1)if prices and income all change by the same proportion

The budget line doesn't change

2)
Refer to Figure 5.1. Which graph most likely represents a doubling of the
prices of both Books and DVDs?
A

3)
Refer to Figure5.1. Which graph represents an increase in the price of
DVDs?
C

4)
Refer to Figure5.1. Which graph represents an increase in the consumer's
income?

5)
Suppose a consumer only purchases food and clothing, and food is plotted
along the horizontal axis of the consumer's indifference map. If the price of
clothing increases and the price of food and income do not change, then
the budget line changes by rotating:
counter-clockwise about the fixed horizontal axis intercept.

6) Assume that food is measured on the horizontal axis and clothing on the
vertical axis. If the price of food falls relative to that of clothing, the budget
line will:

Becomes Flatter

7) If prices and income all change by the same proportion

The budget line doesnt Change

8) An increase in a consumer's income will cause the budget line to

Shift Outwards

9) Sue views hot dogs and hot dog buns as perfect complements in her
consumption, and the corners of her indifference curves follow the 45-
degree line. Initially, the price of hot dogs is $3 per package (8 hot dogs),
the price of buns is $3 per package (8 hot dog buns), and Sue's budget is
$48 per month. How does her optimal consumption bundle change if the
price of hot dog buns increases to $5 per package?

She reduces her consumption by 2 packages of hot dogs and 2 packages

of hot dog buns.

10) Sallys Bakery specializes in making five types

of treats: pies, muffins, ice cream, cookies, and milk
shakes. Steve, a
long-time customer, is addicted to Sallys muffins. The
pies and milk shakes
are equally appealing, but not quite addicting. He does
not like the cookies
very much and absolutely hate Sallys ice cream. If Sally
chooses to make and
sell only pies, cookies, and ice cream, Steve will buy:

Pies

11) Marge has spent her entire budget on milk and cookies. The last glass
of milk provided Marge with 10 additional utils and the last cookie provided
her with 25 additional utils. The price of a cookie is twice the price of a
glass of milk. Given this information, Marge should:

decrease her consumption of milk and increase her consumption of

cookies.

12) An increase in the price of the good measured along the vertical axis
will cause the budget line to

Becomes Flatter

13) Sallys Bakery specializes in making five types

of treats: pies, muffins, ice cream, cookies, and milk
shakes. Angel, a
long-time customer, is addicted to Sallys ice cream. The
cookies and milk
shakes are equally appealing, but not quite addicting. She
does not like the
muffins very much and absolutely hate Sallys pies. If
Sally chooses to make
and sell only muffins, cookies, and ice cream, Angel will
buy:
Ice Cream

14) If an individual has a constant MRS of shoes for sneakers of 3/4 (that
is, he or she is always willing to give up 3 pairs of sneakers to get 4 pairs of
shoes) then, if sneakers and shoes are equally costly, he or she will

buy only sneakers

15) Mikey is very picky and insists that his mom make his breakfast with
equal parts of cereal and apple juice any other combination and it ends up
on the floor. Cereal costs 4 cents per tablespoon and apple juice costs 6
cents per tablespoon. If Mikey's mom budgets $8 per month for Mikey's
breakfast, how much cereal and juice does she buy?

80 tablespoons each of cereal and juice

16) Sue views hot dogs and hot dog buns as perfect complements in her
consumption, and the corners of her indifference curves follow the 45-
degree line. Suppose the price of hot dogs is $5 per package (8 hot dogs),
the price of buns is $3 per package (8 hot dog buns), and Sue's budget is
$48 per month. What is her optimal choice under this scenario?

6 packages of hot dogs and 6 packages of buns

17) Suppose a consumer only purchases food and clothing, and food is
plotted along the horizontal axis of the consumer's indifference map. If the
price of food and clothing increase and income does not change, then the
budget line changes by rotating:

Shift Inwards/
None of the above

18) The price of coffee is always equal to one-half the price of tea. When
we plot the budget line for coffee and tea, coffee is plotted on the horizontal
axis. What is the slope of this budget line?

-1/2

19) The price of bread is $1.50 per pound and the price of butter is $3 per
pound. Steve has an income of $30, with which he buys 4 pounds of bread.
How many pounds of butter does he buy, assuming he buys nothing else?

20) The budget constraint for a consumer who only buys apples (A) and
bananas (B) is PAA + PBB = I where consumer income is I, the price of
apples is PA, and the price of bananas is PB. To plot this budget constraint in
a figure with apples on the horizontal axis, we should use a budget line
represented by the slope-intercept equation:

B = I/PB - (PA/PB)A

21) Suppose a consumer buy books and DVDs. The price of a book is $10,
the price of a DVD is $20 and the consumer's income is $400. If books are
measured on the vertical axis and DVDs are measured on the horizontal
axis, then the budget line intersects the vertical axis at

40

22) Suppose a consumer buy books and DVDs. The price of a book is $10,
the price of a DVD is $20 and the consumer's income is $400. If books are
measured on the vertical axis and DVDs are measured on the horizontal
axis, then the slope of the budget line is

-2
23) Suppose a consumer buys pizza (P) and soft drinks (S). The price of
pizza is $10, the price of soft drinks is $2 and the consumer's income is
$100. If pizza is measured on the vertical axis and soft drinks are
measured on the horizontal axis, then the consumer's budget constraint is
given by

P = 10 - (1/5)S

24) Suppose you only consume food and clothing, and clothing is plotted on
the vertical axis. Also, you purchase food at a fixed price (P F), but the price
of clothing declines as you buy in larger quantities (i.e., quantity discounts).
What does the budget line look like in this case?

The budget line is now convex to (bows in toward) the origin

25) Eliza used to consume 5 cookies and 6 cupcakes a

day. Now she consumes 6 cookies and 3 cupcakes daily in
order to maintain the
same level of happiness as before. The MRS for cookies
with cupcakes is:

-3

26) Suppose a consumer's MRS is given by the formula MRS = T/P, PT

where P stands for the number of pieces of pizza and T stands for the
number of tacos. Starting at 12 tacos and 4 pizzas, the consumer must
receive

3 tacos to compensate them for the loss of one piece of pizza

27) Suppose Bart's MRS for sodas with chips is 6 bags of chips per soda.
Also assume that Lisa's MRS for sodas with chips is 8 bags of chips per
soda. Assuming that these rates of substitution don't depend on the
amounts consumed, which of the following trades would make Bart and
Lisa better off?

No mutually beneficial trade can occur here

28)

Refer to Figure 4.2. The marginal rate of substitution for economics books
with CDs is highest at point

29) Jiaxiu used to consume 8 hot dogs and 4 hamburgers

a day. Now she consumes 12 hot dogs and 2 hamburgers
daily in order to maintain
the same level of wellbeing as before. The MRS for hot
dogs with hamburgers is:

-0.5
30)
Highest Value of X Jose
Highest Value of Y - Juan

31)In order to maintain the same level of

wellbeing, Jack must be given 2 oranges for every apple
that is taken away from
him. Jacks marginal rate of substitution for apple with
oranges is:

-2

32)
Refer to Figure 4.3. Which diagram most likely represents the indifference
map for left shoes and right shoes?

33) Suppose Frank is completely indifferent between drinking Coke or

drinking Pepsi. Then Frank's indifference curves for Coke and Pepsi would
be

Linear

34) Envision a graph with meat on the horizontal axis and vegetables on
the vertical axis. A strict vegetarian would have indifference curves that are:

Horizontal Lines

35)
Which of the following diagrams represent an indifference
curve between right shows (X) and left shoes (Y), for a
consumer that likes to always wear shoes in both feet?

36) Refer to Figure 4.3. Which diagram most likely represents the
indifference map for a good and a "bad"?

37) Felix always consumes exactly four cookies with a glass of milk. Felix's
indifference curves for cookies and milk would be

L-Shaped

38) Two products are perfect complements if

They are valuable only when used together in fixed proportions

39) Two products are perfect substitutes if

A consumer is willing to swap one for another at a fixed rate

40) The more is better assumption states that a consumer

represented by these indifference curves map is always
going to prefer bundle:

B compared to A
C compared to A
None of the other choices is correct
41) Say you own a few 1- bedroom apartments around campus town. If
enrollment at the university unexpectedly declined, should you increase or
decrease the rent you charge in order to deal with the increase in vacancy
rates?

decrease rent

42) The equilibrium price in the market tends to fall when the market is
experiencing a:

supply surplus

43) The equilibrium price in the market tends to increase when the market
is experiencing a:

supply shortage

44) When a market is experiencing a surplus of supply the equilibrium price

tends to:

decrease

45) Suppose we assume the supply and demand for good X are the
following:

Qd = 75 - 2Px
Qs = 0.5Px
What would be the equilibrium quantity in this market?

Equate Px
15
46) Other things equal, a decrease in demand of good X will ________ the
________ for good X.

decrease; quantity supplied

47) Other things equal, a decrease in the average income of buyer's of

good X will __________ the market price of good X (assume good X is a
normal good).

Decrease

48) Other things equal, an increase in the average income of buyer's of

good X will __________ the market price of good X (assume good X is a
normal good).

Increase
49) Other things equal, a decrease in the price of good Y, a substitute of
good X, will __________ the market price of good X.

Decrease

50) Other things equal, an increase in the price of oranges, a substitutes for
apples, will __________ the market price of apples.

Increase

51) Other things equal, an increase in the price of good Y, a complement of

good X, will __________ the market price of good X.

Decrease

52) Other things equal, an increase in one of the inputs needed to produce
good Y, a complement of good X, will __________ the market price of good
X.

Decrease

53) Other things equal, an increase in the price of good Y, a substitute of

good X, will __________ the market price of good X.

Increase

54) Other things equal, a decrease in the average income of buyer's of

good X will __________ the market price of good X (assume good X is an
inferior good).

Increase

55) Other things equal, an increase in the price of gasoline, a complement

for cars, will __________ the market price of cars.

Decrease

56) Georgina thrives on two goods: pears and bananas. The cost of pears
is 30 pesos each and the cost of bananas is 15 pesos each. If her income
is 180 pesos, how many pears can she buy if she spends all of her income
on pears?

57) If she spends her entire budget, Betsy can afford 74 peaches and 9
pineapples. She can also just afford 14 peaches and 21 pineapples. The
price of peaches is 17 cents. What is the price of pineapples in cents?
85

58) A recent news story reported that OPEC is expected to decrease the
supply of oil next summer. Summer is traditionally a time of increased
demand for oil because of the many families driving and flying to vacation
sites. What would be the combined effect of these two events on the
summer market for gasoline?

an increase in the price and an unpredictable change in the quantity

59) The battery packs used in electric and hybrid automobiles are one of
the largest cost components for manufacturing these cars. As the price of
these batteries decline, we expect that the:

supply curve for electric and hybrid autos will shift rightward

60) A freeze in Florida's orange growing regions will:

result in a sharp increase in the price of oranges in the short run because
demand and supply are highly inelastic.

61) When an industry's raw material costs increase, other things remaining
the same,

the supply curve shifts to the left.

62) Suppose biochemists discover an enzyme that can double the amount
of ethanol that may be derived from a given amount of biomass. Based on
this technological development, we expect the:

supply curve for ethanol to shift rightward

63) An important determinant of the amount of grains harvested next year
by Ethiopian farmers is the amount of seeds planted this year. Given that
Western nations have guaranteed to donate five hundred tons of grain next
year, this year the Ethiopian farmers will:

plant fewer seeds as the price of grain will be lower with the food aid

64) Which of the following would cause a shift to the right of the supply
curve for gasoline?
I. A large increase in the price of public transportation.
II. A large decrease in the price of automobiles.
III. A large reduction in the costs of producing gasoline.

3 only

65) Consider the market for corn. What happens if there is an increased
demand for corn tortillas and at the same time a new corn seed becomes
available that dramatically increases the per-acre yield?

The change in price is indeterminate; quantity increases

66) The cost of sensors used in making digital cameras falls, while a
successful ad campaign makes digital cameras more fashionable. As a
result, the equilibrium relative price of digital cameras ________ and the
equilibrium quantity ________.

may increase, decrease, or stay the same; increases

67) Which of the following would cause an unambiguous decrease in the

real price of DVD players?

A shift to the right in the supply curve for DVD players and a shift to the left
in the demand curve for DVD players.

68) Assume that beer is a normal good. If the price of beer rises, then the
substitution effect results in the person buying ________ of the good and
the income effect results in the person buying ________ of the good.

less, less