Question 1

If two combinations of two goods yield the same level of satisfaction, then they are:
A) on the same price line.
B) on the same budget constraint.
C) on the same indifference curve.
D) on different indifference curves.

Accepted Answer

If two combinations of two goods yield the same level of satisfaction, then they are on the same indifference curve. An indifference curve represents all the possible combinations of two goods that give the consumer the same level of satisfaction or utility. Therefore, if two combinations are giving the same level of satisfaction, they must be on the same indifference curve.

Question 2

The marginal rate of substitution assumes that:
A) prices remain unchanged.
B) money income remains unchanged.
C) satisfaction remains unchanged.
D) the quantities of both goods remain unchanged.

Accepted Answer

The marginal rate of substitution represents the rate at which a consumer is willing to substitute one good for another while still maintaining the same level of satisfaction. Therefore, it assumes that satisfaction remains unchanged.

Question 3

In indifference curve analysis, a line that shows all combinations of two goods a consumer can buy is called a(n):
A) indifference curve.
B) utility line.
C) budget line.
D) income possibility line

Accepted Answer

An indifference curve represents all combinations of two goods that give a consumer a certain level of satisfaction or utility, while a utility line is not a term used in indifference curve analysis. The budget line, on the other hand, shows all combinations of two goods that a consumer can buy given the prices of the goods and the consumer's income. Therefore, choice C is correct as it describes the line that is shown in indifference curve analysis. Choice D is incorrect as it is not a term used in the analysis of indifference curves.

Question 4

A line representing all the possible combinations of two commodities that a consumer can purchase at a particular time, given the market prices of the commodities and the consumer's income, is a(n):
A) budget line.
B) consumption line.
C) income consumption curve.
D) indifference curve.

Accepted Answer

A budget line represents the different combinations of two commodities that a consumer can purchase with a certain level of income and given market prices. It is also called a budget constraint or price line. The other options are not correct: a consumption line is not a well-known economic concept, an income consumption curve represents changes in consumption due to changes in income (not prices), and an indifference curve shows combinations of goods that provide the same level of utility to a consumer.

Question 5

An indifference curve shows combinations of two goods that yield:
A) equal prices.
B) equal money income.
C) equal satisfaction.
D) increasing prices.

Accepted Answer

An indifference curve represents all the different combinations of two goods that provide the same level of satisfaction to the consumer. Therefore, the correct choice is C, which is "equal satisfaction".

Question 6

Algebraically, the budget constraint for two goods would be PₓQₓ + PᵧQᵧ is:
A) equal to B.
B) less than B.
C) greater than B.
D) less than or equal to B.

Accepted Answer

The budget constraint represents the total amount of money (B) that can be spent on the two goods, where Pₓ and Pᵧ are the prices of the two goods and Qₓ and Qᵧ are the quantities of the two goods purchased. Therefore, PₓQₓ + PᵧQᵧ ≤ B since the total cost of the goods cannot exceed the budget. Thus, the correct choice is D.

Question 7

As a consumer moves upward along an indifference curve, giving up some of X (on the horizontal axis) to get more of Y (on the vertical axis), his or her marginal rate of substitution of X for Y:
A) becomes infinite.
B) goes from negative to positive.
C) increases.
D) decreases.

Accepted Answer

The answer of As a consumer moves upward along an...

Question 8

If you are willing to give up 10 units of good Y (on the vertical axis) for 5 units of good X (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:
A) 0.5.
B) 2.
C) 5.
D) 10.

Accepted Answer

The slope of the indifference curve at the point where the consumer is willing to give up 10 units of Y for 5 units of X is -10/5 = -2, which is the marginal rate of substitution. Therefore, the answer is B.

As for the best choice, it depends on the prices of X and Y. If the price of X is lower than the marginal rate of substitution (in this case, lower than 2), the consumer should consume more of X and less of Y until the ratio of prices (the slope of the budget constraint) equals the marginal rate of substitution. If the price of Y is lower than the marginal rate of substitution, the consumer should consume more of Y and less of X until the ratio of prices equals the marginal rate of substitution. If the prices of X and Y are equal to the marginal rate of substitution, the consumer can choose any combination of X and Y that lies on the budget constraint and the indifference curve.

Question 9

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend on both goods, the maximum quantity of Cracker Jacks that you can purchase is _______ boxes.
A) 5
B) 10
C) 20
D) 40

Accepted Answer

If you spend all $10 on Cracker Jacks at 50 cents per box, you can buy 20 boxes ($10 / $0.50 = 20).

Question 10

The slope of a budget line for a consumer buying two goods is equal to the _______ of the price of the good on the ________ axis divided by the price of the good on the _______ axis.
A) positive; vertical; horizontal
B) negative; horizontal; vertical
C) positive; horizontal; vertical
D) negative; vertical; horizontal

Accepted Answer

The slope of a budget line represents the rate at which a consumer can trade one good for another, which is determined by the relative prices of the two goods. It is calculated as the negative of the price of the good on the horizontal axis divided by the price of the good on the vertical axis, reflecting the trade-off between the two goods. This is because as a consumer increases consumption of one good, they must give up some of the other good, assuming a fixed budget, which results in a downward sloping budget line.

Question 11

The slope of a(n) _______ curve shows the rate at which two goods can be exchanged _______ the consumer's ________ .
A) marginal utility; which increases; marginal utility
B) indifference; without affecting; total utility
C) iso-utility; without affecting; budget
D) indifference; without affecting; budget

Accepted Answer

The answer of The slope of a(n) _______ curve shows...

Question 12

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend and decide to purchase 8 bags of M&Ms, the maximum quantity of Cracker Jacks that you can purchase is ________ boxes.
A) 10
B) 12
C) 16
D) 20

Accepted Answer

The total cost of 8 bags of M&Ms is 8 * 25 = 200 cents. This leaves you with 1000 - 200 = 800 cents to spend on Cracker Jacks. Since each box of Cracker Jacks costs 50 cents, you can purchase 800 / 50 = 16 boxes of Cracker Jacks.

Question 13

A decreasing marginal rate of substitution indicates that an indifference curve is:
A) a straight line.
B) a vertical line.
C) a horizontal line.
D) bowed in, toward the origin.

Accepted Answer

A decreasing marginal rate of substitution means that as more of one good is consumed, less of the other good is willing to be given up for it. This leads to a bowed-in indifference curve, as the slope of the curve becomes steeper as you move down and to the right. A straight line would indicate a constant marginal rate of substitution, and a vertical or horizontal line would indicate that one good is valued infinitely more than the other and cannot be substituted for at all.

Question 14

A budget line is based on given:
A) tastes.
B) money income.
C) satisfaction.
D) consumer preferences.

Accepted Answer

A budget line shows the combinations of two goods that a consumer can afford based on their money income, assuming that the prices of the goods are given. Tastes, satisfaction, and consumer preferences do not directly determine the shape of the budget line.

Question 15

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend on both goods, the maximum quantity of M&Ms that you can purchase is ________ bags.
A) 5
B) 10
C) 20
D) 40

Accepted Answer

With $10 and each bag of M&Ms costing 25 cents, you can purchase $10 / $0.25 = 40 bags of M&Ms.

Question 16

A curve that represents combinations of two goods that yield equal levels of satisfaction is a(n):
A) indifference curve.
B) budget curve.
C) marginal utility curve.
D) price-consumption curve.

Accepted Answer

An indifference curve shows different combinations of two goods that give the same level of satisfaction to the consumer. The consumer is indifferent between any combination of goods on the same indifference curve, meaning that they are equally desirable to the consumer. Budget curve shows the different combinations of two goods that a consumer can afford given their income and the prices of the goods, Marginal utility curve shows how much utility a consumer can derive from consuming an additional unit of a good, and Price-consumption curve shows how much of a good a consumer will buy at different prices while keeping their income and the price of the other good constant.

Question 17

If you are willing to give up 5 units of good Y (on the vertical axis) for 5 units of good X (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:
A) 0.5.
B) 1.
C) 2.
D) 5.

Accepted Answer

The marginal rate of substitution is the amount of one good a consumer is willing to give up for one more unit of the other good while maintaining the same level of satisfaction. In this case, the consumer is willing to give up 5 units of good Y for 5 units of good X, which means the marginal rate of substitution is 1 (5/5). Therefore, the best choice(s) would depend on the prices of X and Y, as the consumer would choose the combination of goods that gives them the highest level of satisfaction for a given budget.

Question 18

If a consumer moves upward along an indifference curve, his or her total utility:
A) remains constant.
B) first decreases, then increases.
C) increases.
D) first increases, then decreases.

Accepted Answer

An indifference curve represents a combination of goods that give a consumer equal satisfaction and utility. Therefore, moving along an indifference curve means the total utility remains constant, as the consumer is indifferent between the combinations of goods at any point on the curve.

Question 19

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $5 to spend and decide to purchase 8 boxes of Cracker Jacks, the maximum quantity of M&Ms that you can purchase is ________ bags.
A) 4
B) 8
C) 10
D) 12

Accepted Answer

With $5 and choosing to buy 8 boxes of Cracker Jacks at 50 cents each, you spend $4 (8 boxes * $0.50/box = $4). This leaves $1 to spend on M&Ms, which are 25 cents a bag. Therefore, you can buy 4 bags of M&Ms ($1 / $0.25/bag = 4 bags).

Question 20

Combinations of two goods that yield equal levels of utility are shown on a(n) _______ curve.
A) indifference
B) budget
C) marginal utility
D) utility maximizing

Accepted Answer

Indifference curves show all the combinations of two goods that yield the same level of utility. Therefore, this is the best choice for the given question. Budget curves show all the different combinations of two goods that can be purchased with a given income level. Marginal utility curves show the additional utility gained from consuming an additional unit of a good. Utility maximizing curves are not a commonly used economic term.

Quiz 7: The Analysis of Consumer Choice

If two combinations of two goods yield the same level of satisfaction, then they are:

The marginal rate of substitution assumes that:

In indifference curve analysis, a line that shows all combinations of two goods a consumer can buy is called a(n) :

A line representing all the possible combinations of two commodities that a consumer can purchase at a particular time, given the market prices of the commodities and the consumer's income, is a(n) :

An indifference curve shows combinations of two goods that yield:

Algebraically, the budget constraint for two goods would be PₓQₓ + PᵧQᵧ is:

As a consumer moves upward along an indifference curve, giving up some of X (on the horizontal axis) to get more of Y (on the vertical axis) , his or her marginal rate of substitution of X for Y:

If you are willing to give up 10 units of good Y (on the vertical axis) for 5 units of good X (on the horizontal axis) , and your level of satisfaction is unchanged, the marginal rate of substitution is:

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend on both goods, the maximum quantity of Cracker Jacks that you can purchase is _______ boxes.

The slope of a budget line for a consumer buying two goods is equal to the _ of the price of the good on the axis divided by the price of the good on the _ axis.

The slope of a(n) ___ curve shows the rate at which two goods can be exchanged _ the consumer's ______ .

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend and decide to purchase 8 bags of M&Ms, the maximum quantity of Cracker Jacks that you can purchase is ________ boxes.

A decreasing marginal rate of substitution indicates that an indifference curve is:

A budget line is based on given:

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend on both goods, the maximum quantity of M&Ms that you can purchase is ________ bags.

A curve that represents combinations of two goods that yield equal levels of satisfaction is a(n) :

If you are willing to give up 5 units of good Y (on the vertical axis) for 5 units of good X (on the horizontal axis) , and your level of satisfaction is unchanged, the marginal rate of substitution is:

If a consumer moves upward along an indifference curve, his or her total utility:

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $5 to spend and decide to purchase 8 boxes of Cracker Jacks, the maximum quantity of M&Ms that you can purchase is ________ bags.

Combinations of two goods that yield equal levels of utility are shown on a(n) _______ curve.