Use the following figure to answer the question(s) below. Figure: Water vs. Soda

Question

Use the following figure to answer the question(s) below. Figure: Water vs. Soda

(Figure: Water vs. Soda) These figures show the marginal utility Janet receives when she consumes bottled water and soda. Both water and soda cost $1 each. If Janet has $2 in income, and consumes 2 bottles of water and zero sodas,

a) she could be better off if she consumed 2 sodas instead of 2 bottles of water.
b) she is maximizing her utility.
c) the marginal utility of soda will be higher than the marginal utility of bottled water.
d) she could be better off if she consumed 1 bottle of water and 1 soda.

Use the figure to answer the question(s) below.
Figure: Budget Constraint

(Figure: Budget Constraint) This figure represents the budget constraint of a consumer who purchases flip-flops and sneakers. If the price of sneakers rises, then the budget constraint will

a) become flatter.
c) not change.
d) become steeper.
e) shift to the left.

A) The consumer's income increased.
B) The price of movie downloads increased.
C) The price of music downloads decreased.
D) The consumer's income decreased.

Use the figure to answer the question(s) below.
Figure: Indifference Curve

(Figure: Indifference Curve) This figure represents the indifference curve of a consumer who purchases flip-flops and sneakers. Which of the following statements is TRUE?

a) The consumer would prefer bundle C to bundle A.

b) A consumer is indifferent between bundle B and bundle A.

c) Bundle E is not utility maximizing.

d) Bundle B generates the highest utility out of all the points shown.

Explanation / Answer

1. B) She is maximizing her utility.

2. D) Become Steeper (due to fall in the demand of sneakers)

3. A) Consumer's income increase

4. A) The consumer would prefer bundle C to bundle A.

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