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Chapters 3, 4 Practice Problems

Chapters 3, 4 Practice Problems - Practice Problems for...

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Q Pepsi 7 5 Q Coke AGEC 105 Practice Problems for Chapters 3 and 4 1. A consumer’s budget line shows a. The utility that an individual would receive from consuming various combinations of two goods b. The combination of two goods that an individual is able to purchase, given prices and income c. How income is influenced by prices of goods d. How changes in income affect utility e. The relationship between prices and income 2. A family on a trip budgets $800 for sit-down restaurant meals and fast food. If the price of a fast food meal for the family is $20, how many such meals can the family buy if they do not eat at restaurants? 3. If a consumer’s budget line between meat and potatoes has a vertical axis intercept at 100 pounds of meat and a horizontal intercept at 100 pounds of potatoes
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pound of potatoes 4. If income increases, there will be a parallel downward shift of the budget line a. True b. False 5. Suppose that Trey spends all of his income on vacation trips and textbooks. If the price of a trip is $200 and the price of a textbook is $50, then the slope of his budget line (assuming vacation trips are measured on the vertical axis) would be
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