oliviasantanapo
2 years ago
8
Appendix: Representing Preference with Indifference Curves: Another Use of the Budget Constraint
1) ________ in economics is a measure of satisfaction or happiness that comes from consuming a good or service.
A) Budget
B) Utility
C) Income effect
D) Substitution effect
2) A(n) ________ shows the bundles of two goods that provide an equal level of satisfaction to the consumer.
A) budget set
B) indifference curve
C) demand curve
D) budget line
3) The consumption bundle that maximizes a consumer's satisfaction given his income is located:
A) at the point of tangency of the consumer's demand curve and indifference curve.
B) at any point of intersection of the consumer's demand curve and indifference curves.
C) at the point of tangency of the consumer's budget constraint and indifference curve.
D) at any point of intersection of the consumer's demand curve and indifference curves.
4) Between two indifference curves, the one on the right indicates:
A) the same level of utility as the one on the left.
B) the same bundle of goods as the one on the left.
C) a higher level of utility than the one on the left.
D) a lower level of consumer income than the one on the left.
5) For a given level of total utility, ________.
A) there is exactly one indifference curve
B) there are exactly two indifference curves
C) there are exactly three indifference curves
D) there are exactly four indifference curves
The following figure shows the indifference curves (IC) and the budget constraint (BC) of a consumer who needs to decide between the number of trousers and shirts he should purchase.
6) Refer to the figure above. Which indifference curve depicts the highest level of utility?
A) IC1
B) IC2
C) IC3
D) IC4
7) Refer to the figure above. Given the consumer's budget constraint, the consumption bundle which maximizes his satisfaction consists of:
A) 0 shirts and 40 pairs of trousers.
B) 10 shirts and 30 pairs of trousers.
C) 20 shirts and 15 pairs of trousers.
D) 35 shirts and 10 pairs of trousers.
8) Refer to the figure above. In comparison to the bundles on IC1, the bundles on IC3:
A) give the same level of utility and are affordable.
B) give the same level of utility but are not affordable.
C) give a higher level of utility and are affordable.
D) give a higher level of utility but are not affordable.
9) Which of the following examples identifies the income effect of a price change?
A) When Gary's income doubles his wine consumption doubles, the price of wine remaining unchanged.
B) When the price of diesel falls, consumers start purchasing more petrol-powered vehicles.
C) While purchasing shirts and jeans, when the price of a pair of jeans falls, Jack purchases more of both jeans and shirts.
D) While purchasing pens and pencils, when the price of pen falls, Jill purchases more of pens and less of pencils.
10) A substitution effect of a price change is represented by:
A) movement along the same indifference curve.
B) movement to a different indifference curve.
C) a change in the initial budget line to a new budget line.
D) a change in the slope of the initial budget line.
