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CHAPTER 3 Consumer Behavior MULTIPLE CHOICE Section 3.1 easy 1. Gary Franklin is a movie critic. He invented the Franklin Scale with which he rates movies from 1 to 10 (10 being best). When asked about his scale, Mr. Franklin explained "that it is a subjective measure of movie quality. A movie with a ranking of 10 is not necessarily 10 times better than a movie with a ranking of 1, but it is better. A movie with a ranking of 5 is better than a movie with a ranking of 1, but is not as good a movie with a ranking of 10. That's all it really tells you." Based on Mr. Franklin's description, his scale is: a. ordinal but not cardinal. b. cardinal but not ordinal. c. an objective standard to judge movies. d. neither cardinal nor ordinal. easy 2. Which of the following is NOT an assumption regarding people's preferences in the theory of consumer behavior? a. preferences are complete. b. preferences are transitive. c. consumers prefer more of a good to less. d. none of the above. easy 3. The theory of consumer behavior is based on certain assumptions. It includes at least the assumption(s) that preferences are: a. complete. b. transitive. c. intransitive. d. both (a) and (b) are correct. e. both (a) and (c) are correct. easy 4. The assumption of transitive preferences implies that indifference curves must: a. not cross one another. b. have a positive slope. c. be L-shaped. d. be convex to the origin. e. all of the above. easy 5. If a market basket is changed by adding more of at least one good, then rational consumers will: a. rank the market basket more highly after the change. b. more likely prefer a different market basket. c. rank the market basket as being just as desirable as before. d. be unable to decide whether the first market basket is preferred to the second or vice versa. e. have indifference curves that cross. 42
CHAPTER 3 TEST BANK CONSUMER BEHAVIOR SIXTH EDITION easy 6. A consumer prefers market basket A to market basket B, and prefers market basket B to market basket C. Therefore, A is preferred to C. The assumption that leads to this conclusion is: a. transitivity. b. completeness. c. all goods are good. 43
TEST BANK CHAPTER 3 SIXTH EDITION CONSUMER BEHAVIOR d. diminishing MRS. e. assumption of rationality. easy 7. The assumption that preferences are complete: a. means that a consumer will spend her entire income. b. is unnecessary, as long as transitivity is assumed. c. recognizes that there may be pairs of market baskets that cannot be compared. d. means that between any two market baskets of goods, the consumer can determine that either one is preferred to the other or that she is indifferent between them. easy 8. A curve that represents all combinations of market baskets that provide the same level of utility to a consumer is called: a. a budget line. b.
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