Exam 21: The Theory of Consumer Choice

Bundle J contains 10 units of good X and 5 units of good Y. Bundle K contains 5 units of good X and 10 units of good Y. Bundle L contains 10 units of good X and 10 units of good Y. Assume that the consumer's preferences satisfy the four properties of indifference curves. The price of X is $1, the price of Y is $2, and the consumer has an income of $20. Which bundle will the consumer choose?

Scenario 21-1 Suppose the price of hot wings is $10, the price of beer is $1, and the consumer's income is $50. In addition, suppose the consumer's budget constraint illustrates hot wings on the horizontal axis and beer on the vertical axis. -Refer to Scenario 21-1. If the consumer's income rises to $60, then the budget line for hot wings and beer would

Which of the following is most likely an inferior good?

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 considering her budget, the highest indifference curve that a consumer can reach is the

Figure 21-3 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3. Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods? (i) Graph a (ii) Graph b (iii) Graph c (iv) Graph d

The theory of consumer choice illustrates the

Figure 21-29 The figure below illustrates the preferences of a representative consumer, Nathaniel. -Refer to Figure 21-29. A change in Nathaniel's optimum from point A to point B results from

Scenario 21-1 Suppose the price of hot wings is $10, the price of beer is $1, and the consumer's income is $50. In addition, suppose the consumer's budget constraint illustrates hot wings on the horizontal axis and beer on the vertical axis. -Refer to Scenario 21-1. If the price of beer doubles to $2, then the

Figure 21-12 -Refer to Figure 21-12. The marginal rate of substitution between bundles V and Z is

Figure 21-30 The graph shows two budget constraints for a consumer. -Refer to Figure 21-30. Suppose the price of a hamburger is $10 and Budget Constraint A applies. What is the consumer's income? What is the price of a light bulb?

Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (b), if income is equal to $420, then the price of good X is

Figure 21-21 -Refer to Figure 21-21. Suppose that a consumer is originally at point R. Then the price of good X decreases. Which of the following represents the income effect of the price decrease?

Figure 21-32 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. -Refer to Figure 21-32. From the figure we can determine how much income Hannah earns when young and we can determine the interest rate. Could the interest rate rise to a level at which Hannah could afford to be at point D?

Figure 21-15 On the graph, Q_x represents the quantity of good x and Q_y represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves. -Refer to Figure 21-15. For Barbara, the marginal rate of substitution between goods y and x

Jordan is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires. When the income effect dominates the substitution effect, an increase in the interest rate on savings will cause him to

Figure 21-3 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3. Which of the graphs in the figure reflects an increase in the price of good X only?

Which of the following statements is necessarily true regarding a point along a budget line?​

Figure 21-25 The figure pertains to a particular consumer. On the axes, X represents the quantity of good X and Y represents the quantity of good Y. -Refer to Figure 21-25. Suppose the price of good X is $8, the price of good Y is $10, and the consumer's income is $360. Then the consumer's optimal choice is to buy

Suppose Caroline is indifferent between tea and coffee as long as she consumes an equivalent amount of caffeine. Suppose that coffee has twice as much caffeine as tea. Which graph would illustrate a representative indifference curve?