If the food stamp program in the United States moved from coupons redeemable for food to cash payments, A) everyone would buy less food and more of other goods. B) everyone would buy more food and less of other goods. C) some people might buy less food and obtain a higher level of utility. D) […]
An optimal choice in which a consumer does not consume all types of goods A) is a corner solution. B) cannot be an equilibrium. C) cannot exhaust the budget constraint. D) is an interior solution. ANSWER A
If income increases due to a decrease in taxes, then A) utility will increase because consumers can afford a larger bundle of goods. B) utility will fall because consumers will be forced to buy a smaller bundle of goods. C) utility will remain constant. D) utility will increase because consumers will be forced to buy […]
Data shows that United States college students purchase more e-books than German college students. Assuming that all students have identical preferences for e-books and textbooks, what is the likely explanation for this result? A) Taxes on textbooks are higher in the United States than taxes on textbooks in Germany. B) Taxes on textbooks are lower […]
By selecting a bundle where MRS = MRT, the consumer is saying A) “I value my last unit of each good equally.” B) “I am willing to trade one good for the other at the same rate that I am required to do so.” C) “I will equate the amounts spent on all goods consumed.” […]
If both prices decreases by 50%, A) budget constraint will be unchanged. B) slope of the budget constraint will increase. C) slope of the budget constraint will decrease. D) budget constraint will shift outward in a parallel fashion. ANSWER D
If a consumer’s budget line for food (F) and shelter (S) is represented as F = 250 – 5S, we know that A) the consumer’s income is 250. B) the price of shelter is 5. C) the price of shelter is 5 times the price of food. D) All of the above. ANSWER C […]
Suppose a taco costs $4 and a burrito costs $2. Moreover, this Mexican restaurant has a special deal. After you’ve bought 6 burritos, you can buy each extra burrito for $1.50. Assume that tacos are on the vertical axis and burritos on the horizontal axis. What is the marginal rate of transformation (MRT) when 8 […]
The consumer is in equilibrium when A) MRT = MRS. B) Px/Py=MUx/MUy C) the budget line is tangent to the indifference curve at the bundle chosen. D) All of the above. ANSWER D
The intuition behind the budget constraint is that A) more options are preferred to less. B) money is the root of all happiness. C) information is power. D) scarcity is avoidable with prosperity. ANSWER A