Question 1

A numerical score that represents the satisfaction that a consumer gets from a given market basket is called:

Accepted Answer

Utility is the numerical score that represents the satisfaction a consumer derives from a given market basket.

Question 2

Figure 3.1.8
-Refer to Figure 3.1.8 above. This indifference map shows that this consumer:

Accepted Answer

The answer of  Figure 3.1.8
-Refer to Figure 3.1.8 above....

Question 3

Suppose your utility function for food (F) and clothing (C) is u(F,C) = F + 4C. If you reduce your clothing consumption by 2 units, how much do you have to increase your food consumption in order to maintain the same utility level?

Accepted Answer

The utility function is u(F,C) = F + 4C. Reducing clothing by 2 units decreases utility by 8 (since 4*2=8). To maintain the same utility, food consumption must increase by 8 units.

Question 4

A budget line shows the combinations of:

Accepted Answer

The answer of A budget line shows the combinations of:
...

Question 5

A utility function that generates a ranking of market baskets in order of most to least preferred is called:

Accepted Answer

An ordinal utility function generates a ranking of preferences without assigning any specific numerical values to each basket. This ranking allows us to determine which basket is preferred over another, but not by how much. Therefore, a ranking of market baskets in order of most to least preferred is an example of an ordinal utility function.

Question 6

To answer the question: Can money buy happiness?, a study of the relationship between GDP per capita and satisfaction with life demonstrates that:

Accepted Answer

The study shows a direct relationship between GDP per capita and satisfaction with life, meaning that people in countries with higher GDP per capita tend to be happier than people in countries with lower GDP per capita.

Question 7

Suppose that the prices of good A and good B were to suddenly double. If good A is plotted along the horizontal axis,

Accepted Answer

The slope of the budget line represents the rate at which the market is willing to substitute one good for another (the price ratio of the two goods). If the prices of both goods double, the price ratio between good A and good B remains unchanged, hence the slope of the budget line does not change.

Question 8

The endpoints (horizontal and vertical intercepts) of the budget line:

Accepted Answer

The endpoints of the budget line represent the quantity of each good that could be purchased if all of the budget were allocated to that good. They do not indicate the slope, rate of substitution, willingness of trade, or highest level of satisfaction.

Question 9

If the quantity of good A (Q_A) is plotted along the horizontal axis, the quantity of good B (Q_B) is plotted along the vertical axis, the price of good A is P_A, the price of good B is P_B and the consumer's income is I, then the slope of the consumer's budget constraint is:

Accepted Answer

The slope of the consumer's budget constraint is given by the negative ratio of the prices of the two goods, which is -P_A/P_B. This represents the rate at which the consumer can trade off good A for good B while staying within their budget.

Question 10

A consumer has $100 per day to spend on product A, which has a unit price of $7, and product B, which has a unit price of $15. What is the slope of the budget line if good A is on the horizontal axis and good B is on the vertical axis?

Accepted Answer

The slope of the budget line is the negative of the ratio of the price of good A to the price of good B. In this case, the price of good A is $7 and the price of good B is $15, so the slope of the budget line is -7/15.

Question 11

Figure 3.2.1 -Refer to Figure 3.2.1 above. Let I = income, P_F the price of food, and P_C the price of clothing. The vertical intercept of the budget line equals 40, which is equivalent to:

Accepted Answer

The vertical intercept of the budget line represents the maximum amount of clothing that can be purchased if all income is spent on clothing. This is calculated by dividing total income (I) by the price of clothing (P_C), hence the correct answer is I/P_C.

Question 12

A utility function describing by how much one market basket is preferred to another is called:

Accepted Answer

A cardinal utility function measures the degree of preference between different market baskets, indicating by how much one is preferred over another.

Question 13

Figure 3.2.1
-Refer to Figure 3.2.1 above. The slope of the budget line equals:

Accepted Answer

The answer of  Figure 3.2.1
-Refer to Figure 3.2.1 above....

Question 14

Consider the following three market baskets:Table 3.1
 
-Jane is trying to decide which courses to take next semester. She has narrowed down her choice to two courses, Econ 1 and Econ 2. Now she is having trouble and cannot decide which of the two courses to take. It's not that she is indifferent between the two courses, she just cannot decide. An economist would say that this is an example of preferences that:

Accepted Answer

Jane's preferences are incomplete because she cannot make a choice between two options, indicating that her preferences are not fully defined. It is not a matter of transitivity or violating the assumption of more being preferred to less.

Question 15

Consider the following three market baskets:Table 3.1
 
-Two goods for which the marginal rate of substitution is zero or infinite are:

Accepted Answer

Perfect complements are goods for which the marginal rate of substitution is either zero or infinite, indicating that the consumer places a fixed value on the ratio in which these goods are consumed together, such as left shoes and right shoes.

Question 16

To understand consumer behavior and how consumer decisions are made, it is necessary and/or sufficient to work with:

Accepted Answer

The answer of To understand consumer behavior and how consumer...

Question 17

Consider the following three market baskets:Table 3.1
 
-Refer to Table 3.1. If preferences satisfy all four of the basic assumptions:

Accepted Answer

The answer of Consider the following three market baskets:Table 3.1
...

Question 18

Consider the following three market baskets:Table 3.1
 
-Goods that are considered "bads" have this characteristic:

Accepted Answer

Goods that are considered "bads" are those for which less is preferred to more. This means that as the quantity of the good increases, the consumer's satisfaction decreases. Examples of bads include pollution, traffic congestion, and garbage. Therefore, option B is the correct choice. Option A (their marginal rates of substitution are constant) is incorrect because this is a characteristic of goods that are perfect substitutes or perfect complements, not bads. Option C (preferences for those goods are not complete) is incorrect because completeness of preferences is a property of all goods and not just bads. Option D (those goods have horizontal or vertical indifference curves) is incorrect because this is a property of perfect substitutes and perfect complements, not bads.

Question 19

Alvin's preferences for good X and good Y are shown in the diagram below.
  Figure 3.1.6
-Envision a graph with meat on the horizontal axis and vegetables on the vertical axis. A strict vegetarian would have indifference curves that are:

Accepted Answer

A strict vegetarian would only consume vegetables, and would be indifferent between different amounts of vegetables, but would not consume any amount of meat. Therefore, their indifference curves would be horizontal lines, indicating that they are only concerned with the amount of vegetables consumed and not the amount of meat.

Question 20

Figure 3.1.7
-Refer to Figure 3.1.7 above. This indifference map shows that: this consumer:

Accepted Answer

The answer of  Figure 3.1.7
-Refer to Figure 3.1.7 above....

Quiz 3: Consumer Behavior

A numerical score that represents the satisfaction that a consumer gets from a given market basket is called:

Figure 3.1.8 -Refer to Figure 3.1.8 above. This indifference map shows that this consumer:

Suppose your utility function for food (F) and clothing (C) is u(F,C) = F + 4C. If you reduce your clothing consumption by 2 units, how much do you have to increase your food consumption in order to maintain the same utility level?

A budget line shows the combinations of:

A utility function that generates a ranking of market baskets in order of most to least preferred is called:

To answer the question: Can money buy happiness?, a study of the relationship between GDP per capita and satisfaction with life demonstrates that:

Suppose that the prices of good A and good B were to suddenly double. If good A is plotted along the horizontal axis,

The endpoints (horizontal and vertical intercepts) of the budget line:

If the quantity of good A (QA) is plotted along the horizontal axis, the quantity of good B (QB) is plotted along the vertical axis, the price of good A is PA, the price of good B is PB and the consumer's income is I, then the slope of the consumer's budget constraint is:

A consumer has $100 per day to spend on product A, which has a unit price of $7, and product B, which has a unit price of $15. What is the slope of the budget line if good A is on the horizontal axis and good B is on the vertical axis?

Figure 3.2.1 -Refer to Figure 3.2.1 above. Let I = income, PF the price of food, and PC the price of clothing. The vertical intercept of the budget line equals 40, which is equivalent to:

A utility function describing by how much one market basket is preferred to another is called:

Figure 3.2.1 -Refer to Figure 3.2.1 above. The slope of the budget line equals:

Consider the following three market baskets:Table 3.1 -Two goods for which the marginal rate of substitution is zero or infinite are:

To understand consumer behavior and how consumer decisions are made, it is necessary and/or sufficient to work with:

Consider the following three market baskets:Table 3.1 -Refer to Table 3.1. If preferences satisfy all four of the basic assumptions:

Consider the following three market baskets:Table 3.1 -Goods that are considered "bads" have this characteristic:

Alvin's preferences for good X and good Y are shown in the diagram below. Figure 3.1.6 -Envision a graph with meat on the horizontal axis and vegetables on the vertical axis. A strict vegetarian would have indifference curves that are:

Figure 3.1.7 -Refer to Figure 3.1.7 above. This indifference map shows that: this consumer:

If the quantity of good A (Q_A) is plotted along the horizontal axis, the quantity of good B (Q_B) is plotted along the vertical axis, the price of good A is P_A, the price of good B is P_B and the consumer's income is I, then the slope of the consumer's budget constraint is:

Figure 3.2.1 -Refer to Figure 3.2.1 above. Let I = income, P_F the price of food, and P_C the price of clothing. The vertical intercept of the budget line equals 40, which is equivalent to: