Question 1

The intercept of a budget line measures the
A)amount of a good that a consumer will purchase
B)maximum amount of a good that a consumer could purchase,given his consumption of some other good
C)maximum amount of a good that could be consumed at given prices and income
D)minimum amount of a good that could be consumed at given prices and income
E)minimum consumption of a good consistent with utility maximization

Accepted Answer

The intercept of a budget line shows the maximum amount of a good that could be consumed at given prices and income. It represents the boundary of the budget constraint, which sets the limit on the possible combinations of goods that a consumer can afford. The intercepts on the x and y axes represent the amounts of the two goods that could be purchased if all the income were spent on that good, given the prices of the two goods.

Question 2

If a consumer's budget line between meat and potatoes has a vertical axis intercept at 100 pounds of meat and a horizontal axis intercept at 100 pounds of potatoes
A)demand must be inelastic
B)the consumer's budget must equal $100
C)both meat and potatoes must be priced at $1 per pound
D)the price of a pound of meat must equal the price of a pound of potatoes
E)the opportunity cost of meat in terms of potatoes cannot be determined

Accepted Answer

The vertical and horizontal intercepts indicate that the consumer can buy 100 pounds of either meat or potatoes if they spend their entire budget on one good. This implies that the price of a pound of meat equals the price of a pound of potatoes.

Question 3

A family on a trip budgets $800 for restaurant meals and fast food.The price of a fast-food meal is $20 and the family can afford 16 restaurant meals if they don't buy any fast food.How many fast-food meals would the family gain if they gave up one restaurant meal?
A)1
B)0.4
C)2
D)2.5
E)5

Accepted Answer

D

Question 4

If income doubles and the prices of all goods remain the same,the budget line will shift outward by 50 percent along each axis.

Accepted Answer

If income doubles and prices remain constant, the budget line will shift outward by 100 percent along each axis, not 50 percent, because the consumer can now afford twice as much of each good.

Question 5

The ratio of the prices of two goods multiplied by -1 is equal to the slope of the budget line.

Accepted Answer

The slope of the budget line represents the rate at which one good can be traded for another. By convention, it is usually expressed as a negative number, so that when the price of one good increases, the slope becomes more negative, indicating that less of that good can be purchased. Therefore, if we multiply the ratio of the prices of two goods by -1, we obtain the slope of the budget line. For example, if the price of good X is $2 per unit and the price of good Y is $4 per unit, the ratio of the prices is 2:4, or 1:2. If we multiply this by -1, we get -0.5, which represents the slope of the budget line.

Question 6

The ratio of the price of the good on the horizontal axis divided by the price of the good on the vertical axis multiplied by -1
A)is the slope of the demand curve
B)measures the price elasticity of demand for a particular good
C)defines real income for the consumer
D)is the slope of the budget line
E)is the slope of the indifference curve

Accepted Answer

The slope of the budget line is determined by the ratio of the prices of the two goods, with the price of the good on the horizontal axis divided by the price of the good on the vertical axis, multiplied by -1.

Question 7

If income decreases,there will be a parallel inward shift of the budget line.

Accepted Answer

A decrease in income will reduce the amount of money available to spend on goods and services, causing a corresponding inward shift of the budget line. This means that the consumer will have to adjust their spending patterns and purchase fewer goods or lower-priced alternatives.

Question 8

A family on a trip budgets $800 for restaurant meals and fast food.The family can buy 16 restaurant meals if they don't buy any fast food.What is the price of a fast-food meal for the family?
A)$5
B)$16
C)$20
D)$50
E)it is impossible to tell from the information given

Accepted Answer

The problem does not provide any information about the cost of fast-food meals, only the cost of restaurant meals. Therefore, it is impossible to determine the price of a fast-food meal.

Question 9

Suppose that Trey spends all of his income on vacation trips and textbooks.If the price of a trip is $200 and the price of a textbook is $50,then the slope of his budget line (assuming vacation trips are measured on the vertical axis)would be
A)-4
B)4
C)0.25
D)-1.75
E)-0.25

Accepted Answer

The slope of the budget line is the negative ratio of the prices of the two goods. Since vacation trips are on the vertical axis, the slope is - (Price of Textbook / Price of Trip) = - (50 / 200) = -0.25.

Question 10

If the price of bread were zero,a budget line between bread (on the vertical axis)and cheese (on the horizontal axis)would
A)not exist
B)be vertical
C)coincide with the vertical axis
D)be horizontal
E)coincide with the horizontal axis

Accepted Answer

The answer of If the price of bread were zero,a...

Question 11

A family on a trip budgets $800 for sit-down restaurant meals and fast food.The family can buy 16 restaurant meals if they don't buy any fast food.What is the price of a restaurant meal for the family?
A)$5
B)$16
C)$20
D)$50
E)it is impossible to tell from the information given

Accepted Answer

If the family can buy 16 restaurant meals with a budget of $800, the price of each restaurant meal is $800 divided by 16, which equals $50.

Question 12

Figure 6-1
Income = $ 100
Price per Ticket = $20
Price per Compact Disk $ 10
 
-Joe spends all of his money on concert tickets and compact disks.Figure 6-1 shows his budget constraint when his income is $100.The price of a ticket is $20,while the price of a compact disk is $10.What is the opportunity cost of a compact disk?
A)1/2 ticket
B)$20
C)$10
D)1 ticket
E)2 tickets

Accepted Answer

The opportunity cost of a compact disk is the amount of tickets Joe has to give up to buy one disk. Since a ticket costs $20 and a disk costs $10, Joe gives up 1/2 of a ticket for each disk.

Question 13

The slope of the budget line
A)is always -1
B)represents the opportunity cost of consuming one more unit of the good measured on the horizontal axis
C)increases as more of one good is consumed
D)decreases as more of one good is consumed
E)is negative because of the law of demand

Accepted Answer

The slope of the budget line represents the opportunity cost of consuming one more unit of the good measured on the horizontal axis. The steeper the slope, the higher the opportunity cost. The slope is not always -1, and it does not necessarily increase or decrease as more of one good is consumed. The law of demand is not directly related to the slope of the budget line.

Question 14

A family on a trip budgets $800 for sit-down restaurant meals and fast food.If the price of a fast food meal for the family is $20,how many such meals can the family buy if they do not eat at restaurants?
A)8
B)15
C)20
D)40
E)160

Accepted Answer

If the family spends all $800 on fast food meals at $20 each, they can buy 800 / 20 = 40 meals.

Question 15

Figure 6-1
Income = $ 100
Price per Ticket = $20
Price per Compact Disk $ 10
 
-Joe spends all of his money on concert tickets and compact disks.Figure 6-1 shows his budget constraint when his income is $100.The price of a ticket is $20,while the price of a compact disk is $10.If Joe currently buys 3 tickets and would like to purchase a fourth,his opportunity cost would be
A)1 compact disk
B)$20
C)$10
D)2 compact disks
E)4 compact disks

Accepted Answer

If Joe wants to buy a fourth ticket, he would have to give up $20 (the price of the ticket). At $10 per compact disk, he could buy 2 compact disks with that $20. Therefore, his opportunity cost for buying a fourth ticket is 2 compact disks, which is option D.

Question 16

Budget constraints exist for consumers because
A)their utility from consuming goods eventually reaches a maximum level
B)even with unlimited incomes,they have to pay for each good they consume
C)they have to pay for goods and they have limited incomes
D)prices and income are inversely related
E)demand curves for goods generally slope downward

Accepted Answer

Budget constraints exist because consumers have to pay for goods with their limited incomes. They cannot purchase unlimited amounts of goods due to income limitations, which creates a budget constraint. Option A is incorrect because the utility from consuming goods is not necessarily related to budget constraints. Option B is incorrect because it simply restates the fact that consumers have to pay for goods. Option D is incorrect because income and prices are not directly related to budget constraints. Option E is also irrelevant because demand curves do not necessarily relate to budget constraints.

Question 17

A consumer's budget line shows
A)the utility that an individual would receive from consuming various combinations of two goods
B)the combinations of two goods that an individual is able to purchase,given prices and income
C)how income is influenced by prices of goods
D)how changes in income affect utility
E)the relationship between prices and income

Accepted Answer

A consumer's budget line shows the combinations of two goods that an individual is able to purchase, given prices and income. It represents the limit of the consumer's purchasing power and helps to determine the affordable choices available to them. The budget line is typically downward sloping, as the price of one good increases, a consumer will be able to afford lesser amounts of that good or the other good, given their budget constraint.

Question 18

If income decreases,the budget constraint will shift in but the slope will remain the same.

Accepted Answer

When income decreases, the budget constraint will shift inward since there is less income available to spend. However, the slope of the budget constraint remains the same because it is determined by the relative prices of goods and services.

Question 19

If food is measured on the horizontal axis of a budget line diagram,and clothing is measured on the vertical axis,the slope of the budget line
A)may be positive if the price of clothing is high enough
B)may be positive if the price of food is high enough
C)may be positive if income is large enough
D)equals the maximum consumption of food divided by the maximum consumption of clothing times -1
E)equals the maximum consumption of clothing divided by the maximum consumption of food times -1

Accepted Answer

The slope of the budget line is determined by the ratio of the prices of the two goods. It is calculated as the negative of the price of the good on the horizontal axis (food) divided by the price of the good on the vertical axis (clothing), which corresponds to the maximum consumption of clothing divided by the maximum consumption of food times -1.

Question 20

The budget line is useful for illustrating the notion of opportunity cost.

Accepted Answer

The budget line shows the trade-off between purchasing two goods with limited income. By choosing to allocate income towards one good, the opportunity cost is the alternative good that could have been purchased but now must be given up. Therefore, the budget line is a useful tool for illustrating the concept of opportunity cost.

Quiz 6: Consumer Choice

The intercept of a budget line measures the

If a consumer's budget line between meat and potatoes has a vertical axis intercept at 100 pounds of meat and a horizontal axis intercept at 100 pounds of potatoes

A family on a trip budgets $800 for restaurant meals and fast food.The price of a fast-food meal is $20 and the family can afford 16 restaurant meals if they don't buy any fast food.How many fast-food meals would the family gain if they gave up one restaurant meal?

If income doubles and the prices of all goods remain the same,the budget line will shift outward by 50 percent along each axis.

The ratio of the prices of two goods multiplied by -1 is equal to the slope of the budget line.

The ratio of the price of the good on the horizontal axis divided by the price of the good on the vertical axis multiplied by -1

If income decreases,there will be a parallel inward shift of the budget line.

A family on a trip budgets $800 for restaurant meals and fast food.The family can buy 16 restaurant meals if they don't buy any fast food.What is the price of a fast-food meal for the family?

Suppose that Trey spends all of his income on vacation trips and textbooks.If the price of a trip is $200 and the price of a textbook is $50,then the slope of his budget line (assuming vacation trips are measured on the vertical axis) would be

If the price of bread were zero,a budget line between bread (on the vertical axis) and cheese (on the horizontal axis) would

A family on a trip budgets $800 for sit-down restaurant meals and fast food.The family can buy 16 restaurant meals if they don't buy any fast food.What is the price of a restaurant meal for the family?

The slope of the budget line

A family on a trip budgets $800 for sit-down restaurant meals and fast food.If the price of a fast food meal for the family is $20,how many such meals can the family buy if they do not eat at restaurants?

Budget constraints exist for consumers because

A consumer's budget line shows

If income decreases,the budget constraint will shift in but the slope will remain the same.

If food is measured on the horizontal axis of a budget line diagram,and clothing is measured on the vertical axis,the slope of the budget line

The budget line is useful for illustrating the notion of opportunity cost.