Introduction to Microeconomics Quiz - Nov 23, 2023

Consider the table and graph. What does point G show?

• The consumer has income of $80 and spends all the income on food.

• The consumer has income of $80 and spends all the income on food and some clothing.

• The consumer has income of $80 and spends $40 on clothing

Consider the table and graph. What does point D indicate?

• The consumer buys 20 units of food and 10 units of clothing

• The consumer buys 40 units of food and 20 units of clothing

• The consumer buys 40 units of food and 40 units of clothing

Consider the table and graph. Which basket (combination) of the two goods does the consumer choose to buy?

• 20 units of food and 30 units of clothing

• 40 units of food and 20 units of clothing

• Cannot tell from the graph

The initial income level is as indicated by budget line L1. Then, suppose the budget line shifts to L2. What does this shift indicate?

• Income increases, but price ratio does not change

• Income increases, and price ratio also changes

• Income increases, so that the consumer can buy more food and no extra clothing

What does the rotation of the budget line from line L1 to L3 show?

• The Price of food becomes more expensive, while the price of clothing remains the same.

• The Price of food becomes cheaper, while the price of clothing remains the same.

• The Price of food becomes more expensive and the price of clothing becomes cheaper.

Consider the graph. Which point describes the consumer’s optimal choice?

• A

• B

• D

Consider the graph. Why is point B not the consumer’s optimal choice?

• Because at point B, the consumer does not fully spend his/her income and therefore utility is not maximized.

• Because at point B, the consumer's income is lower than at A.

• Because at point B, the consumer's utility is higher than at point A, but cannot achieve it.

Consumer's satisfaction is maximized when...

• the marginal rate of substitution between two commodities is equal to the price ratio of the two commodities

• the marginal benefit of commodity 1 is equal to the marginal benefit of commodity 2

• the price of commodity 1 is equal to the price of commodity 2