Economics Answers

Topics: Indifference curve, Consumer theory, Utility Pages: 18 (3331 words) Published: November 10, 2011
ECON 312 – Intermediate Microeconomics Due date: 22-02-2100


STUDENT’S NAME : Devon Rachae


Multiple Choice Questions

1.The theory of consumer behavior is based on certain assumptions. It includes at least the assumption(s) that preferences are: a. complete.
b. transitive.
c. intransitive.
d. both (a) and (b) are correct.
e. both (a) and (c) are correct.

2.A consumer prefers market basket A to market basket B, and prefers market basket B to market basket C. Therefore, A is preferred to C. The assumption that leads to this conclusion is:

a. transitivity.
b. completeness.
c. all goods are good.
d. diminishing MRS.
e. assumption of rationality.

3.The assumption that preferences are complete:

a. means that a consumer will spend her entire income.
b. is unnecessary, as long as transitivity is assumed.
c. recognizes that there may be pairs of market baskets that cannot be compared. d. means that between any two market baskets of goods, the consumer can determine that either one is preferred to the other or that she is indifferent between them.

4. A curve that represents all combinations of market baskets that provide the same level of utility to a consumer is called:

a. a budget line.
b. an isoquant.
c. an indifference curve.
d. a demand curve.
e. none of the above.

5.An upward sloping indifference curve defined over two goods violates which of the following assumptions from the theory of consumer behavior?

a. transitivity.
b. preferences are complete.
c. more is preferred to less.
d. all of the above.
e. none of the above.

6.The slope of an indifference curve reveals:

a. that preferences are complete.
b. the marginal rate of substitution of one good for another good. c. the ratio of market prices.
d. that preferences are transitive.
e. none of the above.

7.Indifference curves are convex to the origin because of:

a. transitivity of consumer preferences.
b. the assumption of a diminishing marginal rate of substitution. c. the assumption that more is preferred to less.
d. the assumption of completeness.
e. none of the above.

8.Suppose that a market basket of two goods is changed by adding more of one of the goods and subtracting one unit of the other. The consumer will:

a. rank the market basket more highly after the change.
b. rank the market basket more highly before the change.
c. rank the market basket just as desirable as before.
d. any one of the above statements may be true.

Alvin's preferences for good X and good Y are shown in the diagram below.


Figure 3.1

9.Based on Figure 3.1, it can be inferred that:

a. Alvin does not consider good X as "good."
b. Alvin will never purchase any of good Y.
c. Alvin regards good X and good Y as perfect substitutes. d. Alvin regards good X and good Y as perfect complements. e. none of the above.

10.Refer to Figure 3.1. Which of the following is true concerning Alvin's marginal rate of substitution?

a. It is diminishing.
b. It is positive.
c. It is constant.
d. It is zero.

11.Refer to Figure 3.1. Which assumption concerning preferences do Alvin's indifference curves violate?

a. Diminishing marginal rates of substitution.
b. Transitivity of preferences.
c. More is preferred to less.
d. Completeness.

Consider the following three market baskets:

Table 3.1
| |Food |Clothing |
|A |6 |3 |
|B |8 |5 |
|C |5 |8 |

12.Refer to Table 3.1. If preferences satisfy all four of the usual assumptions:

a. A is on the same indifference curve as B.
b. B is on the same indifference...
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