Arnold Quiz: Appendix for The Logic of Consumer Choice

Quiz
Appendix for The Logic of Consumer Choice

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1. Consider Figure 17.2. It pictures a number of possible budget constraints. Which of the following statements about them is correct?: a. Each budget constraint shows all the alternative quantity combinations of two goods, X and Y, that a consumer is able to buy at current market prices in a given period by fully using a given budget.
b. A movement of the constraint from BC to parallel line AD represents a fall in the price of good X.
c. A movement of the constraint from AD to parallel line BC represents a fall in the price of good Y.
d. A fall in the price of X can be represented by a tilting of line BD to BC.
e. A fall in the price of Y can be represented by a tilting of line AD to BD.

2. Consider Figure 17.2. It pictures a number of possible budget constraints. Which of the following statements about them is correct?: a. Given budget constraint BC, if point B represented 100 pounds of meat and C stood for 100 pounds of vegetables, we would know that the budget equaled $100.
b. Given budget constraint BC, if point B represented 100 pounds of meat and C stood for 100 pounds of vegetables, we would know that meat as well as vegetables cost $1 per pound.
c. Given budget constraint BC, if point B represented 100 pounds of meat and C stood for 100 pounds of vegetables, we would know that the price per pound of meat equaled the price per pound of vegetables.
d. Given any budget constraint, if the price of good X doubled, the consumer could still buy any previously accessible amount of X, provided less Y was bought.
e. Given any budget constraint, if the size of the budget rose, along with the price of X, the budget constraint's original intercept with the X axis would move away from the origin.

3. Consider Figure 17.2. It pictures a number of possible budget constraints. Which of the following statements about them is correct?: a. The slope of budget line BC equals B0/0C.
b. The vertical intercept of any budget constraint, such as distance B0 for line BC, equals the size of the budget, B, divided by P_Y, the price of good Y.
c. The horizontal intercept of any budget constraint, such as distance 0C for line BC, equals the size of the budget, B, divided by P_X, the price of good X.
d. The (absolute value of the) slope of any budget line in this graph equals (B/ P_Y)/(B/P_X) or P_X / P_Y.
e. All of the above.

4. Consider Figure 17.3. Curved line DFI is a consumer's indifference curve. Which of the following statements about it is correct?: a. The curve shows all the alternative quantity combinations of two goods, X and Y, that in the consumer's view yield the same (unmeasurable) total utility and among which the consumer is, therefore, indifferent.
b. The curve shows all the alternative quantity combinations of two goods, X and Y, that in the consumer's view yield the same (unmeasurable) marginal utility and among which the consumer is, therefore, indifferent.
c. As the graph indicates, the consumer at F is indifferent between 0J of good X and 0E of good Y.
d. As the graph indicates. the consumer at F is consuming either 0J of good X or 0E of good Y.
e. All of the above.

5. Consider Figure 17.3. Curved line DFI is a consumer's indifference curve. Which of the following statements about it is correct?: a. The curve's slope is downward and to the right, which reflects the assumption that consumers always prefer more of any good to less.
b. Given the assumption noted in (a), it would make no sense to draw a vertical, horizontal, or positively sloped indifference curve.
c. The curve's slope is convex to the origin, which reflects the working of the law of diminishing marginal utility.
d. The (absolute value of the) slope of any indifference curve equals the marginal utility of the good on the horizontal axis (here good X) divided by the marginal utility of the good on the vertical axis (here good Y).
e. All of the above.

6. Consider Figure 17.3. Curved line DFI is a consumer's indifference curve. There are others, not shown. Which of the following statements about this graph is clearly correct?: a. This consumer prefers combination D to F.
b. This consumer prefers combination B to F.
c. This consumer prefers combination I to F.
d. This consumer prefers combination B to C.
e. This consumer prefers combination A to B.

7. Logically, a given consumer's different indifference curves cannot cross because: a. each curve is convex to the origin.
b. vertical and horizontal indifference curves are ruled out by the "people-prefer-more-to-less principle."
c. the amount of one good that an individual is willing to give up to obtain an extra unit of another good, while maintaining the same utility total, declines as more and more of the other good is obtained.
d. of the transitivity principle, according to which a person who prefers A to B and B to C must also prefer A to C.
e. of all of the above.

8. Consider Figure 17.4. It pictures a consumer's budget constraint, along with three of many more indifference curves not shown. Which of the following statements about this graph is correct?: a. By fully spending the budget, this consumer can acquire any combination of goods X and Y that is found in the shaded area underneath the budget constraint.
b. The consumer's utility-maximizing equilibrium is represented by point E, where the highest possible indifference curve is reached, given this budget constraint.
c. At point E, the slope of the budget line equals P_Y/P_X.
d. At point E, the slope of indifference curve, I #2, equals MU_Y/MU_X.
e. All of the above are true.

9. Consider Figure 17.4. It pictures a consumer's budget constraint, along with three of many more indifference curves not shown. Which of the following statements about this graph is correct?: a. At the consumer's equilibrium, E, the marginal utility per pound of X equals the marginal utility per pound of Y.
b. At the consumer's equilibrium, E, the marginal utility per pound of X, divided by the price of Y, equals the marginal utility per pound of Y, divided by the price of X.
c. At the consumer's equilibrium, E, the marginal utility per dollar of X equals the marginal utility per dollar of Y.
d. The consumer might find a new equilibrium, E', on indifference curve I #1 if the price of X fell, ceteris paribus.
e. None of the above.

10. Consider Figure 17.4. It pictures a consumer's budget constraint, along with three of many more indifference curves not shown. Which of the following statements about this graph is correct?: a. If the budget underlying this constraint is $1,000, and if the prices of the two goods are $5 per pound of X and $10 per pound of Y, then we know that the quantities corresponding to point E equal 200X and 100Y.
b. If the budget underlying this constraint is $1,000, and if the prices of the two goods are $5 per pound of X and $10 per pound of Y, then we know that the marginal utility of X at point E equals twice the marginal utility of Y at point E.
c. If the budget underlying this constraint is $1,000, and if the prices of the two goods are $5 per pound of X and $10 per pound of Y, then we know that the marginal utility of X at point E exceeds the marginal utility of Y at point E (but it may not be twice as large).
d. If the budget underlying this constraint is $1,000, and if the prices of the two goods are $5 per pound of X and $10 per pound of Y, then we know that the marginal utility of X at point E equals half the marginal utility of Y at point E.
e. This graph implies an unusual demand curve for goods X and Y, respectively: If the price of X (or Y) fell, ceteris paribus, the budget constraint would tilt, and a new equilibrium would be found where the quantities of X (or Y) consumed (and, obviously, demanded) would be smaller than before.