1. Suppose the price of a kg of rice is $10 and the price of a kg of pasta is $5. What is the opportunity cost of rice in terms of pasta? (NOTE: Enter a positive number.)

2. A consumer has $2,000 a week to spend on renting square feet of housing (at a price of $20 per square foot) and eating out (at a price of $10 per meal). With square feet of housing on the horizontal axis and meals on the vertical axis, what is the slope of this consumer's budget constraint?

3. Refer to the scenario of question 2. What is the opportunity cost of meals in terms of square feet of housing? (NOTE: Enter a positive number.)

4. Suppose consumers can buy only two goods. If all the consumers are price takers and face the same prices, then their budget lines will all have the same slope.

a. True

b. False

5. If all consumers are price takers and face the same prices, then all consumers have the same choice set. a. True b. False 6. If two different consumption bundles A and B are in the choice set of a given consumer, then the two bundles must cost the same.

a. True

b. False

7. Suppose a consumer can spend her income in good 1 and in good 2. If the income of this consumer increases because of a promotion at work, then the opportunity cost of good 1 in terms of good 2 for this consumer also increases.

a. True

b. False

8. The following changes in a consumer's economic circumstances result in a steeper budget line with the vertical intercept unchanged. (Denote the good on the horizontal axis as good 1 and the good on the vertical axis as good 2).

a. A k per cent decrease in the price of good 2 combined with a k per cent increase in income

b. A k per cent increase in the price of good 2 combined with a k per cent decrease in income

c. A k per cent decrease in the price of good 2 combined with a k per cent decrease in income

d. A k percent increase in the price of good 2 combined with a k percent increase in income.

e. None of the above.

9. Suppose inflation comes in the form of an across-the-board increase in all the prices by some percentage k. For a consumer with a fixed (and exogenous) income operating in a 2-good world, this will cause the budget constraint to

a. Rotate outward around the horizontal intercept

b. Shift outward in a parallel way

c. Rotate inward around the vertical intercept

d. Shift inward in a parallel way

e. None of the above.

10. Suppose I give you a coupon for pizza. This coupon lowers the price of pizza by 10% and applies to any quantity of pizza that you may wish to buy. What happens to your budget constraint, with pizza on the vertical axis and, say, water on the horizontal axis?

a. The vertical intercept remains the same but the slope becomes steeper

b. The vertical intercept remains the same but the slope becomes flatter

c. The vertical intercept increases and the slope becomes steeper

d. The vertical intercept increases and the slope becomes flatter

e. None of the above.