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Multiple Choice Quiz
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1
The idea that each extra unit of a good provides less satisfaction is known as:
A)satiation.
B)cardinal utility.
C)diminishing marginal utility.
D)increasing marginal cost.
2
Consumer equilibrium occurs when:
A)marginal utility per dollar spent is equal for each good.
B)marginal utility is equal for all goods.
C)average utility is equal for all goods.
D)marginal utility is equal to zero.
3
When the price of good A falls:
A)marginal utility received from consuming A will rise.
B)marginal utility per dollar of A will rise.
C)consumers’ total utility will fall.
D)all other prices must also rise.
4
The slope of the budget constraint depends on the:
A)elasticity of demand.
B)consumer’s tastes.
C)consumer’s total income.
D)prices of the goods.
5
The consumer’s feasible set is determined by:
A)the quantity supplied.
B)the consumer’s tastes and preferences.
C)market prices and the consumer’s income.
D)the consumer’s tastes and income.
6
Indifference curves connect combinations of goods that:
A)provide the same level of utility.
B)have the same marginal utility.
C)require the same level of total expenditure.
D)can be purchased given current prices.
7
Which of the following statements concerning indifference curves is incorrect?
A)Utility increases as indifference curves get further from the origin.
B)Indifference curves are negatively sloped.
C)Indifference curves cannot cross.
D)Indifference curves are concave when viewed from the origin.
8
Convexity of indifference curves is a result of:
A)increases in prices.
B)changing consumer tastes.
C)diminishing marginal rates of substitution.
D)increases in expenditures.
9
A consumer’s optimum occurs when:
A)marginal utility per dollar spent is equated across goods.
B)the marginal rate of substitution is equal to the relative price.
C)the indifference curve is tangent to the budget constraint.
D)all of the above.
10
An increase in a consumer’s income will:
A)shift her budget constraint toward the origin.
B)shift her budget constraint away from the origin.
C)rotate her budget constraint, making it steeper.
D)rotate her budget constraint, making it flatter.
11
An increase in the price of the good on the horizontal axis will:
A)shift the budget constraint toward the origin.
B)shift the budget constraint away from the origin.
C)rotate the budget constraint, making it steeper.
D)rotate the budget constraint, making it flatter.
12
A change in the price of a good moves the consumer along the demand curve. This movement is caused by:
A)changing consumer tastes.
B)the income and substitution effects.
C)a change in utility.
D)the price effect.
13
After a price change, the substitution effect can be determined by:
A)measuring the change in quantity demanded.
B)changing the price of the other good until the new budget constraint is parallel to the original budget constraint.
C)shifting the indifference curve until it is tangent to the new budget constraint.
D)shifting the budget constraint back until it is tangent to the original indifference curve.
14
The income effect is the result of:
A)a change in income after removing the substitution effect.
B)a change in income without removing the substitution effect.
C)a price change after removing the substitution effect.
D)a price change without removing the substitution effect.
15
Subsidizing daycare may be more effective than an income transfer because:
A)the subsidy does not create an income effect.
B)the subsidy creates both an income and a substitution effect.
C)the subsidy does not create a substitution effect.
D)the subsidy does not distort relative prices.





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