The figure shows Hilda's budget line. Hilda buys only cauliflower (Qc) and geraniums (Qg). The price of a cauliflower is $2 and the price of a geranium is $4. If Hilda's income increases by $20, the price of cauliflower decreases by $1, and the price of geraniums increases by $1, the equation of her new budget line is __________________.

Qg = 12 - 0.2Qc
Qg = 4 - 0.2Qc
Qg = 60 - 5Qc
Qc = 12 - 0.2Qg

The price of one good changes and Sue is now at a point on her indifference curve where the marginal rate of substitution exceeds the relative price. Sue will now choose to buy _______ of the good that is measured on the _______.

the same quantity; x-axis
more; y-axis
more; x-axis
less; x-axis

The figure illustrates Elijah's preferences. He is currently at point a. The price of liver decreases. The move from point ____ to point _______ is the substitution effect and the move from point ____ to point _______ is the income effect.

a; b; b; c
a; c; c; b
a; d; d; b
a; e; e; c

Dan's grandfather earned a lower wage rate than Dan does and worked more hours a week than Dan does. Dan works fewer hours because the ______ of the higher wage rate is less than the _______.

substitution effect; income effect
marginal effect; income effect
price effect; income effect
income effect; substitution effect

Peter likes bagels and pop. The price of a bagel is $2 and the price of pop is $1 a can. Peter spends all his income and buys 3 bagels and 4 cans of pop. Now the price of pop falls to $0.50 a can. If Peter's indifference curves have the regular shape, he will most likely buy ___________________.

fewer bagels and more pop
more bagels and more pop
more pop but an unknown number of bagels
more bagels and less pop

Tom spends all his income on comics and cola and is at his best affordable point. The price of a comic is $4, and the price of a can of cola is $1. If the quantity of cola is plotted on the y-axis, then ________ 4.

Tom's marginal rate of substitution is
the relative price of cola is
both Tom's marginal rate of substitution and the relative price of cola are
Tom's real income in terms of cola is

Rosie consumes only coffee and sandwiches and is at her best affordable point. Now, the price of a cup of coffee doubles and at the same time Rosie's income increases by the amount that allows her to continue buying the same amounts of coffee and sandwiches. Rosie now buys ________cups of coffee and ______________sandwiches.

the same number of; the same number of
fewer; fewer
the same number; more
fewer; more

Wendy spends $30 a week on movies and magazines. The price of a movie is $8, the price of a magazine is $2, and Wendy sees 3 movies a week and buys 3 magazines. The price of a magazine now increases to $4 and Wendy's brother gives her $6 a week so that she can still see 3 movies a week and buy 3 magazines. In this situation, Wendy will see _________ movies and buy _________ magazines.

3; 3
more than 3; fewer than 3
less than 3; less than 3
less than 3; more than 3

Sue consumes only sandwiches and pop and is at her best affordable point. Suppose that sandwiches are plotted on the x-axis. Now the price of a sandwich halves. The substitution effect is that Sue substitutes ___________ for ___________. The income effect is that Sue ______________.

sandwiches; pop; buys less of both goods
sandwiches; pop; buys more of both goods
pop; sandwiches; buys less pop and more sandwiches
pop; sandwiches; buys more pop and fewer sandwiches

The labor supply curve _______ at higher wage rates if as the wage rate increases the _______effect exceeds the _______effect.

has a positive slope; income; substitution
bends backwards; income; substitution
bends backward; price; income
has a negative slope; substitution; price

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