Economics MCQs

Page No. 176

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


a the marginal rate of substitution


b the marginal rate of trade-off.


cthe trade-off rates


dthe marginal rate of indifference



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


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


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


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



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


bpetrol from BP and petrol from shell


ckit-Kat chocolate snacks and Twix chocolate snacks


dcoke and Pepsi



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


awill always increase the quantity of labor supplied


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


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


dwill always decrease the amount of labor supplied



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


ainferior effect


bnormal effect


csubstitution effect


dcomplementary effect


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


b X to point Z


cY to point X


d Z to point X


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


bX


cY


dthe optimal point cannot be determined from this graph


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


ban inferior good


ca normal good


d a substitute good


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


bthe indifference curve is tangent to the budget constraint


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


dall of these answers are true



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


aIndifference curves are downward sloping


bindifference curves are bowed outward


cIndifference curves do not cross each other


dHigher indifference curve is preferred to lower ones



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