Question : 10.5   Appendix: Using Indifference Curves and Budget Lines to Understand : 1387721

10.5   Appendix: Using Indifference Curves and Budget Lines to Understand Consumer Behavior

1) What is an indifference curve?

A) It is a curve that shows the total utility and the marginal utility derived from consuming a bundle of goods.

B) It is a curve that shows the combinations of consumption bundles that gives the consumer the same utility.

C) It is a curve that shows ranks a consumer’s preference for various consumption bundles.

D) It is a curve that shows the tradeoff a consumer faces among different combinations of consumption bundles.

Figure 10-3

2) Refer to Figure 10-3. The Bobsey twins, Laurel and Hardy, both enjoy watching romantic comedies and science fiction movies. Based on the diagrams above what can you conclude about their movie preferences?

A) They have identical movie preferences.

B) Laurel enjoys romantic comedies more than Hardy.

C) Laurel enjoys science fiction movies more than Hardy.

D) The diagrams do not provide any information about relative preferences.

3) Refer to Figure 10-3.  Best friends Laurel and Hardy both enjoy watching romantic comedies and science fiction movies. Based on the diagrams above what can you conclude about their movie preferences?

A) They have identical movie preferences.

B) Hardy enjoys romantic comedies more than Laurel.

C) Hardy enjoys science fiction movies more than Laurel.

D) The diagrams do not provide any information about relative preferences.

4) If Dawson prefers pizza to hamburgers and hamburgers to hot dogs, then if preferences are transitive,

A) at times she could be indifferent among the three items.

B) she must prefer pizza to hot dogs.

C) she could prefer hamburgers to pizza on some occasions but not hot dogs to pizza.

D) she could prefer hot dogs to pizza on some occasions but not hamburgers to hot dogs.

5) If preferences are transitive, indifference curves

A) intersect at the equilibrium consumption bundle.

B) intersect at the optimum consumption bundle.

C) intersect where the marginal rate of substitution for each indifference curve is equal.

D) do not intersect.

6) The slope of an indifference curve

A) is calculated by dividing the price of good on the vertical axis by price of the good on the horizontal axis.

B) measures total utility.

C) measures the marginal rate of substitution between the two goods in question.

D) is calculated by dividing the quantity of the good on the vertical axis by the quantity of the good on the horizontal axis.

7) What is the marginal rate of substitution?

A) the price ratio

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 rate at which the consumer is willing to trade one good for another so that she increases her utility

D) the rate at which the consumer is willing to trade one good for another without any loss in utility