Question 1

An individual's demand curve for X

Accepted Answer

A) shows how the utility-maximizing choice of X changes as the price of X changes. 
B) shows how the individual's preferences change as the price of X changes. 
C) shows how the individual's preferences change as the consumer income changes. 
D) both a and b 
E) both a and c 
A) shows how the utility-maximizing choice of X changes as the price of X changes. 
B) shows how the individual's preferences change as the price of X changes. 
C) shows how the individual's preferences change as the consumer income changes. 
D) both a and b 
E) both a and c A

Question 2

The rate at which a consumer is WILLING to substitute one good for another is measured by

Accepted Answer

A) the corner solution on the Y axis. 
B) the slope of the budget line. 
C) the consumer's real income. 
D) the slope of the tangent to the indifference curve. 
A) the corner solution on the Y axis. 
B) the slope of the budget line. 
C) the consumer's real income. 
D) the slope of the tangent to the indifference curve. D

Question 3

The figure below shows a consumer maximizing utility at two different prices (the left panel)and the consumer's demand for good X at the same two prices of good X (the right panel).The price of good Y is $4.50.When the price of X increases from point S to point R along the demand curve,it is clear that good X ___________ (is,is not)a Giffen good because _______________.

Accepted Answer

A) is not; the substitution effect reinforces the income effect. 
B) is not; good X is an inferior good. 
C) is; the total effect of the price increase is negative. 
D) is; the income effect reinforces the substitution effect. 
E) is; the income effect is larger than the substitution effect. 
A) is not; the substitution effect reinforces the income effect. 
B) is not; good X is an inferior good. 
C) is; the total effect of the price increase is negative. 
D) is; the income effect reinforces the substitution effect. 
E) is; the income effect is larger than the substitution effect. A

Question 4

The figure below shows a consumer maximizing utility at two different prices (the left panel)and the consumer's demand for good X at the same two prices of good X (the right panel).The price of good Y is $14.When the price of X increases from point M to point N along the demand curve,the income effect of the price increase is ________.

Accepted Answer

A) 175 
B) 180 
C) -175 
D) -180 
E) none of the above 
A) 175 
B) 180 
C) -175 
D) -180 
E) none of the above

Question 5

Suppose that utility-maximizing consumers in San Francisco pay three times as much for apples as for peaches.What is the ratio of the marginal utility of apples to the marginal utility of peaches?

Accepted Answer

A) 1/3 
B) 2/3 
C) 3 
D) none of the above 
E) cannot determine without further information 
A) 1/3 
B) 2/3 
C) 3 
D) none of the above 
E) cannot determine without further information

Question 6

Assume James purchases only two goods,steak and chicken,with his weekly income of $60.The price of steak is $10 and the price of chicken is $5.The following table shows the marginal utility James gets from each additional pound of steak and chicken:   Given the above information,what quantities of steak and chicken should James purchase to maximize his utility?

Accepted Answer

A) 3 steak,2 chicken 
B) 5 steak,2 chicken 
C) 4 steak,4 chicken 
D) 2 steak,5 chicken 
E) none of the above 
A) 3 steak,2 chicken 
B) 5 steak,2 chicken 
C) 4 steak,4 chicken 
D) 2 steak,5 chicken 
E) none of the above

Question 7

Which of the following is NOT a characteristic of a typical indifference curve?

Accepted Answer

A) The curve shows all combinations of goods that give the consumer the same level of utility. 
B) As a consumer has less of a good,he is less willing to exchange less of it for one more unit of another good. 
C) The marginal rate of substitution is measured by the slope of the tangent to the curve. 
D) The curve will shift out if income increases. 
A) The curve shows all combinations of goods that give the consumer the same level of utility. 
B) As a consumer has less of a good,he is less willing to exchange less of it for one more unit of another good. 
C) The marginal rate of substitution is measured by the slope of the tangent to the curve. 
D) The curve will shift out if income increases.

Question 8

The figure below shows a consumer maximizing utility at two different prices (the left panel)and the consumer's demand for good X at the same two prices of good X (the right panel).The price of good Y is $4.50.The equation of the budget line passing through point r is _______________.

Accepted Answer

A) Y = 80 - (10/3)X 
B) Y = 90 - (10/3)X 
C) Y = 80 - 0.3X 
D) Y = 90 - 0.3X 
A) Y = 80 - (10/3)X 
B) Y = 90 - (10/3)X 
C) Y = 80 - 0.3X 
D) Y = 90 - 0.3X

Question 9

Assume James purchases only two goods,steak and chicken,with his weekly income of $60.The price of steak is $10 and the price of chicken is $5.The following table shows the marginal utility James gets from each additional pound of steak and chicken:   Given the above information,if the price of steak falls to $8,what quantities of steak and chicken should James purchase to maximize his utility?

Accepted Answer

A) 6 steak,2 chicken 
B) 5 steak,3 chicken 
C) 4 steak,4 chicken 
D) 5 steak,4 chicken 
E) 3 steak,6 chicken 
A) 6 steak,2 chicken 
B) 5 steak,3 chicken 
C) 4 steak,4 chicken 
D) 5 steak,4 chicken 
E) 3 steak,6 chicken

Question 10

The following figure shows a portion of a consumer's indifference map and budget lines.The price of good Y is $7 and the consumer's income is $700.Let the consumer begin in utility-maximizing equilibrium at point A on indifference curve I.Next the price of good X changes so that the consumer moves to a new utility-maximizing equilibrium at point B on indifference curve II.The substitution effect of the change in the price of X is

Accepted Answer

A) +12 
B) +10 
C) -10 
D) +32 
E) +42 
A) +12 
B) +10 
C) -10 
D) +32 
E) +42

Question 11

In the following graph the consumer's income is $1,200.At point B,

Accepted Answer

A) the rate at which the consumer is willing to substitute X for Y is greater than it is at point A. 
B) the consumer is willing to give up more Y in order to gain an extra unit of X than at point A. 
C) the consumer will receive more Y for each unit of X exchanged in the market than at point A. 
D) both a and b 
E) all of the above 
A) the rate at which the consumer is willing to substitute X for Y is greater than it is at point A. 
B) the consumer is willing to give up more Y in order to gain an extra unit of X than at point A. 
C) the consumer will receive more Y for each unit of X exchanged in the market than at point A. 
D) both a and b 
E) all of the above

Question 12

Based on the following graph,if the price of X is $7.50 per unit,how many units of X will a utility-maximizing consumer choose?   The consumer's income is $600.

Accepted Answer

A) 25 
B) 30 
C) 35 
D) 50 
E) none of the above 
A) 25 
B) 30 
C) 35 
D) 50 
E) none of the above

Question 13

Assume that an individual consumes two goods,X and Y.The total utility (assumed measurable)of each good is independent of the rate of consumption of other goods.The prices of X and Y are,respectively,$5 and $10. $\begin{array}{c}
\begin{array}{l}
\text { Units of the GOOd} \
1\
2 \
3 \
4 \
5 \
6 \
7\
8
\end{array}
\begin{array}{l}
\text { Total Utility of } X\
50 \
95 \
135 \
170 \
200 \
225 \
245\
160
\end{array}
\begin{array}{l}
\text { Total Utility of } y\
400 \
750 \
950 \
1100 \
1220 \
1320 \
1400 \
1450 
\end{array}

\end{array}$
 Given the above,if the consumer has $110 to spend on X and Y,which combination will the consumer choose?

Accepted Answer

A) 5X and 4Y 
B) 6X and 8Y 
C) 7X and 6Y 
D) 8X and 7Y 
E) 7X and 7Y 
A) 5X and 4Y 
B) 6X and 8Y 
C) 7X and 6Y 
D) 8X and 7Y 
E) 7X and 7Y

Question 14

A consumer has the indifference map shown below.The market prices of X and Y are $20 and $50,respectively.The consumer has $500 to spend on goods X and Y.The utility-maximizing bundle ________ (is,is not)a corner solution because __________________.

Accepted Answer

A) is; the consumer spends all income on good X to buy 25 units of X. 
B) is; the consumer spends all income on good Y to buy 37.5 units of Y. 
C) is not; the consumer buys 5 units of X and 20 units of Y. 
D) is not; MRS equals the slope of the budget line. 
E) is not; MRS does not equal the slope of the budget line. 
A) is; the consumer spends all income on good X to buy 25 units of X. 
B) is; the consumer spends all income on good Y to buy 37.5 units of Y. 
C) is not; the consumer buys 5 units of X and 20 units of Y. 
D) is not; MRS equals the slope of the budget line. 
E) is not; MRS does not equal the slope of the budget line.

Question 15

In the following figure,a consumer faces a market price of X equal to $6,a market price of Y equal to $6,and the consumer's budget is $180.In order for this consumer to choose the corner solution at point E,which of the following must occur?

Accepted Answer

A) price of X must rise to $18. 
B) price of X must fall to $3. 
C) price of Y must rise to $9. 
D) price of Y must rise to $18. 
E) both b and d must occur. 
A) price of X must rise to $18. 
B) price of X must fall to $3. 
C) price of Y must rise to $9. 
D) price of Y must rise to $18. 
E) both b and d must occur.

Question 16

Lord Greystroke uses his limited income to purchase fruits and nuts; he is currently buying 10 pounds of fruits at a price of $2 per pound and 5 pounds of nuts at a price of $6 per pound.The last pound of fruits added 10 units to Lord Greystroke's total utility,while the last pound of nuts added 30 units.Lord Greystroke

Accepted Answer

A) is making the utility-maximizing choice. 
B) should buy more fruits and less nuts because the last pound of fruits cost less than the last pound of nuts. 
C) should buy more fruits and less nuts because the last dollar spent on fruits added more to total utility than the last dollar spent on nuts. 
D) should buy more nuts and less fruits because the last pound of nuts added more to total utility than the last pound of fruits. 
E) should buy more nuts and less fruits because the last dollar spent on nuts added more to total utility than the last dollar spent on fruits. 
A) is making the utility-maximizing choice. 
B) should buy more fruits and less nuts because the last pound of fruits cost less than the last pound of nuts. 
C) should buy more fruits and less nuts because the last dollar spent on fruits added more to total utility than the last dollar spent on nuts. 
D) should buy more nuts and less fruits because the last pound of nuts added more to total utility than the last pound of fruits. 
E) should buy more nuts and less fruits because the last dollar spent on nuts added more to total utility than the last dollar spent on fruits.

Question 17

Based on the following graph,what is the price of Y?   The consumer's income is $600.

Accepted Answer

A) $0.25 
B) $4 
C) $8 
D) $6 
E) none of the above 
A) $0.25 
B) $4 
C) $8 
D) $6 
E) none of the above

Question 18

The consumer's income is $800.
-According to the above figure,what are the prices of goods X and Y?

Accepted Answer

A)  $P _ { x }$ = $10, $P _ { y }$ = $8 
B)  $P _ { x }$ = $8, $P _ {y }$ = $10 
C)  $P _ { x }$ = $100, $P _ { y}$ = $80 
D)  $P _ { x }$ = $20, $P _ { y }$ = $60 
E)  $P _ { x }$ = $60, $P _ { y }$ = $20 
A)  $P _ { x }$ = $10, $P _ { y }$ = $8 
B)  $P _ { x }$ = $8, $P _ {y }$ = $10 
C)  $P _ { x }$ = $100, $P _ { y}$ = $80 
D)  $P _ { x }$ = $20, $P _ { y }$ = $60 
E)  $P _ { x }$ = $60, $P _ { y }$ = $20

Question 19

The figure below shows a consumer maximizing utility at two different prices (the left panel)and the consumer's demand for good X at the same two prices of good X (the right panel).The price of good Y is $14.When the price of X increases from point M to point N along the demand curve,the total effect of the price increase is ________.

Accepted Answer

A) -335 
B) -425 
C) +20 
D) +40 
A) -335 
B) -425 
C) +20 
D) +40

Question 20

Based on the following graph,one point on the consumer's demand curve for X is   The consumer's income is $600.

Accepted Answer

A) 60 units at a price of $10. 
B) 35 units at a price of $10. 
C) 35 units at a price of $6. 
D) 25 units at a price of $10. 
E) 25 units at a price of $7.50. 
A) 60 units at a price of $10. 
B) 35 units at a price of $10. 
C) 35 units at a price of $6. 
D) 25 units at a price of $10. 
E) 25 units at a price of $7.50.

An individual's demand curve for X

The rate at which a consumer is WILLING to substitute one good for another is measured by

Suppose that utility-maximizing consumers in San Francisco pay three times as much for apples as for peaches.What is the ratio of the marginal utility of apples to the marginal utility of peaches?

Which of the following is NOT a characteristic of a typical indifference curve?

The figure below shows a consumer maximizing utility at two different prices (the left panel)and the consumer's demand for good X at the same two prices of good X (the right panel).The price of good Y is $4.50.The equation of the budget line passing through point r is _______________.

In the following graph the consumer's income is $1,200.At point B,

Based on the following graph,if the price of X is $7.50 per unit,how many units of X will a utility-maximizing consumer choose? The consumer's income is $600.

A consumer has the indifference map shown below.The market prices of X and Y are $20 and $50,respectively.The consumer has $500 to spend on goods X and Y.The utility-maximizing bundle (is,is not)a corner solution because __________.

In the following figure,a consumer faces a market price of X equal to $6,a market price of Y equal to $6,and the consumer's budget is $180.In order for this consumer to choose the corner solution at point E,which of the following must occur?

Based on the following graph,what is the price of Y? The consumer's income is $600.

The consumer's income is $800. -According to the above figure,what are the prices of goods X and Y?

Based on the following graph,one point on the consumer's demand curve for X is The consumer's income is $600.

Managers,profits,and Markets

Demand,supply,and Market Equilibrium

Marginal Analysis for Optimal Decisions

Basic Estimation Techniques

Elasticity and Demand

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost in the Long Run

Production and Cost Estimation

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters

Exam 5: Theory of Consumer Behavior

An individual's demand curve for X

The rate at which a consumer is WILLING to substitute one good for another is measured by

Suppose that utility-maximizing consumers in San Francisco pay three times as much for apples as for peaches.What is the ratio of the marginal utility of apples to the marginal utility of peaches?

Which of the following is NOT a characteristic of a typical indifference curve?

The figure below shows a consumer maximizing utility at two different prices (the left panel)and the consumer's demand for good X at the same two prices of good X (the right panel).The price of good Y is $4.50.The equation of the budget line passing through point r is _______________.

In the following graph the consumer's income is $1,200.At point B,

Based on the following graph,if the price of X is $7.50 per unit,how many units of X will a utility-maximizing consumer choose? The consumer's income is $600.

A consumer has the indifference map shown below.The market prices of X and Y are $20 and $50,respectively.The consumer has $500 to spend on goods X and Y.The utility-maximizing bundle ________ (is,is not)a corner solution because __________________.

In the following figure,a consumer faces a market price of X equal to $6,a market price of Y equal to $6,and the consumer's budget is $180.In order for this consumer to choose the corner solution at point E,which of the following must occur?

Based on the following graph,what is the price of Y? The consumer's income is $600.

The consumer's income is $800. -According to the above figure,what are the prices of goods X and Y?

Based on the following graph,one point on the consumer's demand curve for X is The consumer's income is $600.

Managers,profits,and Markets

Demand,supply,and Market Equilibrium

Marginal Analysis for Optimal Decisions

Basic Estimation Techniques

Elasticity and Demand

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost in the Long Run

Production and Cost Estimation

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters

A consumer has the indifference map shown below.The market prices of X and Y are $20 and $50,respectively.The consumer has $500 to spend on goods X and Y.The utility-maximizing bundle (is,is not)a corner solution because __________.