113. Multiple Choice: Mario sees popcorn and pretzels as pe…
Question Mario sees popcorn and pretzels as perfect substitutes. He is always willing to
substitute 3 cups of popcorn for 1 cup of pretzels. His indifference curves for popcorn
and pretzels are ________ and at the optimal consumption bundle his marginal rate
of substitution of popcorn in place of pretzels is ________.
114. Multiple Choice: Mario sees popcorn and pretzels as pe...
Question Mario sees popcorn and pretzels as perfect substitutes. He is always willing to
substitute 3 cups of popcorn for 1 cup of pretzels. If Mario consumes only pretzels,
then we know that the relative price of popcorn in terms of pretzels is:
115. Multiple Choice: Mario sees popcorn and pretzels as pe...
Question Mario sees popcorn and pretzels as perfect substitutes. He is always willing to
substitute 3 cups of popcorn for 1 cup of pretzels. If Mario consumes only popcorn,
then we know that the relative price of popcorn in terms of pretzels is:
116. Multiple Choice: Mario sees popcorn and pretzels as pe...
Question Mario sees popcorn and pretzels as perfect substitutes. He is always willing to
substitute 3 cups of popcorn for 1 cup of pretzels. If the price of a cup of popcorn
equals the price of a cup of pretzels, Mario will eat:
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117. Multiple Choice: Mario sees popcorn and pretzels as pe...
Question Mario sees popcorn and pretzels as perfect substitutes. He is always willing to
substitute 3 cups of popcorn for 1 cup of pretzels. If the price of a cup of popcorn is
$4 and the price of a cup of pretzels is $1, Mario will eat:
118. Multiple Choice: Mario sees popcorn and pretzels as pe...
Question Mario sees popcorn and pretzels as perfect substitutes. He is always willing to
substitute 3 cups of popcorn for 1 cup of pretzels. If the price of a cup of popcorn is
$3 and the price of a cup of pretzels is $1, Mario will eat:
119. Multiple Choice: Alison is a traveling salesperson who...
Question Alison is a traveling salesperson who drives many miles each day to visit her clients.
She gets utility from the purchase of gasoline, but she doesn’t care which brand of
gasoline she consumes. Suppose she has a daily budget of $100 for gasoline and
can purchase from two companies, PB and Noxxe. Today she notices that the price
of a gallon of gas at PB is $2.50 and the price of a gallon of gas at Noxxe is $3.33.
What is her optimal bundle of gas?
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120. Multiple Choice: Mr. Black always consumes coffee and ...
Question Mr. Black always consumes coffee and cream in fixed proportions—8 ounces of
coffee to 1 ounce of cream. This implies that for Mr. Black the marginal rate of
substitution of coffee for cream is:
121. Multiple Choice: Mr. Black always consumes coffee and ...
Question Mr. Black always consumes coffee and cream in fixed proportions—8 ounces of
coffee to 1 ounce of cream. This implies that for Mr. Black:
122. Multiple Choice: Ms. Sweettooth always consumes iced t…
Question Ms. Sweettooth always consumes iced tea and sugar in fixed proportions: 8 ounces
of iced tea to 3 teaspoons of sugar. Which of the following combinations of iced tea
and sugar will give Ms. Sweettooth the highest total utility?
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123. Multiple Choice: Ms. Sweettooth always consumes iced t…
Question Ms. Sweettooth always consumes iced tea and sugar in fixed proportions: 8 ounces
of iced tea to 3 teaspoons of sugar. This implies that for Ms. Sweettooth the
marginal rate of substitution of iced tea for sugar is:
124. Multiple Choice: Ms. Sweettooth always consumes iced t…
Question Ms. Sweettooth always consumes iced tea and sugar in fixed proportions: 8 ounces
of iced tea to 3 teaspoons of sugar. This implies that for Ms. Sweettooth:
125. Multiple Choice: Cookie Monster always consumes cookie...
Question Cookie Monster always consumes cookies and milk in fixed proportions: 4 cookies
to 8 ounces of milk. Which of the following combinations of cookies and milk will
give Cookie Monster the highest total utility?
126. Multiple Choice: Cookie Monster always consumes cookie...
Question
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Cookie Monster always consumes cookies and milk in fixed proportions: 4 cookies
to 8 ounces of milk. This implies that for Cookie Monster the marginal rate of
substitution of cookies for milk is:
127. Multiple Choice: Josh is a house painter who always pu...
Question Josh is a house painter who always purchases two new paintbrushes for every new
gallon of paint, regardless of the relative prices. If we were to graph these
indifference curves, they would appear as:
128. Multiple Choice: Figure: A Changing Budget Constraint ...
Question Figure: A Changing Budget Constraint for Strawberries and Shortcake
Reference: Ref 10-10
(Figure: A Changing Budget Constraint for Strawberries and Shortcake) Look at the
figure A Changing Budget Constraint for Strawberries and Shortcake. Seb’s original
budget line is given by BL1 and his original indifference curve is given by I1. Which of
the following would have caused his budget line to move to BL2?
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129. Multiple Choice: Suppose the government decides to hel...
Question Suppose the government decides to help poor families with kids by subsidizing the
purchase of milk. The subsidy takes the form of a 50% discount in the price of milk.
Suppose also that poor families buy only milk and soda, which are substitutes,
although not perfect substitutes. What happens to the amount of milk poor families
buy?
130. Multiple Choice: Increases in the price of the good me...
Question Increases in the price of the good measured on the horizontal axis will make the
horizontal intercept ________ and make the budget line ________.
131. Multiple Choice: Increases in the price of the good me...
Question Increases in the price of the good measured on the vertical axis will make the
vertical intercept ________ and make the budget line ________.
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132. Multiple Choice: Decreases in the price of the good me...
Question Decreases in the price of the good measured on the horizontal axis will make the
horizontal intercept ________ and make the budget line ________.
133. Multiple Choice: Decreases in the price of the good me...
Question Decreases in the price of the good measured on the vertical axis will make the
vertical intercept ________ and make the budget line ________.
134. Multiple Choice: Suppose the government decides to hel...
Question Suppose the government decides to help poor families with kids by subsidizing the
purchase of milk. The subsidy takes the form of a 50% discount in the price of milk.
Suppose also that poor families buy only milk and Spam (an inferior good). What
happens to the amount of Spam poor families buy?
135. Multiple Choice: Gwen is consuming the optimal consump…
Question
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Gwen is consuming the optimal consumption bundle of potatoes and steak. Call this
bundle A. Her income is $100, the price of steak is $10, and the price of potatoes is
$1. Put potatoes on the vertical axis and put steak on the horizontal axis. Now let‘s
assume that her income increases to $500, and the price of steak and potatoes
remains constant. With the increase in income, Gwen changes her consumption of
the two goods and now maximizes utility at bundle B. Which of the following is true
if potatoes are inferior goods for Gwen?
136. Multiple Choice: Javon is consuming his optimal utilit…
Question Javon is consuming his optimal utility-maximizing consumption bundle of lobster and
macaroni–and-cheese dinners when he loses his job and has less money to spend
on lobster and macaroni-and-cheese dinners. Both goods are normal goods. When
he adjusts his consumption to reflect the new level of income, the number of
macaroni–and-cheese dinners he consumes:
137. Multiple Choice: Karen consumes gasoline and other goo…
Question Karen consumes gasoline and other goods. A new excise tax on gasoline raises
gas prices. However, the government pays Karen an income subsidy that is just
enough for her to stay on her original (pre-tax) indifference curve. Her new optimal
consumption bundle will have:
Answer the same amount of both goods as before.
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138. Multiple Choice: Suppose Frank buys only milk and cere…
Question Suppose Frank buys only milk and cereal, both of which are normal goods, and he
always maximizes his utility. Suppose Frank‘s boss cuts Frank‘s pay by $200 per
month. What happens to Frank‘s marginal rate of substitution between milk and
cereal?
Answer It fluctuates randomly.
139. Multiple Choice: Suppose ramen is a Giffen good and th...
Question Suppose ramen is a Giffen good and the price of ramen decreases. Then the:
Answer substitution effect will cause a decrease in the consumption of ramen.
140. Multiple Choice: Suppose potatoes are an inferior good...
Question Suppose potatoes are an inferior good and the price of potatoes decreases. Then:
Answer the substitution effect will cause a decrease in the consumption of potatoes.
141. Multiple Choice: Suppose good A is a normal good and t...
Question Suppose good A is a normal good and the price of good A decreases. Then:
Answer the substitution effect will cause a decrease in the consumption of good A.
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142. Multiple Choice: A demand curve is generated from indi...
Question A demand curve is generated from indifference curves by changing:
Answer the price of both goods simultaneously.
143. Multiple Choice: Figure: Income and Substitution Effec...
Question Figure: Income and Substitution Effects
Reference: Ref 10-11
(Figure: Income and Substitution Effects) Look at the figure Income and Substitution
Effects. Carlos is originally consuming his optimal consumption bundle at point A in
the figure when the price of gasoline falls. As Carlos moves to his new optimal
consumption bundle, we observe that gasoline:
Answer is not an ordinary good.
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144. Multiple Choice: Figure: Income and Substitution Effec...
Question Figure: Income and Substitution Effects
Reference: Ref 10-11
(Figure: Income and Substitution Effects) Look at the figure Income and Substitution
Effects. Carlos is originally consuming his optimal consumption bundle at point A in
the figure when the price of gasoline falls. The dashed line tangent to I1 shows a
hypothetical budget line reflecting:
Answer the original income, original price of cell phone minutes, and the new price of
gasoline.
145. Multiple Choice: Figure: Income and Substitution Effec...
Question
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Figure: Income and Substitution Effects
Reference: Ref 10-11
(Figure: Income and Substitution Effects) Look at the figure Income and Substitution
Effects. Carlos is originally consuming his optimal consumption bundle at point A in
the figure when the price of gasoline falls. The movement from K1 to K2 reflects:
Answer the total change in quantity demanded due to the decrease in the price of
gasoline.
146. Multiple Choice: Figure: Income and Substitution Effec...
Question
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Figure: Income and Substitution Effects
Reference: Ref 10-11
(Figure: Income and Substitution Effects) Look at the figure Income and Substitution
Effects. Carlos is originally consuming his optimal consumption bundle at point A in
the figure when the price of gasoline falls. The movement from K2 to K3 reflects:
Answer the total change in quantity demanded due to the decrease in the price of
gasoline.
147. Multiple Choice: Consumers buy both alcoholic and nona…
Question Consumers buy both alcoholic and nonalcoholic beverages. If the government tries
to discourage people from drinking alcoholic beverages by imposing an excise tax
on them but gives consumers an income subsidy to keep the consumers on their
original indifference curves, what will happen to consumption of alcoholic and
nonalcoholic beverages?
Answer The same amount of both goods will be consumed.
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148. Multiple Choice: Javon is consuming his optimal utilit…
Question Javon is consuming his optimal utility-maximizing consumption bundle of lobster and
macaroni–and-cheese dinners. Call this bundle A. His income is $100, the price of a
macaroni–and-cheese dinner is $5, and the price of a lobster is $20. Put lobsters on
the vertical axis and put macaroni-and–cheese dinners on the horizontal axis. Now
let’s assume that his income increases to $500 and the price of macaroni–and–
cheese dinners and lobster remains constant. With the increase in income, Javon
changes his consumption of the two goods and now maximizes utility at bundle B.
Which of the following is correct if macaroni-and-cheese dinners are an inferior good
for Javon?
Answer At bundle B, Javon consumes more macaroni-and-cheese dinners.
149. Multiple Choice: Suppose peanut butter is an inferior ...
Question Suppose peanut butter is an inferior good for Ilia and the price of peanut butter rises.
What will happen to Ilia’s consumption of peanut butter?
Answer The substitution effect will cause an increase in the consumption of peanut
butter.
150. Multiple Choice: In terms of indifference curves, a de…
Question In terms of indifference curves, a demand curve is generated by changes in:
Answer income.
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151. Multiple Choice: A _________ can be generated from ind...
Question A _________ can be generated from indifference curves by changing ________.
Answer supply curve; the price of both goods simultaneously
152. Multiple Choice: Figure: Indifference Curves and Consu...
Question Figure: Indifference Curves and Consumption Bundles
Reference: Ref 10-12
(Figure: Indifference Curves and Consumption Bundles) Look at the figure
Indifference Curves and Consumption Bundles. For the consumer whose indifference
curve map is depicted in the figure:
Answer pizza is a normal good and hot dogs are inferior.
153. Multiple Choice: Figure: Indifference Curves and Consu...
Question
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Figure: Indifference Curves and Consumption Bundles
Reference: Ref 10-12
(Figure: Indifference Curves and Consumption Bundles) Look at the figure
Indifference Curves and Consumption Bundles. In the figure, the lines AA and BC are
parallel. The optimal consumption point could shift from b to c as a result of any of
the following except:
Answer an equal percentage increase in the prices of both hot dogs and pizza while
income is unchanged.
154. Multiple Choice: Figure: Indifference Curves and Consu...
Question
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Figure: Indifference Curves and Consumption Bundles
Reference: Ref 10-12
(Figure: Indifference Curves and Consumption Bundles) Look at the figure
Indifference Curves and Consumption Bundles. In the figure, the initial optimum is at
a. The price of hot dogs increases, and the new equilibrium point is c. The change in
hot dog consumption due to the income effect of the price change is:
Answer H3 to H2.
155. Multiple Choice: Figure: Indifference Curves and Consu...
Question
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Figure: Indifference Curves and Consumption Bundles
Reference: Ref 10-12
(Figure: Indifference Curves and Consumption Bundles) Look at the figure
Indifference Curves and Consumption Bundles. In the figure, the initial optimum is at
a. The price of hot dogs now increases. The change in hot dog consumption due to
the substitution effect is:
156. Multiple Choice: Figure: The Consumption of Video Game…
Question
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Figure: The Consumption of Video Games and eBooks
Reference: Ref 10-13
(Figure: The Consumption of Video Games and eBooks) Look at the figure The Consumption of
Video Games and eBooks. Which chart in the figure shows the effect of a decrease in income
when both video games and eBooks are normal goods?
Answer A
157. Multiple Choice: Figure: The Consumption of Video Game…
Question
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Figure: The Consumption of Video Games and eBooks
Reference: Ref 10-13
(Figure: The Consumption of Video Games and eBooks) Look at the figure The Consumption of
Video Games and eBooks. Which chart in the figure shows the effects of a decrease in income
when video games are an inferior good and eBooks are a normal good?
158. Multiple Choice: Figure: The Consumption of Video Game…
Question
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