Question 1

If a consumer purchases more of good B when his income rises,good B is an inferior good.

Accepted Answer

A) True 
 B)False

Question 2

Figure 21-19
The following graph illustrates a representative consumer's preferences for marshmallows and chocolate chip cookies:  
-Refer to Figure 21-19.Assume that the consumer has an income of $100 and currently optimizes at bundle A.When the price of marshmallows decreases to $5,which bundle will the optimizing consumer choose?

Accepted Answer

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

Question 3

A consumer's indifference curves are right angles when,for the consumer,the goods in question are __________.

Accepted Answer

The answer of A consumer's indifference curves are right angles...

Question 4

Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst.The price of a pint of beer is $5,and the price of a bratwurst is $4.Which of the following combinations of beers and bratwursts represents a point that would lie to the exterior of the consumer's budget constraint?

Accepted Answer

A)  160 beers and 200 bratwursts 
B)  40 beers and 50 bratwursts 
C)  80 beers and 100 bratwursts 
D)  160 beers and 0 bratwursts 
A)  160 beers and 200 bratwursts 
B)  40 beers and 50 bratwursts 
C)  80 beers and 100 bratwursts 
D)  160 beers and 0 bratwursts

Question 5

A typical consumer consumes both coffee and donuts.After the consumer's income decreases,the consumer consumes more coffee but fewer donuts than before.For this consumer,donuts are a normal good,but coffee is an inferior good.

Accepted Answer

A) True 
 B)False

Question 6

A Giffen good is a good for which

Accepted Answer

A)  a decrease in the price decreases the quantity demanded. 
B)  the income effect outweighs the substitution effect. 
C)  an increase in the price decreases the quantity demanded. 
D)  Both a and b are correct. 
A)  a decrease in the price decreases the quantity demanded. 
B)  the income effect outweighs the substitution effect. 
C)  an increase in the price decreases the quantity demanded. 
D)  Both a and b are correct.

Question 7

Suppose the only two goods that Brett consumes are wine and cheese.When wine sells for $10 a bottle and cheese sell for $10 a pound,he buys 6 bottles of wine and 4 pounds of cheese - spending his entire income of $100.One day the price of wine falls to $5 a bottle and the price of cheese increases to $20 a pound,while his income does not change.The bundle of wine and cheese that he purchased at the old prices now costs

Accepted Answer

A)  the same amount at the new prices. 
B)  less than Brett's income at the new prices. 
C)  more than Brett's income at the new prices. 
D)  We do not have enough information to answer the question. 
A)  the same amount at the new prices. 
B)  less than Brett's income at the new prices. 
C)  more than Brett's income at the new prices. 
D)  We do not have enough information to answer the question.

Question 8

The following diagram shows two budget lines: A and B.   Which of the following could explain the change in the budget line from A to B?

Accepted Answer

A)  a simultaneous decrease in the price of X and the price of Y 
B)  an increase in income 
C)  a decrease in income and a decrease in the price of Y 
D)  Both a and b are correct. 
A)  a simultaneous decrease in the price of X and the price of Y 
B)  an increase in income 
C)  a decrease in income and a decrease in the price of Y 
D)  Both a and b are correct.

Question 9

Draw a budget constraint that is consistent with the following prices and income.
Income = 200
PY = 50
PX = 25
a.Demonstrate how your original budget constraint would change if income increases to 500.
b.Demonstrate how your original budget constraint would change if PY decreases to 20.
c.Demonstrate how your original budget constraint would change if PX increases to 40.

Accepted Answer

Question 10

The marginal rate of substitution is equal to the

Accepted Answer

A)  slope of the indifference curve. 
B)  ratio of the prices of the two goods. 
C)  slope of the budget constraint. 
D)  All of the above are correct. 
A)  slope of the indifference curve. 
B)  ratio of the prices of the two goods. 
C)  slope of the budget constraint. 
D)  All of the above are correct.

Question 11

Susie wins $2 million in her state's lottery.If Susie keeps working after she wins the money,we can infer that the income effect is larger than the substitution effect for her.

Accepted Answer

A) True 
 B)False

Question 12

A consumer likes two goods: CDs and novels.The five bundles shown in the table below lie on the same indifference curve for the consumer.   Which of the following statements regarding these bundles is correct?

Accepted Answer

A)  The goods are perfect substitutes for this consumer. 
B)  The goods are perfect complements for this consumer. 
C)  The bundles violate the property that indifference curves do not cross. 
D)  Both b and c are correct. 
A)  The goods are perfect substitutes for this consumer. 
B)  The goods are perfect complements for this consumer. 
C)  The bundles violate the property that indifference curves do not cross. 
D)  Both b and c are correct.

Question 13

Figure 21-4
In each case,the budget constraint moves from BC-1 to BC-2.        
-Refer to Figure 21-4.Which of the graphs in the figure could reflect a simultaneous increase in the price of good X and decrease in the price of good Y?

Accepted Answer

A)  graph a 
B)  graph b 
C)  graph c 
D)  graph d 
A)  graph a 
B)  graph b 
C)  graph c 
D)  graph d

Question 14

Two economists found empirical evidence that when the price of rice decreased in the Hunan province of China,local residents consumed less rice than before the price decrease.The study provides a real-world example of a(n)

Accepted Answer

A)  normal good. 
B)  inferior good that is not a Giffen good. 
C)  Giffen good. 
D)  luxury good. 
A)  normal good. 
B)  inferior good that is not a Giffen good. 
C)  Giffen good. 
D)  luxury good.

Question 15

Figure 21-6  
-Refer to Figure 21-6.Suppose a consumer has $200 in income,the price of popcorn is $1,and the price of Mt.Dew is $2.What is the value of A?

Accepted Answer

A)  200 
B)  100 
C)  50 
D)  25 
A)  200 
B)  100 
C)  50 
D)  25

Question 16

Figure 21-13  
-Refer to Figure 21-13.What is the consumer's marginal rate of substitution as she moves from B to C?

Accepted Answer

A)  4 
B)  2 
C)  1 
D)  0.5 
A)  4 
B)  2 
C)  1 
D)  0.5

Question 17

Jake experiences an increase in his wages.The hours of labor that he supplies to the market would decrease if

Accepted Answer

A)  the income effect is larger than the substitution effect. 
B)  the substitution effect is larger than the income effect. 
C)  neither the income effect nor the substitution effect apply to Harry's labor-leisure tradeoff. 
D)  Jake views both labor and leisure as inferior goods. 
A)  the income effect is larger than the substitution effect. 
B)  the substitution effect is larger than the income effect. 
C)  neither the income effect nor the substitution effect apply to Harry's labor-leisure tradeoff. 
D)  Jake views both labor and leisure as inferior goods.

Question 18

If we observe that William's budget constraint has moved inward,then we know for certain that

Accepted Answer

A)  his income must have decreased. 
B)  he will be indifferent between goods X and Y. 
C)  the price of one or both of the goods must have increased. 
D)  his utility will decrease. 
A)  his income must have decreased. 
B)  he will be indifferent between goods X and Y. 
C)  the price of one or both of the goods must have increased. 
D)  his utility will decrease.

Question 19

An optimizing consumer will select a consumption bundle in which

Accepted Answer

A)  income is maximized,and prices are minimized. 
B)  utility is maximized,and prices are minimized. 
C)  utility is maximized,subject to budget constraints. 
D)  utility is maximized,and indifference curves are linear. 
A)  income is maximized,and prices are minimized. 
B)  utility is maximized,and prices are minimized. 
C)  utility is maximized,subject to budget constraints. 
D)  utility is maximized,and indifference curves are linear.

Question 20

Figure 21-9  
-Refer to Figure 21-9.If the price of good X is $15,what is the price of good Y?

Accepted Answer

A)  $1,500 
B)  $50 
C)  $5 
D)  $0.50 
A)  $1,500 
B)  $50 
C)  $5 
D)  $0.50

Exam 21: The Theory of Consumer Choice

If a consumer purchases more of good B when his income rises,good B is an inferior good.

A consumer's indifference curves are right angles when,for the consumer,the goods in question are __________.

A typical consumer consumes both coffee and donuts.After the consumer's income decreases,the consumer consumes more coffee but fewer donuts than before.For this consumer,donuts are a normal good,but coffee is an inferior good.

A Giffen good is a good for which

The following diagram shows two budget lines: A and B. Which of the following could explain the change in the budget line from A to B?

The marginal rate of substitution is equal to the

Susie wins $2 million in her state's lottery.If Susie keeps working after she wins the money,we can infer that the income effect is larger than the substitution effect for her.

A consumer likes two goods: CDs and novels.The five bundles shown in the table below lie on the same indifference curve for the consumer. Which of the following statements regarding these bundles is correct?

Figure 21-4 In each case,the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-4.Which of the graphs in the figure could reflect a simultaneous increase in the price of good X and decrease in the price of good Y?

Two economists found empirical evidence that when the price of rice decreased in the Hunan province of China,local residents consumed less rice than before the price decrease.The study provides a real-world example of a(n)

Figure 21-6 -Refer to Figure 21-6.Suppose a consumer has $200 in income,the price of popcorn is $1,and the price of Mt.Dew is $2.What is the value of A?

Figure 21-13 -Refer to Figure 21-13.What is the consumer's marginal rate of substitution as she moves from B to C?

Jake experiences an increase in his wages.The hours of labor that he supplies to the market would decrease if

If we observe that William's budget constraint has moved inward,then we know for certain that

An optimizing consumer will select a consumption bundle in which

Figure 21-9 -Refer to Figure 21-9.If the price of good X is $15,what is the price of good Y?

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

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