ECO313 CH.3 T/F
A Laspeyres price index is based on the basket consumed in the later period..
F
A consumer can not consume a basket of goods that lies closer to the origin than their budget line because they can not afford that basket.
F
A utility maximizing person gets marginal utility of 20 from consuming their last piece of bread and of 10 from consuming their last glass of milk. If a piece of bread costs 5 cents, then a glass of milk must cost 20 cents.
F
Along a convex indifference curve, the marginal value of a good rises as the quantity of the good rises.
F
An indifference curve is a construct used by economists to show how tastes for an individual change
F
If a person is willing to trade one good for another, their new basket after the trade must lie on a lower indifference curve than their original basket.
F
If the consumer has the same tax bill under a head tax as under an income tax, then the consumer will be indifferent between the two taxes.
F
If the consumer's income doubles, then his optimal purchases of all goods will double.
F
If the indifference curve is not tangent to the budget line, then we can be sure that the consumer is not at the optimum.
F
Indifference curves fill the fourth quadrant of the plane.
F
Marginal value equals relative price at the consumer's optimum, even if the optimum is a corner solution.
F
The budget line is steep when X in inexpensive relative to Y.
F
The marginal value of a good is the dollar value that the consumer receives, on average, from each unit of the good purchased.
F
The slope of the budget line always equals the consumer's marginal value.
F
When a consumer spends all of the income, it must be true that they are maximizing utility.
F
A Paasche price index makes price changes seem better for the consumer than they really are.
T
A doubling of all prices has the same effect on the budget line as reducing income by half.
T
A utility maximizing person gets marginal utility from consuming their last pencil and pen of 4 and 10 respectively. If pencils cost 10 cents a piece, the pens must cost 25 cents a piece.
T
If the consumer chooses not to purchase potatoes, then the marginal value of potatoes must be less than or equal to the relative price of potatoes.
T
If the consumer has the same tax bill under a head tax as under an income tax, then less leisure will be consumed under the head tax than under the income tax.
T
If the consumer's income and all prices simultaneously triple, then his optimum will not change.
T
If the marginal value of beef is $8 per pound, then the consumer is willing to pay at most $8 for an additional pound of beef.
T
The budget line illustrates the consumer's opportunities and the indifference curve illustrates the consumer's preference.
T
The cardinal utility approach has exactly the same implications as the indifference curve approach.
T
The steeper the indifference curve, the greater the marginal value of a good.
T
There are an infinite number of choices faced by a consumer that are shown along an indifference curve.
T
When a consumer spends all of the income, it must be true that they are consuming a basket of goods on their budget line.
T
When using the composite good convention all other goods are measured in terms of dollars.
T
