Question 1

Which of the following best describes the three components of the buyer's problem in microeconomics?

Accepted Answer

Tastes and preferences, prices, and your budget

Question 2

Suppose jeans cost $$50 each and sweaters cost 25 $$each. If you have $300 to spend, what is the equation for your budget constraint?

Accepted Answer

$$50j + 25s = 300$$

Question 3

What does the slope of the budget line represent in the context of jeans and sweaters?

Accepted Answer

The opportunity cost of one good in terms of the other

Question 4

If the opportunity cost of one pair of jeans is 2 sweaters, what is the opportunity cost of one sweater in terms of jeans?

Accepted Answer

$$\frac{1}{2}$$ pair of jeans

Question 5

Why does the demand curve typically have a negative slope?

Accepted Answer

Because as price increases, quantity demanded decreases

Question 6

What is consumer surplus?

Accepted Answer

The difference between what a buyer is willing to pay and what the buyer actually pays

Question 7

If the price of jeans increases from $$50 to 75$$, what happens to the budget line for jeans and sweaters (with $300 to spend)?

Accepted Answer

The budget line pivots inward, reducing the maximum number of jeans that can be purchased

Question 8

Which of the following best explains why prices are assumed to be fixed in the basic consumer choice model?

Accepted Answer

Because consumers are assumed to be price takers and cannot negotiate prices

Question 9

If a consumer's demand curve for a good is given by $$Q_d = 350 - 50P$$, what is the inverse demand function?

Accepted Answer

$$P = 7 - \frac{Q_d}{50}$$

Question 10

Which of the following statements about consumer preferences is assumed in microeconomic theory?

Accepted Answer

Preferences are complete and transitive

Question 11

Suppose you can buy as many units of a good as you want at a fixed price. What does this imply about the supply curve faced by the individual consumer?

Accepted Answer

It is perfectly elastic at the market price

Question 12

If you have $$300 to spend, jeans cost 50$$, and sweaters cost $25, what is the maximum number of jeans you can buy if you buy no sweaters?

Accepted Answer

6

Question 13

If you spend your entire budget on sweaters (at $$25 each) and have 300$$, how many sweaters can you buy?

Accepted Answer

12

Question 14

What does it mean for a buyer to make decisions 'at the margin'?

Accepted Answer

They compare the additional benefit and additional cost of consuming one more unit

Question 15

If the opportunity cost of one sweater is $$\frac{1}{2}$$ pair of jeans, what does this mean in practical terms?

Accepted Answer

You must give up half a pair of jeans to get one more sweater

Question 16

Which of the following is NOT an assumption made in the basic budget set model?

Accepted Answer

Consumers can save or borrow money

Question 17

If a consumer's budget constraint is $$50j + 25s = 300$$, what is the slope of the budget line (sweaters on the vertical axis, jeans on the horizontal axis)?

Accepted Answer

$$-2$$

Question 18

Which of the following best explains why the budget line is straight in the basic consumer choice model?

Accepted Answer

Because prices are fixed and do not change with quantity purchased

Question 19

If you are maximizing your utility subject to your budget constraint, what condition must hold for the last unit of each good purchased?

Accepted Answer

$$\frac{MB_s}{P_s} = \frac{MB_j}{P_j}$$

Lecture 5: Consumer Behaviour and Budget Constraints in Microeconomics

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