1. Kublai loves Chinese food including American Chinese dishes. Two popular Chinese dishes are General Tso' Chicken (GTC) and spicy Sichuan wontons (SW). If Kublai's utility function looks like

U = (GTC)(SSW), what kind of preferences does Kublai have over the two dishes, GTC and SSW?

A) The dishes are perfect substitutes for Kublai.

B) The dishes are perfect complements for him.

C) Kublai loves GTC but is neutral towards SSW.

D) Kublai has Cobb Douglas preferences over GTC and SSW.

2. The assumption that preferences are complete:

A) means that a consumer will spend her entire income.

B) is unnecessary, as long as transitivity is assumed.

C) recognizes that there may be pairs of market baskets that cannot be compared.

D) means that the consumer can compare any two market baskets of goods and determine that either one is preferred to the other or that she is indifferent between them.

3. Which of the following claims is true at each point along a price-consumption curve?

A) Utility is maximized but income is not all spent.

B) All income is spent, but utility is not maximized.

C) Utility is maximized, and all income is spent.

D) The level of utility is constant.

4. Which of the following is true regarding utility along a price-consumption curve?

A) It is constant.

B) It changes from point to point.

C) It changes only if income changes.

D) It changes only for normal goods.

5. When the income-consumption curve has a positive slope throughout its entire length, we can conclude that

A) both goods are inferior.

B) both goods are normal.

C) the good on the vertical (y) axis is inferior.

D) the good on the horizontal (x) axis is inferior.