consumer theory vs real consumers Mcqs
1. Which of the following is true about the consumers optimum consumption bundle? At the optimum ?
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A. all of these answers are true

B. the slope of the indifference curve equals the slope of the budget constraint

C. none of these answers are true

D. the indifference curve is tangent to the budget constraint

E. the relative prices of the two goods equals the marginal rate of substitution

2. Which of the following statements is not true with regard to the standard properties of indifference curves ?
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A. Indifference curves are downward sloping

B. Indifference curves do not cross each other

C. indifference curves are bowed outward

D. Higher indifference curve is preferred to lower ones

3. If leisure is a normal good, an increase in the wage ?
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A. will always increase the quantity of labor supplied

B. will always decrease the amount of labor supplied

C. will increase the amount of labor supplied if the income effect outweighs the substitution effect

D. will increase the amount of labor supplied if the substitution effect outweighs the income effect
4. The slope at any point on an indifference curve is known as ?
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A. the marginal rate of trade-off.

B. the marginal rate of substitution

C. the trade-off rates

D. the marginal rate of indifference

5. The limit on the consumption bundles that a consumer can afford is known as ?
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A. the consumption limits

B. the marginal rate of substitution

C. an indifference curve

D. the budget constraint
6. If an increase in a consumers income causes the consumer to increase his quantity demand of a good, then the good is ?
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A. a substitute good

B. an inferior good

C. a complementary good

D. a normal good
7. Refer to Exhibit 4. Suppose that the consumer must choose between buying socks and belts Also suppose that the consumers income is 100 If the price of a belt is 10 and the price of a pair of socks is 5, the consumer will choose to buy the commodity bundle represented b point ?
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A. Y

B. X

C. the optimal point cannot be determined from this graph

D. Z
8. Refer to Exhibit 4, Suppose that the consumer must choose between buying socks and belts Also suppose that the consumers income is 100 A pair of socks is ?
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A. none of these answers

B. an inferior effect

C. a Geffen good

D. a normal good
9. The consumers optimal purchase of any two goods is the point where ?
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A. the consumer has reached the highest indifference curve

B. the budget constraint crosses the indifference curve

C. the two highest indifference curves cross

D. the consumer reaches the highest indifference curve subject to remaining on the budget constraint
10. Suppose we measure the quantity of good X on the horizontal axis and the quantity of good Y on the vertical axis If indifference curves are bowed inward, as we move from having an abundance of good X to having an abundance of good Y, the marginal rate of substitution of good Y for good X (the slope of the indifference curve) ?
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A. could rise or fall depending on the relative prices of the two goods.

B. stays the same

C. falls

D. rises
11. Which of the following is not true regarding the outcome of a consumers optimization process ?
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A. The consumers indifference curve is tangent to his budget constraint

B. The consumer is indifferent between any two points on his budget constraint

C. The marginal rate of substitution between goods is equal to the ratio of the prices between goods

D. The consumer has reached his highest indifference curve subject to his budget constraint

E. The marginal utility per dollar spent on each good is the same

12. If an increase in a consumers income causes the consumers to decrease her quantity demanded of a good, then the good is ?
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A. a normal good

B. an inferior good

C. a substitute good

D. a complementary good

13. A change in the relative prices of which of the following pair of goods would likely cause the smallest substitution effect ?
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A. right shoes and left shoes

B. petrol from BP and petrol from shell

C. kit-Kat chocolate snacks and Twix chocolate snacks

D. coke and Pepsi

14. Refer to Exhibit 4, Suppose that the consumer must choose between buying socks and belts Also suppose that the consumers income is 100 Suppose that the price of a pair of socks falls from 5 to 2 The income effect is represented by the movement from point ?
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A. Z to point X

B. X to point Y

C. Y to point X

D. X to point Z

15. If consumption when young and when old are both normal goods, an increase in the interest rate ?
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A. will always decrease the quantity of saving

B. will increase the quantity of saving if the substitution effect outweighs the income effect

C. will always increase the quantity of saving

D. will increase the quantity of saving if the income effect outweighs the substitution effect

16. uppose a consumer must choose between the consumption of sandwiches and pizza. If we measure the quantity of pizza on the horizontal axis and the quantity of sandwiches on the vertical axis and if the price of a pizza is Rs10 and the price of a sandwich is Rs5, then the slope of the budget constraint is ?
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A. 10

B. 2

C. 2-Jan

D. 5

17. If income where to double and prices were to to double the budget line would ?
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A. stay the same

B. rotates outward

C. shift inward in parallel fashion

D. rotate inward

E. shift outward in a parallel fashion

18. The change in consumption that results when a price change moves the consumer along a given indifference curve is known as the ?
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A. substitution effect

B. income effect

C. inferior effect

D. normal effect

E. complementary effect

19. Refer to Exhibit 4, Suppose that the consumer must choose between buying socks and belts Also suppose that the consumers income is 100 Suppose that the price of a pair of socks falls from 5 to 2 The substitution effect is represented by the movement from point ?
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A. X to point Z

B. X to point X

C. Z to point X

D. Y to point X

20. indifference curves for perfect substitutes are ?
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A. right angles

B. straight lines

C. bowed inward

D. nonexistent

E. bowed outward