Foundations of Microeconomics, 5e (Bade/Parkin)
Chapter 12 Consumer Choice and Demand
12.1 Consumption Possibilities
1) A budget line shows the
A) quantities of goods a buyer can purchase with given income and prices.
B) relationship between price and quantity demanded.
C) total utility a consumer realizes from consuming different quantities of a good.
D) quantities of consumption that maximizes marginal utility.
E) the prices of the two goods a buyer can purchase.
2) A consumption point inside the budget line
A) is unaffordable.
B) is possible to afford but has some unspent income.
C) shows that the consumer has chosen to spend all of his or her income on both products.
D) shows that the consumer spends income on only one of the goods.
E) is affordable and, because it is inside the budget line, means that all the person’s budget has
been spent.
3) Which of the following statements is correct?
A) Consumers have the ability to buy everything they desire.
B) A consumer’s budget line shows the limits to what a consumer can buy.
C) A consumer’s budget line shows the goods with the highest marginal utilities.
D) Rich consumers are unaffected by prices.
E) A budget line changes only if the person’s budget changes.
4) Which of the following statements is correct?
A) The slope of the budget line shows the opportunity cost of the good measured along the x–
axis.
B) Along the budget line, consuming more of one good implies consuming more of the other.
C) The slope of the budget line shows there is no tradeoff between the two goods because the
consumer can buy each of them.
D) If the consumer’s budget increases, the budget line shifts leftward and its slope does not
change.
E) None of the above answers is correct.
5) Which of the following is shown by a budget line?
i. The combinations of goods a person can afford.
ii. The production possibilities for a person.
iii. The combinations of goods a person cannot afford.
A) i only
B) i and ii
C) i and iii
D) ii and iii
E) ii only
6) The budget line is the boundary between
A) preferred and nonpreferred consumption combinations.
B) affordable and unaffordable consumption combinations.
C) goods and bads.
D) income and expenditure.
E) income and consumption.
7) Where the budget line intersects the y-axis represents a combination of goods that contains
A) some of both goods.
B) only the good measured on the y-axis.
C) only the good measured on the x-axis.
D) no goods.
E) the quantity of the good measured on the y-axis that has zero marginal utility.
8) A budget line
A) shows the limits to what can be consumed.
B) has a slope equal to a relative price.
C) rotates or shifts only when the consumer’s budget changes.
D) Answers B and C are both correct.
E) Answers A and B are both correct.
9) In order to draw Lucky’s budget line, we need to know
A) only Lucky’s budget.
B) only the prices of the goods Lucky consumes.
C) both Lucky’s budget and the prices of the goods Lucky consumes.
D) Lucky’s budget, the prices of the goods lucky consumes, and the utilities of the goods Lucky
does not consume.
E) the utilities of the goods Lucky consumes.
10) Katie has $15. She likes M&M candies and Hershey’s white chocolate bars. M&M candies
are $1.50 a pack and (the large) Hershey bars are $3.00 each. Katie can choose to buy
A) 4 Hershey bars and 2 packs of M&Ms.
B) 2 Hershey bars and 6 packs of M&Ms.
C) 5 Hershey bars and 10 packs of M&Ms.
D) Both answer A and answer B are correct.
E) Answer A, answer B, and answer C are correct.
11) 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?
A) 5 pairs of shoes and 0 shirts
B) 2 pairs of shoes and 4 shirts
C) 0 pairs of shoes and 7 shirts
D) 2 pairs of shoes and 3 shirts
E) 0 pairs of shoes and 0 shirts
12) If a consumer has $30 to spend on apples and bananas, where on the apple axis would the
consumer’s budget line intersect if the price of apples is $3 a pound?
A) 30 pounds
B) 10 pounds
C) 3 pounds
D) 0 pounds
E) It is impossible to determine with the given information.
13) Timmy makes $100 per week as a taxidermist. He spends all this income to buy pizza and
hair gel. The price of a pizza is $10 and the price of a bottle of hair gel is $4. If Timmy buys 5
bottles of hair gel, then he buys ________ pizzas.
A) 10
B) 4
C) 8
D) 20
E) None of the above answers is correct.
14) Timmy makes $100 per week as a taxidermist. He spends all this income to buy pizza and
hair gel. The price of a pizza is $10 and the price of a bottle of hair gel is $4. If Timmy buys 6
pizzas per week, how many bottles of gel can he purchase?
A) 10
B) 60
C) 20
D) 40
E) None of the above answers is correct.
15) Reb earns $1,000 per week as a fishing guide in Texas. With this money he buys fishing
lures and steaks. Lures cost $5 each, steaks cost $10 each. With this level of income, which
consumption points are not possible?
A) 200 lures, 0 steaks
B) 100 lures, 60 steaks
C) 80 lures, 20 steaks
D) 0 lures, 50 steaks
E) 50 lures, 50 steaks
16) Reb earns $1,000 per week as a fishing guide in Texas. With this money he buys fishing
lures and steaks. Lures cost $5 each, steaks cost $10 each. If Reb purchases 124 lures per week,
how many steaks can he buy?
A) 620
B) 38
C) 123
D) 380
E) 100
17) 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. If Sarah spends
$170 per week on sushi, the maximum quantity of rose bushes can she buy each week is
________ bushes.
A) 33
B) 330
C) 3
D) 17
E) None of the above answers is correct.
18) Susan can watch movies or attend plays. The table above gives combinations of movies and
plays that are on her budget line. If the price of a movie is $10, then her budget for movies and
plays is
A) $10 per month.
B) $50 per month.
C) $60 per month.
D) $120 per month.
E) unknown from the information.
19) 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?
A) Point a
B) Point b
C) Point c
D) Point f
E) Point d
20) 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 $500
per week on rose bushes?
A) Point a
B) Point c
C) Point e
D) Point f
E) Point b
21) 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 $300
per week on rose bushes?
A) Point a
B) Point b
C) Point c
D) Point f
E) Point e
22) 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 is NOT able to purchase the combination of
A) 50 roses bushes and 0 pieces of sushi.
B) 20 rose bushes and 200 pieces of sushi.
C) 0 roses bushes and 300 pieces of sushi.
D) 30 roses bushes and 300 pieces of sushi.
E) None of the above answers is correct because Sarah is able to purchase all the listed
combinations of roses and sushi.
23) The figure above shows a consumer’s budget line for sodas and DVD rentals. Point a
represents an
A) affordable combination of sodas and DVDs that spends the entire budget.
B) affordable combination of sodas and DVDs that does not spend the entire budget.
C) unaffordable combination of sodas and DVDs.
D) affordable combination of sodas and DVDs but whether it spends the entire budget cannot be
determined from the figure.
E) None of the above answers is correct.
24) The figure above shows a consumer’s budget line between sodas and DVD rentals. Point b
represents an
A) affordable combination of sodas and DVDs that spends the entire budget.
B) affordable combination of sodas and DVDs that does not spend the entire budget.
C) unaffordable combination of sodas and DVDs.
D) affordable combination of sodas and DVDs but whether it spends the entire budget cannot be
determined from the figure.
E) None of the above answers is correct.
25) The figure above shows a consumer’s budget line between sodas and DVD rentals. Point c
represents an
A) affordable combination of sodas and DVDs that spends the entire budget.
B) affordable combination of sodas and DVDs that does not spend the entire budget.
C) unaffordable combination of sodas and DVDs.
D) affordable combination of sodas and DVDs but whether it spends the entire budget cannot be
determined from the figure.
E) None of the above answers is correct.
26) The figure above shows a consumer’s budget line between sodas and DVD rentals. Point d
represents an
A) affordable combination of sodas and DVDs that spends the entire budget.
B) affordable combination of sodas and DVDs that does not spend the entire budget.
C) unaffordable combination of sodas and DVDs.
D) affordable combination of sodas and DVDs but whether it spends the entire budget cannot be
determined from the figure.
E) None of the above answers is correct.
27) Bobby buys cat food for his cat, Pearl. If the price of cat food falls, then Bobby’s budget line
will
A) rotate outward and its slope will change.
B) rotate inward and its slope will change.
C) shift outward and its slope will not change.
D) shift inward and its slope will not change.
E) either rotate or shift outward depending on whether cat food has positive or negative marginal
utility.
28) If one of the products a consumer buys rises in price, the consumer’s budget line will
A) shift farther away from the origin of the graph and not change its slope.
B) rotate inward, closer to the origin.
C) vanish.
D) undergo no change.
E) shift farther away from the origin of the graph and become steeper.
29) When the price of a good a consumer buys rises, the consumer’s budget line
A) shifts inward and its slope does not change.
B) shifts outward and its slope does not change.
C) rotates inward and its slope changes.
D) rotates outward and its slope changes.
E) does not change.
30) You consume hamburgers and hot dogs. If the price of a hamburger increases while the price
of a hot dog and your budget do not change, then your budget line will
A) not change because your budget hasn’t changed.
B) shift outward and not change its slope.
C) rotate outward and change its slope.
D) rotate inward and change its slope.
E) shift inward and not change its slope
31) If the slope of the budget line changes, there must have been
A) a change in the consumer’s preferences.
B) an increase in the consumer’s income.
C) a change in the price of at least one good.
D) a change in the price of both goods.
E) None of these could cause a change in the slope of the budget line.
32) An increase in the price of a good
A) rotates the budget line inward and changes its slope.
B) rotates the budget line outward and changes its slope.
C) results in a movement downward along the budget line.
D) results in a movement upward along the budget line.
E) shifts the budget line inward and does not change its slope.
33) If the price of the good measured on the x-axis becomes relatively cheaper, the budget line
will
A) become vertical.
B) become steeper.
C) become flatter.
D) become horizontal.
E) shift rightward and not change its slope.
34) Suppose Alice spends her budget on books and CDs. If her budget does not change and the
price of a book stays the same but the price of a CD falls, her budget line
A) shifts outward and its slope does not change.
B) shifts inward and its slope does not change.
C) rotates inward and its slope changes.
D) rotates outward and its slope changes.
E) does not change because her budget has not changed.
35) 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 ________.
A) increases; increases
B) increases; decreases
C) increases; does not change
D) decreases; increases
E) does not change; does not change
36) Samantha has a budget of $40 and buys beef jerky and fried pork rinds. Her budget does not
change and the price of both beef jerky and fried pork rinds increases. As a result,
A) Samantha’s consumption possibilities have decreased.
B) Samantha’s budget line shifts inward.
C) Samantha can still buy the combination of beef jerky and fried pork rinds she was initially
consuming because her budget did not change.
D) Answers A and B are correct.
E) Answers A and C are correct.
37) Nadir and Nina consume the same goods. If Nadir has more income than Nina, then Nina’s
budget line will
A) lie to the left of Nadir’s budget line.
B) be steeper than Nadir’s budget line.
C) lie to the right of Nadir’s budget line.
D) be flatter than Nadir’s budget line.
E) More information is needed to determine how Nina’s and Nadir’s budget lines compare.
38) Which of the following describes what happens to a consumer’s budget line if that
consumer’s budget increases? The budget line
A) becomes steeper.
B) becomes more horizontal.
C) shifts farther away from the origin of the graph.
D) shifts closer to the origin of the graph.
E) does not change.
39) When a consumer’s budget increases, the budget line
A) becomes steeper.
B) becomes flatter.
C) shifts outward.
D) shifts inward.
E) does not change.
40) An increase in a consumer’s budget
A) shifts the budget line outward and does not change its slope.
B) shifts the budget line inward and does not change its slope.
C) rotates the budget line outward around the point where it intersects the x-axis.
D) rotates the budget line inward around the point where it intersects the x-axis.
E) rotates the budget line outward around the point where it intersects the y-axis.
41) An increase in a consumer’s budget
A) changes the relative prices of the goods.
B) changes the slope of the budget line.
C) decreases consumption possibilities.
D) increases consumption possibilities.
E) has no effect on the consumer’s budget line.
42) A budget line will shift outward and not change its slope if
A) there is an increase in the consumer’s budget.
B) the consumer’s preferences change.
C) the price of one good changes.
D) the price of both goods increase by the same percentage.
E) None of the above shift the budget line outward.
43) If you consume hot dogs and hamburgers and your budget increases, while the prices of hot
dogs and hamburgers do not change, then your budget line
A) does not change.
B) shifts outward and its slope does not change.
C) rotates outward and its slope changes.
D) shifts inward and its slope does not change.
E) rotates inward and its slope changes.
44) In the above figures, which one reflects an increase in the price of chicken?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) Both Figure B and Figure C
45) In the above figures, which one reflects a decrease in the price of chicken?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) Both Figure A and Figure D
46) In the above figures, which one reflects an increase in the price of fish?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) Both Figure B and Figure C
47) In the above figures, which one reflects an increase in the consumer’s income?
A) Figure A
B) Figure B
C) Figure C
D) Figure D
E) Both Figure A and Figure D
48) The slope of the budget line can be interpreted as which of the following?
A) an opportunity cost
B) the consumer’s budget divided by the price of the good measured on the y-axis
C) the consumer’s budget divided by the price of the good measured on the x-axis
D) the number of units of the good measured on the y-axis plus the number of units of the good
measured on the x-axis
E) the budget necessary to buy the combinations of goods on the budget line
49) The slope of the budget line represents an opportunity cost because, moving along the line,
A) income is increasing.
B) income is decreasing.
C) additional income must be earned in order to purchase more of one good.
D) a consumer must give up some of one good in order to get more of the other.
E) it is possible to consume more of both goods.
50) 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
A) give up 5 pounds of clams to obtain 1 pound of oysters.
B) give up 5 pounds of oysters to obtain 1 pound of clams.
C) pay $5 for a pound of clams only.
D) pay $5 for a pound of oysters only.
E) pay $5 for a pound of clams and pay $5 for a pound of oysters.