15) Along an indifference curve A) the MRS is constant. B) the ratio of the marg
ID: 1141308 • Letter: 1
Question
15) Along an indifference curve A) the MRS is constant. B) the ratio of the marginal utilities is constant. C) the MRS is decreasing. D) the price ratio is constant. 16) Which of the following are assumptions about preferences? I. Completeness. II. Transitivity. III. Diminishing marginal utility. IV. More is better than less. A) I and II only B) I and III only C) I, II and III only D) I, II, III and IV 17) Which of the following are true about the consumer’s optimum consumption bundle? I. The indifference curve is tangent to the budget constraint. II. The slope of the indifference curve equals the slope of the budget constraint. III. The relative prices of the two goods equals the marginal rate of substitution. IV. The marginal utility per dollar spent of two goods are equal. A) I only B) II and IV only C) II and III only D) I, II, III and IV 18) The statement that "to encourage economic growth, taxes should be cut," A) would be an example of a normative statement. B) would be an example of a positive statement. C) would be an example of a microeconomic statement. D) would be a statement of mercantilist economic philosophy. 19) If an increase in one variable causes a decrease in another variable, this is A) a direct relationship. B) a dependent relationship. C) an independent relationship. D) an inverse relationship. 20) In the above graphs, an inverse relationship is shown by A) Graph A. B) Graph B. C) Graph C. D) Graph D. 21) In the above graphs a direct relationship is shown by A) Graph A. B) Graph B. C) Graph C. D) Graph D. 22) Which of the following is assumed when constructing a production possibilities curve? A) a fixed amount of resources B) the efficient use of resources C) resources of a given quality D) All of the above are correct. 23) The production possibilities curve can shift inward when A) production increases. B) employment increases. C) the stock of productive capital rises. D) a country experiences a natural disaster. 24) The law of demand includes the statement "other things being equal." These other things include all of the following EXCEPT A) the price of that good in the law of demand. B) consumers' income. C) consumers' tastes and preferences. D) the number of potential buyers. 25) Total market demand can be calculated by A) horizontally summing individual demand curves at each and every price level. B) vertically summing individual demand curves at each and every income level. C) adding up the largest quantity demanded by each individual. D) looking at the changes in the products' popularity. 26) Consider the PPF for office buildings and housing shown in the figure above. Which point in the diagram shows that resources to produce office buildings and housing are being misallocated, unused, or both? A) Point F B) Point G C) Point H D) Point I 27) The market demand curve is constructed by adding the A) quantities demanded by each individual at each price. B) prices that each individual is willing to pay at each quantity. C) Neither answer A nor answer B is correct. D) Both answer A and answer B are correct. 28) The above figure shows Dana's marginal benefit curve for ice cream. If the price of ice cream is $2 per gallon, then the maximum that Dana is willing to pay for the 8th gallon of ice cream is A) $1. B) $2. C) $3. D) $5. 29) Country X has a comparative advantage in producing airplanes if A) It can produce them at a lower opportunity cost than can other nations. B) It can produce them at a lower dollar cost than can other nations. C) It can produce a larger quantity than can other nations. D) It has a larger quantity of skilled workers than do other nations. 30) Which best describes the concept of utility used in economics? A) Satisfaction from consuming goods or services B) Gratification of good purchase C) Expenses related with gas and electric energy D) Utilization level of economic goods 31) How can we measure utility? A) In total quantity of goods acquired B) In units of utils C) In total quantity of services acquired D) Utilization percentages 32) Mark prefers Coke to Tea and Tea to Apple juice and Apple Juice to Coke. What economic preference assumption is broken here? A) Transitivity B) Monotonicity or non-satiation (more is better) C) Completeness D) Diminishing Marginal returns 33) Mark has two specific movies to watch. He has to choose only one. However, he is not able to decide which one to choose. Also, he cannot say he is indifferent. He just does not know what to choose. What preference assumption is broken here? A) Monotonicity or non-satiation (more is better) B) Transitivity C) Completeness D) Diminishing Marginal Returns 34) Greater quantities provide greater levels of satisfaction to the individual. What preference assumption is this? A) Completeness B) Transitivity C) Monotonicity or non-satiation (more is better) D) Diminishing Marginal Returns 35) Mark received 100 units of utils by consuming 2 pizzas. He decided to eat 1 more pizzas. Now his total satisfaction from consuming 3 pizzas became 130. What is his marginal utility from consuming 3rd pizza? A) 130 B) 43.3 C) 30 D) 100 36) Mark receives 100 units of utility from consuming 1 pizzas and 1 coke. If he consumes 2 pizzas and 2 cokes his utility will be 120. Where does his indifference curve of 120 utility position in relation to indifference curve reflecting 100 utility level? (You can draw a graph and see) A) Above the indifference curve of 100 utility level B) It is coinciding with indifference curve of 100 utility level C) Under the indifference curve of 100 utility level D) None
Explanation / Answer
15. Along with an indifference curve, C) the MRS is decreasing. MRS is the marginal rate of substitution is the slope of indifference curve and it falls because of the law of diminishing marginal utility.
16. D) I, II, III and IV. Preferences assume completeness which means that if A is preferred to B and B is preferred to A, the consumer is indifferent between A and B.
Transitivity means if A is preferred over B and B is preferred over C, then A is preferred over C.
More is preferred because it gives more satisfaction and consumer reaches a higher indifference curve.
Marginal utility declines along an indifference curve because additional consumption yields lesser satisfaction.
17) D) I, II, III and IV. At equilibrium, the budget line is tangent to IC, it means the slope of two is equal. As per the law of equi -marginal utility, the ratio of marginal utility to the price of both goods is same.
18) The statement that "to encourage economic growth, taxes should be cut," A) would be an example of a normative statement. Statements which discuss ide staeal behavior related to what should be are normative statements.
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