Business Economic

1. The theory of consumer choice provides the foundation for understanding a. the structure of a firm. b. the profitability of a firm. c. a firm 's product demand. d. a firm 's product supply. ANS: C PTS: 1 DIF: 1 REF: 21-0 TOP: Consumer choice MSC: Definitional 2. The theory of consumer choice examines a. the determination of output in competitive markets. b. the tradeoffs inherent in decisions made by consumers. c. how consumers select inputs into manufacturing production processes. d. the determination of prices in competitive markets. ANS: B PTS: 1 DIF: 1 REF: 21-0 TOP: Consumer choice MSC: Definitional 3. Consider two goods, books and hamburgers. The slope of the consumer 's budget constraint is measured by the a. consumer 's income divided by the price of hamburgers. b. relative price of books and hamburgers. c. consumer 's marginal rate of substitution. d. number of books purchased divided by the number of hamburgers purchased. ANS: B PTS: 1 DIF: 2 REF: 21-1 TOP: Budget constraint MSC: Interpretive 4. If a consumer 's income decreases, the budget constraint for CDs and DVDs will a. shift outward, parallel to the original budget constraint. b. shift inward, parallel to the original budget constraint. c. rotate outward along the CD axis because we can afford more CDs. d. rotate outward along the DVD axis because we can afford more DVDs. ANS: B PTS: 1 DIF: 2 REF: 21-1 TOP: Budget constraint MSC: Analytical 5. If the relative price of a concert ticket is 3 times the price of a meal at a good restaurant, then the opportunity cost of a concert ticket can be measured by the a. slope of the budget constraint. b. slope of an indifference curve. c. marginal rate of substitution. d. income effect. ANS: A PTS: 1 DIF: 2 REF: 21-1 TOP: Budget constraint MSC: Analytical 6. When the price of a shirt falls, the a. quantity of shirts demanded falls. b. quantity of shirts demanded rises. c. quantity of shirts supplied rises. d. demand for shirts falls. ANS: B PTS: 1 DIF: 1