of utility, with higher levels of utility being associated with higher indifference curves. Therefore, the consumer would prefer to be on the higher indifference curve to maximize their utility.

Question 11

-Refer to Figure 4.4.Which diagram most likely represents the indifference map for left shoes and right shoes?
A) A
B) B
C) C
D) D

Accepted Answer

The answer of 
-Refer to Figure 4.4.Which diagram most likely...

Question 12

Suppose Frank is completely indifferent between drinking Coke and drinking Pepsi.Then Frank's indifference curves for Coke and Pepsi would be
A) Linear
B) L-shaped
C) Convex
D) Positively sloped

Accepted Answer

Indifference curves represent combinations of goods between which a consumer is indifferent. If Frank is completely indifferent between drinking Coke and Pepsi, it means he values them equally at any combination. Therefore, his indifference curve would be linear, indicating a constant rate of substitution between Coke and Pepsi.

Question 13

Higher rates of substitution are indicated by _______ _______ values of the marginal rate of substitution.
A) Small negative
B) Large negative
C) Small positive
D) Large positive

Accepted Answer

Higher rates of substitution indicate that consumers are willing to trade-off larger amounts of one good for another. This is reflected in higher values of the marginal rate of substitution, which measures the amount of one good a consumer is willing to give up for another while keeping utility constant. Therefore, the best choice is D, large positive values for the marginal rate of substitution.

Question 14

Suppose a consumer's MRS is given by the formula MRS_PT = T/P,where P stands for the number of pieces of pizza and T stands for the number of tacos.Starting at 12 tacos and 4 pizzas,the consumer must receive A) 3 tacos to compensate them for the loss of one piece of pizza B) 3 pieces of pizza to compensate them for the loss of one taco C) 1/3 taco to compensate them for the loss of one piece of pizza D) 1/3 piece of pizza to compensate them for the loss of one taco

Accepted Answer

The answer of Suppose a consumer's MRS is given by...

Question 15

The slope of an indifference curve tells us
A) The marginal utility the consumer receives from consuming an additional unit of a good
B) How much of one good is required to compensate the consumer for giving up some of another good
C) The amount of utility a consumer receives from consuming a bundle of goods
D) The rate at which utility changes as more of one good is consumed

Accepted Answer

The slope of an indifference curve represents the rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility, which is essentially how much of one good is needed to compensate for giving up some of another good.

Question 16

The rate at which a consumer will exchange one good for another is called
A) Marginal utility
B) The marginal rate of transformation
C) The rate of substitutability
D) The marginal rate of substitution

Accepted Answer

The rate at which a consumer will exchange one good for another is called the marginal rate of substitution (MRS), which is measured by the slope of the consumer's indifference curve. MRS measures the willingness of a consumer to trade off one good for another while maintaining the same level of utility. Marginal utility (A) refers to the additional utility gained from consuming an additional unit of a good, while the marginal rate of transformation (B) refers to the ratio at which one good can be exchanged for another in a production scenario. The rate of substitutability (C) is not a commonly used term in economics and does not accurately describe the concept being asked for in this question.

Question 17

Rates of substitution are determined by
A) The consumer's income
B) The consumer's preferences
C) The number of available consumption bundles
D) The prices of different goods

Accepted Answer

Rates of substitution are determined by the consumer's preferences, as they reflect the rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility.

Question 18

Intuitively,the marginal rate of substitution for X with Y does not tell us
A) How much Y a consumer needs to compensate them for a little less X
B) How much X must be taken away from a consumer to compensate them for an increase in Y
C) How much X a consumer needs to compensate them for a little less Y
D) How much more Y the consumer will buy if the price of Y increases

Accepted Answer

The marginal rate of substitution for X with Y tells us how much of Y the consumer is willing to give up for a unit increase in X, or how much of X the consumer is willing to give up for a unit increase in Y. It does not tell us about the consumer's willingness to pay for the goods or the effect of price changes on the consumer's demand. Therefore, option D is the best choice as it relates to the effects of price changes on consumer demand.

Question 19

Two products are perfect complements if
A) A consumer is willing to swap one for another at a fixed rate
B) They are valuable only when used together in fixed proportions
C) Their indifference curves are "straight lines."
D) They lie on the same indifference curve

Accepted Answer

Perfect complements are goods that are consumed together in fixed proportions. They are only valuable when consumed together in a specific ratio. An example is left and right shoes; each pair of shoes must have one left and one right shoe.

Question 20

-Refer to Figure 4.4.Which diagram most likely represents the indifference map for a good and a "bad"?
A) A
B) B
C) C
D) D

Accepted Answer

In an indifference map for a good and a "bad," the indifference curves typically slope upwards, indicating that to keep utility constant when consuming more of the "bad," one must also consume more of the good. Diagram B is the only one that shows this characteristic, with indifference curves sloping upwards from left to right.

Quiz 4: Principles and Preferences

-Refer to Figure 4.4.Which diagram most likely represents the indifference map for Sony PlayStation and Nintendo GameCube?

As we move down and to the right along an indifference curve,the marginal rate of substitution

-Refer to Figure 4.2.The marginal rate of substitution for economics books with CDs is highest at point

Suppose Joe's MRS for cookies with crackers is 6 crackers per cookie.Also assume that Mary's MRS for cookies with crackers is 3 crackers per cookie.Assuming that these rates of substitution don't depend on the amounts consumed,which of the following trades would make Joe and Mary better off?

Suppose Bart's MRS for sodas with chips is 6 bags of chips per soda.Also assume that Lisa's MRS for sodas with chips is 8 bags of chips per soda.Assuming that these rates of substitution don't depend on the amounts consumed,which of the following trades would make Bart and Lisa better off?

Two products are perfect substitutes if

-Refer to Figure 4.3,which relates to two consumers shopping for a new car.Which of the following statements is true?

The marginal rate of substitution between two goods is given by

A marginal rate of substitution formula tells us

For any given family of indifference curves,a consumer would prefer to be at a point

-Refer to Figure 4.4.Which diagram most likely represents the indifference map for left shoes and right shoes?

Suppose Frank is completely indifferent between drinking Coke and drinking Pepsi.Then Frank's indifference curves for Coke and Pepsi would be

Higher rates of substitution are indicated by _ _ values of the marginal rate of substitution.

Suppose a consumer's MRS is given by the formula MRS_PT = T/P,where P stands for the number of pieces of pizza and T stands for the number of tacos.Starting at 12 tacos and 4 pizzas,the consumer must receive

The slope of an indifference curve tells us

The rate at which a consumer will exchange one good for another is called

Rates of substitution are determined by

Intuitively,the marginal rate of substitution for X with Y does not tell us

Two products are perfect complements if

-Refer to Figure 4.4.Which diagram most likely represents the indifference map for a good and a "bad"?