Consumer Theory Vs. Real Consumers MCQs

Option A: will always increase the quantity of saving

Option B: will always decrease the quantity of saving

Option C: will increase the quantity of saving if the substitution effect outweighs the income effect

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

Correct Answer: will increase the quantity of saving if the substitution effect outweighs the income effect ✔

Option A: stay the same

Option B: rotate inward

Option C: shift outward in a parallel fashion

Option D: rotates outward

Correct Answer: stay the same ✔

Option A: an inferior effect

Option B: a Geffen good

Option C: a normal good

Option D: none of these answers

Correct Answer: a normal good ✔

Option A: Z to point X

Option B: X to point X

Option C: X to point Z

Option D: Y to point X

Correct Answer: Z to point X ✔

Option A: a substitute good

Option B: a normal good

Option C: a complementary good

Option D: an inferior good

Correct Answer: an inferior good ✔

Option A: rises

Option B: stays the same

Option C: could rise or fall depending on the relative prices of the two goods.

Option D: falls

Correct Answer: rises ✔

Option A: the budget constraint crosses the indifference curve

Option B: the two highest indifference curves cross

Option C: the consumer reaches the highest indifference curve subject to remaining on the budget constraint

Option D: the consumer has reached the highest indifference curve

Correct Answer: the consumer reaches the highest indifference curve subject to remaining on the budget constraint ✔

Option A: the marginal rate of substitution

Option B: the marginal rate of trade-off.

Option C: the trade-off rates

Option D: the marginal rate of indifference

Correct Answer: the marginal rate of substitution ✔

Option A: The marginal utility per dollar spent on each good is the same

Option B: The marginal rate of substitution between goods is equal to the ratio of the prices between goods

Option C: The consumer’s indifference curve is tangent to his budget constraint

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

Correct Answer: The consumer is indifferent between any two points on his budget constraint ✔

Option A: right shoes and left shoes

Option B: petrol from BP and petrol from shell

Option C: kit-Kat chocolate snacks and Twix chocolate snacks

Option D: coke and Pepsi

Correct Answer: right shoes and left shoes ✔

Option A: will always increase the quantity of labor supplied

Option B: will increase the amount of labor supplied if the substitution effect outweighs the income effect

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

Option D: will always decrease the amount of labor supplied

Correct Answer: will increase the amount of labor supplied if the substitution effect outweighs the income effect ✔

Option A: inferior effect

Option B: normal effect

Option C: substitution effect

Option D: complementary effect

Correct Answer: substitution effect ✔

Option A: X to point Y

Option B: X to point Z

Option C: Y to point X

Option D: Z to point X

Correct Answer: X to point Y ✔

Option A: Z

Option B: X

Option C: Y

Option D: the optimal point cannot be determined from this graph

Correct Answer: Z ✔

Option A: a complementary good

Option B: an inferior good

Option C: a normal good

Option D: a substitute good

Correct Answer: a normal good ✔

Option A: the slope of the indifference curve equals the slope of the budget constraint

Option B: the indifference curve is tangent to the budget constraint

Option C: the relative prices of the two goods equals the marginal rate of substitution

Option D: none of these answers are true

Correct Answer: all of these answers are true ✔

Option A: Indifference curves are downward sloping

Option B: indifference curves are bowed outward

Option C: Indifference curves do not cross each other

Option D: Higher indifference curve is preferred to lower ones

Correct Answer: indifference curves are bowed outward ✔

Option A: 2

Option B: 10

Option C: 1/2

Option D: 5

Correct Answer: 2 ✔

Option A: right angles

Option B: bowed outward

Option C: straight lines

Option D: nonexistent

Correct Answer: straight lines ✔

Option A: an indifference curve

Option B: the budget constraint

Option C: the marginal rate of substitution

Option D: the consumption limits

Correct Answer: the budget constraint ✔