Question 1

Moving along an indifference curve,if a consumer requires a large amount of the good measured along the y-axis to make up for one unit less of the good measured on the x-axis,then

Accepted Answer

The marginal rate of substitution (MRS) represents the rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility. A high MRS, meaning the consumer requires a large amount of one good to replace a small amount of another, corresponds to a steep indifference curve. This indicates a strong preference for the good on the x-axis over the one on the y-axis.

Question 2

The magnitude of the slope of an indifference curve is the

Accepted Answer

The magnitude of the slope of an indifference curve is the marginal rate of substitution, which measures how much of one good a consumer is willing to give up to obtain an additional unit of another good while remaining on the same level of utility or satisfaction.

Question 3

What is the difference between a budget line and an indifference curve?

Accepted Answer

A budget line represents the combinations of two goods that can be purchased with a given income and prices, while an indifference curve shows the various combinations of two goods that provide the same level of utility or satisfaction to a consumer. So, the budget line indicates what is possible, while the indifference curve indicates what is preferred or chosen by the consumer.

Question 4

An indifference curve is a line that shows combinations of goods among which a consumer

Accepted Answer

An indifference curve represents all the combinations of goods that give a consumer the same level of satisfaction or utility, and therefore the consumer is indifferent between any two combinations on the same curve. Therefore, the correct answer is D - the consumer is indifferent between the combinations along the indifference curve.

Question 5

Normally shaped indifference curves are bowed towards the origin of the graph.The reason for this shape is

Accepted Answer

Indifference curves are bowed towards the origin because of the diminishing marginal rate of substitution. This means that the slope of the curve decreases as we move downwards and to the right along the curve. As a result, more of one good must be given up to obtain additional units of the other good, leading to the convex shape of the curve.

Question 6

Suppose the quantity of burgers is on the horizontal axis and the quantity of bags of French fries is measured on the vertical axis and Carol's indifference curves are drawn in the graph.As Carol consumes more

Accepted Answer

According to the law of diminishing marginal rate of substitution, as Carol consumes more of one good (burgers), she will require increasingly larger amounts of the other good (fries) to compensate for the decrease in satisfaction from consuming more of the first good. This means that her marginal rate of substitution for burgers decreases as she consumes more of them along an indifference curve.

Question 7

The marginal rate of substitution is equal to the magnitude of the

Accepted Answer

The marginal rate of substitution (MRS) measures the rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility. It is equal to the slope of the indifference curve, which shows all possible combinations of two goods that provide the same level of satisfaction. The other options are not directly related to the concept of MRS.

Question 8

Along an indifference curve,if the marginal rate of substitution is 3,then the consumer is willing to

Accepted Answer

Marginal rate of substitution (MRS) represents the maximum amount of one good a consumer is willing to give up for one additional unit of the other good while remaining on the same indifference curve. Therefore, if the MRS is 3, the consumer is willing to give up 3 units of the good measured along the y-axis for 1 unit of the good measured along the x-axis. In other words, the consumer is willing to trade 3 units of one good for 1 unit of the other good. Therefore, the correct answer is B.

Question 9

The marginal rate of substitution of one good for another is measured by moving

Accepted Answer

The marginal rate of substitution (MRS) measures the rate at which a consumer is willing to trade one good for another while remaining indifferent, which can be observed by moving along an indifference curve.

Question 10

In a preference map,consumption combinations on higher indifference curves

Accepted Answer

The principle of consumer preference implies that a consumption combination on a higher indifference curve represents a preferred combination to any combination on a lower indifference curve. Therefore, option B is the correct choice. Option A and C are incorrect because the cost of a combination is not necessarily dependent on the indifference curve. Option D is incorrect because, by definition of the indifference curve, any point on a given indifference curve is equally preferred to all other points on the same curve, so it is not possible to say that a combination on a higher indifference curve is less preferred. Option E is also incorrect because the fact that a combination is on a higher indifference curve does not automatically make it more, less or equally preferred compared to any combination on a lower indifference curve.

Question 11

A preference map is a

Accepted Answer

A preference map is a series of indifference curves, which represent different combinations of two goods that provide the consumer with the same level of satisfaction or utility. The consumer is indifferent between points on the same indifference curve, but prefers points on higher indifference curves.

Question 12

In an indifference curve/budget line diagram,a consumer's equilibrium consumption combination will occur

Accepted Answer

The consumer's equilibrium consumption combination occurs where an indifference curve is tangent to the budget line, indicating the highest level of satisfaction the consumer can achieve given their budget constraints. This point is always on the budget line, not inside or outside of it.

Question 13

The magnitude of the slope of an indifference curve at a particular point measures the

Accepted Answer

The slope of an indifference curve represents the rate at which a consumer is willing to substitute one good for another while still remaining indifferent, known as the marginal rate of substitution (MRS). The magnitude of the slope measures the magnitude of the MRS.

Question 14

As Sam moves rightward along his indifference curve,his marginal rate of substitution for the good on the horizontal axis

Accepted Answer

According to the law of diminishing marginal utility, as an individual consumes more of a good, the marginal utility derived from each additional unit decreases. This means that the individual is willing to give up less and less of the good on the horizontal axis (as reflected in the quantity of the good on the vertical axis) as they move rightward along the indifference curve, leading to a diminishing marginal rate of substitution.

Question 15

Which of the following statements is FALSE?

Accepted Answer

A consumer can have multiple indifference curves, each representing a different level of utility or satisfaction.

Question 16

The marginal rate of substitution for the good on the horizontal axis is

Accepted Answer

The marginal rate of substitution (MRS) measures the rate at which a consumer is willing to trade one good for another while remaining indifferent to the level of satisfaction. It is calculated as the magnitude of the slope of the indifference curve. Therefore, the correct option is C. Options A, B, and D are incorrect because they do not relate to the concept of MRS. Option E is incorrect because the linearity of the indifference curves does not determine the MRS value.

Question 17

Suppose the quantity of burgers is measured on the horizontal axis and the quantity of bags of French fries is measured on the vertical axis.The marginal rate of substitution for burgers is

Accepted Answer

The marginal rate of substitution for burgers is the rate at which a person is willing to give up bags of fries to get more burgers while staying on the same indifference curve. This means how many bags of fries the person is willing to give up for one more burger is the marginal rate of substitution for burgers.

Question 18

Which of the following is true if Clarice is at her consumer equilibrium?
i.Clarice is on her budget line.
ii.Clarice is on her highest attainable indifference curve.
iii.Clarice is dividing her budget equally across all goods.

Accepted Answer

If Clarice is at her consumer equilibrium, she is on the highest attainable indifference curve which represents the highest level of satisfaction she can achieve given her budget constraint. She is also on her budget line because she is spending all of her budget. However, there is no requirement that she divide her budget equally across all goods, so statement iii is not necessarily true.

Question 19

Moving along an indifference curve,if a consumer requires a small amount of the good measured along the y-axis to make up for one unit less of the good measured on the x-axis,then

Accepted Answer

The marginal rate of substitution (MRS) is low when a consumer requires only a small amount of one good to substitute for a decrease in another, resulting in a flatter indifference curve. This reflects a lower willingness to trade between the two goods.

Question 20

When the indifference curve is steep,the consumer has a

Accepted Answer

When the indifference curve is steep, it means that the consumer is willing to give up a significant amount of the good on the horizontal axis for a small increase in the good on the vertical axis. This implies a high marginal rate of substitution for the good on the horizontal axis since the consumer values it highly and is willing to trade away more of it for the other good.

Quiz 13: Consumer Choice and Demand