Test Bank to Accompany Principles of Microeconomics Test Item File 2 Ninth Edition [Chapter 1-21]

Homer buys pizza for $10 and Pepsi for $2. He has income of $100. His budget constraint will shift inward if a. the price of pizza rises to $12 b. the price of Pepsi falls to $1 c. his income rises to $150 d. the price of pizza, the price of Pepsi, and his income all rise by 50 percent - ans a. the price of pizza rises to $12 Marge also buys pizza for $10 and Pepsi for $2. She has income of $200. Her budget constraint will experience a parallel outward shift if a. the price of pizza falls to $5, the price of Pepsi falls to $1, and her income falls to $100. b. the price of pizza rises to $20, the price of Pepsi rises to $4, and her income remains the same. c. the price of pizza falls to $8, the price of Pepsi falls tp $1, and her income rises to $240. d. the price of pizza rises to $20, the price of Pepsi rises to $4, and her income rises to $500. - ans d. the price of pizza rises to $20, the price of Pepsi rises to $4, and her income rises to $500. At two points on an indifference curve, a. the consumer has the same income. b. the consumer has the same marginal rate of substitution. c. the bundles of goods cost the consumer the same amount. d. the bundles of goods yield the consumer the same satisfaction. - ans d. the bundles of goods yield the consumer the same satisfaction. At any point on an indifference curve, the slope of the curve measures the consumer's a. income. b. willingness to trade one good for the other. c. perception of two goods as substitutes or complements. d. elasticity of demand. - ans b. willingness to trade one good for the other. Bart and Lisa are both optimizing consumers in the markets for shirts and hats, where they pay $100 for a shirt and $50 for a hat. Bart buys 8 shirts and 4 hats, while Lisa buys 6 shirts and 12 hats. From this information, we can infer that Bart's marginal rate of substitution is _______ hats per shirt, while Lisa's is _______. a. 2; 1 b. 2; 2 c. 4; 1 d. 4; 2 - ans b. 2; 2 Maggie buys peanuts butter and jelly, both of which are normal goods. When the price of peanut butter rises, the income effect induces Maggie to buy _______ peanut butter and _______ jelly. a. more; more b. more; less c. less; more d. less; less - ans d. less; less Ned buys wine and bread. When the price of wine rises, the substitution effect induces Ned to buy ________ wine and ________ bread. a. more; more b. more; less c. less; more d. less; less - ans c. less; more Consumption when young and consumption when old are both normal goods for Seymour, a worker saving for retirement. When the interest rate falls, what happens to Seymour's consumption when old? a. It definitely increases. b. It definitely decreases. c. It increases only if the substitution effect exceeds the income effect. d. It decreases only if the substitution effect exceeds the income effect. - ans b. It definitely decreases. Mr. Burns buys only lobster and chicken. Lobster is a normal good, while chicken is an inferior good. When the price of lobster rises, Mr. Burns buys a. less of both goods. b. more lobster and less chicken. c. less lobster and more chicken. d. less lobster, but the impact on chicken is ambiguous. - ans c. less lobster and more chicken. If Edna buys more pasta when the price of pasta increases, we can infer that for Edna a. pasta is a normal good for which the income effect exceeds the substitution effect. b. pasta is a normal good for which the substitution effect exceeds the income effect. c. pasta is an inferior good for which the income effect exceeds the substitution effect. d. pasta is an inferior good for which the substitution effect exceeds the income effect. - ans c. pasta is an inferior good for which the income effect exceeds the substitution effect. Maude's labor-supply curve slopes upward if, for Maude, a. leisure is a normal good b. consumption is a normal good. c. the income effect on leisure exceed the substitution effect. d. the substitution effect on leisure exceeds the income effect. - ans d. the substitution effect on leisure exceeds the income effect.