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Test Bank for Intermediate Microeconomics A Modern Approach, 9th Edition by Hal Varian (All Chapters) Latest Complete Guide A+

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Test Bank for Intermediate Microeconomics A Modern Approach, 9th Edition by Hal Varian (All Chapters) Latest Complete Guide A+

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Test Bank for Intermediate Microeconomics A Moder
Approach, 9e by Hal Varian (All Chapters)
CHAPTER 2: Budget Constraint


TRUE/FALSE

1. If there are two goods with positive prices and the price of one good is reduced, while income and
other prices remain constant, then the size of the budget set is reduced.

ANS: F DIF: 1

2. If good 1 is measured on the horizontal axis and good 2 is measured on the vertical axis and if the
price of good 1 is p1 and the price of good 2 is p2, then the slope of the budget line is p2/p1.

ANS: F DIF: 1

3. If all prices are doubled and money income is left the same, the budget set does not change because
relative prices do not change.

ANS: F DIF: 1

4. If there are two goods and if one good has a negative price and the other has a positive price, then the
slope of the budget line will be positive.

ANS: T DIF: 1

5. If all prices double and income triples, then the budget line will become steeper.

ANS: F DIF: 1

6. If good 1 is on the horizontal axis and good 2 is on the vertical axis, then an increase in the price of
good 1 will not change the horizontal intercept of the budget line.

ANS: F DIF: 1

7. If there are two goods and the prices of both goods rise, then the budget line must become steeper.

ANS: F DIF: 1

8. There are two goods. You know how much of good 1 a consumer can afford if she spends all of her
income on good 1. If you knew the ratio of the prices of the two goods, then you could draw the
consumer’s budget line without any more information.

ANS: T DIF: 1

, 9. A consumer prefers more to less of every good. Her income rises, and the price of one of the goods
falls while other prices stay constant. These changes must have made her better off.

ANS: T DIF: 1

10. There are 3 goods. The price of good 1 is 1, the price of good 2 is 1, and the price of good 3 is 2. It
is physically possible for a consumer to consume any commodity bundle with nonnegative amounts of
each good. A consumer who has an income of 10 could afford to consume some commodity bundles
that include 5 units of good 1 and 6 units of good 2.

ANS: T DIF: 2

11. A decrease in income pivots the budget line around the bundle initially consumed.

ANS: F DIF: 1


MULTIPLE CHOICE

1. If she spends all of her income on breadfruits and melons, Natalie can just afford 9 breadfruits and 10
melons per day. She could also use her entire budget to buy 3 breadfruits and 12 melons per day. The
price of breadfruits is 8 yen each. How much is Natalie’s income per day?
a. 313 yen
b. 317 yen
c. 309 yen
d. 303 yen
e. None of the above.
ANS: E DIF: 1

2. If she spends all of her income on uglifruits and breadfruits, Maria can just afford 11 uglifruits and 4
breadfruits per day. She could also use her entire budget to buy 3 uglifruits and 8 breadfruits per day.
The price of uglifruits is 6 pesos each. How much is Maria’s income per day?
a. 115 pesos
b. 105 pesos
c. 114 pesos
d. 119 pesos
e. None of the above.
ANS: C DIF: 1

3. Harold lives on Doritos and seafood salads. The price of Doritos is 1 dollar per bag and the price of
seafood salads is 2 dollars each. Harold allows himself to spend no more than 11 dollars a day on food.
He also restricts his consumption to 6,500 calories per day. There are 1,500 calories in a bag of Doritos
and 500 calories in a seafood salad. If he spends his entire money budget each day and consumes no
more calories than his calorie limit, he can consume up to
a. 3 bags of Doritos per day but no more.
b. 1 bag of Doritos per day but no more.
c. 4 seafood salads per day but no more.
d. 4 bags of Doritos per day but no more.
e. None of the above.
ANS: A DIF: 2

,4. Quincy lives on pretzels and seafood salads. The price of pretzels is 1 dollar per bag and the price of
seafood salads is 2 dollars each. Quincy allows himself to spend no more than 14 dollars a day on
food. He also restricts his consumption to 3,400 calories per day. There are 600 calories in a bag of
pretzels and 200 calories in a seafood salad. If he spends his entire money budget each day and
consumes no more calories than his calorie limit, he can consume up to
a. 2 bags of pretzels per day but no more.
b. 5 seafood salads per day but no more.
c. 4 bags of pretzels per day but no more.
d. 5 bags of pretzels per day but no more.
e. None of the above.
ANS: C DIF: 2

5. Clara spends her entire budget and consumes 5 units of x and 13 units of y. The price of x is twice the
price of y. Her income doubles and the price of y doubles, but the price of x stays the same. If she
continues to buy 13 units of y, what is the largest number of units of x that she can afford?
a. 10
b. 5
c. 12
d. 14
e. There is not enough information to say.
ANS: A DIF: 1

6. Maria spends her entire budget and consumes 5 units of x and 6 units of y. The price of x is twice the
price of y. Her income doubles and the price of y doubles, but the price of x stays the same. If she
continues to buy 6 units of y, what is the largest number of units of x that she can afford?
a. 12
b. 10
c. 14
d. 5
e. There is not enough information to say.
ANS: B DIF: 1

7. In year 1, the price of good x was $3, the price of good y was $2, and income was $90. In year 2, the
price of x was $9, the price of good y was $6, and income was $90. On a graph with x on the horizontal
axis and y on the vertical, the new budget line is
a. flatter than the old one and lies below it.
b. flatter than the old one and lies above it.
c. steeper than the old one and lies below it.
d. steeper than the old one and lies above it.
e. None of the above.
ANS: E DIF: 1

8. In year 1, the price of good x was $4, the price of good y was $1, and income was $70. In year 2, the
price of x was $9, the price of good y was $2, and income was $70. On a graph with x on the horizontal
axis and y on the vertical, the new budget line is
a. steeper than the old one and lies below it.
b. steeper than the old one and lies above it.
c. flatter than the old one and lies below it.

, d. flatter than the old one and lies above it.
e. None of the above.
ANS: A DIF: 1

9. If she spends her entire budget, Betsy can afford 74 peaches and 9 pineapples. She can also just afford
14 peaches and 21 pineapples. The price of peaches is 17 cents. What is the price of pineapples in
cents?
a. 95 cents
b. 5 cents
c. 22 cents
d. 85 cents
e. None of the above.
ANS: D DIF: 1

10. If she spends her entire budget, Heidi can afford 39 peaches and 12 pears. She can also just afford 24
peaches and 17 pears. The price of peaches is 9 cents. What is the price of pears in cents?
a. 12 cents
b. 37 cents
c. 27 cents
d. 3 cents
e. None of the above.
ANS: C DIF: 1

11. Isabella thrives on two goods: lemons and tangerines. The cost of lemons is 40 guineas each and the
cost of tangerines is 20 guineas each. If her income is 320 guineas, how many lemons can she buy if
she spends all of her income on lemons?
a. 6
b. 8
c. 16
d. 11
e. None of the above.
ANS: B DIF: 1

12. Georgina thrives on two goods: pears and bananas. The cost of pears is 30 pesos each and the cost of
bananas is 15 pesos each. If her income is 180 pesos, how many pears can she buy if she spends all of
her income on pears?
a. 9
b. 12
c. 4
d. 6
e. None of the above.
ANS: D DIF: 1

13. Will spends his entire income on 8 sacks of acorns and 8 crates of butternuts. The price of acorns is 9
dollars per sack and his income is 88 dollars. He can just afford a commodity bundle with A sacks of
acorns and B crates of butternuts that satisfies the budget equation
a. 9A  4B  88.
b. 18A  4B  176.

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