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Economics 1021A/B Study Guide - Final Guide: Renting, Jolt Cola, Normal Good


Department
Economics
Course Code
ECON 1021A/B
Professor
Jeannie Gillmore
Study Guide
Final

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Parkin/Bade, Economics: Canada in the Global Environment, 8e
Chapter 9 Possibilities, Preferences, and Choices
9.1 Consumption Possibilities
1) Guy has an income (Y) of $50 with which he can purchase DVDs (D) at $10 each and haircuts
(H) at $20 each. Which one of the following represents Guy's budget line?
A) Y = 10QD - 20QH
B) 50 = QD + QH
C) Y = 50 + QD + QH
D) 20Y = QD + 10QH
E) 50 = 10QD + 20QH
Answer: E
Diff: 2 Type: MC
Topic: Consumption Possibilities
Use the figure below to answer the following questions.
Figure 9.1.1
2) Shelly's budget line is shown in Figure 9.1.1 Which point is unaffordable given her income
and current prices?
A) A and B
B) B only
C) C only
D) C and D only
E) All points are unattainable.
Answer: B
Diff: 1 Type: MC
Topic: Consumption Possibilities
Copyright © 2013 Pearson Canada Inc. 132
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Parkin/Bade, Economics: Canada in the Global Environment, 8e
3) Shelly's budget line is shown in Figure 9.1.1. Which points are affordable given her income
and current prices?
A) A only
B) B only
C) C only
D) D only
E) A, C, and D
Answer: E
Diff: 2 Type: MC
Topic: Consumption Possibilities
4) David has an income of $30 to buy movie tickets and bus tickets. The price of a movie ticket
is $6 and the price of a bus ticket is $2. What is David's real income?
A) $30
B) 5 movie tickets or 15 bus tickets
C) 15 movie tickets or 5 bus tickets
D) $38
E) $32
Answer: B
Diff: 2 Type: MC
Topic: Consumption Possibilities
5) David has an income of $30 to buy movie tickets and bus tickets. The price of a movie ticket
is $6 and the price of a bus ticket is $2. What is the relative price of a bus ticket in terms of
movie tickets?
A) 2 movie tickets
B) 15 movie tickets
C) $3
D) 1/3 movie tickets
E) $6
Answer: D
Diff: 2 Type: MC
Topic: Consumption Possibilities
6) Real income in terms of a good is defined as
A) income divided by the quantity consumed of a good.
B) the income of a producer of that good.
C) the price of one good divided by the price of another good.
D) dollar income.
E) income divided by the price of a good.
Answer: E
Diff: 1 Type: MC
Topic: Consumption Possibilities
Copyright © 2013 Pearson Canada Inc. 133
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Parkin/Bade, Economics: Canada in the Global Environment, 8e
7) Marie-Louise has an income of $10 to buy peanuts and popcorn. The price of a bag of peanuts
is $1 and the price of a bag of popcorn is $2. What is Marie-Louise's real income in terms of
popcorn?
A) 1/2 bag of popcorn
B) 1 bag of popcorn
C) 2 bags of popcorn
D) 5 bags of popcorn
E) 10 bags of popcorn
Answer: D
Diff: 2 Type: MC
Topic: Consumption Possibilities
8) The price of one good divided by the price of another good is
A) an absolute price.
B) a relative price.
C) a marginal price.
D) a demand price.
E) a money price.
Answer: B
Diff: 1 Type: MC
Topic: Consumption Possibilities
9) The price of a cup of coffee is $2.00. The price of a cup of tea is $1.20. The relative price of a
cup of tea with respect to a cup of coffee is
A) 0.6 cups of coffee.
B) 1.67 cups of coffee.
C) 1.0 cup of coffee.
D) 1.25 cups of coffee.
E) 0.75 cups of coffee.
Answer: A
Diff: 1 Type: MC
Topic: Consumption Possibilities
10) The magnitude of the slope of the budget line is the
A) relative price of the good measured on the vertical axis.
B) relative price of the good measured on the horizontal axis.
C) absolute price of the good measured on the horizontal axis.
D) real price of the good measured on the vertical axis.
E) price of the good measured on the vertical axis.
Answer: B
Diff: 3 Type: MC
Topic: Consumption Possibilities
Copyright © 2013 Pearson Canada Inc. 134
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