1. All combinations of goods and services that provide the same utility are identified by the: A) law of constant marginal utility.B) law of increasing marginal utility. C) law of diminishing marginal utility. D) indifference curve.E) elasticity of demand.2. The budget set defines the combinations of good X and Y that A) maximizes supplier's profit. B) maximizes consumer's utility.C) are affordable if all income is spent.D) are desirable to the consumer.E) are affordable to the consumer.3. An increase in money income shifts the consumer's: A) budget line to the right. B) budget line to the left. C) indifference curves to the left. D) indifference curves to the right. E) marginal utilities per dollar spent 4. A fall in the price of a good increases the real income or purchasing power of consumers so that they are able to buy more of the product. This statement best describes: A) the income effect. B) the substitution effect. C) a complementary good. D) a luxury good. E) an inferior good. 5. If the price of a product falls, that product becomes cheaper and people will want to purchase more of it in place of other goods. This statement best describes: A) the income effect. B) the substitution effect. C) a complementary good. D) a luxury good. E) an inferior good. 6. Suppose you spend your budget only on milk and bread. If both are normal goods and the price of milk increases, the quantity of bread you choose to buy will change. How? A) It will either increase or decrease, or somethingB) The substitution effect suggests more will be purchased, but the income effect suggests less will be purchased C) The income effect suggests more will be purchased, but the substitution effect suggests less will be purchased D) Both the income and substitution effects suggest that more will be purchased E) Both the income and substitution effects suggest that less will be purchased 7. Given limited budgets, consumers obtain the most satisfaction if they purchase goods and services that: A) provide the highest level of marginal utility. B) are hi tech or are of the best quality.C) provide the highest level of marginal utility per dollar spent (best bang for your dollar). D) cost the least.E) cost the most, so they can show off.8. If the quantity of X is measured on the horizontal axis and the quantity of Y is measured on the vertical axis, the slope of the budget constraint will decrease if the: A) price of Y increases. B) price of Y decreases. C) marginal utility of X decreases.D) income decreases.E) income increases.9. What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and Px = $10, Py = $20, X = 20, and M = 400? A) 20.B) 15.C) 10.D) 5.E) 0. 10. Suppose a consumer with an income of $100 who is faced with Px = 1 and Py = 1/2. What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)? A) 0.50.B) -1.0.C) -2.0.D) -4.0. E) -0.5011. The difference between a price decrease and an increase in income is that A) A price decrease leaves real income unchanged while an increase in income increases real income.B) A price decrease decreases real income while an increase in income increases real income.C) A price decrease does not affect the consumption of other goods while an increase in income does.D) An increase in income does not affect the slope of the budget line while a decrease in price does change the slope.E) There is no difference.12. Joe Schmoe prefers a three pack of soda to a six-pack. What properties does this preference violate? A) More is better.B) Diminishing MRS. C) Transitivity.D) Completeness.E) Diminishing marginal utility.13. A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of: A) more is better.B) completeness.C) substitutability.D) complementarity. E) jointness.14. Sam Voter prefers Ronald to Joe, Joe to Gary, and Gary to Ronald. Sam's preferences A) are not complete.B) are not transitive. C) indicate that he is a liberal.D) are consistent with our assumptions about consumer behavior.E) are irrational.15. By the property of "more is better" and transitivity, indifference curves A) may overlap one another.B) do not intersect one another.C) can intersect one another only twice.D) can intersect one another only once.E) are straight lines.16. Given that income is $200 and the price of good Y is $40. What is the vertical intercept of the budget line? A) 5. B) 1/5.C) 20.D) 400.E) 8,000.17. The equilibrium consumption bundle is A) the cheapest bundle of goods money can buy.B) the bundle where the budget line and the indifference curve meet.C) the affordable bundle that yields the greatest satisfaction to the consumer.D) any affordable bundle in the budget set. E) any bundle that is the farthest from the origin.18. At the point of consumer equilibrium the slope of the budget line is equal to the: A) indifference curve.B) consumer preference. C) market rate of substitution.D) marginal rate of substitution.E) the slope of the demand curve.19. If you wish to open a store and you do not like risk, it would be wise to sell: A) only normal goods.B) all inferior goods. C) a mix of normal and inferior goods.D) luxury goods.E) high tech goods.20. The total earnings of a worker are represented by E = 100 + $10(24 - L), where E is earnings and L is the number of hours of leisure. How much will the worker earn if he takes 14 hours of leisure per day? A) $200. B) $100.C) $240.D) $150.E) $140.21. Suppose earnings are given by E = $60 + $7(24 - L), where E is earnings and L is the hours of leisure. How much is this person working if their daily earnings are $116? A) 6 hours. B) 8 hours.C) 12 hours.D) 16 hours.E) 18 hours.