EC270: Microeconomic Theory 1 Chapters 3:
Preferences Practice Questions & Answers | 2025
(The Ultimate Guide for 2026/2027)
©L. McLeod
Fall 2025
Wilfrid Laurier University
1.1 Multiple Choice Questions
1. (b)
2. (c)
3.
(e)
4. (e)
5. (a)
6. (e)
7. (c)
8. (a)
9. (e)
10. (e)
1.2 Economic Concepts to Remember
Marginal Rate of Substitution (MRS) : is the rate at which the consumer is only just willing to exchange x2
for a small amount of x1. It is also the slope of the indifference curve.
1
, Practice Questions (Chapters 3: Preferences) EC270: Microeconomic Theory I
source: Figure 3.11 from Varian & Melitz (2024)
Convexity : means a mixture of bundles are (at least weakly) preferred to the bundles themselves. For
example, if a 50-50 mixture of the bundles (x1,x2) and (y1,y2) is given by (z1,z2) such that:
, then (z1,z2) ⪰ (x1,x2) or (z1,z2) ⪰ (y1,y2).
source: Figure 3.10a from Varian & Melitz (2024)
1.3 Multiple Choice Solutions
Question 1 : If there are only two goods, if more of good 1 is always preferred to less, and if less of good 2 is
always preferred to more, then indifference curves
Answer: if more of good 1 is preferred to less, then good 1 is a “good”. If less of good 2 is always
preferred to more then good 2 is a “bad”. Indifference curves representing 1 “good” and 1 “bad” are
upward sloping (see page 40 in Chapter 3, and Figure 3.5).
2 ©L. McLeod, Fall 2025
Preferences Practice Questions & Answers | 2025
(The Ultimate Guide for 2026/2027)
©L. McLeod
Fall 2025
Wilfrid Laurier University
1.1 Multiple Choice Questions
1. (b)
2. (c)
3.
(e)
4. (e)
5. (a)
6. (e)
7. (c)
8. (a)
9. (e)
10. (e)
1.2 Economic Concepts to Remember
Marginal Rate of Substitution (MRS) : is the rate at which the consumer is only just willing to exchange x2
for a small amount of x1. It is also the slope of the indifference curve.
1
, Practice Questions (Chapters 3: Preferences) EC270: Microeconomic Theory I
source: Figure 3.11 from Varian & Melitz (2024)
Convexity : means a mixture of bundles are (at least weakly) preferred to the bundles themselves. For
example, if a 50-50 mixture of the bundles (x1,x2) and (y1,y2) is given by (z1,z2) such that:
, then (z1,z2) ⪰ (x1,x2) or (z1,z2) ⪰ (y1,y2).
source: Figure 3.10a from Varian & Melitz (2024)
1.3 Multiple Choice Solutions
Question 1 : If there are only two goods, if more of good 1 is always preferred to less, and if less of good 2 is
always preferred to more, then indifference curves
Answer: if more of good 1 is preferred to less, then good 1 is a “good”. If less of good 2 is always
preferred to more then good 2 is a “bad”. Indifference curves representing 1 “good” and 1 “bad” are
upward sloping (see page 40 in Chapter 3, and Figure 3.5).
2 ©L. McLeod, Fall 2025
