Download Chapter 8 Practice Questions Malla Davidson

Chapter 8 Practice Questions Malla Davidson 2005
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1) For a consumer, a budget line shows the boundary between 1) _______
A) what is desired and what is not desired.
B) what is needed and what is not needed.
C) what is available and what is not available.
D) what is affordable and what is not affordable.
2) If Sam has $60.00 each week to spend on gasoline and coffee, and their respective prices are $0.75 per
litre and $3.00 per kilogram, which of the following equations represents his budget line? 2) _______
A) $60.00 = $0.75(Qg) - $3.00(Qc ) B) $60.00 = $0.75(Qg) + $3.00(Qc )
C) $60.00 = Qg /$0.75 + Qc /$3.00 D) $60.00 = $0.75/Qg + $3.00/Qc
3) The magnitude of the slope of a budget line is equal to 3) _______
A) the price of one good divided by the price of the other good.
B) income divided by the price of a good.
C) the price of a good divided by income.
D) real income.
4) If money income increases, a consumer's budget line 4) _______
A) becomes flatter.
B) shifts leftward and its slope does not change.
C) shifts rightward and its slope does not change.
D) becomes steeper.
5) The figure above shows Sam's budget line. Which of the following combinations of gasoline and coffee
are not available to Sam? 5) _______
A) 80 litres of gasoline and 0 kilograms of coffee
B) 64 litres of gasoline and 4 kilograms of coffee
C) 32 litres of gasoline and 16 kilograms of coffee
D) 16 litres of gasoline and 8 kilograms of coffee
6) The figure above shows Sam's budget line. Which of the following combinations of gasoline and coffee
are available to Sam? 6) _______
A) 24 litres of gasoline and 16 kilograms of coffee
B) 2 litres of gasoline and 20 kilograms of coffee
C) 32 litres of gasoline and 12 kilograms of coffee
D) 80 litres of gasoline and 1 kilogram of coffee
7) The figure above shows Sam's budget line. Sam's budget line shows 7) _______
A) whether or not Sam thinks gasoline and coffee are worth their prices.
B) which combinations of gasoline and coffee Sam is planning to purchase.
C) which combinations of gasoline and coffee Sam can afford.
D) whether or not Sam currently has enough gasoline and enough coffee.
8) The figure above shows Sam's budget line. Why will Sam not purchase 72 litres of gasoline and 4
kilograms of coffee? 8) _______
A) Because he cannot afford this combination.
B) Because this combination contains more gasoline than his gasoline tank will hold.
C) Because he does not like this combination.
D) Because this combination does not contain enough coffee to satisfy him.
9) The figure above shows Sam's budget line. Which of the following formulas represents Sam's budget
equation? 9) _______
A) $60.00 = $0.75(Qg) + $3.00(Qc) B) $60.00 = $0.75/Qg + $3.00/Qc
C) $60.00 = $0.75(Qg) - $3.00(Qc) D) $60.00 = Qg /$0.75 + Qc /$3.00
10) The figure above shows Sam's budget line. Which of the following equals the vertical intercept of
Sam's budget line? 10) ______
A) Y/Pg B) - (Pc /Pg) C) Y/Pc D) - (Pg /Pc)
11) The figure above shows Sam's budget line. The vertical intercept of Sam's budget line is equal to 11)
______
A) the quantity of coffee purchased if zero gasoline is purchased.
B) Pg /Y.
C) the quantity of gasoline purchased if zero coffee is purchased.
D) Pc /Y.
12) The figure above shows Sam's budget line. Which of the following equals the slope of Sam's budget
line? 12) ______
A) Y/Pc B) - (Pg /Pc) C) - (Pc /Pg) D) Y/Pg
13) The figure above shows Sam's budget line. The magnitude of the slope of Sam's budget line is equal to
the 13) ______
A) price of coffee divided by the price of gasoline.
B) price of gasoline divided by the price of coffee.
C) quantity of coffee purchased divided by the quantity of gasoline purchased.
D) quantity of gasoline purchased divided by the quantity of coffee purchased.
14) The figure above shows Sam's budget line. Which of the following would result in Sam's budget line
rotating inward and not changing its vertical intercept? 14) ______
A) a decrease in Sam's income
B) a fall in the price of a litre of gasoline
C) an increase in the price of a kilogram of coffee
D) a decline in his preference for coffee
15) The figure above shows Sam's budget line. Which of the following would result in Sam's budget line
rotating outward and not changing its horizontal intercept? 15) ______
A) a fall in the price of a litre of gasoline
B) a rise in the price of a kilogram of coffee.
C) a fall in the price of a kilogram of coffee
D) a rise in the price of a litre of gasoline
16) The figure above shows Sam's budget line. Which of the following would result in Sam's budget line
shifting leftward and not changing its slope? 16) ______
A) a fall in the ratio of the price of a litre of gasoline to the price of a kilogram of coffee
B) a decline in his preferences for both gasoline and coffee
C) a decrease in Sam's income
D) an equal percentage reduction in the prices of both a litre of gasoline and a kilogram of coffee
17) The curve in the above figure shows alternative combinations of gasoline and coffee that Sam likes
equally well. This curve is called 17) ______
A) a budget line. B) a demand curve.
C) an indifference curve. D) a consumption curve.
18) The above figure shows one of Sam's indifference curves between gasoline and coffee. Which of the
following statements about a movement along Sam's indifference curve is correct? 18) ______
A) He likes all combinations of gasoline and coffee along the curve equally well.
B) As he moves rightward along the curve, he likes the combinations of gasoline and coffee better and
better.
C) As he moves leftward along the curve, he likes the combinations of gasoline and coffee better and
better.
D) None of the above are true.
19) The combinations of gasoline and coffee along one of Sam's indifference curves are combinations 19)
______
A) that he can afford with his $60.00 income.
B) which require the same total expenditure.
C) among which he is "indifferent."
D) that give him the same marginal rate of substitution.
20) Which of the following statements is true? 20) ______
A) To determine a consumer's best affordable point, we need only the budget line or the indifference curve.
B) Every point on a budget line lies on an indifference curve.
C) The price effect is shown by moving up or down a fixed budget line.
D) Both A and B are true.
21) Your weekly budget for gasoline and movie rentals is $45.00. Referring to the figure above, what is
the price per litres of gasoline? 21) ______
A) $1.75 B) $0.75 C) $1.00 D) $1.25
22) Your weekly budget for gasoline and movie rentals is $45.00. Referring to the figure above, what is
the price per movie rental? 22) ______
A) $2.25 B) $3.00 C) $2.00 D) $2.50
23) The above figure shows your budget line and indifference curves. What quantities of gasoline and
movie rentals would you choose? 23) ______
A) 50 litres of gasoline and 15 movie rentals
B) 40 litres of gasoline and 5 movie rentals
C) 20 litres of gasoline and 10 movie rentals
D) 30 litres of gasoline and 8 movie rentals
24) The above figure shows Sam's budget line and one of his indifference curves. What combination of
coffee and gasoline will Sam select? 24) ______
A) Combination c because that contains all the coffee he needs and some gasoline.
B) Combination a because that contains all the gasoline he needs and still has some coffee.
C) Combination b because it is on his budget line and on the highest attainable indifference curve.
D) none of the above
25) The total effect of a change in the price on the quantity of a good consumed is called the 25) ______
A) income effect. B) real effect.
C) substitution effect. D) price effect.
26) The substitution effect from a fall in the price of a litre of gasoline is shown in the above figure by the
movement from 16) ______
A) point B to point C.
B) point A to point C.
C) point A to point B and then to point C.
D) point A to point B.
27) The income effect from a fall in the price of a litre of gasoline is shown in the above figure by the
movement from 17) ______
A) point A to point B.
B) point A to point B and then to point C.
C) point B to point C.
D) point A to point C.
28) In the above figure, when the price of a litre of gasoline falls, which points in the above figure are used
to derive points on the consumer's demand curve for gasoline? 18) ______
A) Points A and B B) Points A and C
C) Points A, B, and C D) Points B and C
29) In the above figure, the movement from point C to point A is the result of 19) ______
A) an increase in the price of coffee.
B) an increase in the price of gasoline.
C) a decrease in the price of coffee.
D) a decrease in the price of gasoline.
30) In the above figure, the rise in the price of a litre of gasoline that created the movement from point C to
point A would be shown as a movement ________ along the demand curve for ________. 20) ______
A) upward; coffee B) downward; gasoline
C) upward; gasoline D) downward; coffee