Multiple Choice

Figure 21-1 The downward-sloping line on the figure represents a consumer’s budget
constraint.

1. Refer to Figure 21-1. If the consumer’s income is $140, then what is the price of a CD?
a. $3
b. $5
c. $7
d. $9

2. Refer to Figure 21-1. If the price of a CD is $12, then the consumer’s income amounts to
a. $140.
b. $180.
c. $210.
d. $240.

3. Refer to Figure 21-1. A consumer who chooses to spend all of her income could be at which point(s) on the figure?
a. A only
b. E only
c. B, C, or D only
d. A, B, C, or D only

4. Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the
exception of
a. A.
b. E.
c. A and E.
d. None of the above are correct. All of the points identified on the figure are affordable.

Figure 21-2 The downward-sloping line on the figure represents a consumer’s budget
constraint.

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5. Refer to Figure 21-2. A consumer who chooses to spend all of her income could be at which point(s) on the figure?
a. V only
b. Z only
c. V, W, X, or Y only
d. W, X, or Y only

6. Refer to Figure 21-2. Which points are affordable?

a. W, X, and Y only
b. Z only
c. V, W, X, and Y only
d. V, W, X, Y, and Z

7. Refer to Figure 21-2. If the consumer’s income is $100, then what is the price of an apple?
a. $0.50
b. $0.75
c. $1.00
d. $1.25

8. Refer to Figure 21-2. Which of the following statements is not necessarily correct?
a. Points W, X, and Y all cost the consumer the same amount of money.
b. Point Z is unaffordable for the consumer given his budget constraint.
c. Point V costs less than point Z.
d. Points W, X, and Y give the consumer the same level of satisfaction.

9. Refer to Figure 21-2. Which of the following statements is correct?

a. Points W, X, and Y all cost the consumer the same amount of money.
b. Point V is unaffordable for the consumer given his budget constraint.
c. Point Z costs less than point V.
d. Points W, X, and Y give the consumer the same level of satisfaction.

Figure 21-3
In each case, the budget constraint moves from BC-1 to BC-2.

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10. Refer to Figure 21-3. Which of the graphs in the figure reflects a decrease in the price of good X only?
a. graph a
b. graph b
c. graph c
d. graph d

11. Refer to Figure 21-3. Which of the graphs in the figure reflects an increase in the price of good X only?
a. graph a
b. graph b
c. graph c
d. graph d

12. Refer to Figure 21-3. Which of the graphs in the figure reflects a decrease in the price of good Y only?
a. graph a
b. graph b
c. graph c
d. graph d

13. Refer to Figure 21-3. Which of the graphs in the figure reflects an increase in the price of good Y only?
a. graph a
b. graph b
c. graph c
d. graph d
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14. Refer to Figure 21-3. Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both
goods?
(i) graph a
(ii) graph b
(iii) graph c
(iv) graph d
a. (i) only
b. (iv) only
c. (ii) or (iii) only
d. None of the above is correct.

15. Refer to Figure 21-3. Which of the graphs in the figure could reflect a simultaneous decrease in the price of good X
and increase in the price of good Y?
(i) graph a
(ii) graph b
(iii) graph c
(iv) graph d
a. (ii) only
b. (iii) only
c. (ii) or (iv) only
d. None of the above is correct.

Figure 21-4
In each case, the budget constraint moves from BC-1 to BC-2.

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16. Refer to Figure 21-4. Which of the graphs in the figure could reflect a simultaneous increase in the price of good X
and decrease in the price of good Y?
a. graph a
b. graph b
c. graph c
d. graph d

17. Refer to Figure 21-4. Which of the graphs in the figure could reflect an increase in income?
a. graph a
b. graph b
c. graph d
d. None of the above is correct.

18. Refer to Figure 21-4. Which of the graphs in the figure could reflect a decrease in income?
a. graph a
b. graph b
c. graph d
d. None of the above is correct.

Figure 21-5
(a) (b)

19. Refer to Figure 21-5. In graph (a), if income is equal to $200, then the price of good X is
a. $12.
b. $16.
c. $20.
d. $24.

20. Refer to Figure 21-5. In graph (a), if income is equal to $200, then the price of good Y is
a. $3.
b. $5.
c. $7.
d. $10.
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21. Refer to Figure 21-5. In graph (a), what is the price of good X relative to the price of good Y (i.e., PX/PY)?
a. 1/4
b. 1/3
c. 3
d. 4

22. Refer to Figure 21-5. In graph (a), what is the price of good Y relative to the price of good X (i.e., Py/Px)?
a. 1/4
b. 1/3
c. 3
d. 4

23. Refer to Figure 21-5. In graph (b), if income is equal to $420, then the price of good X is
a. $1.
b. $3.
c. $10.
d. $30.

24. Refer to Figure 21-5. In graph (b), if income is equal to $420, then the price of good Y is
a. $1.
b. $3.
c. $10.
d. $30.

25. Refer to Figure 21-5. In graph (b), what is the price of good X relative to the price of good Y (i.e., Px/Py)?
a. 1/3
b. 1
c. 3
d. 10

26. Refer to Figure 21-5. In graph (b), what is the price of good Y relative to the price of good X (i.e., PY/PX)?
a. 1/3
b. 1
c. 3
d. 10

27. Refer to Figure 21-5. Assume that a consumer faces the budget constraint shown in graph (a) in January and the
budget constraint shown in graph (b) in February. If the consumer’s income has remained constant, then what has
happened to prices between January and February?
a. The price of X has fallen, but there could not have been a change in the price of Y.
b. The price of Y has fallen, but there could not have been a change in the price of X.
c. The price of X has fallen, and the price of Y has risen.
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 d. The price of Y has fallen, and the price of X has risen.

Figure 21-6

28. Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of popcorn is $2, and the value of B is 100.
What is the price of Mt. Dew?
a. $1
b. $2
c. $5
d. $100

29. Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of Mt. Dew is $2, and the value of A is 200.
What is the price of popcorn?
a. $0.50
b. $1
c. $2
d. $4

30. Refer to Figure 21-6. Suppose a consumer has $200 in income, the price of popcorn is $1, and the price of Mt. Dew
is $2. What is the value of A?
a. 200
b. 100
c. 50
d. 25

31. Refer to Figure 21-6. Suppose a consumer has $200 in income, the price of popcorn is $1, and the price of Mt. Dew
is $2. What is the value of B?
a. 200
b. 100
c. 50
d. 25

32. Refer to Figure 21-6. Suppose the price of popcorn is $2, the price of Mt. Dew is $4, the value of A is 30, and the
value of B is 15. How much income does the consumer have?
a. $120
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 b. $80
c. $60
d. $30

Figure 21-7

33. Refer to Figure 21-7. Suppose a consumer has $500 in income, the price of a book is $10, and the value of B is 50.
What is the price of a DVD?
a. $5
b. $10
c. $50
d. $100

34. Refer to Figure 21-7. Suppose a consumer has $200 in income, the price of a book is $5, and the price of a DVD is
$10. What is the value of A?
a. 40
b. 20
c. 10
d. 2

35. Refer to Figure 21-7. Suppose a consumer has $200 in income, the price of a book is $5, and the price of a DVD is
$10. What is the value of B?
a. 40
b. 20
c. 10
d. 2

36. Refer to Figure 21-7. Suppose the price of a book is $15, the price of a DVD is $10, the value of A is 5, and the value
of B is 7.5. How much income does the consumer have?
a. $150
b. $100
c. $75
d. $37.50

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Figure 21-8

37. Refer to Figure 21-8. You have $36 to spend on good X and good Y. If good X costs $6 and good Y costs $12, your
budget constraint is
a. AB.
b. BC.
c. CD.
d. DE.

38. Refer to Figure 21-8. You have $300 to spend on good X and good Y. If good X costs $30 and good Y costs $50,
your budget constraint is
a. AB.
b. BC.
c. CD.
d. DE.

39. Refer to Figure 21-8. You have $600 to spend on good X and good Y. If good X costs $100 and good Y costs $100,
your budget constraint is
a. AB.
b. BC.
c. CD.
d. DE.

40. Refer to Figure 21-8. If the price of good X is $5, and your budget constraint is DE, what is the price of good Y?
a. $10
b. $5
c. $2.50
d. $1.67

41. Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?
a. $3.33
b. $5

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 c. $15
d. $30

Figure 21-9

42. Refer to Figure 21-9. If the consumer has $600 in income, what is the price of good X?
a. $20
b. $6
c. $3
d. $0.33

43. Refer to Figure 21-9. If the consumer has $600 in income, what is the price of good Y?
a. $20
b. $6
c. $3
d. $0.33

44. Refer to Figure 21-9. If the price of good Y is $5, what is the price of good X?
a. $500
b. $150
c. $16.67
d. $1.50

45. Refer to Figure 21-9. If the price of good X is $15, what is the price of good Y?
a. $1,500
b. $50
c. $5
d. $0.50

46. The following diagram shows two budget lines: A and B.

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Which of the following could explain the change in the budget line from A to B?
a. a decrease in the price of X
b. an increase in the price of Y
c. a decrease in the price of Y
d. More than one of the above could explain this change.

47. The following diagram shows two budget lines: A and B.

Which of the following could explain the change in the budget line from A to B?
a. a simultaneous decrease in the price of X and the price of Y
b. an increase in income
c. a decrease in income and a decrease in the price of Y
d. Both a and b are correct.

48. The following diagram shows two budget lines: A and B.

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Which of the following could explain the change in the budget line from A to B?
a. a decrease in income and a decrease in the price of X
b. a decrease in income and an increase in the price of X
c. an increase in income and a decrease in the price of X
d. an increase in income and an increase in the price of X

49. The following diagram shows a budget constraint for a particular consumer.

If the price of X is $20, then what is the price of Y?

a. $15
b. $25
c. $35
d. $70

50. The following diagram shows a budget constraint for a particular consumer.

If the price of X is $12, then what is the price of Y?

a. $9
b. $16

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 c. $24
d. $30

51. The following diagram shows a budget constraint for a particular consumer.

If the price of X is $5, what is the consumer’s income?

a. $10
b. $30
c. $150
d. $300

Scenario 21-1
Suppose the price of hot wings is $10, the price of beer is $1, and the consumer’s income is $50. In addition, suppose the
consumer’s budget constraint illustrates hot wings on the horizontal axis and beer on the vertical axis.
52. Refer to Scenario 21-1. If the price of beer doubles to $2, then the
a. budget constraint intersects the vertical axis at 25 beers.
b. slope of the budget constraint rises to -2.
c. slope of the budget constraint falls to -4.
d. budget constraint shifts inward in a parallel fashion.

53. Refer to Scenario 21-1. If the consumer's income rises to $60, then the budget line for hot wings and beer would
a. now intersect the horizontal axis at 6 orders of hot wings and the vertical axis at 60 beers.
b. not change.
c. now intersect the horizontal axis at 4 orders of hot wings and the vertical axis at 16 beers.
d. rotate outward along the beer axis.

54. A budget constraint illustrates the

a. prices that a consumer chooses to pay for products he consumes.
b. purchases made by consumers.
c. consumption bundles that a consumer can afford.
d. consumption bundles that give a consumer equal satisfaction.

55. A budget constraint shows

a. the maximum utility that a consumer can achieve for a given level of income.
b. a series of bundles that cost the consumer the same amount of money.
c. a series of bundles that give the consumer the same level of utility.
d. All of the above are correct.
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56. Budget constraints exist for consumers because
a. their utility from consuming goods eventually reaches a maximum level.
b. even with unlimited incomes they have to pay for each good they consume.
c. they have to pay for goods, and they have limited incomes.
d. prices and incomes are inversely related.

57. Karen, Tara, and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days. Ice cream costs $5
per gallon, and paperback novels cost $8 each. Karen has a budget of $80, Tara has a budget of $60, and Chelsea has a
budget of $40 to spend on ice cream and paperback novels. Who can afford to purchase 8 gallons of ice cream and 5
paperback novels?
a. Karen, Tara, and Chelsea
b. Karen only
c. Tara and Chelsea but not Karen
d. none of the women

58. Karen, Tara, and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days. Ice cream costs $5
per gallon, and paperback novels cost $8 each. Karen has a budget of $80, Tara has a budget of $60, and Chelsea has a
budget of $40 to spend on ice cream and paperback novels. Who can afford to purchase 5 gallons of ice cream and 8
paperback novels?
a. Karen, Tara, and Chelsea
b. Karen only
c. Tara and Chelsea but not Karen
d. none of the women

59. Abby, Bobbi, and Deborah each buy ice cream and paperback novels to enjoy on hot summer days. Ice cream costs $5
per gallon, and paperback novels cost $8 each. Abby has a budget of $80, Bobbi has a budget of $60, and Deborah has a
budget of $40 to spend on ice cream and paperback novels. Who can afford to purchase 4 gallons of ice cream and 5
paperback novels?
a. Abby, Bobbi, and Deborah
b. Abby only
c. Abby and Bobbi, but not Deborah
d. None of the women can afford to purchase 4 gallons of ice cream and 5 paperback novels.

60. Abby, Bobbi, and Deborah each buy ice cream and paperback novels to enjoy on hot summer days. Ice cream costs $5
per gallon, and paperback novels cost $8 each. Abby has a budget of $80, Bobbi has a budget of $60, and Deborah has a
budget of $40 to spend on ice cream and paperback novels. Which of the following statements is correct?
a. Each woman faces the same budget constraint.
b. The slope of the budget constraint is the same for each woman.
c. The area underneath the budget constraint is larger for Deborah than for Abby.
d. All of the above are correct.

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