Question 1

The assumption that people are rational

Accepted Answer

The assumption that people are rational is often used in economics and is considered fairly accurate for most cases, as it simplifies the modeling of decision-making processes. However, it is acknowledged that people can also be influenced by emotions and other factors.

Question 2

The category that represents the largest share of household spending in the United States is

Accepted Answer

Housing represents the largest share of household spending in the United States, encompassing costs such as rent or mortgage payments, utilities, maintenance, and other related expenses.

Question 3

A budget line shows

Accepted Answer

A budget line represents the combination of goods and services that a consumer can purchase with a given budget, based on their prices, thus showing consumption possibilities.

Question 4

The slope of the budget line is

Accepted Answer

The slope of the budget line is negative because it reflects the trade-off between two goods. To purchase more of one good, you must give up some quantity of the other good, assuming a fixed income and constant prices. This trade-off is represented by a downward sloping budget line.

Question 5

Suppose the price of a taco is $1 and the price of a soft drink is $2. If Mehmet has $5, then he can buy

Accepted Answer

Mehmet can buy three tacos for $3 and one soft drink for $2, totaling $5.

Question 6

Xiao has a budget of $150 to spend on T-shirts and jeans. The jeans she likes cost $56, and T-shirts cost $10. The combination of three T-shirts and three pairs of jeans would fall

Accepted Answer

The cost of three T-shirts and three pairs of jeans is (3 * $10) + (3 * $56) = $30 + $168 = $198, which exceeds Xiao's budget of $150.

Question 7

Jordan brought $20 to the movie theater to spend on popcorn and candy bars. Popcorn costs $5 a bucket and a candy bar costs $3. If he buys two buckets of popcorn, what would be the largest number of candy bars that he can purchase?

Accepted Answer

After buying two buckets of popcorn for $5 each, Jordan spends $10, leaving him with $10. Since each candy bar costs $3, the largest number of candy bars he can purchase with $10 is three ($3 x 3 = $9).

Question 8

A budget line is linear because

Accepted Answer

The budget line is linear because it assumes that the prices of the two goods are constant, which means that the trade-off between the two goods does not change as more of one good is consumed in place of the other. This constant trade-off is what keeps the budget line straight.

Question 9

Tena has $50 per week to spend on lunches. Egg rolls cost $2 each and a plate of chow mein costs $7. Tena wants to buy five plates of chow mein and ten egg rolls per week. This combination of chow mein and egg rolls each week is

Accepted Answer

The total cost for five plates of chow mein and ten egg rolls is $65, which exceeds Tena's $50 budget, making it unobtainable.

Question 10

Suppose the price of a hamburger is $4 and the price of a soft drink is $1. If Jill has $10, then she can buy

Accepted Answer

Jill can buy two hamburgers for $8 (2 x $4) and two soft drinks for $2 (2 x $1), which is within her budget of $10.

Question 11

Assume that you have $60 a week to spend on fresh-squeezed fruit juice and chips. A bottle of fresh-squeezed fruit juice costs $6 and a bag of chips costs $3. If you buy seven bottles of juice, how many bags of chips can you purchase?

Accepted Answer

If you buy seven bottles of juice, you will spend $6 * 7 = $42 on juice. This leaves you with $60 - $42 = $18 to spend on chips. Since each bag of chips costs $3, you can purchase $18 / $3 = 6 bags of chips.

Question 12

Suppose you have $100 to spend on two goods: $20 for DVDs or $10 for books. Which combination of the two goods is NOT on the budget line?

Accepted Answer

The budget line represents all the combinations of goods a consumer can purchase with a given budget, given the prices of the goods. To be on the budget line, the total cost of DVDs and books must equal $100. For choice C, seven books at $10 each is $70, and three DVDs at $20 each is $60, totaling $130, which exceeds the $100 budget.

Question 13

Suppose you have $100 to spend on two goods: computer games, which cost $25 each, and audiobooks, which cost $10 each. The combination of two computer games and four audiobooks would fall

Accepted Answer

Two computer games cost $25 * 2 = $50, and four audiobooks cost $10 * 4 = $40. The total cost is $50 + $40 = $90, which is less than the budget of $100. Therefore, the combination of two computer games and four audiobooks would fall inside the budget line.

Question 14

(Figure: Bowling and Chinese Buffet) Bill can consume ten Chinese buffets or go bowling five times per month (or any other specific other combinations). This graph represents Bill's

Accepted Answer

The answer of (Figure: Bowling and Chinese Buffet) Bill can...

Question 15

(Figure: Bowling and Chinese Buffet) The price of a Chinese buffet dinner is $10 and an evening of bowling costs $20. Bill has $100 per month to spend on these two goods. Assuming Bill is a utility-maximizing consumer, if he wants to eat at the Chinese buffet six times this month, he can go bowling only _____ time(s) this month.

Accepted Answer

The answer of (Figure: Bowling and Chinese Buffet) The price...

Question 16

(Figure: Bowling and Chinese Buffet) The price of a Chinese buffet dinner is $10 and an evening of bowling costs $20. Bill has $100 per month to spend on these two goods. If Bill wants to go bowling four times this month, he can eat at his favorite Chinese buffet only _____ times this month.

Accepted Answer

The answer of (Figure: Bowling and Chinese Buffet) The price...

Question 17

(Figure: Bowling and Chinese Buffet) If the price of a Chinese buffet increases, the budget line will rotate

Accepted Answer

The answer of (Figure: Bowling and Chinese Buffet) If the...

Question 18

(Figure: Bowling and Chinese Buffet) If the price of bowling increases, the budget line will rotate

Accepted Answer