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WorksheetsBudget Line and Indifference Curves
Total questions: 39
Worksheet time: 7hrs 30mins
A consumption point inside the budget line
is unaffordable.
shows that the consumer spends income on only one of the goods.
shows that the consumer has chosen to spend all of his or her income on both products.
is affordable and, because it is inside the budget line, means that all the person's budget has been spent.
is possible to afford but has some unspent income.
Which of the following statements is correct?
Along the budget line, consuming more of one good implies consuming more of the other.
The slope of the budget line shows there is no tradeoff between the two goods because the consumer can buy each of them.
If the consumer's budget increases, the budget line shifts leftward and its slope does not change.
The slope of the budget line shows the opportunity cost of the good measured along the x-axis.
None of the above answers is correct.
A budget line
has a slope equal to a relative price.
shows the limits to what can be consumed.
rotates or shifts only when the consumer's budget changes.
Answers B and C are both correct.
Answers A and B are both correct.
Suppose a consumer has $100 to spend on two goods, shoes and shirts. If the price of a pair of shoes is $20 per pair and the price of a shirt is $15 each, which of the following combinations is unaffordable to the consumer?
0 pairs of shoes and 0 shirts
2 pairs of shoes and 4 shirts
5 pairs of shoes and 0 shirts
0 pairs of shoes and 7 shirts
2 pairs of shoes and 3 shirts
Which of the following describes what happens to a consumer's budget line if that consumer's budget increases? The budget line
becomes steeper.
shifts farther away from the origin of the graph.
does not change.
becomes more horizontal.
shifts closer to the origin of the graph.
In the above figures, which one reflects an increase in the price of chicken?
Figure A
Figure B
Figure C
Figure D
Both Figure B and Figure C
In the above figures, which one reflects a decrease in the price of chicken?
Figure A
Figure B
Figure C
Figure D
Both Figure A and Figure D
In the above figures, which one reflects an increase in the consumer's income?
Figure A
Figure B
Figure C
Figure D
Both Figure A and Figure D
In the above figures, which one reflects an increase in the price of fish?
Figure A
Figure B
Figure C
Figure D
Both Figure B and Figure C
Bobby buys cat food for his cat, Pearl. If the price of cat food falls (catfood is on the x axis), then Bobby's budget line will
rotate outward and its slope will change.
shift inward and its slope will not change.
shift outward and its slope will not change.
rotate inward and its slope will change.
either rotate or shift outward depending on whether cat food has positive or negative marginal utility.
Reb buys fishing lures and steaks. If his budget does not change and the price of a fishing lure decreases, the maximum number of fishing lures he can purchase ________ and the maximum number of steaks he can purchase ________.
increases; decreases
does not change; does not change
decreases; increases
increases; does not change
increases; increases
The figure above shows Sarah's budget line. Sarah earns $500 per week selling baskets made out of tree vines. With this money she buys sushi and rose bushes. Each piece of sushi costs $1 and each rose bush costs $10. Sarah will be at what point on her budget line if she spends $200 per week on sushi?
Point b
Point c
Point d
Point f
Point a
Suppose that you consume only pizza and Diet Pepsi. The table above gives your utility from consuming these two goods. What is the marginal utility you get from the fourth slice of pizza?
18
12
4
36
72
The demand curve for macadamia nuts is downward sloping. This slope is because consumers maximize their utility and an increase in the price of macadamia nuts leads to
no change in quantity demanded.
consumers' budget lines shifting outward with no change in their slope.
a decrease in the marginal utility per dollar from macadamia nuts.
consumers' budget lines rotating outward with their slopes changing.
an increase in the marginal utility per dollar from macadamia nuts.
Juan's marginal utility from strawberries is 200 and his marginal utility from cream is 100. Juan spends all his budget. The price of strawberries is $5 per pound and the price of cream is $5 per pint. To maximize his utility, Juan should
buy less cream and more strawberries.
buy less cream and fewer strawberries.
buy more cream and fewer strawberries.
buy more cream and more strawberries.
change nothing because Juan is maximizing his utility now.
As Shaniq drinks additional cups of tea at breakfast, Shaniq's
marginal utility from tea decreases.
total utility from tea increases.
total utility from tea decreases.
Both answers A and B are correct.
Both answers B and C are correct.
You can use marginal utility theory to find the demand curve by changing
only the prices of both goods.
only the price of one good.
income and the prices of both goods.
only income.
the utility schedule.
Suppose that Misty likes pizza and hotdogs. If her marginal utility per dollar from pizza is 6 and from hotdogs it is 5, Misty
could increase her total utility by buying more hotdogs and less pizza.
must obtain more income in order to reach her consumer equilibrium.
is maximizing her marginal utility.
could increase her total utility by buying more pizza and fewer hotdogs.
is maximizing her total utility.
Suppose that Hank consumes only Mountain Dew and pizza. If Hank's total utility from all amounts of both Mountain Dew and pizza double from what they were before, then Hank's demand for
both goods must double.
neither good changes.
one of the goods must decrease by one-half.
one of the goods must double.
both goods must decrease by one-half.
A relative price is the
absolute price of a good.
price of a substitute.
price of one good multiplied by the price of another.
price of a related good.
price of one good divided by the price of another.
Sue consumes oysters and clams. Pounds of oysters are measured on the y-axis and pounds of clams on the x-axis. If the slope of Sue's budget line is 5 pounds of oysters per pound of clams, Sue must
pay $5 for a pound of oysters only.
pay $5 for a pound of clams and pay $5 for a pound of oysters.
give up 5 pounds of oysters to obtain 1 pound of clams.
give up 5 pounds of clams to obtain 1 pound of oysters.
pay $5 for a pound of clams only.
The maximum price a consumer is willing to pay for an extra unit of a good or service when total utility is maximized is known as
marginal utility.
quantity demanded.
marginal benefit.
total utility.
demand.
Jen consumes 5 CDs and 2 tacos. She receives 500 units of utility from her 5th CD and 200 units of utility from her 2nd taco. The price of a CD is $10, the price of a taco is $4, and she is spending her entire budget. Which of the following is true regarding Jen's choices?
Jen is maximizing utility.
Jen is operating on her demand curve for tacos.
Jen is operating on her demand curve for CDs.
Only answers A and B are correct
Answers A, B, and C are correct.
At all points on a demand curve, the
A)i only
i.consumer's budget has been allocated to maximize total utility.
B)ii only
iii.price represents the marginal benefit the consumer gets from an extra unit of a good.
ii.quantity is the quantity demanded at each price when total utility is maximized.
An indifference curve shows
affordable combinations of goods.
the relative price of one good relative to another.
consumption possibilities that a consumer faces at different prices and income.
different combinations of two goods among which the consumer is indifferent.
the opportunity cost of one good relative to another.
Moving along an indifference curve the
consumer prefers some of the consumption points to others.
marginal rate of substitution for a good increases as more of the good is consumed.
marginal rate of substitution is constant.
marginal rate of substitution is equal to 0.
consumer does not prefer one consumption point to another.
As a consumer moves away from the origin onto higher indifference curves, what happens?
The consumer reaches less preferred combinations of goods.
The consumer reaches more affordable combinations of goods.
The consumer reaches more preferred combinations of goods.
Nothing
None of the above because it is impossible to move from one indifference curve to another.
We have asked Mac to rank his preferences between three market baskets, A, B, and C. If Mac prefers B to C but does not care if he gets A or B, then
A is on a higher indifference curve than B.
B is on a higher indifference curve than C but it is not possible to determine whether C is on a higher, lower, or the same indifference curve as A.
C is on a higher indifference curve than A.
B and C are on the same indifference curve.
Both A and B are on a higher indifference curve than C.
Which of the following statements is FALSE?
A consumer has only one indifference curve.
A consumer possesses a preference map.
The marginal rate of substitution is equal to the magnitude of the slope of the indifference curve.
Diminishing marginal rate of substitution means that the marginal rate of substitution decreases as more of the good is consumed.
An indifference curve is a curve that shows the combination of goods among which a consumer is indifferent.
The marginal rate of substitution of one good for another is measured by moving
among different indifference curves.
along a budget line.
among different budget lines.
along a demand curve.
along an indifference curve.
The magnitude of the slope of an indifference curve is the
marginal rate of substitution.
rate of increasing opportunity cost.
marginal rate of utility of income.
rate of relative prices.
marginal utility of substitution.
Normally shaped indifference curves are bowed towards the origin of the graph. The reason for this shape is
the principle of diminishing marginal rate of relative price.
diminishing marginal rate of substitution.
that the marginal rate of substitution is constant along an indifference curve.
that indifference curves farther away from the origin represent higher levels of utility.
the law of demand.
Moving along an indifference curve, if a consumer requires a small amount of the good measured along the y-axis to make up for one unit less of the good measured on the x-axis, then
the marginal rate of substitution is high and the indifference curve is steep.
total utility is increasing.
the marginal rate of substitution is high and the indifference curve is shallow (relatively flat).
the marginal rate of substitution is low and the indifference curve is shallow (relatively flat).
the marginal rate of substitution is low and the indifference curve is steep.
Along an indifference curve, if the marginal rate of substitution is 3, then the consumer is willing to
pay $3 for one unit of the good measured along the y-axis.
give up 1 unit of the good measured along the y-axis for 3 units of the good measured along the x-axis.
give up 3 units of the good measured along the y-axis for 1 unit of income, that is, $1 of income.
give up 3 units of the good measured along the y-axis for 1 unit of the good measured along the x-axis.
pay $3 for one unit of the good measured along the x-axis.
Which of the following is true if Clarice is at her consumer equilibrium?
ii and iii
i only
iii only
i and ii
i and ii
A point where the budget line is just touching an indifference curve at one point is
the best affordable point.
the least affordable point.
on the lowest attainable indifference curve.
Both answers B and C are correct.
Both answers A and C are correct.
In an indifference curve/budget line diagram, at the consumer equilibrium the slope of the budget line
is less than the slope of the indifference curve.
is greater than the slope of the indifference curve.
equals the slope of the indifference curve.
may be greater than, equal to, or less than the slope of the indifference curve.
has nothing to do with the equilibrium.
Using Gabriel's budget line and his indifference curves between horseback riding lessons and baseball lessons, and then changing the prices of each activity holding his income constant, which of the following can be derived?
Gabriel's supply curve for each activity
Gabriel's net gain for each activity
Gabriel's demand curve for each activity
Gabriel's marginal benefit for each activity
Both answers A and B are correct.
In the indifference curve/budget line diagram, consumers reach higher indifference curves when
their budget decreases.
the price of only the good measured along the y-axis increases.
the price of either good falls.
the price of either good rises.
the price of only the good measured along the x-axis increases.
