Chapter_9_problem_set - Exam Name MULTIPLE CHOICE Choose...

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Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which one of the following statements best describes a consumer's budget line? 1) _______ A) the amount of each good a consumer can purchase B) the desired level of consumption for a consumer C) the limits to a consumer's set of affordable consumption choices D) the set of all affordable consumption choices E) the consumption choices made by a consumer 2) Let Y = $100, Q X = quantity of good X , and Q W = quantity of good W , P X = $4 and P W = $5. The budget equation is shown as 2) _______ A) Q X = Q W + (4/5) Y . B) 100 = 4 Q X + 5 Q W . C) Q X = 100 + (4/5) Q W . D) 100 = Q X + (4/5) Q W . E) Q W = Q X + (4/5) Y . 3) An indifference curve is best defined as 3) _______ A) a boundary line defining production possibilities. B) the set of all bundles that the consumer enjoys equally well. C) the level of consumption where a consumer is indifferent to receiving more consumption. D) a boundary line between attainable and unattainable choices. E) a ranking of preferred consumption bundles. 4) A consumer always has a cup of coffee with a tablespoon of sugar. What would the consumer's indifference curves for these two goods look like? 4) _______ A) nearly straight - lined B) straight - lined C) tightly curved D) upward sloping E) L - shaped. 5) Normal goods are defined as goods whose consumption 5) _______ A) decreases as prices increase. B) increases as prices increase. C) increases as income increases. D) decreases as income increases. E) stays the same as income increases. 6) For an inferior good, which statement is true? 6) _______ A) The good is of poor workmanship. B) The substitution effect is positive; as price increases, consumption increases. C) The substitution effect is negative; as price increases, consumption increases.
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D) The income effect is absent; as income increases, consumption remains constant. E) The income effect moves in the opposite direction to the substitution effect. Use the figure below to answer the following question(s). Figure 8.10 7) Consider an initial budget line labelled RS in Figure 8.10. What would cause the budget line to shift to RT ? 7) _______
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This note was uploaded on 12/31/2011 for the course ECON 101 taught by Professor Vanderwaal during the Fall '08 term at Waterloo.

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Chapter_9_problem_set - Exam Name MULTIPLE CHOICE Choose...

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