# HW 4—Appendix C 1) Indifference curves are convex to the origin if

```HW 4—Appendix C
1) Indifference curves are convex to the origin if
A) a person's marginal rate of substitution declines as he or she consumes more of a good.
B) a person's marginal rate of substitution increases as he or she consumes more of a
good.
C) the law of diminishing marginal utility holds.
D) a and c
E) none of the above
2) The marginal rate of substitution is illustrated by the
A) slope of the indifference curve.
B) slope of the budget line.
C) ratio of the marginal utility of the good on the vertical axis to the marginal utility of the
good on the horizontal axis.
D) distance between the indifference curves.
E) distance between the budget line and the indifference curve.
6) Refer to Exhibit 21-6. I1, I2 and I3 are indifference curves and line ab is the relevant
budget constraint. Point N is
A) the consumer's equilibrium position.
B) unattainable.
C) inferior to every other labeled point on the diagram.
D) attainable, but does not exhaust the consumer's income.
7) If a person's income and the prices of both goods all rise by the same percentage, then
her budget constraint
A) moves inward toward the origin, and its slope remains the same.
B) moves outward away from the origin, and its slope changes.
C) moves outward away from the origin, and its slope remains the same.
D) does not change in any way.
Exhibit 21-8
3) An indifference curve shows all
A) possible equilibrium positions on an indifference map.
B) equilibrium combinations of two products that are obtainable with a given money
income.
C) combinations of two products that will yield the same utility to a consumer.
D) possible combinations of two products that a consumer can purchase, given her income
and the prices of the products.
E) none of the above
Exhibit 21-6
4)
Refer to Exhibit 21-6. I1, I2 and I3 are
indifference curves and line ab is the relevant budget
constraint. The equilibrium position for the
consumer is at
A)
any point on the budget constraint.
B)
point M.
C)
point J.
D)
point T.
E)
point R.
5)
Refer to Exhibit 21-6. I1, I2 and I3 are
indifference curves and line ab is the relevant budget
constraint. If the consumer is initially at point R, he
should
A) strive for point N by obtaining a larger money income.
B) purchase more of X and less of Y.
C) remain at that point in order to maximize utility.
D) purchase more of Y and less of X.
E) none of the above
8)
Refer to Exhibit 21-8. A move of the budget
constraint from 1 to 2 is caused by a
A)
rise in the price of good X.
B)
fall in the price of good X.
C)
rise in the price of good Y.
D)
fall in income.
9)
Which of the following statements is
correct about the budget line and the indifference
curve?
A)
The budget line represents the consumer's
constraint and the indifference curve represents the
consumer's preferences.
B)
The budget line represents the consumer's
preferences and the indifference curve represents the
consumer's constraint.
C) The budget line represents the consumer's highest utility level and the indifference curve
represents the consumer's constraint.
D) The budget line represents the consumer's preferences and the indifference curve
represents the consumer's highest utility level.
10) Given Lana's budget and the prices of two goods, Lana maximizes her utility by
A) choosing the combination of the two goods for which the MRS is smaller than the price
ratio.
B) choosing the combination of the two goods for which the MRS is equal to the price
ratio.
C) choosing the combination of the two goods for which the MRS is greater than the price
ratio.
D) There is not sufficient information to answer the question.
11)
A)
B)
C)
D)
Increases in utility are represented by moving
to an indifference curve to the northeast
to an indifference curve to the southwest.
to a higher budget line.
to a lower budget line.
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