 |
1 | |
Points to the right of the budget line _______ and points to the left _______ |
|
| | A) | are unaffordable, allow extra spending |
| | B) | allow extra spending, are unaffordable |
| | C) | are unaffordable, use up the entire budget |
| | D) | allow extra spending, use up the entire budget |
|
2 | |
If consumption bundle A is to the northwest of consumption bundle B, A _______ B |
|
| | A) | is preferred to |
| | B) | is dominated by |
| | C) | is indifferent to |
| | D) | may or may not be preferred to |
|
3 | |
The quantity of one good that a consumer must sacrifice to increase the consumption of another, without changing total utility is known as |
|
| | A) | the opportunity cost |
| | B) | the marginal utility |
| | C) | the marginal rate of substitution |
| | D) | the production possibility frontier |
|
4 | |
Along each indifference curve, utility is _______ |
|
| | A) | increasing |
| | B) | decreasing |
| | C) | constant |
| | D) | bliss |
|
5 | |
When a budget line just touches an indifference curve the consumer _______ and ________ |
|
| | A) | has money left over, is on the highest possible indifference curve |
| | B) | has exhausted her budget, is not on the highest possible indifference curve |
| | C) | has insufficient funds, is on the highest possible indifference curve |
| | D) | has exhausted her budget, is on the highest possible indifference curve |
|
6 | |
An increase in income will cause a consumer's budget line to __________ |
|
| | A) | shift outwards parallel to the original budget line |
| | B) | shift inwards parallel to the original budget line |
| | C) | remain unchanged |
| | D) | rotate |
|
7 | |
A budget line will rotate when |
|
| | A) | income changes |
| | B) | relative prices change |
| | C) | tastes change |
| | D) | the marginal rate of substitution changes |
|
8 | |
The income effect of a price increase of a normal good is to __________ of that good and the substitution effect is to _______ of that good |
|
| | A) | increase quantity demanded, reduce quantity demanded |
| | B) | increase quantity demanded, increase quantity demanded |
| | C) | reduce quantity demanded, reduce quantity demanded |
| | D) | reduce quantity demanded, increase quantity demanded |
|
9 | |
For a budget line representing 2 goods, the slope depends on the ratio of the prices |
|
| | A) | TRUE |
| | B) | FALSE |
|
10 | |
Diminishing marginal rates of substitution suggest that more and more of one good must be sacrificed to get more and more of another |
|
| | A) | TRUE |
| | B) | FALSE |
|
11 | |
If indifference curves intersect, a consumer will prefer a point as far to the northwest as possible. |
|
| | A) | TRUE |
| | B) | FALSE |
|
12 | |
Any price change can be decomposed into an income effect and a complementary effect |
|
| | A) | TRUE |
| | B) | FALSE |
2002 A McGraw-Hill Online Learning Centre