28) What does the marginal rate of substitution measure?
A) It measures the rate at which a consumer must give up one good to purchase another good.
B) It measures the rate at which a consumer will substitute one good for another when the price of one good changes.
C) It measures the change in utility from consuming one additional unit of a good.
D) It measures the rate at which a consumer is willing to trade off one product for another while keeping utility constant.
29) Which of the following is held constant along an indifference curve?
A) the prices of the goods in question
B) the marginal rate of substitution between the two goods in question
C) the marginal utility derived from consuming any bundle of goods on the indifference curve
D) the total utility derived from consuming any bundle of goods on the indifference curve
30) In the utility maximizing model, consumer preferences are assumed to be transitive. What does this mean?
A) that consumers prefer more of a good to less
B) that consumers have the freedom to change their preferences from time to time
C) that consumers have preferences that are relatively consistent in the time period under consideration
D) that consumers go through cycles in their consumption behavior
31) Why do convex indifference curve have a negative slope?
A) because consumers take market prices as given
B) because consumers face a budget constraint
C) because to keep utility constant, a consumer must get more of one good if she is to give up some of the other
D) because scarcity implies that it is not possible to consume more of one good without giving up some of the other
32) What happens to the absolute value of marginal rate of substitution as you move down a convex (bowed toward the origin) indifference curve?
A) increases
B) decreases
C) remains constant
D) could increase or decrease
33) A consumer's budget constraint is
A) the limited income that a consumer has to spend on goods and services.
B) the rate at which the consumer must give up one good to purchase an additional unit of the other goods in the market.
C) the price ratio a consumer faces in the marketplace.
D) the extent to which one's preferences are limited by one's income.
34) Vinny consumes tacos and chicken wings. To keep his utility constant, he must consume more tacos if he consumes fewer chicken wings. This means that
A) Vinny's indifference curve for tacos and chicken wings must have a negative slope.
B) the prices Vinny pays for tacos and chicken wings are always the same.
C) Vinny's marginal utility from each good must be constant along his convex indifference curves for tacos and chicken wings.
D) Vinny's marginal rate of substitution must be constant along his indifference curves for tacos and chicken wings.
35) Which of the following statements is false?
A) There is an indifference curve associated with any combination of goods selected by a consumer.
B) A consumer is indifferent among all consumption bundles along a given budget line.
C) All consumption bundles along a given indifference curve are equally desirable.
D) Consumption bundles that lie on higher indifference curves yield higher utility.
36) Which of the following is not a characteristic of indifference curves?
A) Indifference curves cannot intersect.
B) Indifference curves are usually bowed in, or convex.
C) The slope of an indifference curve is negative.
D) The closer to the origin, the greater the utility level.
