Question 1

Figure 21-14

-Refer to Figure 21-14.Which of the following statements is correct?

Accepted Answer

A)   The indifference curves represented in graph a are perfect substitutes.
B)   The indifference curves represented in graph b are perfect complements.
C)   The indifference curves represented in graph c are neither perfect substitutes not perfect complements.
D)   All of the above are correct.E) A) and C)
F) A) and B)

Question 2

Energy drinks and granola bars are normal goods.When the price of energy drinks decreases,the income effect causes a

Accepted Answer

A)   shift to a lower indifference curve, and the consumer buys fewer granola bars.
B)   shift to a higher indifference curve, and the consumer buys more granola bars.
C)   movement along the indifference curve, and the consumer buys fewer granola bars.
D)   movement along the indifference curve, and the consumer buys more granola bars.E) B) and D)
F) None of the above

Question 3

Figure 21-10
 
-Refer to Figure 21-10.Which of the following statements is not true for a consumer who moves from bundle B to bundle C?

Accepted Answer

A)   At bundle C the consumer would be willing to give up a larger amount of cake in exchange for a donut than at bundle B.
B)   The marginal rate of substitution at bundles B and C are the same since the points lie on the same indifference curve.
C)   The consumer is willing to sacrifice donuts to obtain cake.
D)   The consumer receives the same level of satisfaction at bundles B and C.E) B) and C)
F) B) and D)

Question 4

At the consumer's optimum the

Accepted Answer

A)   budget constraint will have a slope of MUx/Px.
B)   slope of the indifference curve is equal to the slope of the budget constraint.
C)   indifference curve will intersect the budget constraint at the midpoint of the budget constraint.
D)   Both b and c are correct.E) C) and D)
F) All of the above

Question 5

A Giffen good is a good for which an increase in the price

Accepted Answer

A)   decreases the quantity supplied.
B)   increases the quantity supplied.
C)   decreases the quantity demanded.
D)   increases the quantity demanded.E) A) and B)
F) A) and C)

Question 6

Figure 21-18
 
-Refer to Figure 21-18.Assume that the consumer depicted in the figure has an income of $20.The price of Skittles is $2 and the price of M&M's is $4.The consumer's optimal choice is point

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) All of the above
F) A) and C)

Question 7

Figure 21-22
 
-Refer to Figure 21-22.When the price of X is $80,the price of Y is $20,and the consumer's income is $160,the consumer's optimal choice is D.Then the price of X decreases to $20.The demand curve can be illustrated as the movement from

Accepted Answer

A)   D to E.
B)   D to C.
C)   C to E.
D)   E to D.E) A) and B)
F) B) and D)

Question 8

Jack and Diane each buy pizza and paperback novels.Pizza costs $3 per slice,and paperback novels cost $5 each.Jack has a budget of $30,and Diane has a budget of $15 to spend on pizza and paperback novels.Which consumer(s) can afford to purchase 3 slices of pizza and 4 paperback novels?

Accepted Answer

A)   Jack only
B)   Diane only
C)   both Jack and Diane
D)   neither Jack nor DianeE) A) and B)
F) B) and C)

Question 9

Assume that consumption when young and consumption when old are both normal goods.The income effect of an increase in the interest rate will result in

Accepted Answer

A)   an increase in saving when young.
B)   an increase in saving when old.
C)   a decrease in saving when young.
D)   a decrease in saving when old.E) None of the above
F) All of the above

Question 10

Which of the following statements is not correct?

Accepted Answer

A)   Reducing taxes on interest income might encourage people to save more.
B)   Reducing taxes on interest income might reduce saving.
C)   A price increase will create income and substitution effects that will both always work to reduce consumption of the good.
D)   Utility is maximized when the marginal rate of substitution between any two goods equals the relative prices of the two goods.E) A) and B)
F) All of the above

Question 11

The goal of the consumer is to

Accepted Answer

A)   maximize utility.
B)   be on the highest indifference curve.
C)   maximize satisfaction.
D)   All of the above are the goals of the consumer.E) A) and B)
F) A) and C)

Question 12

Suppose the price of good X falls and the consumption of good X increases.From this we can infer that X is a(n) 
(i) normal good.
(ii) inferior good.
(iii) Giffen good.

Accepted Answer

A)   (i)  only
B)   (i)  or (ii)  only
C)   (iii)  only
D)   (ii)  or (iii)  onlyE) None of the above
F) A) and D)

Question 13

If a consumer experiences a decrease in income,the new budget constraint will have the same slope as the old budget constraint.

Accepted Answer

A) True 
 B)False

Question 14

The theory of consumer choice is representative of how consumers make decisions but is not intended to be a literal account of the process.

Accepted Answer

A) True 
 B)False

Question 15

Figure 21-12
 
-Refer to Figure 21-12.The marginal rate of substitution between bundles V and Z is

Accepted Answer

A)   greater than the marginal rate of substitution between bundles Z and T.
B)   less than the marginal rate of substitution between bundles Z and T.
C)   equal to the marginal rate of substitution between bundles Z and T.
D)   We are unable to compare the marginal rates of substitution.E) B) and C)
F) A) and B)

Question 16

Figure 21-10
 
-Refer to Figure 21-10.When comparing bundle A to bundle E,the consumer

Accepted Answer

A)   prefers bundle A because it contains more donuts.
B)   prefers bundle E because it lies on a higher indifference curve.
C)   prefers bundle E because it contains more donuts.
D)   is indifferent between the two bundles.E) C) and D)
F) A) and D)

Question 17

Giffen goods have positively-sloped demand curves because they are

Accepted Answer

A)   normal goods for which the income effect outweighs the substitution effect.
B)   normal goods for which the substitution effect outweighs the income effect.
C)   inferior goods for which the income effect outweighs the substitution effect.
D)   inferior goods for which the substitution effect outweighs the income effect.E) A) and C)
F) All of the above

Question 18

Which of the following statements is not correct?

Accepted Answer

A)   If Jane gets a higher wage and works more, the substitution effect is greater than the income effect for her.
B)   If Spencer experiences a wage decrease and works less, the income effect is greater than the substitution effect for him.
C)   If the substitution effect is greater than the income effect, the labor-supply curve is upward sloping.
D)   If the income effect is greater than the substitution effect, the labor-supply curve is downward sloping.E) A) and B)
F) All of the above

Question 19

Which of the following is not a property of a typical indifference curve?

Accepted Answer

A)   downward sloping
B)   bowed away from the origin
C)   does not intersect another indifference curve
D)   a higher one is preferred to a lower oneE) A) and C)
F) A) and B)

Question 20

Figure 21-10
 
-Refer to Figure 21-10.When comparing bundle B to bundle C,the consumer

Accepted Answer

A)   prefers bundle B because it contains more donuts.
B)   is indifferent between the two bundles.
C)   prefers bundle C because it contains more cake.
D)   In order to compare bundle B to bundle C, we must know the prices of cake and donuts.E) None of the above
F) A) and B)

Exam 21: The Theory of Consumer Choice.

Energy drinks and granola bars are normal goods.When the price of energy drinks decreases,the income effect causes a

Correct AnswerverifiedShow Answer

The goal of the consumer is to

Correct AnswerverifiedShow Answer

Suppose the price of good X falls and the consumption of good X increases.From this we can infer that X is a(n) (i) normal good. (ii) inferior good. (iii) Giffen good.

Correct AnswerverifiedShow Answer

Figure 21-22 -Refer to Figure 21-22.When the price of X is $80,the price of Y is $20,and the consumer's income is $160,the consumer's optimal choice is D.Then the price of X decreases to $20.The demand curve can be illustrated as the movement from

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Which of the following is not a property of a typical indifference curve?

Correct AnswerverifiedShow Answer

Figure 21-10 -Refer to Figure 21-10.When comparing bundle A to bundle E,the consumer

Correct AnswerverifiedShow Answer

Giffen goods have positively-sloped demand curves because they are

Correct AnswerverifiedShow Answer

Assume that consumption when young and consumption when old are both normal goods.The income effect of an increase in the interest rate will result in

Correct AnswerverifiedShow Answer

A Giffen good is a good for which an increase in the price

Correct AnswerverifiedShow Answer

Figure 21-10 -Refer to Figure 21-10.Which of the following statements is not true for a consumer who moves from bundle B to bundle C?

Correct AnswerverifiedShow Answer

Jack and Diane each buy pizza and paperback novels.Pizza costs $3 per slice,and paperback novels cost $5 each.Jack has a budget of $30,and Diane has a budget of $15 to spend on pizza and paperback novels.Which consumer(s) can afford to purchase 3 slices of pizza and 4 paperback novels?

Correct AnswerverifiedShow Answer

Figure 21-14 -Refer to Figure 21-14.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The theory of consumer choice is representative of how consumers make decisions but is not intended to be a literal account of the process.

Correct AnswerverifiedShow Answer

Figure 21-18 -Refer to Figure 21-18.Assume that the consumer depicted in the figure has an income of $20.The price of Skittles is $2 and the price of M&M's is $4.The consumer's optimal choice is point

Correct AnswerverifiedShow Answer

Figure 21-10 -Refer to Figure 21-10.When comparing bundle B to bundle C,the consumer

Correct AnswerverifiedShow Answer

Figure 21-12 -Refer to Figure 21-12.The marginal rate of substitution between bundles V and Z is

Correct AnswerverifiedShow Answer

If a consumer experiences a decrease in income,the new budget constraint will have the same slope as the old budget constraint.

Correct AnswerverifiedShow Answer

At the consumer's optimum the

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified