BUDGET CONSTRAINT
Consider two goods, books and hamburgers. The slope of the consumer's budget constraint is measured by the
a.consumer's income divided by the price of hamburgers.
b.relative price of books and hamburgers.
c.consumer's marginal rate of substitution.
d.number of books purchased divided by the number of hamburgers purchased.
b.relative price of books and hamburgers.
If two bundles of goods give a consumer the same satisfaction, the consumer must be
a.on her budget constraint.
b.in a position of equilibrium.
c.indifferent between the bundles.
d.Both a and c are correct
c.indifferent between the bundles.
Economists represent a consumer's preferences using
a.demand curves.
b.budget constraints.
c.indifference curves.
d.supply curves
c.indifference curves.
Suppose a consumer spends his income on CDs and DVDs. If his income decreases, the budget constraint
for CDs and DVDs will
a.shift outward, parallel to the original budget constraint.
b.shift inward, parallel to the original budget constraint.
c.rotate outward along the CD axis because he can afford more CDs.
d.rotate outward along the DVD axis because he can afford more DVDs
b.shift inward, parallel to the original budget constraint.
Refer to Figure 21-7.When comparing bundle A to bundle E, the consumer
a.prefers bundle A because it contains more donuts.
b.prefers bundle E because it lies on a higher indifference curve.
c.prefers bundle E because it contains more donuts.
d.is indifferent between the two bundles.
b.prefers bundle E because it lies on a higher indifference curve.
A consumer
a.is equally satisfied with any indifference curve.
b.prefers indifference curves with positive slopes.
c.prefers higher indifference curves to lower indifference curves.
d.prefers indifference curves that are straight lines to indifference curves that are right angles.
c.prefers higher indifference curves to lower indifference curves.
Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst. The price of a pint of beer is $5, and the price of a bratwurst is $4. Which of the following combinations of beers and bratwursts represents a point that would lie directly on the consumer’s budget constraint?
a.160 beers and 200 bratwursts
b.40 beers and 50 bratwursts
c.80 beers and 100 bratwursts
d.80 beers and 0 bratwursts
c.80 beers and 100 bratwursts
Refer to Figure 21-7.When comparing bundle B to bundle C, the consumer
a.prefers bundle B because it contains more donuts.
b.is indifferent between the two bundles.
c.prefers bundle C because it contains more cake.
d.In order to compare bundle B to bundle C, we must know the prices of cake and donuts
b.is indifferent between the two bundles.
Which of the following is not a property of a typical indifference curve?
a.downward sloping
b.bowed away from the origin
c.do not intersect
d.higher ones are preferred to lower ones
b.bowed away from the origin
Karen, Tara, and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days. Ice cream costs $5 per gallon, and paperback novels cost $8 each. Karen has a budget of $80, Tara has a budget of $60, and Chelsea has a budget of $40 to spend on ice cream and paperback novels. Who can afford to purchase 8 gallons of ice cream and 5 paperback novels?
a.Karen, Tara, and Chelsea
b.Karen only
c.Tara and Chelsea but not Karen
d.none of the women
b.Karen only
Refer to Figure 21-7. A person that chooses to consume bundle C is likely to
a.receive higher total satisfaction at bundle C than at bundle A.
b.spend more on bundle C than bundle A.
c.receive higher marginal utility from cake than from donuts.
d.receive higher marginal utility from donuts than from cake
d.receive higher marginal utility from donuts than from cake
The slope of an indifference curve is
a.the rate of change of consumer's preferences.
b.the marginal rate of preference.
c.the marginal rate of substitution.
d.always equal to the slope of the budget constraint
c.the marginal rate of substitution.
Refer to Figure 21-1. A consumer that chooses to spend all of her income could be at which point(s) on the budget constraint?
a.A only
b.E only
c.B, C, or D only
d.A, B, C, or D onl
c.B, C, or D only
When two goods are perfect substitutes, the marginal rate of substitution
a.is constant along the indifference curve.
b.decreases as the scarcity of one good increases.
c.increases as the scarcity of one good increases.
d.changes to reflect the consumer’s changing preferences for the goods
a.is constant along the indifference curve.