Question 1

An interior solution to a consumer's utility maximization problem implies

Accepted Answer

A)   consuming a positive amount of all goods.
B)   consuming negative amounts of all goods.
C)   consuming less than optimal amounts of all goods.
D)   consuming more than an optimal amount of at least one good.E) A) and B)
F) A) and D)

Question 2

An indifference curve represents bundles of goods that a consumer

Accepted Answer

A)   views as equally desirable.
B)   ranks from most preferred to least preferred.
C)   refers to any other bundle of goods.
D)   All of the above.E) A) and C)
F) A) and D)

Question 3

The consumer is in equilibrium when

Accepted Answer

A)   MRT = MRS.
B)   
C)   the budget line is tangent to the indifference curve at the bundle chosen.
D)   All of the above.E) C) and D)
F) A) and D)

Question 4

The marginal rate of transformation of y for x represents

Accepted Answer

A)   the slope of the budget constraint.
B)   the rate at which the consumer must give up y to get one more x.
C)    -/  .
D)   All of the above.E) B) and C)
F) All of the above

Question 5

In behavioral economics,the endowment effect refers to

Accepted Answer

A)   most people believe that most wealthy people inherit their wealth.
B)   many people would be indifferent between being endowed with money or knowledge.
C)   many people place a higher value on what they own than when they consider purchasing.
D)   most people respond to tax incentives to provide an endowment for their children.E) All of the above
F) A) and B)

Question 6

The principle that "More is better" results in indifference curves

Accepted Answer

A)   sloping down.
B)   not intersecting.
C)   reflecting greater preferences the further they are from the origin.
D)   All of the above.E) None of the above
F) A) and B)

Question 7

What is the difference between ordinal and cardinal measurement?

Accepted Answer

Prices are measured in money,which is a ...

Question 8

In behavioral economics,the term salience refers to

Accepted Answer

A)   relevance to the problem being investigated.
B)   people only consider information when it is conveyed in a subtle manner.
C)   how an experiment is designed.
D)   people consider information when it is presented in an "eye grabbing" manner.E) B) and C)
F) A) and C)

Question 9

The assumption of completeness means that

Accepted Answer

A)   the consumer can rank all possible consumption bundles.
B)   more of a good is always better.
C)   the consumers can rank all affordable consumption bundles.
D)   all preferences conditions are met.E) B) and D)
F) All of the above

Question 10

As the price of a good rises,the consumer will experience

Accepted Answer

A)   a desire to consume a different bundle.
B)   a decrease in utility.
C)   a southern or western movement on the indifference map.
D)   All of the above.E) A) and B)
F) None of the above

Question 11

What is the intuition that an expansion of an individual's budget set represents a gain?

Accepted Answer

A)   More options are preferred to less.
B)   Money is the root of all happiness.
C)   Information is power.
D)   Scarcity is avoidable with prosperity.E) C) and D)
F) B) and D) A

Question 12

If a consumer prefers apples to bananas and prefers bananas to citrus fruit,in order to satisfy assumptions about preferences she has to prefer

Accepted Answer

A)   bananas to apples.
B)   citrus fruit to bananas.
C)   apples to citrus fruit.
D)   citrus fruit to apples.E) All of the above
F) B) and C) C

Question 13

If more is better,how can you explain that more pollution doesn't violate this principle?

Accepted Answer

When dealing with a "bad," we recast it ...

Question 14

A consumer buys food (F) and shelter (S) .If the consumer's income rises and there is no change in the prices of F or S,the marginal rate of transformation of F for S will

Accepted Answer

A)   increase.
B)   decrease.
C)   stay the same.
D)   change, but there is not enough information to know how.E) None of the above
F) A) and D) C

Question 15

Lisa eats both pizzas and burritos.If the price of a pizza increases,Lisa's opportunity set

Accepted Answer

A)   becomes larger.
B)   becomes smaller.
C)   is unchanged.
D)   cannot be determined without more information.E) A) and D)
F) All of the above

Question 16

A consumer's willingness to trade one good for another can be expressed by the consumer's

Accepted Answer

A)   indifference curve.
B)   marginal rate of substitution.
C)   Both A and B above.
D)   None of the above.E) A) and D)
F) All of the above

Question 17

The indifference curves for left shoes and right shoes would most likely be

Accepted Answer

A)   upward sloping and concave to the origin.
B)   downward sloping and convex to the origin.
C)   downward sloping and straight lines.
D)   L-shaped.E) A) and B)
F) None of the above

Question 18

Indifference curves close to the origin are ________ those farther from the origin because of ________.

Accepted Answer

A)   better than; transitivity
B)   worse than; nonsatiation
C)   better than; completeness
D)   worse than; transitivityE) A) and B)
F) All of the above

Question 19

Convexity of indifference curves implies that consumers are willing to

Accepted Answer

A)   give up more "y" to get an extra "x" the more "x" they have.
B)   give up more "y" to get an extra "x" the less "x" they have.
C)   settle for less of both "x" and "y."
D)   acquire more "x" only if they do not have to give up any "y."E) All of the above
F) A) and D)

Question 20

An increase in the price of a good causes

Accepted Answer

A)   a change in the slope of the budget line.
B)   an increase in the consumption of that good.
C)   a rightward shift of the demand curve for that good.
D)   a parallel rightward shift of the budget line.E) A) and D)
F) A) and C)

Exam 4: Consumer Choice

An interior solution to a consumer's utility maximization problem implies

Correct AnswerverifiedShow Answer

An indifference curve represents bundles of goods that a consumer

Correct AnswerverifiedShow Answer

The consumer is in equilibrium when

Correct AnswerverifiedShow Answer

The marginal rate of transformation of y for x represents

Correct AnswerverifiedShow Answer

In behavioral economics,the endowment effect refers to

Correct AnswerverifiedShow Answer

The principle that "More is better" results in indifference curves

Correct AnswerverifiedShow Answer

What is the difference between ordinal and cardinal measurement?

Correct AnswerverifiedPrices are measured in money,which is a ...View AnswerShow Answer

In behavioral economics,the term salience refers to

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The assumption of completeness means that

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As the price of a good rises,the consumer will experience

Correct AnswerverifiedShow Answer

What is the intuition that an expansion of an individual's budget set represents a gain?

Correct AnswerverifiedA

If a consumer prefers apples to bananas and prefers bananas to citrus fruit,in order to satisfy assumptions about preferences she has to prefer

Correct AnswerverifiedC

If more is better,how can you explain that more pollution doesn't violate this principle?

Correct AnswerverifiedWhen dealing with a "bad," we recast it ...View AnswerShow Answer

A consumer buys food (F) and shelter (S) .If the consumer's income rises and there is no change in the prices of F or S,the marginal rate of transformation of F for S will

Correct AnswerverifiedC

Lisa eats both pizzas and burritos.If the price of a pizza increases,Lisa's opportunity set

Correct AnswerverifiedShow Answer

A consumer's willingness to trade one good for another can be expressed by the consumer's

Correct AnswerverifiedShow Answer

The indifference curves for left shoes and right shoes would most likely be

Correct AnswerverifiedShow Answer

Indifference curves close to the origin are ________ those farther from the origin because of ________.

Correct AnswerverifiedShow Answer

Convexity of indifference curves implies that consumers are willing to

Correct AnswerverifiedShow Answer

An increase in the price of a good causes

Correct AnswerverifiedShow Answer

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Prices are measured in money,which is a ...
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A

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C

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When dealing with a "bad," we recast it ...
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C

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Indifference curves close to the origin are those farther from the origin because of .

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