Economics 301 – Intermediate Microeconomics
Problem Set #2
1. All points on or below a budget constraint
a) Are attainable with the given income.
b) Are equally desirable.
c) Represent bundles that exactly exhaust the income available.
d) Are described, in part, by a, b, and c above.
2. If the price of a good shown on the vertical axis of a budget graph is cut in
half and the price of the good on the horizontal axis is cut by 25%, then the
budget constraint
a) Shifts left and becomes steeper.
b) Shifts right and becomes steeper.
c) Shifts left and becomes flatter.
d) Shifts right and becomes flatter.
3. Indifference curves that intersect would be illogical constructs because
a) Of the assumption that more is preferred to less.
b) Indifference curves are an inherently illogical construct.
c) Of the transitivity assumption.
d) Of both a and c above.
e) Of none of the above.
4. The marginal rate of substitution between food and shelter at a given point on
an indifference curve
a) Is equal to the absolute value of the slope of the indifference curve at
that point.
b) Is equal to the rate at which the consumer is willing to exchange the
two goods.
c) Reflects the relative values the consumer attaches to the two goods.
d) Is described, in part, by each of the above statements.
5. If food is on the vertical axis and shelter is on the horizontal axis, a set of
indifference curves that are quite steep
a) Reflect a preference pattern that generally values shelter high relative
to food.
b) Imply that food has a higher relative value than shelter for this
consumer.
c) Say nothing about how the consumer feels about the two goods until a
budget line is introduced.
d) Mean that the two goods are perfect complements.
6. Smith likes cashews better than almonds and likes almonds better than
walnuts. He likes pecans equally well as macadamia nuts and prefers
