Exam 21: The Theory of Consumer Choice

Figure 21-2.The graph shows two budget constraints for a consumer. -Refer to Figure 21-2.Suppose Budget Constraint B applies.If the consumer's income is $90 and if he is buying 5 light bulbs,then how much money is he spending on hamburgers?

The indifference curves for perfect substitutes are straight lines.

For a typical consumer,indifference curves can intersect if they satisfy the property of transitivity.

When the indifference curve is tangent to the budget constraint,

The theory of consumer choice explains how people choose between

Which of the following is not correct?

An increase in income will cause a consumer's budget constraint to

The goal of the consumer is to

A rational consumer maximizes her

Suppose that you have $100 today and expect to receive $100 one year from today.Your money market account pays an annual interest rate of 25%,and you may borrow money at that interest rate.Suppose that you borrow $60 and spend $160 today.After you repay your loan one year from today,how much money will you have available for consumption one year from today?

In the work-leisure model,suppose consumption and leisure are both normal goods.The income effect of a wage increase results in the worker choosing to

Figure 21-11 -Refer to Figure 21-11.What is the consumer's marginal rate of substitution as she moves from B to C?

John is planning ahead for retirement in a two-period world.When John is young he will earn $1 million,and when John is old and retired he will be given $50,000 from Social Security.If the interest rate between the two time periods is 7 percent,what is the slope of John's budget constraint when considering the consumption possibilities between the two periods if consumption when young is graphed on the horizontal axis and consumption when old is graphed on the vertical axis?

An optimizing consumer will select the consumption bundle in which the

Evaluate the following statement,"Warren Buffet is the second richest person in the world.He doesn't face any constraint on his ability to purchase commodities he wants."

Figure 21-9 -Refer to Figure 21-9.If the consumer has $600 in income,what is the price of good Y?

Alicia is a vegetarian,so she does not eat beef.That is,beef provides no additional utility to Alicia.She loves potatoes,however.If we illustrate Alicia's indifference curves by drawing beef on the horizontal axis and potatoes on the vertical axis,her indifference curves will

Budget constraints exist for consumers because

Consumer theory provides the foundation for understanding demand curves because

The following diagram shows a budget constraint for a particular consumer. If the price of X is $5,what is the price of Y?