ECON 2210 Chapter Notes - Chapter 3: Demand Curve, Shampoo, Revealed Preference
BSc II – Section B Microeconomics Winter 2009 Quiz 2 (B)
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Good Y
45°
Good X
A
Lahore School of Economics
Microeconomics I
Winter Term 2009
Quiz 2: BSc. 2, Section B
The assumption that preferences are complete:
a. means that a consumer will spend her entire income.
b. is unnecessary, as long as transitivity is assumed.
c. recognizes that there may be pairs of market baskets that cannot be compared.
d. means that between any two market baskets of goods, the consumer can determine that
either one is preferred to the other or that she is indifferent between them.
Alvin's preferences for good X and good Y are shown in the diagram below.
Figure 3.2
Based on Figure 3.2, it can be inferred that:
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BSc II – Section B Microeconomics Winter 2009 Quiz 2 (B)
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a. Alvin does not consider good X as "good."
b. Alvin will never purchase any of good Y.
c. Alvin regards good X and good Y as perfect substitutes.
d. Alvin regards good X and good Y as perfect complements.
e. none of the above.
Refer to Figure 3.2. At any consumption bundle with the quantity of good X exceeding the quantity
of good Y (that is, a bundle located below the 45 degree line, like point A), Alvin’s marginal rate of
substitution of good X for good Y is
a. diminishing.
b. positive.
c. constant and positive.
d. zero.
Refer to Figure 3.2. Which assumption concerning preferences do Alvin's indifference curves
violate? (Any of the BOLD options marked are considered correct)
a. Diminishing marginal rates of substitution.
b. Transitivity of preferences.
c. More is preferred to less.
d. Completeness.
e. Both (a) and (c).
Which of the following is true about the indifference curve where one commodity (such as
pollution) is "bad"?
a. It has a negative slope.
b. It has a positive slope.
c. It is horizontal.
d. It is vertical.
Which of the following are examples of situations in which the standard model of the consumer may
not be realistic?
a. impulse purchases
b. following fads and fashions instead of one’s own preferences
c. complexity of making choices
d. all of the above
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BSc II – Section B Microeconomics Winter 2009 Quiz 2 (B)
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Use the following two statements to answer this question:
I.If utility is ordinal, a market basket that provides 30 utils provides twice the satisfaction of a market
basket that provides 15 utils.
II.When economists first studied utility it was believed that utility was cardinal, but it was later
discovered that ordinal preferences are sufficient to explain how most individual decisions are made.
a. Both I and II are true.
b. I is true, and II is false.
c. I is false, and II is true.
d. Both I and II are false.
Consider the following three market baskets:
Cheese
Crackers
A
5
8
B
15
6
C
10
7
If baskets A and B are on the same indifference curve and if indifference curves exhibit
diminishing MRS:
a. C is preferred to both A and B.
b. A and B are both preferred to C.
c. C is on the same indifference curve as A and B.
d. There is not enough information to determine preferences for C relative to the other goods.
Theodore's budget line has changed from A to B. Which of the following explains the change in
Theodore's budget line?
a. The price of food and the price of clothing increased.
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Document Summary
Alvin"s preferences for good x and good y are shown in the diagram below. Based on figure 3. 2, it can be inferred that: Which assumption concerning preferences do alvin"s indifference curves violate? (any of the bold options marked are considered correct: diminishing marginal rates of substitution, transitivity of preferences, more is preferred to less, completeness, both (a) and (c). It has a negative slope: it has a positive slope. Use the following two statements to answer this question: I. if utility is ordinal, a market basket that provides 30 utils provides twice the satisfaction of a market basket that provides 15 utils. Ii. when economists first studied utility it was believed that utility was cardinal, but it was later discovered that ordinal preferences are sufficient to explain how most individual decisions are made: both i and ii are true. I is true, and ii is false: i is false, and ii is true, both i and ii are false.
