Economics MCQs

Page No. 176

The slope at any point on an indifference curve is known as ?


a the marginal rate of substitution

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b the marginal rate of trade-off.

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cthe trade-off rates

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dthe marginal rate of indifference

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Which of the following is not true regarding the outcome of a consumer’s optimization process ?


aThe marginal utility per dollar spent on each good is the same

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bThe marginal rate of substitution between goods is equal to the ratio of the prices between goods

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c The consumer’s indifference curve is tangent to his budget constraint

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

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A change in the relative prices of which of the following pair of goods would likely cause the smallest substitution effect ?


aright shoes and left shoes

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bpetrol from BP and petrol from shell

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ckit-Kat chocolate snacks and Twix chocolate snacks

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dcoke and Pepsi

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If leisure is a normal good, an increase in the wage ?


awill always increase the quantity of labor supplied

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bwill increase the amount of labor supplied if the substitution effect outweighs the income effect

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cwill increase the amount of labor supplied if the income effect outweighs the substitution effect

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dwill always decrease the amount of labor supplied

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


ainferior effect

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bnormal effect

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csubstitution effect

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dcomplementary effect

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View Answer substitution effect

Refer to Exhibit 4, Suppose that the consumer must choose between buying socks and belts Also suppose that the consumer’s 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 ?


aX to point Y

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b X to point Z

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cY to point X

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d Z to point X

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View Answer X to point Y

Refer to Exhibit 4. Suppose that the consumer must choose between buying socks and belts Also suppose that the consumer’s 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 ?


aZ

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bX

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cY

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dthe optimal point cannot be determined from this graph

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View Answer Z

If an increase in a consumer’s income causes the consumer to increase his quantity demand of a good, then the good is ?


aa complementary good

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ban inferior good

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ca normal good

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d a substitute good

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View Answer a normal good

Which of the following is true about the consumer’s optimum consumption bundle? At the optimum ?


athe slope of the indifference curve equals the slope of the budget constraint

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bthe indifference curve is tangent to the budget constraint

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c the relative prices of the two goods equals the marginal rate of substitution

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dall of these answers are true

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Which of the following statements is not true with regard to the standard properties of indifference curves ?


aIndifference curves are downward sloping

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bindifference curves are bowed outward

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cIndifference curves do not cross each other

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dHigher indifference curve is preferred to lower ones

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