Question 1

Since indifference curves depend on the _____ for individuals,this means that two consumers with the same income _____.
A) utility function;must consume different amounts of the two goods
B) utility function;may consume different amounts of the two goods
C) optimal utility rule;must consume different amounts of the two goods
D) marginal utility function;have the same marginal utility for two goods.

Accepted Answer

Indifference curves depend on an individual's utility function, which may differ from person to person. Therefore, two consumers with the same income may consume different amounts of the two goods since their preferences and utility functions may differ.

Question 2

Diminishing marginal utility is the reason most indifference curves:
A) slope upward.
B) slope downward.
C) are vertical.
D) are horizontal.

Accepted Answer

Diminishing marginal utility means that as you consume more of a good, the additional satisfaction you get from each additional unit of that good will decrease. Therefore, as you move along an indifference curve (which represents equal levels of satisfaction), consuming more of one good while holding the other constant will eventually result in a decrease in the marginal utility of that good, causing the curve to slope downward.

Question 3

Use the following to answer questions : 
-(Figure: Oreos and Apples)Use Figure Oreos and Apples,which provides an indifference curve map for Diego.As Diego moves along an indifference curve from point F to point E,he buys _____ Oreos to obtain _____ apples.
A) fewer;more
B) more;more
C) the same number of;more
D) no;more

Accepted Answer

As Diego moves from point F to point E on the indifference curve map, he is moving towards a higher level of utility. Therefore, he must be obtaining more of the preferred good (apples) and fewer of the non-preferred good (Oreos). Therefore, the answer is A – he buys fewer Oreos to obtain more apples.

Question 4

When an individual's consumption of an additional unit of a good generates a smaller increase in total utility than the previous unit consumed,this person's indifference curve will be:
A) a straight line.
B) convex,or bowed toward the origin.
C) concave,or bowed away from the origin.
D) a right angle.

Accepted Answer

The answer of When an individual's consumption of an additional...

Question 5

Miguel eats only burgers with onion rings.Miguel's indifference curve between burgers and onion rings must be a straight line.

Accepted Answer

The statement is false. While it is possible for Miguel's indifference curve to be linear, it is not a necessary condition just because he only eats burgers with onion rings. The shape of the indifference curve depends on the individual's preferences between the two goods.

Question 6

Use the following to answer questions :
Scenario: Music Downloads and Streamed Movies
Phillip has an income of $300 per month,which he uses to purchase music downloads (MD)and streamed movies (SM).Each music download costs $1 and each streamed movie costs $5.
-(Scenario: Music Downloads and Streamed Movies)Read the scenario Music Downloads and Streamed Movies.Which of the following equations expresses Phillip's budget line?
A) 300 = 1MD + 5SM
B) SM = 300 - 1MD
C) 300 = 1 / MD + 5 / SM
D) SM = 300 + 5SM

Accepted Answer

Phillip's budget line is 300 = 1MD + 5SM. This equation shows that Phillip has a total budget of $300, which he can use to purchase music downloads (MD) and streamed movies (SM). Each music download costs $1, and each streamed movie costs $5.

Question 7

Ellen consumes goods X and Y.As she consumes less X,she must be compensated with additional units of Y,and her marginal rate of substitution of X for Y decreases as she consumes more Y.This means that goods X and Y are:
A) ordinary.
B) unique.
C) complements.
D) substitutes.

Accepted Answer

Goods X and Y are ordinary because the diminishing marginal rate of substitution indicates a typical consumer behavior of deriving less satisfaction from each additional unit of a good as they consume more of it, which is characteristic of ordinary goods.

Question 8

Use the following to answer questions : $$\begin{array}{l}
\text { Table: Madeline's Preferences for T-Shirts and Coffee }\
\begin{array} { l c c } 
\hline \begin{array} { l } 
\text { Consumption } \
\text { Bundle }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { of T-Shirts }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Coffee (cups) }
\end{array} \
\hline \text { A } & 30 & 3 \
\text { B } & 24 & 4 \
\text { C } & 21 & 5 \
\text { D } & 19 & 6 \
\text { E } & 18 & 7 \
\hline
\end{array}
\end{array}$$
-(Table: Madeline's Preferences for T-Shirts and Coffee)Use Table Madeline's Preferences for T-Shirts and Coffee.Assume each consumption bundle provides the same level of utility for Madeline.Suppose Madeline is consuming bundle C.If she changes her purchases to bundle D,this means that she:
A) gives up two T-shirts to obtain one more cup of coffee.
B) gives up one cup of coffee to obtain two more T-shirts.
C) will now have 11 cups of coffee and 40 T-shirts.
D) doesn't give up any T-shirts to obtain more coffee.

Accepted Answer

Madeline moves from bundle C (21 T-shirts, 5 cups of coffee) to bundle D (19 T-shirts, 6 cups of coffee), giving up 2 T-shirts to obtain 1 more cup of coffee.

Question 9

Use the following to answer questions : 
-(Figure: Oreos and Apples)Use Figure Oreos and Apples,which provides an indifference curve map for Diego.The consumption bundle that provides the highest level of utility is bundle:
A) A or C.
B) B or D.
C) E or F.
D) A or B.

Accepted Answer

The highest level of utility is achieved where the highest indifference curve intersects with the budget line tangent. This occurs at bundle E or F, where the indifference curve U3 is tangent to the budget line. Bundles A and B are both on a lower indifference curve than U3, and bundles C and D are both outside of the budget constraint. Therefore, the best choice(s) are E or F.

Question 10

The assumption that more is preferred to less explains why indifference curves:
A) that lie closer to the origin represent higher levels of utility.
B) that lie farther from the origin represent higher levels of utility.
C) cross frequently.
D) slope upward and away from the origin.

Accepted Answer

The assumption that more is preferred to less means that individuals prefer higher levels of consumption to lower levels. Therefore, indifference curves that are farther from the origin represent higher levels of utility as they reflect higher levels of consumption.

Question 11

A typical indifference curve is _____,and its slope is the _____ of the good on the horizontal axis divided by the marginal utility of the good on the vertical axis.
A) downward sloping;negative of the marginal utility
B) upward sloping;negative of the marginal utility
C) downward sloping;negative of the total utility
D) downward sloping;total cost

Accepted Answer

Indifference curves are typically downward sloping, indicating that as the consumer consumes more of one good, they are willing to give up some of it to obtain more of the other good. The slope of the indifference curve is given by the negative of the ratio of the marginal utility of the good on the vertical axis to the good on the horizontal axis, indicating the rate at which the consumer is willing to substitute one good for another. Therefore, choice A is the best choice as it correctly describes both the shape and slope of the indifference curve.

Question 12

When we graphically isolate the substitution effect of a change in the price of one good,utility is held constant.

Accepted Answer

When we isolate the substitution effect graphically, we are holding utility constant to observe how the change in price affects the quantity demanded of the good, while keeping the consumer at the same level of utility.

Question 13

Use the following to answer questions : $$\begin{array}{l}
\text { Table: Madeline's Preferences for T-Shirts and Coffee }\
\begin{array} { l c c } 
\hline \begin{array} { l } 
\text { Consumption } \
\text { Bundle }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { of T-Shirts }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Coffee (cups) }
\end{array} \
\hline \text { A } & 30 & 3 \
\text { B } & 24 & 4 \
\text { C } & 21 & 5 \
\text { D } & 19 & 6 \
\text { E } & 18 & 7 \
\hline
\end{array}
\end{array}$$
-(Table: Madeline's Preferences for T-Shirts and Coffee)Use Table Madeline's Preferences for T-Shirts and Coffee.Assume each consumption bundle provides the same level of utility.Suppose Madeline is consuming bundle A but then changes her consumption and slowly moves along her indifference curve to bundles B,C,D,and finally E.As she moves toward bundle E,she gives up:
A) the same number of T-shirts to obtain another cup of coffee.
B) an increasing number of T-shirts to obtain another cup of coffee.
C) a decreasing number of T-shirts to obtain another cup of coffee.
D) no T-shirts to obtain another cup of coffee.

Accepted Answer

As Madeline moves from bundle A to E, she gives up fewer T-shirts for each additional cup of coffee, indicating a decreasing marginal rate of substitution.

Question 14

The ratio of the prices of two goods is equal to the ratio of the marginal utilities of the two goods at:
A) the vertical intercept of the budget line.
B) the optimal consumption bundle.
C) the horizontal intercept of the budget line.
D) the intersection of the budget line with the highest indifference curve.

Accepted Answer

The optimal consumption bundle is where the consumer maximizes utility subject to their budget constraint. At this point, the ratio of the marginal utilities of the two goods is equal to the price ratio. This is due to the fact that the consumer allocates their budget in such a way that the last dollar spent on each good gives the same addition to their utility, and this occurs when the ratio of marginal utilities is equal to the price ratio. Therefore, the correct answer is B.

Question 15

Use the following to answer questions : 
-An indifference curve map illustrates _____ levels of utility,while each indifference curve in the map indicates consumption bundles that yield _____ level of utility for an individual.
A) different;the same
B) the same;a different
C) the same;the same
D) different;a different

Accepted Answer

An indifference curve map shows various levels of utility through different curves, where each curve represents combinations of goods or services that provide the same level of utility to the consumer.

Question 16

If Ian's indifference curve between guitars and Cadillacs is shaped like a right angle,then he considers the two goods perfect complements.

Accepted Answer

The answer of If Ian's indifference curve between guitars and...

Question 17

Use the following to answer questions : 
-(Figure: Oreos and Apples)Use Figure Oreos and Apples,which provides an indifference curve map for Diego.Diego prefers:
A) E to F.
B) F to E.
C) A to E.
D) D to C.

Accepted Answer

The answer of Use the following to answer questions :...

Question 18

Use the following to answer questions :
Scenario: Music Downloads and Streamed Movies
Phillip has an income of $300 per month,which he uses to purchase music downloads (MD)and streamed movies (SM).Each music download costs $1 and each streamed movie costs $5.
-(Scenario: Music Downloads and Streamed Movies)Read the scenario Music Downloads and Streamed Movies.Suppose Phillip's income falls by half,and the prices for both music downloads and streamed movies also fall by half.As a result of this,Phillip:
A) can buy fewer music downloads if he spends all of his income on music downloads.
B) can buy fewer streamed movies if he spends all of his income on streamed movies.
C) will not notice any change in his budget line.
D) will undergo a parallel shift out of his budget line.

Accepted Answer

The answer of Use the following to answer questions :
Scenario:...

Question 19

Use the following to answer questions : $$\begin{array}{l}
\text { Table: Madeline's Preferences for T-Shirts and Coffee }\
\begin{array} { l c c } 
\hline \begin{array} { l } 
\text { Consumption } \
\text { Bundle }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { of T-Shirts }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Coffee (cups) }
\end{array} \
\hline \text { A } & 30 & 3 \
\text { B } & 24 & 4 \
\text { C } & 21 & 5 \
\text { D } & 19 & 6 \
\text { E } & 18 & 7 \
\hline
\end{array}
\end{array}$$
-(Table: Madeline's Preferences for T-Shirts and Coffee)Use Table Madeline's Preferences for T-Shirts and Coffee.Assume each consumption bundle provides the same level of utility.As Madeline moves from bundle A to bundle E,her total utility:
A) decreases.
B) increases.
C) stays the same.
D) is zero regardless of which bundle she chooses.

Accepted Answer

Since each consumption bundle provides the same level of utility, as Madeline moves from bundle A to bundle E, her total utility stays the same.

Question 20

To find her optimal consumption bundle,Vanessa would have to:
A) calculate the numerical value of the utility she receives from each specific consumption bundle.
B) rank-order consumption bundles based on the level of utility she receives from each one.
C) calculate her budget for each consumption bundle and identify the substitution and income effects of each bundle.
D) choose her bundles in an irrational manner.

Accepted Answer

The answer of To find her optimal consumption bundle,Vanessa would...

Quiz 22: Consumer Preferences

Since indifference curves depend on the _ for individuals,this means that two consumers with the same income _.

Diminishing marginal utility is the reason most indifference curves:

Use the following to answer questions : -(Figure: Oreos and Apples) Use Figure Oreos and Apples,which provides an indifference curve map for Diego.As Diego moves along an indifference curve from point F to point E,he buys _ Oreos to obtain _ apples.

When an individual's consumption of an additional unit of a good generates a smaller increase in total utility than the previous unit consumed,this person's indifference curve will be:

Miguel eats only burgers with onion rings.Miguel's indifference curve between burgers and onion rings must be a straight line.

Ellen consumes goods X and Y.As she consumes less X,she must be compensated with additional units of Y,and her marginal rate of substitution of X for Y decreases as she consumes more Y.This means that goods X and Y are:

Use the following to answer questions : -(Figure: Oreos and Apples) Use Figure Oreos and Apples,which provides an indifference curve map for Diego.The consumption bundle that provides the highest level of utility is bundle:

The assumption that more is preferred to less explains why indifference curves:

A typical indifference curve is _,and its slope is the _ of the good on the horizontal axis divided by the marginal utility of the good on the vertical axis.

When we graphically isolate the substitution effect of a change in the price of one good,utility is held constant.

The ratio of the prices of two goods is equal to the ratio of the marginal utilities of the two goods at:

Use the following to answer questions : -An indifference curve map illustrates _ levels of utility,while each indifference curve in the map indicates consumption bundles that yield _ level of utility for an individual.

If Ian's indifference curve between guitars and Cadillacs is shaped like a right angle,then he considers the two goods perfect complements.

Use the following to answer questions : -(Figure: Oreos and Apples) Use Figure Oreos and Apples,which provides an indifference curve map for Diego.Diego prefers:

To find her optimal consumption bundle,Vanessa would have to:

Quiz 22: Consumer Preferences

Since indifference curves depend on the _____ for individuals,this means that two consumers with the same income _____.

Diminishing marginal utility is the reason most indifference curves:

Use the following to answer questions : -(Figure: Oreos and Apples) Use Figure Oreos and Apples,which provides an indifference curve map for Diego.As Diego moves along an indifference curve from point F to point E,he buys _____ Oreos to obtain _____ apples.

When an individual's consumption of an additional unit of a good generates a smaller increase in total utility than the previous unit consumed,this person's indifference curve will be:

Miguel eats only burgers with onion rings.Miguel's indifference curve between burgers and onion rings must be a straight line.

Ellen consumes goods X and Y.As she consumes less X,she must be compensated with additional units of Y,and her marginal rate of substitution of X for Y decreases as she consumes more Y.This means that goods X and Y are:

Use the following to answer questions : -(Figure: Oreos and Apples) Use Figure Oreos and Apples,which provides an indifference curve map for Diego.The consumption bundle that provides the highest level of utility is bundle:

The assumption that more is preferred to less explains why indifference curves:

A typical indifference curve is _____,and its slope is the _____ of the good on the horizontal axis divided by the marginal utility of the good on the vertical axis.

When we graphically isolate the substitution effect of a change in the price of one good,utility is held constant.

The ratio of the prices of two goods is equal to the ratio of the marginal utilities of the two goods at:

Use the following to answer questions : -An indifference curve map illustrates _____ levels of utility,while each indifference curve in the map indicates consumption bundles that yield _____ level of utility for an individual.

If Ian's indifference curve between guitars and Cadillacs is shaped like a right angle,then he considers the two goods perfect complements.

Use the following to answer questions : -(Figure: Oreos and Apples) Use Figure Oreos and Apples,which provides an indifference curve map for Diego.Diego prefers:

To find her optimal consumption bundle,Vanessa would have to:

Since indifference curves depend on the _ for individuals,this means that two consumers with the same income _.

Use the following to answer questions : -(Figure: Oreos and Apples) Use Figure Oreos and Apples,which provides an indifference curve map for Diego.As Diego moves along an indifference curve from point F to point E,he buys _ Oreos to obtain _ apples.

A typical indifference curve is _,and its slope is the _ of the good on the horizontal axis divided by the marginal utility of the good on the vertical axis.

Use the following to answer questions : -An indifference curve map illustrates _ levels of utility,while each indifference curve in the map indicates consumption bundles that yield _ level of utility for an individual.