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71
14) In the labor market, the income and substitution effects work in the same direction.
Answer: FALSE
Diff: 1
Topic: Household Choice in Input Markets
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-10
6.5 Appendix: Indifference Curves
1) Harry tells you that he prefers Pepsi to Coke, Coke to 7-UP, and 7-UP to Pepsi. This violates what
assumption made when analyzing consumer preferences?
A) that more is better
B) that there is a diminishing marginal rate of substitution
C) that consumers are rational
D) that consumers are able to choose among all the combinations of goods and services available
Topic: Appendix: Indifference Curves
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-11
2) A consumer satisfies the condition ________ when her indifference curve is just tangent to her budget
constraint.
A) MUx = MUy
B) TUx = TUy
C) MUx/Px = MUy/Py
D) TUx/Px = TUy/Py
Topic: Appendix: Indifference Curves
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-10
3) Assume Sally is initially in equilibrium and that X and Y are normal goods for her. Then the price of X
rises. For Sally to move to a new equilibrium point, her consumption of
A) X must remain constant, but her consumption of Y must increase.
B) X must decrease.
C) X must increase.
D) both X and Y must increase.
Topic: Appendix: Indifference Curves
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-11
72
4) An assumption underlying indifference curve analysis is that MUx/MUy ________ as more of X and
less of Y is consumed.
A) increases
B) decreases
C) remains constant
D) always equals one
Topic: Appendix: Indifference Curves
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-11
Refer to the information provided in Figure 6.12 below to answer the question(s) that follow.
Figure 6.12
5) Refer to Figure 6.12. If Arthur moves from indifference curve 1 to indifference curve 2, then Arthur's
A) marginal utility increases.
B) total utility increases.
C) total income decreases.
D) prices of the goods increase.
Topic: Appendix: Indifference Curves
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-2
73
6) Refer to Figure 6.12. If Arthur moves from indifference curve 2 to indifference curve 1, then Arthur's
A) marginal utility decreases.
B) total utility decreases.
C) total income increases.
D) prices of the goods decrease.
Topic: Appendix: Indifference Curves
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-2
74
Refer to the information provided in Figure 6.13 below to answer the question(s) that follow.
Figure 6.13
7) Refer to Figure 6.13. Assume Ellen has two products available, pizza and hamburgers. Ellen is always
willing to trade one pizza for one hamburger regardless of how many pizzas and hamburgers she has.
The curve in Panel ________ represents her indifference curve.
A) A
B) B
C) C
D) D
Topic: Appendix: Indifference Curves
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-2
75
8) Refer to Figure 6.13. Assume Ellen has two products available, pizza and hamburgers. Ellen must be
compensated with more pizzas as she gives up more burgers. The curve in Panel ________ represents her
indifference curve.
A) A
B) B
C) C
D) D
Topic: Appendix: Indifference Curves
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-2
9) Refer to Figure 6.13. Assume Megan has two products available, pizza and hamburgers. Megan is
always willing to trade an equal number of pizzas for hamburgers regardless of how many pizzas and
hamburgers she has. The curve in Panel ________ represents her indifference curve.
A) A
B) B
C) C
D) D
Topic: Appendix: Indifference Curves
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-2
10) Refer to Figure 6.13. Assume Megan has two products available, pizza and hamburgers. Megan must
be compensated with more pizzas as she gives up more hamburgers. The curve in Panel ________
represents her indifference curve.
A) A
B) B
C) C
D) D
Topic: Appendix: Indifference Curves
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-2
76
11) As you move up an indifference curve, the absolute value of the slope
A) increases.
B) decreases.
C) remains constant.
D) initially increases and then decreases.
Topic: Appendix: Indifference Curves
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-11
Refer to the information provided in Figure 6.14 below to answer the question(s) that follow.
Figure 6.14
12) Refer to Figure 6.14. If the price of an ice cream cone is $2, Jason's income is
A) $75.
B) $250.
C) $300.
D) indeterminate because the price of ice cream sandwiches is not given.
Topic: Appendix: Indifference Curves
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-2
77
13) Refer to Figure 6.14. Jason maximizes utility at point
A) A.
B) B.
C) C.
D) D.
Topic: Appendix: Indifference Curves
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-2
14) Refer to Figure 6.14. The slope of the indifference curve is the ratio of the
A) marginal utility of ice cream cones to the marginal utility of ice cream sandwiches.
B) marginal utility of ice cream sandwiches to the marginal utility of ice cream cones.
C) total utility of ice cream cones to the total utility of ice cream sandwiches.
D) total utility of ice cream sandwiches to the total utility of ice cream cones.
Topic: Appendix: Indifference Curves
Skill: Definition
Learning Outcome: Micro-2
15) Refer to Figure 6.14. At point A, the slope of the indifference curve is
A) -0.67.
B) -1.5.
C) -3.0.
D) indeterminate because the marginal utilities are unknown.
Topic: Appendix: Indifference Curves
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-2
16) Refer to Figure 6.14. If the price of an ice cream cone is $2, the price of ice cream sandwiches is
A) $2.
B) $3.
C) $50.
D) $100.
Topic: Appendix: Indifference Curves
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-2
