Question

Question 1

If you are trying to make yourself as happy as you can be given the constraints that you face, you are effectively:

Select one:

a. trying to find the intersection point between two budget constraints.

b. trying to find the point on the budget constraint that is on the highest indifference curve.

c. trying to find the point where the budget constraint and an indifference curve intersect.

d. trying to find the point on an indifference curve that is on the lowest budget constraint.

Question 2

Consumers would always prefer to have more of every good they consume, but what prevents them from reaching higher and higher indifference curves?

Select one:

a. Their preferences and their income

b. The prices they face, their income, and their preferences

c. The prices they face and their income

d. The prices they face and their preferences

Question 3

Indifference curves for perfect substitutes are _______ and indifference curves for perfect complements are _______.

Select one:

a. positively-sloped; negatively-sloped

b. horizontal; vertical

c. straight lines; right angles

d. bowed-inward; bowed-outward

Question 4

In a world with just two goods, pizza and coffee, which of the following would NOT be a variable that affects a consumer's budget constraint?

Select one:

a. The consumer's income

b. The price of pizza

c. The consumer's preferences

d. The price of coffee

Question 5

If, for a consumer choosing between two goods, the MRS equals the price ratio, then:

Select one:

a. the marginal utility per dollar for both goods is equal to 1 and the consumer is maximizing utility.

b. the marginal utility provided by each good is equal to that good's price, and the consumer is maximizing utility.

c. we know nothing about whether the consumer is maximizing utility since prices are measured in dollars, not utility.

d. the marginal utility per dollar is equal for the two goods and the consumer is maximizing utility.

Question 6

Quantity demanded in a market increases when price falls because:

Select one:

a. when the price of a good falls, some consumers believe it is because the quality of the good has fallen.

b. as the price of a good falls, its marginal utility rises, which encourages more people to buy it.

c. for some consumers, the decrease in price makes additional units of a good worth buying.

d. sellers expect more customers, so they produce more units of output.

Question 7

Which of the following is true of combinations of coffee and pizza shown on the graph of indifference curves?

Select one:

a. Combinations above and to the left of other combinations are better.

b. Combinations below and to the right of other combinations are better.

c. Combinations below and to the left of other combinations are better.

d. Combinations above and to the right of other combinations are better.

Question 8

What is magical about the price of a cup of coffee?

Select one:

a. That a cup of coffee can have one price despite there being tens of thousands of types of coffee

b. That the price of a cup of coffee can actually be lower than the marginal cost of producing the cup of coffee

c. That people are actually smart enough to compute what the price of a cup of coffee should be

d. That one number can contain so much information about so many different variables in the world

Question 9

A combination of goods where an indifference curve intersects the budget constraint:

Select one:

a. must cost more than at least one other point on your budget constraint.

b. must provide less utility than at least one other point on your budget constraint.

c. provides more utility than any other point on your budget constraint.

d. costs less than any other point on your budget constraint.

Question 10

If pizza and coffee are both "goods" that means:

Select one:

a. they were made and sold by a producer.

b. we always prefer more of them to less.

c. we prefer both of them to holding money as cash.

d. they both have market prices.

Question 11

The budget constraint is:

Select one:

a. downward-sloping because of the law of demand.

b. a straight line because the price ratio is constant.

c. bowed-inward because preferences change as consumption changes.

d. upward-sloping because a greater budget means more consumption.

Question 12

To say that goods have diminishing marginal utility is to say that:

Select one:

a. you get less and less additional satisfaction from each additional unit of a good.

b. total satisfaction decreases as you consume additional units of a good.

c. over time, the impact of the additional satisfaction that you got from consuming a good gets smaller.

d. the additional satisfaction that you get from each additional unit of a good increases over time.

Question 13

Professor Girante claims that:

Select one:

a. calculating marginal utility would not help you choose what to buy.

b. everybody calculates marginal utility when choosing what to buy.

c. only economists calculate marginal utility when choosing what to buy.

d. very few of us calculate marginal utility when choosing what to buy.

Question 14

The budget constraint separates:

Select one:

a. the affordable combinations of goods from the unaffordable combinations of goods.

b. combinations of goods according to how much utility, or satisfaction, they provide.

c. those combinations of goods that provide utility from those combinations that do not.

d. the units of the good on the horizontal axis from the units of the good on the vertical axis.

Question 15

What word do economists use for the value that we get from the goods that we consume?

Select one:

a. Utility

b. Surplus

c. Consumption value

d. Goodness

Answer 1

1. b. trying to find the point on the budget constraint that is on the highest indifference curve.

Explanation: The budget constraint shows combinations of goods which a consumer can afford given his budget. An indifference curve shows the combination of goods which provides the same level of utility to a consumer. The higher the indifference curve the higher is the utility. A consumer maximizes utility at the point on the budget constraint that is on the highest indifference curve.