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Micro Tut 4 2014

This document contains a practice microeconomics test with 5 multiple choice questions. The questions cover topics like indifference curves, budget constraints, equilibrium, marginal rates of substitution, and marginal utility. For each question, there are 5 possible answer choices listed from A to E.

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Katitja Molele
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182 views3 pages

Micro Tut 4 2014

This document contains a practice microeconomics test with 5 multiple choice questions. The questions cover topics like indifference curves, budget constraints, equilibrium, marginal rates of substitution, and marginal utility. For each question, there are 5 possible answer choices listed from A to E.

Uploaded by

Katitja Molele
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Micro tut 4 Chapters 7

Written question

Draw an indifference curve for each of the following pairs of goods. Under each diagram (i)
explain whether the goods are perfect complements, perfect substitutes or neither; (ii) discuss
the shape of each curve; and (iii) discuss how the shape relates to the marginal rate of
substitution.

(a) LCD TVs and Plasma TVs


(b) Socks and Shoes
(c) Work and leisure
(d) Clothes and food
(e) Bricks and mortar
(f) Tea and Coffee

Use the following diagram to answer questions 1 2 and 3. The diagram shows two
indifference curves and two different budget lines.

QY
D

B
15
IC2
A
5
IC1

15 20 30 QX

MCQ question 1

In the original position of equilibrium (Point A), 5 units of Y and 20 units of X get consumed.
Given that the price of X is R2, the consumers income and the price of Y respectively are:

A. R40 and R8
B. R60 and R12
C. R60 and R4
D. R30 and R15
E. R45 and R1
MCQ question 2

The value of point D:

A. is 60.
B. is 30.
C. is 24.
D. is 20.
E. cannot be calculated

MCQ question 3

Point C is not a position of equilibrium because:

A. MUX/PX > MUY/PY


B. PY/PX < marginal rate of substitution (defined as QY/QX)
C. MUX/MUY < PX/PY
D. the total utility received from the consumption of product Y is not maximised
E. Marginal rate of substitution = Px/Py but MUX/MUY
MCQ question 4

The following diagram illustrates Brees indifference curves (IC1 and IC2) and budget
constraints (BC1 and BC2) for cheese and bread. Due to a global wheat shortage, the price of
bread doubles from R5 to R10 per slice. The price of cheese is R10 per slice and Brees
income is R60. Which of the following statements is correct?

6
Slices of cheese

3 IC1

IC2
2
BC2 BC1

4 6 12
Slices of bread
A. The rise in the price of bread allows Bree to move on to a higher indifference curve
and spend more of her income
B. The income and substitution effects are equally responsible for the decreases in
consumption of bread by 2 slices and cheese by 1 slice
C. The income effect alone causes the consumption of bread to decrease by 2 slices and
the consumption of cheese to decrease by 1 slice
D. The substitution effect alone causes the consumption of bread to decrease by 2 slices
and the consumption of cheese to decrease by 1 slice
E. According to Bree, cheese and bread are perfect substitutes

MCQ question 5

Davids average utility from consuming three burgers is 20 utils per burger. His marginal
utility on the fourth burger is 18 utils. If David consumes the fifth burger, then his:

(i) average utility will decrease.


(ii) marginal utility will decrease .
(iii) total utility will increase.
(iv) total utility will decrease.

A. Only (i), (ii) and (iv) are correct


B. Only (i) and (iv) are correct
C. Only (ii) and (iii) are correct
D. Only (i), (ii) and (iii) are correct
E. Only (ii) and (iv) are correct

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