Question 1

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

Accepted Answer

A) $20 
B) $6 
C) $3 
D) $0.33 
A) $20 
B) $6 
C) $3 
D) $0.33 A

Question 2

If the price of bread is zero and the price of cheese is positive, then the budget constraint between bread (on the horizontal axis) and cheese (on the vertical 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. D

Question 3

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 pretzels does she buy each month?

Accepted Answer

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

Question 4

The income effect of a price change is unaffected by whether the good is a normal or inferior good.

Accepted Answer

A) True 
 B)False

Question 5

If a good is a Giffen good, then

Accepted Answer

A) the supply curve is downward sloping. 
B) the demand curve is upward sloping. 
C) the demand curve is horizontal. 
D) there is no optimal level of consumption for the consumer. 
A) the supply curve is downward sloping. 
B) the demand curve is upward sloping. 
C) the demand curve is horizontal. 
D) there is no optimal level of consumption for the consumer.

Question 6

Assume that a college student spends her income on mac-n-cheese and CDs. The price of one box of mac-n-cheese is $1, and the price of one CD is $12. If she has $200 of income, she could choose to consume

Accepted Answer

A) 30 boxes of mac-n-cheese and 12 CDs. 
B) 40 boxes of mac-n-cheese and 14 CDs. 
C) 20 boxes of mac-n-cheese and 16 CDs. 
D) 60 boxes of mac-n-cheese and 12 CDs. 
A) 30 boxes of mac-n-cheese and 12 CDs. 
B) 40 boxes of mac-n-cheese and 14 CDs. 
C) 20 boxes of mac-n-cheese and 16 CDs. 
D) 60 boxes of mac-n-cheese and 12 CDs.

Question 7

The theory of consumer choice provides the foundation for understanding the

Accepted Answer

A) structure of a firm. 
B) profitability of a firm. 
C) demand for a firm's product. 
D) supply of a firm's product. 
A) structure of a firm. 
B) profitability of a firm. 
C) demand for a firm's product. 
D) supply of a firm's product.

Question 8

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?

Accepted Answer

A) $0 
B) $25 
C) $50 
D) $75 
A) $0 
B) $25 
C) $50 
D) $75

Question 9

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve.  
-Refer to Figure 21-24. At his optimum, Steve is willing to give up about

Accepted Answer

A) 0.75 pounds of pears for 1 pound of apples. 
B) 0.75 pounds of apples for 1 pound of pears. 
C) 1.20 pounds of pears for 1 pound of apples. 
D) 1.20 pounds of apples for 1 pound of pears. 
A) 0.75 pounds of pears for 1 pound of apples. 
B) 0.75 pounds of apples for 1 pound of pears. 
C) 1.20 pounds of pears for 1 pound of apples. 
D) 1.20 pounds of apples for 1 pound of pears.

Question 10

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 11

Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will

Accepted Answer

A) cause the consumer to buy more of good Y and less of good X. 
B) cause the consumer to buy more of good X and less of good Y. 
C) not affect the amount of goods X and Y that the consumer buys. 
D) result in an upward-sloping demand for good Y if the substitution effect is positive. 
A) cause the consumer to buy more of good Y and less of good X. 
B) cause the consumer to buy more of good X and less of good Y. 
C) not affect the amount of goods X and Y that the consumer buys. 
D) result in an upward-sloping demand for good Y if the substitution effect is positive.

Question 12

Indifference curves tend to be bowed inward because of diminishing

Accepted Answer

A) marginal rates of substitution. 
B) demand for the good as prices rise. 
C) income. 
D) Both a and b are correct. 
A) marginal rates of substitution. 
B) demand for the good as prices rise. 
C) income. 
D) Both a and b 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 decrease 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 14

Figure 21-17  
-Refer to Figure 21-17. When the price of X is $6, the price of Y is $24, and income is $48, Paul's optimal choice is point C. Then the price of Y decreases to $6. Paul's new optimal choice is point

Accepted Answer

A) A. 
B) B. 
C) D. 
D) E. 
A) A. 
B) B. 
C) D. 
D) E.

Question 15

For Antonio, the income effect of an interest-rate increase is stronger than the substitution effect. In response to a higher interest rate, will Antonio save more or will he save less?

Accepted Answer

In response to a hig

Question 16

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve.  
-Refer to Figure 21-24. In moving from point A to point C, Steve gives up

Accepted Answer

A) 4.9 pounds of apples, gains 2.0 pounds of pears, and becomes worse off. 
B) 4.9 pounds of apples, gains 2.0 pounds of pears, and becomes better off. 
C) 5.5 pounds of apples, gains 4.1 pounds of pears, and becomes worse off. 
D) 5.5 pounds of apples, gains 4.1 pounds of pears, and becomes better off. 
A) 4.9 pounds of apples, gains 2.0 pounds of pears, and becomes worse off. 
B) 4.9 pounds of apples, gains 2.0 pounds of pears, and becomes better off. 
C) 5.5 pounds of apples, gains 4.1 pounds of pears, and becomes worse off. 
D) 5.5 pounds of apples, gains 4.1 pounds of pears, and becomes better off.

Question 17

Figure 21-2 The downward-sloping line on the figure represents a consumer's budget
constraint.  
-Refer to Figure 21-2. Which of the following statements is not necessarily correct?

Accepted Answer

A) Points W, X, and Y all cost the consumer the same amount of money. 
B) Point Z is unaffordable for the consumer given his budget constraint. 
C) Point V costs less than point Z. 
D) Points W, X, and Y give the consumer the same level of satisfaction. 
A) Points W, X, and Y all cost the consumer the same amount of money. 
B) Point Z is unaffordable for the consumer given his budget constraint. 
C) Point V costs less than point Z. 
D) Points W, X, and Y give the consumer the same level of satisfaction.

Question 18

Which of the following is a property of a typical indifference curve?

Accepted Answer

A) upward sloping 
B) bowed away from the origin 
C) does not intersect another indifference curve 
D) a lower one is preferred to a higher one 
A) upward sloping 
B) bowed away from the origin 
C) does not intersect another indifference curve 
D) a lower one is preferred to a higher one

Question 19

Figure 21-10  
-Refer to Figure 21-10. Which of the following statements is not correct?

Accepted Answer

A) Bundles on Indifference Curve 3 are preferred to bundles on Indifference Curve 1. 
B) The consumer is indifferent between bundles A and E because they contain the same number of donuts. 
C) The consumer is indifference between bundles B and C. 
D) The consumer prefers bundle C to bundle D. 
A) Bundles on Indifference Curve 3 are preferred to bundles on Indifference Curve 1. 
B) The consumer is indifferent between bundles A and E because they contain the same number of donuts. 
C) The consumer is indifference between bundles B and C. 
D) The consumer prefers bundle C to bundle D.

Question 20

Gerald spends his weekly income on gin and cocktail olives. The price of gin has risen from $7 to $9 per bottle, the price of cocktail olives has fallen from $6 to $5 per jar, and Gerald's income has stayed fixed at $46 per week. Since the price changes, Gerald has been buying 4 bottles of gin and 2 jars of cocktail olives per week. At the original prices, 4 bottles of gin and 2 jars of cocktail olives would have

Accepted Answer

A) exactly exhausted his income. 
B) cost more than his income. 
C) cost less than his income. 
D) could have maximized his satisfaction given his budget constraint. 
A) exactly exhausted his income. 
B) cost more than his income. 
C) cost less than his income. 
D) could have maximized his satisfaction given his budget constraint.

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

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

The income effect of a price change is unaffected by whether the good is a normal or inferior good.

If a good is a Giffen good, then

Assume that a college student spends her income on mac-n-cheese and CDs. The price of one box of mac-n-cheese is $1, and the price of one CD is $12. If she has $200 of income, she could choose to consume

The theory of consumer choice provides the foundation for understanding the

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. At his optimum, Steve is willing to give up about

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?

Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will

Indifference curves tend to be bowed inward because of diminishing

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 decrease in income?

Figure 21-17 -Refer to Figure 21-17. When the price of X is $6, the price of Y is $24, and income is $48, Paul's optimal choice is point C. Then the price of Y decreases to $6. Paul's new optimal choice is point

For Antonio, the income effect of an interest-rate increase is stronger than the substitution effect. In response to a higher interest rate, will Antonio save more or will he save less?

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. In moving from point A to point C, Steve gives up

Figure 21-2 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. Which of the following statements is not necessarily correct?

Which of the following is a property of a typical indifference curve?

Figure 21-10 -Refer to Figure 21-10. Which of the following statements is not correct?

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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

Frontiers in Microeconomics

Filters

Exam 21: The Theory of Consumer Choice

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

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

The income effect of a price change is unaffected by whether the good is a normal or inferior good.

If a good is a Giffen good, then

Assume that a college student spends her income on mac-n-cheese and CDs. The price of one box of mac-n-cheese is $1, and the price of one CD is $12. If she has $200 of income, she could choose to consume

The theory of consumer choice provides the foundation for understanding the

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. At his optimum, Steve is willing to give up about

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?

Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will

Indifference curves tend to be bowed inward because of diminishing

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 decrease in income?

Figure 21-17 -Refer to Figure 21-17. When the price of X is $6, the price of Y is $24, and income is $48, Paul's optimal choice is point C. Then the price of Y decreases to $6. Paul's new optimal choice is point

For Antonio, the income effect of an interest-rate increase is stronger than the substitution effect. In response to a higher interest rate, will Antonio save more or will he save less?

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. In moving from point A to point C, Steve gives up

Figure 21-2 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. Which of the following statements is not necessarily correct?

Which of the following is a property of a typical indifference curve?

Figure 21-10 -Refer to Figure 21-10. Which of the following statements is not correct?

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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

Frontiers in Microeconomics

Filters