Question 1

The budget line shifts inward in a parallel way when you get less income.

Accepted Answer

A) True 
 B)False

Question 2

The slope of the indifference curve measures the terms on which the consumer would be willing to trade one good for another.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer questions :
Figure 5A-2 
-In Figure 5A-2, the shift from the budget line AB to the new budget line DB was caused by an increase in the price of Y.

Accepted Answer

A) True 
 B)False

Question 4

The equilibrium condition for the consumer is that:

Accepted Answer

A)  along a budget line, the indifference curve be tangent to the budget line.
B)  expenditure on each good be equal.
C)  the marginal utility of each good be equal to its price.
D)  marginal utilities be equal for all goods.
E)  none of the above.F) C) and E)
G) A) and B)

Question 5

In the figure below, if the consumer is currently at point A, with the given budget line and indifference curve, she should:

Accepted Answer

A)  move to point B.
B)  buy less of good 1 and more of good 2.
C)  buy less of good 1 and less of good 2.
D)  remain at A.
E)  buy more of good 1 and less of good 2.F) None of the above
G) B) and D)

Question 6

Increasing all prices and income in exactly the same proportion:

Accepted Answer

A)  leaves equilibrium quantities consumed unchanged.
B)  increases consumption of luxuries.
C)  decreases consumption of necessities.
D)  both B and C are correct.
E)  none of the above are correct.F) A) and B)
G) A) and C)

Question 7

Consumer equilibrium on an indifference map is at:

Accepted Answer

A)  any intersection of the budget line and an indifference curve.
B)  any point on the highest indifference curve shown on the indifference map.
C)  that point where the budget line is tangent to an indifference curve.
D)  any point inside the budget line.
E)  any point on the budget line.F) A) and B)
G) A) and E)

Question 8

Use the following to answer questions :
Figure 5A-2 
-The slope of the budget line BD in Figure 5A-2 is -2.

Accepted Answer

A) True 
 B)False

Question 9

An indifference curve is bowed out like the production possibility frontier.

Accepted Answer

A) True 
 B)False

Question 10

All consumers have the same indifference curves.

Accepted Answer

A) True 
 B)False

Question 11

Use the following to answer questions :
Figure 5A-2 
-In Figure 5A-2, starting from the budget constraint AC, if both income and prices are doubled, the household's budget constraint would shift out to EF, and the household could attain a utility level of U(4).

Accepted Answer

A) True 
 B)False

Question 12

The slope of the budget line equals the price ratio of the two goods.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer questions :
Figure 5A-1 
-Refer to Figure 5A-1.What is the slope of the budget constraint?

Accepted Answer

A)  -1.2.
B)  .83.
C)  1.
D)  -.83.
E)  None of the above.F) C) and E)
G) A) and B)

Question 14

Use the following to answer questions :
Figure 5A-1 
-Refer to Figure 5A-1.If X costs $6 per unit and Y costs $5 per unit, what is the income of this household?

Accepted Answer

A)  $25.
B)  $30.
C)  $36.
D)  Not enough information.
E)  None of the above.F) None of the above
G) A) and C)

Question 15

The scarcer the good, the greater its relative substitution value.

Accepted Answer

A) True 
 B)False

Question 16

In consumer equilibrium, the consumer's substitution ratio for two goods equals the price ratio of the two goods.

Accepted Answer

A) True 
 B)False

Question 17

Indifference curves are generally convex to the origin because of:

Accepted Answer

A)  the law of diminishing marginal utility.
B)  substitution and income effects.
C)  limitations of the economy in producing an ever-increasing amount of the commodities in question.
D)  the instability of individual human wants.
E)  none of the above.F) All of the above
G) A) and E)

Question 18

A consumer's indifference curves will be influenced by all the following except:

Accepted Answer

A)  household size.
B)  education.
C)  prices.
D)  advertising.
E)  none of the above.F) All of the above
G) B) and E)

Question 19

An indifference curve represents consumption bundles among which the consumer is indifferent.

Accepted Answer

A) True 
 B)False

Question 20

Geometrically, the consumer is at equilibrium where the slope of the budget line is exactly equal to the slope of the indifference curve.

Accepted Answer

A) True 
 B)False

Exam 19: Geometrical Analysis of Consumer Equilibrium

Consumer equilibrium on an indifference map is at:

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All consumers have the same indifference curves.

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The slope of the indifference curve measures the terms on which the consumer would be willing to trade one good for another.

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Indifference curves are generally convex to the origin because of:

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Use the following to answer questions : Figure 5A-2 -In Figure 5A-2, starting from the budget constraint AC, if both income and prices are doubled, the household's budget constraint would shift out to EF, and the household could attain a utility level of U(4).

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Use the following to answer questions : Figure 5A-2 -In Figure 5A-2, the shift from the budget line AB to the new budget line DB was caused by an increase in the price of Y.

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An indifference curve represents consumption bundles among which the consumer is indifferent.

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A consumer's indifference curves will be influenced by all the following except:

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The scarcer the good, the greater its relative substitution value.

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Use the following to answer questions : Figure 5A-2 -The slope of the budget line BD in Figure 5A-2 is -2.

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In consumer equilibrium, the consumer's substitution ratio for two goods equals the price ratio of the two goods.

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The slope of the budget line equals the price ratio of the two goods.

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The equilibrium condition for the consumer is that:

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Geometrically, the consumer is at equilibrium where the slope of the budget line is exactly equal to the slope of the indifference curve.

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Use the following to answer questions : Figure 5A-1 -Refer to Figure 5A-1.What is the slope of the budget constraint?

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In the figure below, if the consumer is currently at point A, with the given budget line and indifference curve, she should:

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The budget line shifts inward in a parallel way when you get less income.

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Increasing all prices and income in exactly the same proportion:

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An indifference curve is bowed out like the production possibility frontier.

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Use the following to answer questions : Figure 5A-1 -Refer to Figure 5A-1.If X costs $6 per unit and Y costs $5 per unit, what is the income of this household?

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