Question 1

Figure 21-17  
-Refer to Figure 21-17.It would be possible for the consumer to reach I2 if

Accepted Answer

A)  the price of Y decreases. 
B)  the price of X decreases. 
C)  income increases. 
D)  All of the above would be correct. 
A)  the price of Y decreases. 
B)  the price of X decreases. 
C)  income increases. 
D)  All of the above would be correct.

Question 2

Traci consumes two goods,lemonade and pretzels.Lemonade costs $2 per glass,and she consumes it to the point where the marginal utility she receives from her last glass of lemonade is 4.Pretzels cost $3 per bag.The relationship between the marginal utility Traci gets from eating a bag of pretzels and the number of bags she eats per month is as follows:   If Traci is maximizing her utility,how many bags of potato chips does she buy each month?

Accepted Answer

A)  3 
B)  4 
C)  5 
D)  6 
A)  3 
B)  4 
C)  5 
D)  6

Question 3

Monica consumes two goods,iced tea and spaghetti.The price of iced tea is $2 per bottle.Her income is $500 per month.She spends all her income each month.She purchases 50 bottles of iced tea and 100 servings of spaghetti.What is the price of a serving of spaghetti?

Accepted Answer

A)  $10 
B)  $5 
C)  $4 
D)  $2 
A)  $10 
B)  $5 
C)  $4 
D)  $2

Question 4

Suppose Reta is planning for retirement in a two-period world.In the first period Reta is young and earns $1 million,and in the second period Reta is old and retired and earns nothing.The interest rate is initially 10 percent,but then it falls to 7 percent.After the interest rate falls,the

Accepted Answer

A)  substitution effect will induce Reta to consume more when she is young. 
B)  substitution effect will induce Reta to consume less when she is young. 
C)  income effect will induce Reta to consume more when she is young. 
D)  change in interest rates affects the substitution effect but not the income effect. 
A)  substitution effect will induce Reta to consume more when she is young. 
B)  substitution effect will induce Reta to consume less when she is young. 
C)  income effect will induce Reta to consume more when she is young. 
D)  change in interest rates affects the substitution effect but not the income effect.

Question 5

Suppose that Jake likes to consume one glass of milk with every three chocolate chip cookies.For Jake,an additional cookie has no value unless he can consume it with the appropriate proportion of milk.Jake's indifference curves for milk and cookies are

Accepted Answer

A)  right angles. 
B)  bowed inward. 
C)  bowed outward. 
D)  downward-sloping straight lines. 
A)  right angles. 
B)  bowed inward. 
C)  bowed outward. 
D)  downward-sloping straight lines.

Question 6

Suppose that Harry likes pears twice as much as apples,meaning that he is always indifferent between consuming one pear or two apples.Harry's indifference curves for pears and apples are

Accepted Answer

A)  right angles. 
B)  bowed inward. 
C)  bowed outward. 
D)  downward-sloping straight lines. 
A)  right angles. 
B)  bowed inward. 
C)  bowed outward. 
D)  downward-sloping straight lines.

Question 7

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

Accepted Answer

A)  $10 
B)  $30 
C)  $150 
D)  $300 
A)  $10 
B)  $30 
C)  $150 
D)  $300

Question 8

When indifference curves are bowed in toward the origin,

Accepted Answer

A)  consumers are more inclined to trade away goods they have in abundance. 
B)  an increase in income will shift the indifference curve away from the origin. 
C)  a decrease in income will shift the indifference curve toward the origin. 
D)  Both b and c are correct. 
A)  consumers are more inclined to trade away goods they have in abundance. 
B)  an increase in income will shift the indifference curve away from the origin. 
C)  a decrease in income will shift the indifference curve toward the origin. 
D)  Both b and c are correct.

Question 9

In order to represent a consumer's choices on a graph,we draw her budget constraint as well as her __________ curves.

Accepted Answer

The answer of In order to represent a consumer's choices...

Question 10

Figure 21-9  
-Refer to Figure 21-9.If the price of good Y is $5,what is the price of good X?

Accepted Answer

A)  $500 
B)  $150 
C)  $16.67 
D)  $1.50 
A)  $500 
B)  $150 
C)  $16.67 
D)  $1.50

Question 11

Figure 21-15  
-Refer to Figure 21-15.The price of X is $5,the price of Y is $20,and the consumer's income is $40.Which point represents the consumer's optimal choice?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 12

Shelley wins $1 million in her state's lottery.If Shelley keeps working after she wins the money,we can infer that the substitution effect must exactly offset the income effect for her.

Accepted Answer

A) True 
 B)False

Question 13

Utility measures the

Accepted Answer

A)  income a consumer receives from consuming a bundle of goods. 
B)  satisfaction a consumer receives from consuming a bundle of goods. 
C)  satisfaction a consumer places on her budget constraint. 
D)  All of the above are correct. 
A)  income a consumer receives from consuming a bundle of goods. 
B)  satisfaction a consumer receives from consuming a bundle of goods. 
C)  satisfaction a consumer places on her budget constraint. 
D)  All of the above are correct.

Question 14

Higher education is a normal good.If its price falls,

Accepted Answer

A)  the quantity demanded of higher education will fall. 
B)  the substitution and income effects work in opposite directions. 
C)  the income effect is positive. 
D)  higher education will be a Giffen good. 
A)  the quantity demanded of higher education will fall. 
B)  the substitution and income effects work in opposite directions. 
C)  the income effect is positive. 
D)  higher education will be a Giffen good.

Question 15

Karen,Tara,and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days.Ice cream costs $5 per gallon,and paperback novels cost $8 each.Karen has a budget of $80,Tara has a budget of $60,and Chelsea has a budget of $40 to spend on ice cream and paperback novels.Who can afford to purchase 5 gallons of ice cream and 8 paperback novels?

Accepted Answer

A)  Karen,Tara,and Chelsea 
B)  Karen only 
C)  Tara and Chelsea but not Karen 
D)  none of the women 
A)  Karen,Tara,and Chelsea 
B)  Karen only 
C)  Tara and Chelsea but not Karen 
D)  none of the women

Question 16

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 5 slices of pizza and 5 paperback novels?

Accepted Answer

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

Question 17

If John's marginal utility derived from the consumption of another candy bar is 1 and the price of the candy bar is $1.50,then

Accepted Answer

A)  this is the last candy bar John will purchase since the marginal utility is less than the price. 
B)  the opportunity cost of the candy bar is less than $1.50. 
C)  if John purchases and consumes the candy bar his total satisfaction will go down because the marginal utility is less than the price. 
D)  there is not enough information to determine if John will or will not purchase the candy bar. 
A)  this is the last candy bar John will purchase since the marginal utility is less than the price. 
B)  the opportunity cost of the candy bar is less than $1.50. 
C)  if John purchases and consumes the candy bar his total satisfaction will go down because the marginal utility is less than the price. 
D)  there is not enough information to determine if John will or will not purchase the candy bar.

Question 18

The marginal rate of substitution

Accepted Answer

A)  varies along an indifference curve if the curve is bowed inward. 
B)  is constant along an indifference curve if the curve is a straight line. 
C)  is greater when a consumer has more of two goods rather than less of two goods. 
D)  Both a and b are correct. 
A)  varies along an indifference curve if the curve is bowed inward. 
B)  is constant along an indifference curve if the curve is a straight line. 
C)  is greater when a consumer has more of two goods rather than less of two goods. 
D)  Both a and b are correct.

Question 19

Suppose a consumer consumes two goods,X and Y.The slope of the budget constraint equals the

Accepted Answer

A)  marginal rate of substitution. 
B)  rate at which the consumer will give up X to gain Y while maintaining the same level of utility. 
C)  relative price of the two goods. 
D)  All of the above are correct. 
A)  marginal rate of substitution. 
B)  rate at which the consumer will give up X to gain Y while maintaining the same level of utility. 
C)  relative price of the two goods. 
D)  All of the above are correct.

Question 20

When indifference curves are downward sloping,the marginal rate of substitution is usually constant.

Accepted Answer

A) True 
 B)False

Exam 21: The Theory of Consumer Choice

Figure 21-17 -Refer to Figure 21-17.It would be possible for the consumer to reach I2 if

Monica consumes two goods,iced tea and spaghetti.The price of iced tea is $2 per bottle.Her income is $500 per month.She spends all her income each month.She purchases 50 bottles of iced tea and 100 servings of spaghetti.What is the price of a serving of spaghetti?

Suppose Reta is planning for retirement in a two-period world.In the first period Reta is young and earns $1 million,and in the second period Reta is old and retired and earns nothing.The interest rate is initially 10 percent,but then it falls to 7 percent.After the interest rate falls,the

Suppose that Jake likes to consume one glass of milk with every three chocolate chip cookies.For Jake,an additional cookie has no value unless he can consume it with the appropriate proportion of milk.Jake's indifference curves for milk and cookies are

Suppose that Harry likes pears twice as much as apples,meaning that he is always indifferent between consuming one pear or two apples.Harry's indifference curves for pears and apples are

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

When indifference curves are bowed in toward the origin,

In order to represent a consumer's choices on a graph,we draw her budget constraint as well as her __________ curves.

Figure 21-9 -Refer to Figure 21-9.If the price of good Y is $5,what is the price of good X?

Figure 21-15 -Refer to Figure 21-15.The price of X is $5,the price of Y is $20,and the consumer's income is $40.Which point represents the consumer's optimal choice?

Shelley wins $1 million in her state's lottery.If Shelley keeps working after she wins the money,we can infer that the substitution effect must exactly offset the income effect for her.

Utility measures the

Higher education is a normal good.If its price falls,

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 5 slices of pizza and 5 paperback novels?

If John's marginal utility derived from the consumption of another candy bar is 1 and the price of the candy bar is $1.50,then

The marginal rate of substitution

Suppose a consumer consumes two goods,X and Y.The slope of the budget constraint equals the

When indifference curves are downward sloping,the marginal rate of substitution is usually constant.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply,demand,and Government Policies

Consumers,producers,and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Market for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving,investment,and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Figure 21-17 -Refer to Figure 21-17.It would be possible for the consumer to reach I₂ if