1. Indifference curves illustrate
a. a firm’s profits.
b. a consumer’s budget.
c. a consumer’s preferences.
d. the prices of two goods.
2. Economists represent a consumer's preferences using
a. demand curves.
b. budget constraints.
c. indifference curves.
d. supply curves.
3. If two bundles of goods give a consumer the same satisfaction, the consumer must be
a. on her budget constraint.
b. in a position of equilibrium.
c. indifferent between the bundles.
d. Both a and c are correct.
4. Indifference curves graphically represent
a. an income level sufficient to allow an individual to achieve a given level of satisfaction.
b. the constraints faced by individuals.
c. an individual's preferences.
d. the relative price of commodities.
5. A consumer
a. is equally satisfied with any indifference curve.
b. prefers indifference curves with positive slopes.
c. prefers higher indifference curves to lower indifference curves.
d. prefers indifference curves that are straight lines to indifference curves that are right angles.
6. A consumer's preferences provide a ranking of
a. all possible consumption bundles.
b. only the consumption bundles that fall on the same indifference curve.
c. consumption bundles based their prices.
d. consumption bundles based on the consumer’s income.
7. If Walter has one hour of leisure time in which to watch a sporting event on television, his preferences are as follows:
Walter prefers watching football to watching baseball, but he prefers watching baseball to watching basketball. He is
indifferent between watching baseball and watching hockey. Bundle A contains one hour of football and zero hours of all
other sports. Bundle B contains one hour of baseball and zero hours of all other sports. Bundle C contains one hour of
basketball and zero hours of all other sports. Bundle D contains one hour of hockey and zero hours of all other sports. If
we were to graph Walter’s preferences using indifference curves, which of the following bundles would be on the same
indifference curve?
a. A, B, and C only
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b. B and D only
c. A and D only
d. There is no combination of the sports that could be drawn on the same indifference curve.
8. Hannah and Chris each like jewelry and music by the Rolling Stones. If we were to graph an indifference curve with
jewelry on the horizontal axis and CDs by the Rolling Stones on the vertical axis, then
a. Hannah and Chris would have identical indifference curves.
b. Hannah’s indifference curve would be higher than Chris’s indifference curve.
c. Chris’s indifference curve would be higher than Hannah’s indifference curve.
d. Because we do not know the intensity of each woman’s preferences, we do not have enough information to
compare their indifference curves.
9. Both Diana and Sarah like jazz music and music by the Beatles. Diana likes music by the Beatles much better than jazz
music, whereas Sarah prefers jazz music to music by the Beatles. If we were to graph an indifference curve with CDs by
the Beatles on the horizontal axis and jazz CDs on the vertical axis, then
a. Diana and Sarah would have identical indifference curves.
b. Diana’s indifference curve would be steeper than Sarah’s indifference curve.
c. Sarah’s indifference curve would be steeper than Diana’s indifference curve.
d. We do not have enough information to compare their indifference curves.
10. Alicia is a vegetarian, so she does not eat beef. That is, beef provides no additional utility to Alicia. She loves
potatoes, however. If we illustrate Alicia’s indifference curves by drawing beef on the horizontal axis and potatoes on the
vertical axis, her indifference curves will
a. slope downward.
b. be vertical straight lines.
c. slope upward.
d. be horizontal straight lines.
11. Irene is a vegetarian, so she does not eat pork. That is, pork provides no additional utility to Irene. She loves broccoli,
however. If we illustrate Irene’s indifference curves by drawing broccoli on the horizontal axis and pork on the vertical
axis, her indifference curves will
a. slope downward.
b. be vertical straight lines.
c. slope upward.
d. be horizontal straight lines.
12. Bundle A contains 10 units of good X and 5 units of good Y. Bundle B contains 5 units of good X and 10 units of
good Y. Bundle C contains 10 units of good X and 10 units of good Y. The consumer is indifferent between bundle A and
bundle B. Assume that the consumer’s preferences satisfy the four properties of indifference curves. Which of the
following statements is correct?
a. The consumer must prefer bundle C to either bundle A or B.
b. Bundle A and bundle B lie on the same indifference curve.
c. The consumer must prefer bundle B to bundle C.
d. Both a) and b) are correct.
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13. A consumer likes two goods: books and movies. The two bundles shown in the table below lie on the same
indifference curve for the consumer.
Bundle
A
B
Books
2
3
Movies
3
2
Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four properties
of indifference curves?
a. 1 movie and 5 books
b. 3 movies and 3 books
c. 5 movies and 1 book
d. 1 movie and 7 books
14. A consumer likes two goods: books and movies. The three bundles shown in the table below lie on the same
indifference curve for the consumer.
Bundle
A
B
C
Books
2
4
3
Movies
4
2
3
Which of the following properties of indifference curves would this consumer's preferences violate?
a. Indifference curves are downward sloping.
b. Indifference curves do not cross.
c. Indifference curves are bowed inward.
d. These bundles do not violate any of the properties of indifference curves.
15. Laura consumes only beer and chips. Her indifference curves are all bowed inward. Consider the bundles (2,6), (4,4),
and (6,2). If Laura is indifferent between (2,6) and (6,2), then Laura must
a. prefer (4,4) to (6,2).
b. be indifferent between (4,4) and (6,2).
c. prefer (6,2) to (4,4).
d. prefer (2,6) to (4,4).
16. An indifference curve illustrates the
a. prices facing a consumer as she chooses how much of good X and good Y to consume.
b. income facing a consumer as she chooses how much of good X and good Y to consume.
c. trade-offs facing a consumer as she chooses how much of good X and good Y to consume.
d. All of the above are correct.
Figure 21-10
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17. Refer to Figure 21-10. When comparing bundle A to bundle E, the consumer
a. prefers bundle A because it contains more donuts.
b. prefers bundle E because it lies on a higher indifference curve.
c. prefers bundle E because it contains more donuts.
d. is indifferent between the two bundles.
18. Refer to Figure 21-10. When comparing bundle B to bundle C, the consumer
a. prefers bundle B because it contains more donuts.
b. is indifferent between the two bundles.
c. prefers bundle C because it contains more cake.
d. In order to compare bundle B to bundle C, we must know the prices of cake and donuts.
19. Refer to Figure 21-10. A person who chooses to consume bundle C is likely to
a. receive higher total satisfaction at bundle C than at bundle A.
b. spend more on bundle C than bundle A.
c. receive higher marginal utility from cake than from donuts.
d. receive higher marginal utility from donuts than from cake.
20. Refer to Figure 21-10. Which of the following statements is correct?
a. Bundle A provides the same utility as bundle E.
b. Bundle A provides the same utility as bundle C.
c. Bundle B contains more cake than bundle C.
d. The bundles along indifference curve Indifference Curve 2 are preferred to those along indifference curve
Indifference Curve 3.
21. Refer to Figure 21-10. Which of the following statements is correct?
a. If a consumer moves from bundle C to bundle A, her loss of cake cannot be compensated for by an increase in
donuts.
b. Bundle E is preferred to all other points identified in the figure.
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c. Because more is preferred to less, bundle C may be preferred to bundle E in some circumstances for this
consumer.
d. Even though bundle E has more of both goods than bundle B, we could draw a different set of indifference
curves in which bundle B is preferred to bundle E.
22. Refer to Figure 21-10. Which of the following statements is not true for a consumer who moves from bundle B to
bundle C?
a. At bundle C the consumer would be willing to give up a larger amount of cake in exchange for a donut than at
bundle B.
b. The marginal rate of substitution at bundles B and C are the same since the points lie on the same indifference
curve.
c. The consumer is willing to sacrifice donuts to obtain cake.
d. The consumer receives the same level of satisfaction at bundles B and C.
23. Refer to Figure 21-10. Which of the following statements is not correct?
a. Bundles on Indifference Curve 3 are preferred to bundles on Indifference Curve 1.
b. The consumer is indifferent between bundles A and E because they contain the same number of donuts.
c. The consumer is indifference between bundles B and C.
d. The consumer prefers bundle C to bundle D.
24. Refer to Figure 21-10. Which of the following comparisons is correct regarding the marginal rate of substitution
(MRS) of donuts for cake?
a. The MRS is greater between bundles A and B than between bundles B and C.
b. The MRS is greater between bundles B and C than between bundles A and B.
c. The MRS is the same between bundles A and B and bundles B and C because all three bundles lie on the same
indifference curve.
d. The MRS is greater between bundles E and B than between bundles B and D.
Figure 21-11
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25. Refer to Figure 21-11. The graph illustrates
a. a typical budget constraint.
b. a typical indifference curve.
c. an indifference curve where goods X and Y are perfect complements.
d. an indifference curve where goods X and Y are perfect substitutes.
26. Refer to Figure 21-11. What is the consumer’s marginal rate of substitution?
a. 12
b. 4
c. 1
d. We do not have enough information to answer the question because the MRS varies along the graph.
27. Refer to Figure 21-11. What is the consumer’s marginal rate of substitution as she moves from A to B?
a. 12
b. 6
c. 4
d. 1
28. Refer to Figure 21-11. What is the consumer’s marginal rate of substitution as she moves from B to C?
a. 12
b. 6
c. 4
d. 1
29. Refer to Figure 21-11. As the consumer moves from point A to B to C to D, the consumer’s marginal rate of
substitution
a. remains constant.
b. increases.
c. decreases.
d. first increases, then decreases.
30. Refer to Figure 21-11. As the consumer moves from point A to B to C to D, the consumer’s total utility
a. remains constant.
b. increases.
c. decreases.
d. first increases, then decreases.
Figure 21-12
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31. Refer to Figure 21-12. Which of the following statements is not correct?
a. The consumer prefers bundle Y to bundle Z.
b. The consumer is indifference between bundle W and bundle X.
c. The consumer is indifference between bundle X and bundle V.
d. The consumer prefers bundle X to bundle Z.
32. Refer to Figure 21-12. Which of the following statements is correct?
a. The consumer prefers bundle Y to bundle Z.
b. The consumer is indifference between bundle X and bundle V.
c. The consumer prefers bundle Y to bundle X.
d. The consumer prefers bundle Z to bundle V.
33. Refer to Figure 21-12. The marginal rate of substitution between bundles V and Z is
a. greater than the marginal rate of substitution between bundles Z and T.
b. less than the marginal rate of substitution between bundles Z and T.
c. equal to the marginal rate of substitution between bundles Z and T.
d. We are unable to compare the marginal rates of substitution.
34. Refer to Figure 21-12. If the consumer moves from bundle V to bundle X, the
a. marginal rate of substitution remains constant.
b. total utility remains constant.
c. total utility increases.
d. Both a) and b) are correct.
35. Refer to Figure 21-12. If the consumer moves from bundle W to bundle Z, the
a. marginal rate of substitution remains constant.
b. total utility remains constant.
c. total utility decreases.
d. Both a) and b) are correct.
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Figure 21-13
36. Refer to Figure 21-13. What is the consumer’s marginal rate of substitution as she moves from A to B?
a. 4
b. 2
c. 1
d. 0.5
37. Refer to Figure 21-13. What is the consumer’s marginal rate of substitution as she moves from B to C?
a. 4
b. 2
c. 1
d. 0.5
38. Refer to Figure 21-13. As the consumer moves from A to B to C, the marginal rate of substitution
a. increases.
b. decreases.
c. remains constant.
d. first increases, then decreases.
39. Refer to Figure 21-13. As the consumer moves from A to B to C, the consumer’s total utility
a. increases.
b. decreases.
c. remains constant.
d. first increases, then decreases.
40. The following diagram shows one indifference curve representing the preferences for goods X and Y for one
consumer.
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What is the marginal rate of substitution between points A and B?
a. 2/5
b. 1
c. 5/2
d. 3
41. The following diagram shows one indifference curve representing the preferences for goods X and Y for one
consumer.
What is the marginal rate of substitution between points A and B?
a. 1/2
b. 4/3
c. 2
d. 3
42. Indifference curves tend to be bowed inward because of diminishing
a. marginal rates of substitution.
b. demand for the good as prices rise.
c. income.
d. Both a and b are correct.
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43. The slope of an indifference curve is
a. the rate of change of consumer's preferences.
b. the marginal rate of preference.
c. the marginal rate of substitution.
d. always equal to the slope of the budget constraint.
44. The rate at which a consumer is willing to exchange one good for another while maintaining a constant level of
satisfaction is called the
a. relative expenditure ratio.
b. value of marginal product.
c. marginal rate of substitution.
d. relative price ratio.
45. The marginal rate of substitution is equal to the
a. slope of the indifference curve.
b. ratio of the prices of the two goods.
c. slope of the budget constraint.
d. All of the above are correct.
46. The marginal rate of substitution is
a. the slope of a budget constraint.
b. always constant.
c. the slope of an indifference curve.
d. the point at which the budget constraint and the indifference curve are tangent.
47. The rate at which a consumer is willing to trade one good for another to maintain the same level of satisfaction is
affected by the
a. prices of the products.
b. amount of each good the consumer is currently consuming.
c. consumer’s income.
d. marginal value product.
48. Clark enjoys fishing and hunting. He divides his leisure hours between the two outdoor activities. Suppose we were to
draw Clark’s indifference curves for the two activities, placing fishing on the horizontal axis and hunting on the vertical
axis. If Clark’s indifference curves are bowed inward, then
a. the rate at which he is willing to give up an hour of hunting for an hour of fishing changes depending on how
many hours of each activity he has done. For example, if Clark has already fished a lot in one week, he will be
more willing to give up an hour of fishing for an hour of hunting than if he has only fished a little that week.
b. the rate at which he is willing to give up an hour of hunting for an hour of fishing is constant because he must
derive the same enjoyment out of each activity.
c. the rate at which he is willing to give up an hour of hunting for an hour of fishing changes depending on how
many hours of each activity he has done. For example, if Clark has already fished a lot in one week, he will be
less willing to give up an hour of fishing for an hour of hunting than if he has only fished a little that week.
d. Clark’s indifference curves will not cross. When indifference curves are bowed outward, the indifference
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curves must cross.
49. The marginal rate of substitution
a. varies along an indifference curve if the curve is bowed inward.
b. is constant along an indifference curve if the curve is a straight line.
c. is greater when a consumer has more of two goods rather than less of two goods.
d. Both a and b are correct.
50. Bundle L contains 10 units of good X and 20 units of good Y. Bundle M contains 8 units of good X and 21 units of
good Y. The consumer is indifferent between bundle L and bundle M. Assume that the consumer’s preferences satisfy the
four properties of indifference curves. Which of the following correctly expresses the marginal rate of substitution of good
X for good Y between these two points?
a. The consumer will give up 1 unit of good X to gain 2 units of good Y.
b. The consumer will give up 2 units of good X to gain 1 unit of good Y.
c. The price of good X is twice as large as the price of good Y.
d. The price of good X is half as large as the price of good Y.
51. If an indifference curve is bowed in toward the origin, the marginal rate of substitution is
a. not likely to reflect the relative value of goods.
b. likely to be constant for all bundles along the indifference curve.
c. likely to be identical to the price ratio for each bundle along the indifference curve.
d. different for each bundle along the indifference curve.
52. If an indifference curve is bowed out away from the origin, the marginal rate of substitution is
a. not likely to reflect the relative value of goods.
b. likely to be constant for all bundles along the indifference curve.
c. likely to be identical to the price ratio for each bundle along the indifference curve.
d. different for each bundle along the indifference curve.
53. As long as a consumer remains on the same indifference curve,
a. she is indifferent to all points that lie on any other indifference curve.
b. her preferences will not affect the marginal rate of substitution.
c. she is unable to decide which bundle of goods to choose.
d. she is indifferent among the points on that curve.
54. Assume that a consumer’s indifference curve is bowed inward and satisfies the other three properties of indifference
curves. As the consumer moves from left to right along the horizontal axis, the consumer’s marginal rate of substitution
a. increases.
b. decreases.
c. remains constant.
d. increases, then decreases.
55. Assume Victoria’s indifference curves are bowed outward but her indifference curves satisfy the other three properties
of indifference curves. As Victoria moves from right to left along the horizontal axis, her marginal rate of substitution
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a. increases.
b. decreases.
c. remains constant.
d. increases, then decreases.
56. When indifference curves are bowed inward, the marginal rate of substitution is
a. the same at all points along an indifference curve.
b. increasing as the consumer moves to the right along an indifference curve.
c. decreasing as the consumer moves to the right along an indifference curve.
d. constant.
57. Each of the following are characteristics of a typical indifference curve map except
a. moving northeast to a new indifference curve will increase utility.
b. points on the same indifference curve yield equal utility.
c. the axes represent levels of utility for each of the goods.
d. indifference curves cannot cross.
58. Which of the following is a property of typical indifference curves?
a. Indifference curves usually intersect.
b. Indifference curves have positive slopes.
c. Indifference curves are downward sloping and always linear.
d. Indifference curves are usually bowed in toward the origin.
59. All of the following are properties of typical indifference curves except
a. higher indifference curves are preferred to lower ones.
b. indifference curves are downward sloping.
c. indifference curves do not cross.
d. indifference curves are bowed outward.
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