Page 895 - Krugmans Economics for AP Text Book_Neat

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SOLUTIONS TO AP REVIEW QUESTIONS

Kyle, MU /MU = 5, if P /P = 2, he should consume b. Kathleen would purchase 10 song downloads and 0 DVD
B G B G
fewer games and more books to lower his MU /MU rentals. We know that Kathleen wants to be on the high-
B G
until it is equal to 2. est indifference curve possible. We also know that there
Tackle the Test: is no tangency point in this case because the indifference
curve and the budget line are both straight lines with dif-
Multiple-Choice Questions ferent slopes. Thus, the highest indifference curve that
1. c touches the budget line will touch it on one of the axes.
2. e Since the slope of the budget line is steeper than the
slope of the indifference curve (−2.5 versus −0.5), the
3. a highest indifference curve that can be afforded, given the
4. b budget line, is at the point 10 songs and 0 DVD rentals.
5. e
Tackle the Test:
Free-Response Questions

2. a. Quantity
of songs
10

0 4 Quantity of DVD rentals