Microeconomics II Week 2 Quiz
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Questions and Answers

What does a weak preference relation represent in consumer preferences?

  • At least as preferred as another bundle (correct)
  • A strict preference for one bundle over another
  • Indifference between two bundles
  • Total avoidance of a particular bundle

    • If a consumer is indifferent between two bundles, they strictly prefer one over the other.

    False

    Define strict preference in the context of consumer preferences.

    Strict preference occurs when a consumer prefers one bundle over another and does not have a preference for the reverse.

    A consumer is said to strictly prefer bundle x to bundle x0 if ____________.

    <p>x % x0 and x0 %/ x</p> Signup and view all the answers

    Match the following terms with their definitions:

    <p>Weak Preference = At least as preferred as another bundle Strict Preference = Preferred without indifference Indifference = Both bundles are equally preferred Preference Relation = A way to rank consumption bundles</p> Signup and view all the answers

    If a consumer weakly prefers bundle x to x0, then they also strictly prefer x to x0.

    <p>False</p> Signup and view all the answers

    What does it mean when a consumer is indifferent between two bundles?

    <p>The consumer considers both bundles to be at least equally preferred.</p> Signup and view all the answers

    What does the consumption bundle typically denote?

    <p>A vector of quantities of two goods</p> Signup and view all the answers

    The budget constraint is defined as p1x1 + p2x2 = m.

    <p>False</p> Signup and view all the answers

    What happens to the budget constraint when a consumer spends all their income?

    <p>It is satisfied with equality.</p> Signup and view all the answers

    What is considered a leading example of a bad?

    <p>Pollution.</p> Signup and view all the answers

    The consumer’s budget set contains all bundles where the inequality ______ is satisfied.

    <p>p1x1 + p2x2 ≤ m</p> Signup and view all the answers

    What does the slope of the budget line represent?

    <p>The relative price of good 1 to good 2</p> Signup and view all the answers

    More of a bad is always preferable to less of it.

    <p>False</p> Signup and view all the answers

    What do indifference curves represent in relation to consumer preferences?

    <p>Indifference curves represent the different combinations of goods that provide the same level of utility to the consumer.</p> Signup and view all the answers

    How can the budget line be visually represented?

    <p>As a straight line on a graph.</p> Signup and view all the answers

    A typical example of a bad in economics is __________.

    <p>labour</p> Signup and view all the answers

    Match the following variables with their respective descriptions:

    <p>x1 = Quantity of good 1 x2 = Quantity of good 2 p1 = Price of good 1 p2 = Price of good 2</p> Signup and view all the answers

    A consumer can afford a bundle x = (x1, x2) if ______ is true.

    <p>p1x1 + p2x2 ≤ m</p> Signup and view all the answers

    Match the type of good with its related characteristic:

    <p>Good = Typically preferred in greater amounts Bad = Not preferred, more consumption is undesirable Bliss point = Level of consumption beyond which goods behave as bads Indifference curve = Shows combinations providing equal utility</p> Signup and view all the answers

    In which scenario do indifference curves have a positive slope?

    <p>When one good is a good and the other is a bad.</p> Signup and view all the answers

    The consumer prefers more of both goods when both are classified as bads.

    <p>False</p> Signup and view all the answers

    What happens to consumer preferences after reaching a bliss point?

    <p>Goods behave as bads beyond the bliss point.</p> Signup and view all the answers

    What does transitivity imply about consumer preferences?

    <p>If a consumer prefers x to x0 and x0 to x00, they must prefer x to x00.</p> Signup and view all the answers

    A preference relation that is complete is always reflexive.

    <p>True</p> Signup and view all the answers

    What does rationality imply for consumers in terms of their preferences?

    <p>Consumers know what they like and can rank all alternatives.</p> Signup and view all the answers

    A preference relation is said to be _________ if for every x X, x % x.

    <p>reflexive</p> Signup and view all the answers

    Which of the following statements is true regarding strict preference and indifference relations?

    <p>Strict preference and indifference can be transitive but are not always complete.</p> Signup and view all the answers

    Explain why a preference relation can be reflexive but not complete.

    <p>A preference relation can specify preferences only for individual items without comparing them to others.</p> Signup and view all the answers

    Match the terms with their definitions:

    <p>Transitivity = If x is preferred over x0 and x0 over x00, then x is preferred over x00 Reflexivity = An element x is always comparable to itself Completeness = For any two alternatives, one must be preferred, or they are indifferent Rationality = Consumers can consistently rank alternatives.</p> Signup and view all the answers

    If a preference relation is complete, then for every pair of bundles x and x0, one of the following must hold: (a) x x0, (b) x0 x, or (c) x x0. This illustrates the concept of _______ in consumer theory.

    <p>completeness</p> Signup and view all the answers

    What does it mean for preferences to be strictly monotonic?

    <p>More of one good is always preferred if the other good is unchanged.</p> Signup and view all the answers

    Local non-satiation is a stronger axiom than strict monotonicity.

    <p>False</p> Signup and view all the answers

    What graphical effect does local non-satiation have on indifference curves?

    <p>It removes the thick portions from the indifference sets.</p> Signup and view all the answers

    Preferences that are _____ monotonic are weakly monotonic.

    <p>strictly</p> Signup and view all the answers

    Match the types of monotonicity with their definitions:

    <p>Strictly monotonic = More of one good is strictly preferred Weakly monotonic = More of one good is preferred or indifferent Locally non-satiated = No thick portions in indifference curves Strictly convex = Combining bundles is strictly preferred</p> Signup and view all the answers

    Which statement best describes strictly convex preferences?

    <p>A consumer prefers combinations of bundles.</p> Signup and view all the answers

    Weak monotonicity is strictly stronger than local non-satiation.

    <p>True</p> Signup and view all the answers

    What is the implication of weak monotonicity on indifference curves?

    <p>Indifference curves cannot intersect.</p> Signup and view all the answers

    Which set represents the bundles that are considered at least as good as a bundle x?

    <p>At least as good set %(x)</p> Signup and view all the answers

    The preferred to set (x) and the indifference set (x) can contain the same bundles.

    <p>False</p> Signup and view all the answers

    What is the relationship between the 'at least as good' set %(x) and the 'preferred to' set (x)?

    <p>The at least as good set %(x) is equal to the union of the preferred to set (x) and the indifference set (x).</p> Signup and view all the answers

    The set of bundles that are considered worse than a bundle x is called the ______ set.

    <p>worse than</p> Signup and view all the answers

    What is true about the set of bundles that can be included in both (x) and (x)?

    <p>They are disjoint sets.</p> Signup and view all the answers

    If a bundle x0 belongs to the 'not better than' set -(x), it means x0 is better than x.

    <p>False</p> Signup and view all the answers

    Explain in your own words what bundles are included in the 'indifference' set (x).

    <p>Bundles in the indifference set (x) are those that are considered equal in preference to bundle x.</p> Signup and view all the answers

    Study Notes

    Course Information

    • Course title: Microeconomics II
    • Instructors: Shaun Grimshaw, Max Posch, and Alejandro Robinson-Cortés
    • Institution: University of Exeter
    • Term: Autumn 2024
    • Week: 2

    Contents

    • Introduction (pages 5-7)
      • Models and mathematics
      • Desirable allocations (efficiency and fairness)
      • How to use the notes
    • Budget Sets (pages 10-16)
      • Consumption Sets, Bundles, and Budget Sets
      • Changes in Prices and Income
      • Policies Affecting Budget Sets
        • Per-unit and ad-valorem taxes and subsidies
        • Lump-sum taxes and rationing
        • Non-linear taxes and subsidies
        • Vouchers
    • Preferences (pages 18-30)
      • Preference Relations
      • Axioms of Consumer Theory
        • Rational Preferences (completeness and transitivity)
        • Visualizing Preferences
        • Local Non-satiation and Monotonicity
        • Convexity
        • Well-behaved Preferences
      • Goods, Bads, and Bliss Points
      • Marginal Rate of Substitution
    • References (page 34)
    • Glossary (page 35)

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    Description

    Test your understanding of key concepts in Microeconomics II from Week 2, including budget sets, consumer preferences, and their implications on efficiency and fairness. This quiz covers essential models and mathematical frameworks relevant to the course.

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