WorksheetsEIA2007 Consumer Behaviour
Total questions: 15
Worksheet time: 8mins
The theory of consumer behavior assumes that consumers can compare and rank all possible market baskets. This assumption is called:
completeness.
transitivity.
nonsatiation (more is preferred to less).
rationality.
) If a consumer prefers basket A to basket B and basket B to basket C, then the consumer also prefers A to C. This assumption is called:
completeness.
transitivity.
nonsatiation.
rationality.
The shape of an indifference curve like the one in this figure:
represents more realistically the preferences of a rational consumer.
implies that consumer preferences are not complete
violates the assumption that more is preferred to less.
has market baskets that represent different levels of utility.
The slope of an indifference curve reveals:
that preferences are complete.
the marginal rate of substitution of one good for another good.
the ratio of market prices.
that preferences are transitive.
Two goods for which the marginal rate of substitution is zero or infinite are:
perfect substitutes.
perfect complements.
goods considered "bads."
substitutes and complements at the same time.
This indifference map shows that this consumer:
prefers cars with more space and less acceleration.
obtains the same additional utility from more space or more acceleration.
obtains more utility only when acceleration increases, even if space remains about the same.
takes notice of the fact that, as acceleration increases, space decreases
A utility function describing by how much one market basket is preferred to another is called:
a cardinal utility function.
an ordinal utility function.
either an ordinal or a cardinal function. Both types of functions use this ranking.
neither an ordinal nor a cardinal function. Neither type uses this ranking
A budget line shows the combinations of:
prices that place a limit on the purchase and consumption of two goods.
two goods that can be purchased with a given income, and given the prices of the two goods.
two goods that can be purchase at various levels of income.
the quantities of two goods that can be purchased at various prices.
Assume that food is measured on the horizontal axis and clothing on the vertical axis. If the price of food falls relative to that of clothing, the budget line will:
become flatter.
become steeper.
shift outward.
become steeper or flatter depending on the relationship between prices and income.
. Theodore's budget line has changed from A to B. Which of the following explains the change in Theodore's budget line?
The price of food and the price of clothing increased.
The price of food increased, and the price of clothing decreased.
The price of food decreased, and the price of clothing increased.
The price of food and the price of clothing decreased.
The revealed preference approach can provide more informative comparisons of market baskets if we also assume that the consumer's indifference curves are:
concave.
convex.
incomplete.
intransitive.
Oscar consumes only two goods, X and Y. Assume that Oscar is not at a corner solution, but he is maximizing utility. Which of the following is NOT necessarily true?
MRSxy = Px/Py.
MUx/MUy = Px/Py.
Px/Py = money income.
Px/Py = slope of the indifference curve at the optimal choice.
Jane is attempting to maximize utility by selecting a market basket of goods. For each of the goods in the market basket the marginal utility per dollar spent is equal. There are some goods which are affordable but do not appear in the Jane's market basket. If Jane has maximized utility, the marginal utility per dollar spent on each of the goods that does not appear in the market basket is:
too high.
too low
zero
infinite
You view tea and scones as perfect complements, and the corners of the indifference curves lie on the 45-degree line. Tea is plotted along the horizontal axis of the indifference map. Also, at your current point of consumption, you have not fully exhausted the available budget, and you consume more tea than scones. Based on this information, which of the following statements is NOT true?
The marginal utility of tea equals zero for your current consumption bundle.
The marginal utility of scones equals zero for your current consumption bundle.
To reach the point of optimal consumption, you must increase your scone consumption.
The equal marginal principle does not have to be satisfied at the optimal consumption point for this
Which price index tends to understate the impact of price changes on consumers?
Chain-weighted index
Laspeyres index
Paasche index
Ideal cost-of-living index
