What does an indifference curve represent in economics?
A) The trade-off between price and quantity
B) The different combinations of goods that give a consumer the same level of satisfaction
C) The production function of a firm
D) The relationship between income and consumption
Which of the following is true about indifference curves?
A) They slope upward to the right
B) They represent a consumer’s budget constraint
C) They are convex to the origin
D) They intersect each other at various points
What does the slope of an indifference curve represent?
A) The rate at which the consumer is willing to substitute one good for another
B) The consumer’s income
C) The price of the goods in the market
D) The marginal utility of the goods
If two indifference curves intersect, it implies:
A) A contradiction in consumer preferences
B) Both goods are perfect substitutes
C) The consumer is indifferent to the goods
D) The consumer’s utility is maximized
Which of the following describes the shape of an indifference curve for perfect substitutes?
A) It is straight and downward sloping
B) It is convex to the origin
C) It is concave to the origin
D) It is a vertical line
An indifference curve that is convex to the origin implies that:
A) The consumer has a diminishing marginal rate of substitution
B) The consumer has an increasing marginal rate of substitution
C) The goods are perfect substitutes
D) The consumer is willing to give up one good for another at a constant rate
Which of the following is a characteristic of indifference curves?
A) They are always straight lines
B) Higher indifference curves represent higher levels of utility
C) They do not slope downward
D) They intersect at multiple points
If a consumer’s budget constraint is tangent to an indifference curve, the consumer is:
A) At equilibrium and maximizing utility
B) Experiencing diminishing marginal utility
C) Unwilling to consume any more goods
D) On a higher indifference curve
The marginal rate of substitution (MRS) is:
A) The amount of money a consumer is willing to pay for a good
B) The rate at which a consumer is willing to substitute one good for another
C) The total utility derived from all goods consumed
D) The budget constraint of the consumer
In indifference curve analysis, the marginal rate of substitution typically:
A) Increases as more of one good is consumed
B) Decreases as more of one good is consumed
C) Remains constant
D) Has no relationship with the quantity of goods consumed
The point where the budget line is tangent to an indifference curve represents:
A) The consumer’s maximum satisfaction at the given budget
B) A situation of economic inefficiency
C) The minimum price at which a good can be sold
D) The consumer’s indifference to the price of goods
Which of the following will cause the budget line to shift?
A) Changes in the price of one of the goods
B) A change in the shape of the indifference curve
C) An increase in the consumer’s preferences
D) A decrease in the marginal utility of a good
The substitution effect in indifference curve analysis is caused by:
A) Changes in the consumer’s income
B) Changes in the prices of goods
C) Changes in the utility function
D) The consumer’s total expenditure
An indifference curve that is concave to the origin represents:
A) Perfect complements
B) Perfect substitutes
C) A diminishing marginal rate of substitution
D) An increasing marginal rate of substitution
What is the condition for a consumer to be in equilibrium in indifference curve analysis?
A) The marginal rate of substitution is equal to the price ratio
B) The consumer’s income is maximized
C) The indifference curve is horizontal
D) The consumer consumes equal quantities of all goods
What does the law of diminishing marginal rate of substitution state?
A) As the consumer consumes more of a good, the willingness to give up other goods increases
B) As the consumer consumes more of a good, the willingness to give up other goods decreases
C) The consumer’s budget will always increase
D) Indifference curves become steeper as the quantity of goods increases
If an indifference curve is steep, it indicates that:
A) The consumer is willing to sacrifice more of one good for a small increase in the other good
B) The consumer is indifferent between both goods
C) The consumer has no preference between goods
D) The consumer prefers one good over the other
What happens when the price of one good decreases in indifference curve analysis?
A) The budget line rotates outward, and the consumer may move to a higher indifference curve
B) The budget line rotates inward
C) The consumer’s income increases
D) The price ratio remains the same
Which of the following is NOT a characteristic of perfect substitutes in indifference curve analysis?
A) Indifference curves are straight lines
B) The marginal rate of substitution is constant
C) The consumer is willing to exchange goods at a constant rate
D) The indifference curve is convex to the origin
In indifference curve analysis, a consumer’s preferences are considered to be:
A) Transitive, complete, and reflexive
B) Non-comparable
C) Inconsistent and irrational
D) Irrelevant to the consumer’s utility
The concept of “consumer equilibrium” in indifference curve analysis refers to:
A) The point where the consumer consumes all available goods
B) The point where the consumer’s budget line is tangent to the highest attainable indifference curve
C) The point where the total utility is maximized
D) The point where all goods have equal marginal utility
If the consumer’s indifference curves are very steep, it indicates:
A) The consumer prefers the good on the horizontal axis more than the good on the vertical axis
B) The consumer prefers the good on the vertical axis more than the good on the horizontal axis
C) The consumer is indifferent between the goods
D) The consumer cannot substitute between the goods
What does the income effect in indifference curve analysis refer to?
A) The change in the consumer’s consumption choices due to a change in income
B) The change in the price of one good
C) The consumer’s change in preferences for one good
D) The shift in the indifference curve
If two goods are perfect complements, the indifference curve will be:
A) A straight line
B) L-shaped
C) Convex to the origin
D) Concave to the origin
Which of the following is true for indifference curves representing perfect complements?
A) The consumer is willing to substitute one good for another at a constant rate
B) The goods are consumed in fixed proportions
C) The indifference curves are convex to the origin
D) The consumer values one good more than the other
If a consumer moves to a higher indifference curve, it indicates:
A) The consumer’s utility has decreased
B) The consumer is now in a worse position
C) The consumer’s satisfaction has increased
D) The consumer has decreased their consumption of goods
What is the term used to describe a situation where the consumer is equally satisfied with different combinations of two goods?
A) Opportunity cost
B) Indifference curve
C) Budget constraint
D) Marginal utility
