Question 1

If the price of bread is zero,the budget constraint between bread (on the vertical axis)and cheese (on the horizontal axis)would

Accepted Answer

A)  be vertical. 
B)  coincide with the vertical axis. 
C)  coincide with the horizontal axis. 
D)  be horizontal. 
A)  be vertical. 
B)  coincide with the vertical axis. 
C)  coincide with the horizontal axis. 
D)  be horizontal.

Question 2

The theory of consumer choice illustrates the

Accepted Answer

A)  importance of property rights in creating efficient markets. 
B)  ability of a single economic actor to have a substantial influence on market prices. 
C)  the trade-offs that people face in their role as purchasers. 
D)  All of the above are correct. 
A)  importance of property rights in creating efficient markets. 
B)  ability of a single economic actor to have a substantial influence on market prices. 
C)  the trade-offs that people face in their role as purchasers. 
D)  All of the above are correct.

Question 3

A consumer's optimal choice is affected by income,prices of goods,and preferences.

Accepted Answer

A) True 
 B)False

Question 4

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 one 
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 one

Question 5

A good is an inferior good if the consumer buys less of it when

Accepted Answer

A)  his income rises. 
B)  the price of the good rises. 
C)  the price of a substitute good falls. 
D)  his income falls. 
A)  his income rises. 
B)  the price of the good rises. 
C)  the price of a substitute good falls. 
D)  his income falls.

Question 6

At a consumer's optimal choice,the consumer chooses the combination of goods that equates the marginal rate of substitution and the price ratio.

Accepted Answer

A) True 
 B)False

Question 7

When we derive the demand curve for a good,we should remember that the

Accepted Answer

A)  income effect must be greater than the substitution effect. 
B)  substitution effect must be greater than the income effect. 
C)  substitution effect must be in the same direction as the income effect. 
D)  income effect and the substitution effect may work in the same or in opposite directions. 
A)  income effect must be greater than the substitution effect. 
B)  substitution effect must be greater than the income effect. 
C)  substitution effect must be in the same direction as the income effect. 
D)  income effect and the substitution effect may work in the same or in opposite directions.

Question 8

Consider the indifference curve map for nickels and quarters.Assume nickels are on the vertical axis and quarters are on the horizontal axis.The indifference curves for nickels and quarters are

Accepted Answer

A)  straight lines with slope of -1/5 
B)  straight lines with a slope of -1. 
C)  straight lines with a slope of -5. 
D)  L shaped. 
A)  straight lines with slope of -1/5 
B)  straight lines with a slope of -1. 
C)  straight lines with a slope of -5. 
D)  L shaped.

Question 9

At a consumer's optimal choice,the consumer chooses the combination of goods such that the ratio of the marginal utilities equals the ratio of the prices.

Accepted Answer

A) True 
 B)False

Question 10

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 an increase in income?

Accepted Answer

A)  graph a 
B)  graph b 
C)  graph d 
D)  None of the above is correct. 
A)  graph a 
B)  graph b 
C)  graph d 
D)  None of the above is correct.

Question 11

A consumer's budget constraint is drawn with the quantity of pizza measured along the horizontal axis and the price of Pepsi measured along the vertical axis.If the market is offering the consumer the trade-off of 3 pints of Pepsi for 1 pizza,then what is the slope of the consumer's budget constraint?

Accepted Answer

A pizza costs three times as m

Question 12

Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack.  
-Refer to Figure 21-1.Which of the following pairs of prices matches the appearance of the budget constraint?

Accepted Answer

A)  price of apples = $6/pound;price of pears = $4/pound 
B)  price of apples = $4/pound;price of pears = $6/pound 
C)  price of apples = $6/pound;price of pears = $5/pound 
D)  price of apples = $5/pound;price of pears = $6/pound 
A)  price of apples = $6/pound;price of pears = $4/pound 
B)  price of apples = $4/pound;price of pears = $6/pound 
C)  price of apples = $6/pound;price of pears = $5/pound 
D)  price of apples = $5/pound;price of pears = $6/pound

Question 13

Assume that a college student purchases only Ramen noodles and textbooks.If Ramen noodles are an inferior good and textbooks are a normal good,then the substitution effect associated with a decrease in the price of Ramen noodles,by itself,will result in

Accepted Answer

A)  a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles. 
B)  a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles. 
C)  an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles. 
D)  an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles. 
A)  a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles. 
B)  a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles. 
C)  an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles. 
D)  an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles.

Question 14

Higher indifference curves are preferred to lower ones as long as the

Accepted Answer

A)  marginal rate of substitution is diminishing. 
B)  products in the bundle are "bads" and not "goods." 
C)  products in the bundle are "goods" and not "bads." 
D)  budget constraint does not shift. 
A)  marginal rate of substitution is diminishing. 
B)  products in the bundle are "bads" and not "goods." 
C)  products in the bundle are "goods" and not "bads." 
D)  budget constraint does not shift.

Question 15

Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack.  
-Refer to Figure 21-1.If Jack's income is $12.60,then the price of a pound of apples is

Accepted Answer

A)  $4.50. 
B)  $3.85. 
C)  $3.00. 
D)  $2.80. 
A)  $4.50. 
B)  $3.85. 
C)  $3.00. 
D)  $2.80.

Question 16

The slope of the budget constraint is determined by the

Accepted Answer

A)  relative price of the goods measured on the axes. 
B)  relative price of the goods measured on the axes and the consumer's income. 
C)  endowment of productive resources. 
D)  preferences of the consumer. 
A)  relative price of the goods measured on the axes. 
B)  relative price of the goods measured on the axes and the consumer's income. 
C)  endowment of productive resources. 
D)  preferences of the consumer.

Question 17

Consider the indifference curve map and budget constraint for two goods,beef and potatoes.Suppose the good measured on the horizontal axis,potatoes,is a Giffen good.Beef is measured on the vertical axis and is a normal good.When the price of potatoes increases,the substitution effect causes

Accepted Answer

A)  an increase in the consumption of potatoes,and the income effect causes a decrease in the consumption of potatoes.The substitution effect is less than the income effect. 
B)  a decrease in the consumption of potatoes,and the income effect causes an increase in the consumption of potatoes.The substitution effect is greater than the income effect. 
C)  an increase in the consumption of potatoes,and the income effect causes a decrease in the consumption of potatoes.The substitution effect is greater than the income effect. 
D)  a decrease in the consumption of potatoes,and the income effect causes an increase in the consumption of potatoes.The substitution effect is less than the income effect. 
A)  an increase in the consumption of potatoes,and the income effect causes a decrease in the consumption of potatoes.The substitution effect is less than the income effect. 
B)  a decrease in the consumption of potatoes,and the income effect causes an increase in the consumption of potatoes.The substitution effect is greater than the income effect. 
C)  an increase in the consumption of potatoes,and the income effect causes a decrease in the consumption of potatoes.The substitution effect is greater than the income effect. 
D)  a decrease in the consumption of potatoes,and the income effect causes an increase in the consumption of potatoes.The substitution effect is less than the income effect.

Question 18

When two goods are perfect complements,the indifference curves are right angles.

Accepted Answer

A) True 
 B)False

Question 19

Figure 21-11  
-Refer to Figure 21-11.What is the consumer's marginal rate of substitution?

Accepted Answer

A)  12 
B)  4 
C)  1 
D)  We do not have enough information to answer the question because the MRS varies along the graph. 
A)  12 
B)  4 
C)  1 
D)  We do not have enough information to answer the question because the MRS varies along the graph.

Question 20

Figure 21-14      
-Refer to Figure 21-14.Which of the graphs illustrates indifference curves for which the marginal rate of substitution is undefined?

Accepted Answer

A)  graph a 
B)  graph b 
C)  graph c 
D)  All of the above are correct. 
A)  graph a 
B)  graph b 
C)  graph c 
D)  All of the above are correct.

Exam 21: The Theory of Consumer Choice

If the price of bread is zero,the budget constraint between bread (on the vertical axis)and cheese (on the horizontal axis)would

The theory of consumer choice illustrates the

A consumer's optimal choice is affected by income,prices of goods,and preferences.

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

A good is an inferior good if the consumer buys less of it when

At a consumer's optimal choice,the consumer chooses the combination of goods that equates the marginal rate of substitution and the price ratio.

When we derive the demand curve for a good,we should remember that the

Consider the indifference curve map for nickels and quarters.Assume nickels are on the vertical axis and quarters are on the horizontal axis.The indifference curves for nickels and quarters are

At a consumer's optimal choice,the consumer chooses the combination of goods such that the ratio of the marginal utilities equals the ratio of the prices.

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 an increase in income?

Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack. -Refer to Figure 21-1.Which of the following pairs of prices matches the appearance of the budget constraint?

Assume that a college student purchases only Ramen noodles and textbooks.If Ramen noodles are an inferior good and textbooks are a normal good,then the substitution effect associated with a decrease in the price of Ramen noodles,by itself,will result in

Higher indifference curves are preferred to lower ones as long as the

Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack. -Refer to Figure 21-1.If Jack's income is $12.60,then the price of a pound of apples is

The slope of the budget constraint is determined by the

Consider the indifference curve map and budget constraint for two goods,beef and potatoes.Suppose the good measured on the horizontal axis,potatoes,is a Giffen good.Beef is measured on the vertical axis and is a normal good.When the price of potatoes increases,the substitution effect causes

When two goods are perfect complements,the indifference curves are right angles.

Figure 21-11 -Refer to Figure 21-11.What is the consumer's marginal rate of substitution?

Figure 21-14 -Refer to Figure 21-14.Which of the graphs illustrates indifference curves for which the marginal rate of substitution is undefined?

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