# Business Economic

**Topics:**Consumer theory, Budget constraint, Inferior good

**Pages:**45 (18341 words)

**Published:**February 17, 2013

REF: 21-1

7. A budget constraint a. shows the prices that a consumer chooses to pay for products he consumes. b. shows the purchases made by consumers. c. shows the consumption bundles that a consumer can afford. d. represents the consumption bundles that give a consumer equal satisfaction. ANS: C PTS: 1 DIF: 1 REF: 21-1 TOP: Budget constraint MSC: Definitional

8. Assume that a college student spends her income on books and pizza. The price of a pizza is $8.00, and the price of a book is $15. If she has $100 of income, she could choose to consume a. 8 pizzas and 4 books. b. 4 pizzas and 5 books. c. 9 pizzas and 3 books. d. 4 pizzas and 3 books. ANS: D PTS: 1 DIF: 2 REF: 21-1 TOP: Budget constraint MSC: Applicative 9. Assume that a college student spends her income on mac-n-cheese and CDs. The price of one box of mac-ncheese is $1.00, and the price of one CD is $12.00. If she has $100 of income, she could choose to consume a. 15 boxes of mac-n-cheese and 6 CDs. b. 20 boxes of mac-n-cheese and 7 CDs. c. 10 boxes of mac-n-cheese and 8 CDs. d. 30 boxes of mac-n-cheese and 6 CDs. ANS: A PTS: 1 DIF: 2 REF: 21-1 TOP: Budget constraint MSC: Applicative 10. A consumer that doesn't spend all of her income a. would be at a point outside of her budget constraint. b. would be at a point inside her budget constraint. c. must not be consuming positive quantities of all goods. d. must be consuming at a point where her budget constraint touches one of the axes. ANS: B PTS: 1 DIF: 2 REF: 21-1 TOP: Budget constraint MSC: Interpretive 11. An increase in income will cause a consumer's budget constraint to a. shift outward, parallel to its initial position. b. shift inward, parallel to its initial position. c. pivot around the "Y" axis. d. pivot around the "X" axis. ANS: A PTS: 1 DIF: 2 REF: 21-1 TOP: Budget constraint MSC: Analytical

Figure 21-1

12. Refer to Figure 21-1. Which point in the figure showing a consumer’s budget constraint represents the...

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