978-1259723223 Test Bank TBChap007 Part 9

286.

The graph shows two indifference curves, and QR and QS represent different budget lines. A

change in the equilibrium position on the diagram from point 1 to point 2 could result, other

things being equal, from

287. If a consumer is initially in equilibrium, an increase in money income will

7-156

written consent of McGraw-Hill Education.

D. have no effect on the equilibrium position.

288.

Given the indifference map and budget constraint lines above, what is the demand curve for

sweaters?

7-157

written consent of McGraw-Hill Education.

Blooms: Understand

D i f f i c u l t y :

02 Medium

Learning Objective: 07–06 Appendix: Relate how the indifference curve model of

consumer behavior derives demand curves from budget lines, indifference curves, and

utility maximization.

Test Bank: II

To pi c:

Indifference Curve Analysis

289.

Given the indifference curves for an individual as shown above, if the price of good Y = $1, it

can be determined that two points on his or her demand curve for good X are

7-158

written consent of McGraw-Hill Education.

To pi c:

Indifference Curve Analysis

290.

The individual demand curve that is implied by the budget constraints and indifference curves

above will be

7-159

291.

In the graph, a decrease in the price of good Y will result in

A. a decrease in demand for good Y.

B. an increase in demand for good Y.

292.

Graph I above shows E.T.’s equilibrium combinations of beer and candy for three different

prices of beer. (I1, I2, and I3 are indifference curves. The price of a package of candy is

constant at $1.00.) Letting PC represent the price of beer, which demand curve (d) above is

consistent with graph I?

293.

Recently, the price of lentils increased. As a result Lincoln residents noticed that their neighbor,

Rasputin, decreased his consumption of lentils and of steak. Rasputin said his utility had

declined. Many citizens made donations to the “Rasputin Relief Fund.” Rasputin was given a

cash grant equal to the amount he claimed to need to regain his initial utility level. Happy and

thankful, Rasputin rushed off to the store to make his new purchases-consisting of more steak

and slightly less lentils. Each graph above shows two indifference curves for Rasputin, I1 and

I2, and the two budget constraints, B1 and B2, that he faced. Let E1 represent Rasputin‘s initial

equilibrium, E2 equal his equilibrium following the

increase in the price of lentils, and E3 his equilibrium after receiving the cash from the relief

fund. Which graph above is consistent with Rasputin’s claims in the above story?

7-162

written consent of McGraw-Hill Education.

D i f f i c u l t y :

02 Medium

Learning Objective: 07–06 Appendix: Relate how the indifference curve model of

consumer behavior derives demand curves from budget lines, indifference curves, and

utility maximization.

Test Bank: II

To pi c:

Indifference Curve Analysis

294.

Suppose an individual’s budget line shifted as shown above. Which of the four pairs of graphs,

each showing the demand for Good X and a separate demand for Good Y, is the most consistent

with the given change in the top graph?

A. pair A

7-163

written consent of McGraw-Hill Education.

B. pair B

C. pair C

D. pair D

295. In a topographic map, each line represents a particular elevation above sea level, and in an

indifference map, each line represents a particular level of

A. total utility.

True / False Questions

296. The budget line shows all the combinations of two products that the consumer can buy,

given money income and product prices.

7-164

written consent of McGraw-Hill Education.

utility maximization.

Test Bank: II

To pi c:

Indifference Curve Analysis

297. If the quantity of X is measured on the horizontal axis and the quantity of Y on the vertical,

then the slope of the budget line is equal to the price of X divided by the price of Y.

298. A parallel shift in a budget line is caused by changes in a consumer’s level of satisfaction.

299. A change in the relative prices for two goods can be shown as a parallel shift in a

consumer’s budget line.

7-165

written consent of McGraw-Hill Education.

utility maximization.

Test Bank: II

To pi c:

Indifference Curve Analysis

300. Indifference curves are convex to the origin due to diminishing marginal rates of

substitution.

301. Indifference curves and budget lines can be used to derive an individual’s demand curve

for a product.

302. The consumer will select that point on the budget line which puts him or her on the highest

attainable indifference curve.

7-166

written consent of McGraw-Hill Education.

consumer behavior derives demand curves from budget lines, indifference curves, and

utility maximization.

Test Bank: II

To pi c:

Indifference Curve Analysis

303. A consumer maximizes total utility when she or he purchases the combination of the two

products at which her or his budget line is tangent to an indifference curve.

304. An increase in the price of a product normally enables a consumer to reach a higher

indifference curve.

305. It is possible that as a result of the budget line shifting outward, the consumer will buy less

of a product.

7-167

written consent of McGraw-Hill Education.

Learning Objective: 07–06 Appendix: Relate how the indifference curve model of

consumer behavior derives demand curves from budget lines, indifference curves, and

utility maximization.

Test Bank: II

To pi c:

Indifference Curve Analysis