NEW
Font size
WorksheetsPOSSIBILITIES, PREFERENCES AND CHOICES
Total questions: 10
Worksheet time: 8mins
The variable that determine a household’s budget line are
its
preferences and income
its
preferences and prices
prices and
incomes
none
of the above are correct
A budget line shows the
consumption
possibilities for several sets of relative prices at a level of income.
complete
set of preferences for a household at various incomes.
consumption
possibilities of a consumer at given level of income and prices.
rate at which consumers wish to substitute one good for another
An
indifference curve shows combinations of goods
which the
customers prefers equally
that
are inside or on the budget line
that are affordable
that have the same relative price
A consumer is in equilibrium when the consumption
point is on
the budget line
an indifference curve
the highest
indifference curve that just touches the budget line.
none of the above
Utility is best defined as
the practical usefulness of good
the price of the good
the amount one is willing to pay for a good
the satisfaction from consuming a good
An increase in a consumerʹs income creates a
rightward parallel shift of the budget line.
leftward parallel shift of the budget line.
rightward rotation of the budget line, so that the budget line becomes steeper.
leftward rotation of the budget line, so that the budget line becomes steeper.
The magnitude of the slope of the budget line is determined by
the marginal rate of substitution
the level of income.
the consumerʹs preferences for the goods.
relative prices.
The price of one good divided by the price of another good is a
money price.
relative price
budget constraint.
divisible good
Budget lines are drawn on a diagram with the
price of the good on the vertical axis and its quantity on the horizontal axis.
price of one good on the vertical axis and the price of another good on the horizontal axis.
quantity of the good on the vertical axis and its price on the horizontal axis.
quantity of one good on the vertical axis and the quantity of another good on the
horizontal axis.
In the figure above, the marginal rate of substitution ( MRS) at point A is equal to
pounds of pickles per pound of olives.
8
1.33
6
2
