2013 CH 11 sample questions

Transcription

1 Class: Date: 2013 CH 11 sample questions Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The budget line shows a. the person's lifetime earnings. b. a person's budget and its limits. c. a family's budget and what it plans to buy for the year. d. the utility gained from successive amounts of a good. e. only the affordable combinations of goods and services the person can buy. 2. Which of the following statements is correct? a. Consumers have the ability to buy everything they desire. b. A consumer's budget line shows the limits to what a consumer can buy. c. A consumer's budget line shows the goods with the highest marginal utilities. d. Rich consumers are unaffected by prices. e. A budget line changes only if the person's budget changes. 3. A budget line a. keeps the budgets of all consumers in line with their needs. b. shows the satisfaction people get from their budget. c. describes the limits to consumption choices, given the income of the consumer and the prices of goods and services. d. has a positive slope. e. has no slope. 4. Which of the following statements is correct? a. The slope of the budget line shows the opportunity cost of the good measured along the x-axis. b. Along the budget line, consuming more of one good implies consuming more of the other. c. The slope of the budget line shows there is no tradeoff between the two goods because the consumer can buy each of them. d. If the consumer's budget increases, the budget line shifts leftward and its slope does not change. 5. A budget line a. shows the limits to what can be consumed. b. has a slope equal to a relative price. c. rotates or shifts only when the consumer's budget changes. d. Answers B and C are both correct. e. Answers A and B are both correct. 6. In order to draw a budget line for a consumer, we need to know a. only the consumer's budget. b. only the prices of the goods the consumer demands. c. both the consumer's budget and the prices of the goods the consumer demands. d. the consumer's budget, the prices of the goods the consumer demands, and the utilities of the goods the consumer buys. e. the utilities of the goods the consumer buys. 3

2 7. Timmy makes $100 per week as a taxidermist. He spends all this income to buy pizza and hair gel. The price of a pizza is $10 and the price of a bottle of hair gel is $4. If Timmy buys 5 bottles of hair gel, then he buys pizzas. a. 10 b. 4 c. 8 d Timmy makes $100 per week as a taxidermist. He spends all this income to buy pizza and hair gel. The price of a pizza is $10 and the price of a bottle of hair gel is $4. If Timmy buys 6 pizzas per week, how many bottles of gel can he purchase? a. 10 b. 60 c. 20 d Reb earns $1,000 per week as a fishing guide in Texas. With this money he buys fishing lures and steaks. Lures cost $5 each, steaks cost $10 each. With this level of income, which consumption points are not possible? a. 200 lures, 0 steaks b. 100 lures, 60 steaks c. 80 lures, 20 steaks d. 0 lures, 50 steaks e. 50 lures, 50 steaks 10. Reb earns $1,000 per week as a fishing guide in Texas. With this money he buys fishing lures and steaks. Lures cost $5 each, steaks cost $10 each. If Reb purchases 124 lures per week, how many steaks can he buy? a. 620 b. 38 c. 123 d. 380 e Sarah earns $500 per week selling baskets made out of tree vines. With this money she buys sushi and rose bushes. Each piece of sushi costs $1 and each rose bush costs $10. If Sarah spends $170 per week on sushi, the maximum quantity of rose bushes can she buy each week is bushes. a. 33 b. 330 c. 3 d. 17 2

3 12. Susan can watch movies or attend plays. The table above gives combinations of movies and plays that are on her budget line. If the price of a movie is $5, then her budget for movies and plays is a. $5 per month. b. $25 per month. c. $30 per month. d. $60 per month. e. unknown from the information. 13. The figure above shows Sarah's budget line. Sarah earns $500 per week selling baskets made out of tree vines. With this money she buys sushi and rose bushes. Each piece of sushi costs $1 and each rose bush costs $10. Sarah will be at what point on her budget line if she spends $200 per week on sushi? a. Point a b. Point b c. Point c d. Point f e. Point d 3

4 14. The figure above shows Sarah's budget line. Sarah earns $500 per week selling baskets made out of tree vines. With this money she buys sushi and rose bushes. Each piece of sushi costs $1 and each rose bush costs $10. Sarah will be at what point on her budget line if she spends $500 per week on rose bushes? a. Point a b. Point c c. Point e d. Point f e. Point b 15. The figure above shows Sarah's budget line. Sarah earns $500 per week selling baskets made out of tree vines. With this money she buys sushi and rose bushes. Each piece of sushi costs $1 and each rose bush costs $10. Sarah will be at what point on her budget line if she spends $300 per week on rose bushes? a. Point a b. Point b c. Point c d. Point f e. Point e 16. The figure above shows Sarah's budget line. Sarah earns $500 per week selling baskets made out of tree vines. With this money she buys sushi and rose bushes. Each piece of sushi costs $1 and each rose bush costs $10. At what point on Sarah's budget line will she be if she decides not to buy any rose bushes? a. Point a b. Point b c. Point c d. Point f e. Point d 17. The figure above shows a consumer's budget line for sodas and DVD rentals. Point a represents an a. affordable combination of sodas and DVDs that spends the entire budget. b. affordable combination of sodas and DVDs that does not spend the entire budget. c. unaffordable combination of sodas and DVDs. d. affordable combination of sodas and DVDs but whether it spends the entire budget cannot be determined from the figure. 4

5 18. The figure above shows a consumer's budget line between sodas and DVD rentals. Point b represents an a. affordable combination of sodas and DVDs that spends the entire budget. b. affordable combination of sodas and DVDs that does not spend the entire budget. c. unaffordable combination of sodas and DVDs. d. affordable combination of sodas and DVDs but whether it spends the entire budget cannot be determined from the figure. 19. The figure above shows a consumer's budget line between sodas and DVD rentals. Point c represents an a. affordable combination of sodas and DVDs that spends the entire budget. b. affordable combination of sodas and DVDs that does not spend the entire budget. c. unaffordable combination of sodas and DVDs. d. affordable combination of sodas and DVDs but whether it spends the entire budget cannot be determined from the figure. 20. The figure above shows a consumer's budget line between sodas and DVD rentals. Point d represents an a. affordable combination of sodas and DVDs that spends the entire budget. b. affordable combination of sodas and DVDs that does not spend the entire budget. c. unaffordable combination of sodas and DVDs. d. affordable combination of sodas and DVDs but whether it spends the entire budget cannot be determined from the figure. 21. If the price of a good that a consumer purchases falls, the consumer's budget line will a. rotate outward and its slope will change. b. rotate inward and its slope will change. c. shift outward and its slope will not change. d. shift inward and its slope will not change. e. either rotate or shift outward depending on whether the good has positive or negative marginal utility. 22. Sarah buys milk and ground beef. When the price of milk changes, the a. slope of Sarah's budget line changes. b. slope of Sarah's budget line remains the same. c. tradeoff between milk and ground beef changes. d. Both answers A and C are correct. e. Both answers B and C are correct. 23. Suppose Alice spends her budget on books and CDs. If her budget does not change and the price of a book stays the same but the price of a CD falls, her budget line a. shifts outward and its slope does not change. b. shifts inward and its slope does not change. c. rotates inward and its slope changes. d. rotates outward and its slope changes. e. does not change because her budget has not changed. 24. Suppose Alice spends her income on books and CDs. If her budget does not change and the price of a book remains the same but the price of a CD falls, Alice a. can now buy more books if she spends all her budget on books. b. can now buy fewer CDs if she spends all her budget on CDs. c. can now still buy the same number of books if she spends all her budget on books. d. definitely must buy more CDs and more books. e. can buy the same number of books and CDs because her budget has not changed. 5

6 25. Reb buys fishing lures and steaks. If his budget does not change and the price of a fishing lure decreases, the maximum number of fishing lures he can purchase and the maximum number of steaks he can purchase. a. increases; increases b. increases; decreases c. increases; does not change d. decreases; increases e. does not change; does not change 26. Samantha has a budget of $40 and buys beef jerky and fried pork rinds. Her budget does not change and the price of both beef jerky and fried pork rinds increases. As a result, a. Samantha's consumption possibilities have decreased. b. Samantha's budget line shifts inward. c. Samantha can still buy the combination of beef jerky and fried pork rinds she was initially consuming because her budget did not change. d. Answers A and B are correct. e. Answers A and C are correct. 27. An increase in a consumer's budget a. shifts the budget line outward and does not change its slope. b. shifts the budget line inward and does not change its slope. c. rotates the budget line outward around the point where it intersects the x-axis. d. rotates the budget line inward around the point where it intersects the x-axis. e. rotates the budget line outward around the point where it intersects the y-axis. 28. If you consume hot dogs and hamburgers and your budget increases, while the prices of hot dogs and hamburgers do not change, then your budget line a. does not change. b. shifts outward and its slope does not change. c. rotates outward and its slope changes. d. shifts inward and its slope does not change. e. rotates inward and its slope changes. 6

7 29. In the above figures, which one reflects an increase in the price of chicken? a. Figure A b. Figure B c. Figure C d. Figure D e. Both Figure B and Figure C 30. In the above figures, which one reflects a decrease in the price of chicken? a. Figure A b. Figure B c. Figure C d. Figure D e. Both Figure A and Figure D 31. In the above figures, which one reflects an increase in the consumer's income? a. Figure A b. Figure B c. Figure C d. Figure D e. Both Figure A and Figure D 7

8 32. When the price of one good changes while another good's price does not change, then there has been a change in the a. relative price. b. marginal utility price. c. absolute price. d. marginal price. e. utility price. 33. Looking at prices for various goods in the United States between 1995 to 2005, we see that although the price of different goods have changed at different rates, a. all relative prices have risen. b. all relative prices have decreased. c. the relative price of gasoline and of college books and supplies have risen. d. the relative price of long-distance phone calls and of coffee have risen. e. relative prices have not changed. 34. In the United States from 1995 to 2005, which of the following products had the largest relative price increase? a. bananas b. coffee c. electricity d. personal computers e. gasoline 35. In the United States from 1995 to 2005, which of the following products had the largest relative price decrease? a. long-distance phone calls b. gasoline c. college books and supplies d. apples e. personal computers 36. The benefit or satisfaction that a person gets from the consumption of a good or service is called a. marginal opportunity benefit. b. utility. c. demand. d. quantity demanded. e. purchased utility. 37. The additional satisfaction from consuming one more unit of a product is called a. marginal return. b. marginal cost. c. marginal utility. d. total utility. e. marginal demand. 38. Marginal utility is the change in total utility that results from a. an increase in the price of the good. b. a change in the budget line. c. a one-unit change in the quantity of a good consumed. d. a decrease in the price of the good. e. an increase in the consumer's income. 8

9 39. If the total utility of 2 bags of chips is 25, the total utility of 3 bags is 33, and the total utility of 4 bags is 40 units, then the marginal utility of the 3rd and 4th bags are a. 8 and 7, respectively. b and 11, respectively. c. 11 and 10, respectively. d. 58 and 73, respectively. e. 33 and 40, respectively. 40. Diminishing marginal utility means that an increase in the consumption of a good leads to a. a decrease in total utility. b. a decrease in marginal utility. c. an increase in marginal utility. d. no change in marginal utility. e. an increase in the consumer's budget. 41. Kevin likes weasel leg stew. But every bite of the stew that he eats provides him with less and less total utility. This fact means that Kevin's marginal utility is a. decreasing. b. increasing, but at a decreasing rate. c. increasing at an increasing rate. d. not changing. e. changing but the rate of change is not certain without more information. 42. The table above shows Buffy's utility from wooden stakes and cloves of garlic. The total utility Buffy gets from 5 wooden stakes is a. 7. b. 65. c d The table above shows Buffy's utility from wooden stakes and cloves of garlic. The marginal utility of which clove of garlic is the largest? a. the first clove b. the second clove c. the fifth clove d. the third clove e. The marginal utility of all cloves is the same. 9

10 44. The table above shows Buffy's utility from wooden stakes and cloves of garlic. As Buffy uses more stakes, the marginal utility of a stake and as she uses more cloves of garlic, the marginal utility of a clove of garlic. a. increases; increases b. increases; decreases c. decreases; increases d. decreases; decreases e. does not change; does not change 45. The table above gives Matt's utility from consuming slices of pizza. His marginal utility from the 4th slice is a. 30 units. b. 3 units. c. 94 units. d units. e. 7.5 units 46. The table above gives Matt's utility from consuming slices of pizza. As Matt consumes more slices of pizza, he a. obtains greater amounts of marginal utility. b. obtains less total utility. c. has diminishing marginal utility. d. has diminishing total utility. e. has unchanging marginal utility. 47. For a consumer to maximize utility, in part the consumer must a. allocate the entire available budget. b. make the marginal utility per dollar spent as much different as possible for all goods. c. make the marginal utility per dollar spent as small as possible for all goods. d. spend as little of the budget as possible. e. Answers A and B are both correct. 48. In order to maximize her utility, a consumer must a. not allocate her entire available budget. b. allocate her entire available budget in order to buy the combination of goods that equalizes the total utility per dollar spent for all goods. c. allocate her entire available budget and do nothing else because when the entire budget is allocated, utility is maximized. d. allocate her entire available budget in order to buy the combination of goods that equalizes the marginal utility per dollar spent for all goods. e. allocate her entire available budget in order to buy the combination of goods that makes the marginal utility per dollar spent for all goods as large as possible. 10

11 49. Celine will maximize her utility if she allocates all of her available budget and then consumes so that the a. marginal utility of good X is equal to marginal utility of good Y. b. marginal utility per dollar spent on good X is equal to marginal utility per dollar spent on good Y. c. total utility of good X is equal to the total utility of good Y. d. total utility per dollar spent on good Y is equal to total utility per dollar spent on good X. e. total utility per dollar spent on good X is equal to the marginal utility per dollar spent on good X and the total utility per dollar spent on good Y is equal to the marginal utility per dollar spent on good Y. 50. For David, the marginal utility of an additional car is 2,000 units and the marginal utility of an additional vacation is 1,000 units. David is allocating all his budget. Hence to maximize his utility, David will a. shift his consumption from the vacation to the car. b. shift his consumption from the car to the vacation. c. save his budget by not spending it until he can afford both the car and the vacation. d. buy both the car and the vacation now. e. possibly do something, but there is not enough information available to determine what he would do. 51. If Raul's marginal utility per dollar spent on bread is 25 and the marginal utility per dollar spent on butter is 30, a. Raul should purchase more butter and less bread to increase his total utility. b. Raul's marginal utility of butter will fall if he buys more butter. c. Raul's marginal utility of bread will rise if he buys less bread. d. Only answer B and answer C are correct. e. Answer A, answer B, and answer C are correct. 52. Brenda's marginal utility per dollar from the second hamburger is 20. Her marginal utility from the third hamburger would be a. less than 20. b. more than 20. c. equal to 20. d. not comparable to the marginal utility per dollar from the second hamburger. e. some amount, but we need more information to determine how it compares to Chase has a budget of $14 which he must allocate between steak and cranberry juice. The table gives his marginal utility and the marginal utility per dollar for both of those goods. The price of steak is $10 per serving and the price of cranberry juice is $2 per serving. To maximize his utility, Chase should buy a. 2 servings of steak and 2 servings of cranberry juice. b. 2 servings of steak and 4 servings of cranberry juice. c. 1 serving of steak because this has the highest marginal utility. d. 1 serving of steak and 2 servings of cranberry juice. e. 4 servings of steak and 4 servings of cranberry juice. 11

12 54. Liz consumes two goods, candy bars and potato chips. Her budget is $4 per day. The price of a candy bar is $1.00 and the price of a bag of chips is 50 cents. Her utility is in the table above. How much marginal utility per dollar spent does the 3rd bag of potato chips give Liz? a. 18 b. 4 c. 8 d. 36 e. We need more information to be able to answer the question. 55. Liz consumes two goods, candy bars and potato chips. Her budget is $4 per day. The price of a candy bar is $1.00 and the price of a bag of chips is 50 cents. Her utility is in the table above. For Liz to maximize her utility, what combination of candy bars and potato chips should she eat? a. 4 candy bars and 0 bags of potato chips b. 3 candy bars and 2 bags of potato chips c. 2 candy bars and 4 bags of potato chips d. 1 candy bar and 5 bags of potato chips e. None of the above answers are correct. 56. The demand curve for macadamia nuts is downward sloping. This slope is because consumers maximize their utility and an increase in the price of macadamia nuts leads to a. no change in quantity demanded. b. an increase in the marginal utility per dollar spent on macadamia nuts. c. a decrease in the marginal utility per dollar spent on macadamia nuts. d. consumers' budget lines rotating outward with their slopes changing. e. consumers' budget lines shifting outward with no change in their slope. 57. Juan's marginal utility from strawberries is 200 and his marginal utility from cream is 100. Juan spends all his budget. The price of strawberries is $5 per pound and the price of cream is $5 per pint. To maximize his utility, Juan should a. buy more cream and fewer strawberries. b. buy less cream and more strawberries. c. buy more cream and more strawberries. d. buy less cream and fewer strawberries. e. change nothing because Juan is maximizing his utility now. 58. When making a decision between purchasing soda or pizza, a consumer compares a. only the marginal utility derived from the purchase of each unit of the items. b. only the prices of each item. c. marginal utility per-dollar-consumed for each item. d. marginal utility per dollar spent for each item. e. the price of each item to his or her total utility from the item. 12

13 59. The maximum price a consumer is willing to pay for an extra unit of a good or service when total utility is maximized is known as a. demand. b. marginal benefit. c. quantity demanded. d. total utility. e. marginal utility. 60. The fact that diamonds have a much higher price than water a. violates the rules of utility maximization because water is necessary for life. b. does not violate the rules of utility maximization because globally, fresh water is actually very rare. c. does not violate the rules of utility maximization because water's marginal utility is low. d. violates the rules of utility maximization because diamonds are not necessities. e. violates the rules of utility maximization because the consumer actually consumes a large amount of water. 61. One reason why the price of diamonds is so high is because the a. marginal utility of diamonds is zero. b. marginal utility of diamonds is high. c. marginal utility of diamonds is low. d. total utility of diamonds is low. e. total utility of diamonds is high. 62. Why does the paradox of value between diamonds and water arise? a. because water has a low price and a low total utility, while diamonds have a high price and a high total utility b. because water has a low price and a low marginal utility, while diamonds have a high price and a high marginal utility c. because necessities like water are higher priced than luxuries like diamonds d. because diamonds have a higher value to people even though water is essential to life e. because water has a low price and a low total utility, while diamonds have a high price but also a low total utility 63. The paradox of value with respect to water and diamonds can be explained using consumer surplus because a. water is cheap but provides a large consumer surplus, while diamonds are expensive with a small consumer surplus. b. diamonds are in large supply relative to their demand, while water is scarce in supply relative to its demand. c. water is cheap but provides a small consumer surplus, while diamonds are expensive but provide a large consumer surplus. d. the total consumer surplus from diamonds is greater than the total consumer surplus from water. 64. An indifference curve is a line that shows a. what the consumer can afford to buy. b. how the quantity demanded of a good changes as its price changes. c. combinations of goods among which the consumer is indifferent. d. combinations of goods that have the same marginal rate of substitution. e. combinations of goods that are affordable. 13

14 65. An indifference curve is a line that shows a. combinations of goods among which a consumer is indifferent. b. different combinations of goods a consumer is able to buy. c. the indifference of consumers for the budget constraint. d. Both answers B and C are correct. e. Both answers A and C are correct. 66. A curve that shows combinations of goods among which a consumer does not prefer one combination to another is a. a budget line. b. an indifference curve. c. a production possibilities curve. d. a demand curve. e. a marginal rate of substitution curve. 67. An indifference curve is plotted with the a. quantity of a good on the horizontal axis and the good's price on the vertical axis. b. quantity of a good on the horizontal axis and the quantity of another good on the vertical axis. c. price of a good on the vertical axis and income on the horizontal axis. d. quantity of a good on the horizontal axis and marginal utility on the vertical axis. e. price of a good on the horizontal axis and the price of another good on the vertical axis. 68. Along an indifference curve the a. marginal rate of substitution is constant. b. consumer does not prefer one consumption point to another. c. marginal rate of substitution is equal to 0. d. consumer prefers some of the consumption points to others. e. marginal rate of substitution for a good increases as more of the good is consumed. 69. A preference map is a a. series of indifference curves. b. positively sloped series of curves, which reflect a consumer's preferences. c. contour map of a consumer's budget. d. map showing how much a consumer prefers one good for another. 70. The marginal rate of substitution is defined as the rate at which a. a person will give up more of one good to get another. b. prices fall. c. a person will purchase more of every item they desire. d. a person will purchase less of every item they desire in response to a price increase. e. a person will substitute an increased budget for higher prices of the goods the person consumes. 71. The marginal rate of substitution is equal to the magnitude of the a. slope of the demand curve. b. price of the good measured along the x-axis. c. slope of the indifference curve. d. relative prices of the two goods. e. price of the good measured along the y-axis. 14

15 72. As Sam moves rightward along his indifference curve, his marginal rate of substitution for the good on the horizontal axis a. is diminishing. b. is increasing. c. remains constant. d. shows the change in his income. e. first increases and then diminishes. 73. Suppose the quantity of burgers is measured on the horizontal axis and the quantity of bags of French fries is measured on the vertical axis. The marginal rate of substitution for burgers is a. the ratio of burgers consumed to bags of fries consumed. b. the ratio of bags of fries consumed to burgers consumed. c. the rate at which a person is willing to give up burgers to get more bags of fries while staying on the same indifference curve. d. the rate at which a person is willing to give up bags of fries to get more burgers while staying on the same indifference curve. e. the number of burgers consumed minus the number of bags of fries consumed. 74. A point where the budget line is just touching an indifference curve at one point is a. the least affordable point. b. the best affordable point. c. on the lowest attainable indifference curve. d. Both answers B and C are correct. e. Both answers A and C are correct. 75. At the point where the budget line is just touching an indifference curve at one point, a. the slope of the budget line is equal to the slope of the indifference curve. b. the marginal rate of substitution equals the relative price. c. the consumer can change his or her consumption and can move to a higher indifference curve. d. Both answers A and B are correct. e. Both answers B and C are correct. 76. A consumer is in equilibrium when the a. consumer is buying any combination of goods and services on his or her budget line. b. consumer is buying the combination of goods and services on the budget line and on the highest attainable indifference curve. c. marginal rate of substitution is as small as possible. d. marginal rate of substitution is as large as possible. e. marginal rate of substitution exceeds the relative price of the two goods by as much as possible. 77. Luke enjoys eating tuna sashimi and drinking Pepsi. His consumer equilibrium occurs where his budget line a. just touches the lowest indifference curve at one point. b. just touches the highest indifference curve at one point. c. touches every indifference curve. d. is below every indifference curve. e. More information about Luke's budget is needed to determine his consumer equilibrium. 15

16 78. Which of the following is NOT necessary for a consumer to be at his or her best affordable point of consumption? a. The consumer chooses a bundle of goods and services that lies on his or her budget line. b. The consumer is on his or her highest attainable indifference curve. c. When only two goods are consumed, the consumer chooses equal amounts of both. d. The marginal rate of substitution between two goods is equal to the relative price of those two goods. e. The indifference curve is tangent to the budget line. 79. Roger earns $60 per month, which he spends on frisbees and CDs. The price of a frisbee is $6, and the price of a CD is $12. Which of the following combinations of frisbees and CDs is most likely to be his best affordable point? a. 8 frisbees and 1 CD b. 5 frisbees and 2 CDs c. 3 frisbees and 4 CDs d. 2 frisbees and 5 CDs e. 2 frisbees and 2 CDs 80. Using Gabriel's budget line and his indifference curves between horseback riding lessons and baseball lessons, and then changing the prices of each activity holding his income constant, which of the following can be derived? a. Gabriel's demand curve for each activity b. Gabriel's supply curve for each activity c. Gabriel's marginal benefit for each activity d. Gabriel's net gain for each activity e. Both answers A and B are correct. 81. In an indifference curve/budget line diagram, generally when the price of a good increases, the consumer purchases a. less of the good and moves to a lower indifference curve. b. less of the good and moves to a higher indifference curve. c. more of the good and moves to a higher indifference curve. d. more of the good and moves to a lower indifference curve. e. the same amount of the good and moves to a higher indifference curve. 82. Gertrude has a $15 budget to spend on soda and crackers. Soda costs $1 per bottle and crackers cost 50 each. If the price of soda increases to $2 per bottle, the rotates inward and there is a movement along the. a. budget line; demand curve for crackers b. demand curve; indifference curve for crackers c. budget line; demand curve for soda d. demand curve; indifference curve for soda e. indifference curves; demand curve for soda 83. Gertrude has a $15 budget to spend on soda and crackers. Soda costs $1 per bottle and crackers cost 50 each. The quantity of soda is measured on the vertical axis. If the price of soda increases to $2 per bottle and the price of crackers increase to $1 each, the a. indifference curves shift inward. b. indifference curves shift outward. c. budget line shifts inward. d. budget line shifts outward. e. demand curve for soda shifts leftward. 16

17 84. Moving down along an indifference curve, a. the price of the good measured on the vertical axis decreases. b. total utility decreases. c. the marginal rate of substitution for the good on the horizontal axis decreases. d. the slope of the budget line decreases. e. the consumer increasingly prefers the new consumption points to the old consumption points. 85. Which of the following is true regarding the demand curve for sodas? a. As you move upward along the demand curve, you experience diminishing marginal utility. b. A point on a person's demand curve for soda represents a best affordable point in an indifference curve/budget line diagram. c. Moving upward along the demand curve, the marginal rate of substitution for the good on the horizontal axis decreases. d. An increase in the price of soda shifts the curve outward. e. An increase in the price of soda shifts the curve inward. 86. Consider an indifference curve for sodas and pizza, drawn in a figure with sodas measured along the horizontal axis. Moving downward along the indifference curve, the a. marginal utility per dollar for sodas must increase. b. marginal utility per dollar for pizza must increase. c. consumer remains indifferent among the different combinations of soda and pizza. d. the level of total utility must change. e. marginal rate of substitution is constant. 87. Billy has a $20 budget to spend on yogurt and cereal. Yogurt cost $2 each and cereal costs $4 each. Which of the following could be a utility-maximizing combination of yogurt and cereal? a. 4 yogurts and 4 cereals. b. 10 yogurts and 5 cereals. c. 5 yogurts and 3 cereals. d. 2 yogurts and 4 cereals. e. 1 yogurt and 4 cereals. 88. Billy has a $20 budget to spend on yogurt and cereal. Yogurt cost $2 each and cereal costs $4 each. Suppose that the quantity of yogurt is on the vertical axis and the quantity of cereal is on the horizontal axis. If the price of yogurt increases, which of the following is true? i. The budget line rotates outward. ii. Yogurt's marginal utility per dollar decreases. iii. The relative price of yogurt increases. a. i and ii b. i and iii c. ii and iii d. i, ii, and iii e. Only i 17