1
Created by Boundless
In the Indifference Curve Analysis, a consumer maximizes utility by choosing that
combination of goods _______.
A
Where the marginal decision rule is satisfied
B
At which the budget line is tangent to the highest
indifference curve
C
All of these answers.
D
At which the consumer's marginal rate of substitution is
equal to the price ratios of the two goods
2
Created by Boundless
A consumer may choose to consume at a point that falls ___________.
A
anywhere below, but not on, the budget line
B
anywhere on or below the budget line
C
anywhere on or above the budget line
D
anywhere on the budget line
3
Created by Boundless
In order to maximize possible utility, consumers will consume a a point that lies
____________.
A
where the indifference curve intersects the budget line
B
where the indifference curve falls above the budget line
C
where the indifference curve falls below the budget line
D
where the indifference curve is tangent to the budget line
4
Created by Boundless
Imagine an indifference curve for two goods that is a straight line with the same xand y-intercepts. The two goods are __________.
A
perfect complements
B
perfect substitutes
C
inferior goods
D
normal goods
5
Created by Boundless
Imagine an indifference curve for two goods that consists of a vertical line and a
horizontal line that meet to form a right angle. The two goods are __________.
6
A
normal goods
B
perfect substitutes
C
perfect complements
D
inferior goods
Created by Boundless
Which of the following lists the three main properties of indifference curve?
A
Upward sloping, convex to the origin, and intersect at the
origin
B
Downward sloping, convex to the origin, and do not
intersect
C
Upward sloping, concave to the origin, and do not intersect
D
Downward sloping, concave to the origin, and do not
intersect
7
Created by Boundless
What does it imply for an indifference curve to be convex to the origin?
A
One combination of goods can only give one particular
level of utility
B
Less consumption of one good requires additional
consumption of another good to remain indifferent
C
Consumers prefer variety
D
All of these answers
8
Created by Boundless
What does it imply for an indifference curve to be downward sloping?
A
Consumers prefer variety
B
All of these answers
C
Less consumption of one good requires additional
consumption of another good to remain indifferent
D
One combination of goods can only give one particular
level of utility
9
Created by Boundless
In the case of an Inferior good, the Income Effect and the Substitution effect tend
to _________.
A
Move in the same direction
B
Move in the opposite direction
C
Have no impact on the final purchase of a commodity
D
Cancel one another's effect
10
Created by Boundless
Tom has $10. The cost of each pen is $2, while the cost of a pencil is $1. Tom will
purchase the two goods to maximize utility. Tom buys 3 pens and 4 pencils. If the
price of pen were to fall to $1 each, Tom would buy _______.
A
More pens
B
More pencils
C
It depends on the utility maximizing condition
D
The same number of pens and pencils as before
11
Created by Boundless
In the case of a Normal good, the Income Effect and the Substitution effect tend to
________.
A
Cancel one another's effect
B
Move in the opposite direction
C
Have no impact on the final purchase of a commodity
D
Move in the same direction
12
Created by Boundless
Assume the price of a normal good falls. Which of the following is true?
A
Demand for the good will rise due to the income effect and
the substitution effect
B
Demand for the good will rise due to the income effect but
fall due to the substitution effect
C
Demand for the good will fall due to the income effect and
the substitution effect
D
Demand for the good will fall due to the income effect but
ruse due to the substitution effect
13
Created by Boundless
If widgets are an inferior, ordinary good, what will happen when the price of
widgets falls?
14
A
The negative income effect will partially offset the positive
substitution effect
B
The negative income effect will overwhelm the positive
substitution effect
C
The positive income effect will partially offset the negative
substitution effect
D
The positive income effect will overwhelm the negative
substitution effect
Created by Boundless
A demand curve traces ___________.
A
The different levels of consumption of a good that are
affordable at a given price
B
The different levels of consumption of a good that occur
when the good's price changes
C
The different levels of consumption of a good that provide
the same level of utility
D
The different levels of consumption of a good that occur
when the price of a substitute good changes
15
Created by Boundless
Which of the following describes Giffen goods?
A
The substitution effect dominates the income effect,
producing an upward sloping demand curve
B
The income effect dominates the substitution effect,
producing an upward sloping demand curve
C
The income effect dominates the substitution effect,
producing an downward sloping demand curve
D
The substitution effect dominates the income effect,
producing an downward sloping demand curve
16
Created by Boundless
If a worker chooses to work more when the wage rate rises, leisure is a(n)
___________.
A
ordinary good
B
normal good
C
inferior good
D
17
Giffen good
Created by Boundless
If a worker chooses to work less when the wage rate rises, leisure is a(n)
___________.
A
normal good
B
Giffen good
C
inferior good
D
ordinary good