Tag: government budget and economy

Quizzes (6) Questions (228)

Questions Related to government budget and economy

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Position of the price line would ________ with a change in the money income of the consumer.

  1. not change

  2. change

  3. depend on other factors

  4. none of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Position of the price line would change with change in money income of the consumer, because money income determines the budget/purchasing power of the consumer.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Given the income of the consumer, the slope of the price line is determined by the __________.

  1. Price of $X$

  2. Price of $Y$

  3. Ratio of prices of $X$ and $Y$

  4. none of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The slope of price line is determined by the ratio of prices of both the commodities 'X' and 'Y'. It is the locus of all the bundles of 'X and Y' that can be bought with the given income of the consumer.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

The total effect of a price change of a commodity is _______________.

  1. substitution effect plus price effect

  2. substitution effect plus income effect

  3. substitution effect plus demonstration effect

  4. substitution effect minus income effect
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The total effect of a price change is the sum of the substitution effect (changing relative prices) and the income effect (changing real purchasing power).

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Consumer's equilibrium condition can be written as ___________.

  1. $\dfrac{MU _x}{P _x} = \dfrac{MU _y}{P _y}$

  2. $\dfrac{MU _x}{P _x} > \dfrac{MU _y}{P _y}$

  3. $\dfrac{MU _x}{P _x} < \dfrac{MU _y}{P _y}$

  4. $\dfrac{P _x}{MU _x} = \dfrac{P _y}{MU _y}$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The condition for consumer equilibrium in the case of two goods is that the marginal utility per dollar spent on each good must be equal, expressed as MUx/Px = MUy/Py.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Budget line is also called _________.

  1. consumption possibility line

  2. production possibility line

  3. distribution possibility line

  4. saving possibility line
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The budget line shows all possible consumption bundles a consumer can afford, hence it is often referred to as the consumption possibility line.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Convex indifference curve is explained by _________.

  1. diminishing MRS

  2. increasing MRS

  3. constant MRS

  4. none of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The convexity of an indifference curve toward the origin is a direct result of the diminishing marginal rate of substitution (MRS), meaning the consumer is willing to give up less of one good to get more of another as they consume more of it.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Consumer's equilibrium occurs when __________.

  1. $MRS > \dfrac{P _x}{P _y}$

  2. $MRS = \dfrac{P _x}{P _y}$

  3. $MRS < \dfrac{P _x}{P _y}$

  4. $MRS = \dfrac{P _y}{P _x}$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Consumer equilibrium occurs at the point where the indifference curve is tangent to the budget line, meaning the slope of the indifference curve (MRS) equals the slope of the budget line (Px/Py).

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Constraints on which budget line is made are __________.

  1. given income and prices

  2. given prices and tastes

  3. given income and tastes

  4. given prices and government policy
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A budget line is defined by the constraint of the consumer's total money income and the market prices of the two goods being considered.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

For consumers' equilibrium to be stable, the requirement is __________.

  1. constant MRS

  2. increasing MRS

  3. diminishing MRS

  4. none of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

For an equilibrium to be stable and represent a maximum utility point, the indifference curve must be convex to the origin, which is characterized by a diminishing MRS.