Question 1

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 2

When the price of an inferior good decreases,

Accepted Answer

A) both the income and substitution effects encourage the consumer to purchase more of the good. 
B) both the income and substitution effects encourage the consumer to purchase less of the good. 
C) the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good. 
D) the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good. 
A) both the income and substitution effects encourage the consumer to purchase more of the good. 
B) both the income and substitution effects encourage the consumer to purchase less of the good. 
C) the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good. 
D) the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good.

Question 3

Hold the prices of goods, as well as Amy's preferences, constant. If Amy's income increases, then

Accepted Answer

A) both her indifference curves and budget constraint change. 
B) her indifference curves change, but her budget constraint does not change. 
C) her budget constraint changes, but her indifference curves do not change. 
D) neither her indifference curves nor her budget constraint change. 
A) both her indifference curves and budget constraint change. 
B) her indifference curves change, but her budget constraint does not change. 
C) her budget constraint changes, but her indifference curves do not change. 
D) neither her indifference curves nor her budget constraint change.

Question 4

Figure 21-18  
-Refer to Figure 21-18. Given the budget constraint depicted in the graph, the consumer's optimal choice will be point

Accepted Answer

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

Question 5

A consumer chooses an optimal consumption point where the

Accepted Answer

A) marginal rate of substitution exceeds the relative price ratio. 
B) slope of the indifference curve equals the slope of the budget constraint. 
C) ratio of the prices equals one. 
D) All of the above are correct. 
A) marginal rate of substitution exceeds the relative price ratio. 
B) slope of the indifference curve equals the slope of the budget constraint. 
C) ratio of the prices equals one. 
D) All of the above are correct.

Question 6

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 B?

Accepted Answer

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

Question 7

Which of the following statements is not correct?

Accepted Answer

A) If Fiona gets a higher wage and works more, the substitution effect is greater than the income effect for her. 
B) If Miguel experiences a wage decrease and works less, the income effect is greater than the substitution effect for him. 
C) If the substitution effect is greater than the income effect, the labor-supply curve is upward sloping. 
D) If the income effect is greater than the substitution effect, the labor-supply curve is downward sloping. 
A) If Fiona gets a higher wage and works more, the substitution effect is greater than the income effect for her. 
B) If Miguel experiences a wage decrease and works less, the income effect is greater than the substitution effect for him. 
C) If the substitution effect is greater than the income effect, the labor-supply curve is upward sloping. 
D) If the income effect is greater than the substitution effect, the labor-supply curve is downward sloping.

Question 8

The direction of the substitution effect is not influenced by whether the good is normal or inferior.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin.  
-Refer to Figure 21-31. If the price of a shirt is $36 and point A is Kevin's optimum, then what is Kevin's income?

Accepted Answer

Kevin's in

Question 11

Just as the theory of the competitive firm provides a more complete understanding of supply, the theory of consumer choice provides a more complete understanding of

Accepted Answer

A) demand. 
B) profits. 
C) production possibility frontiers. 
D) wages. 
A) demand. 
B) profits. 
C) production possibility frontiers. 
D) wages.

Question 12

The substitution effect of an increase in the interest rate will result in an increase in

Accepted Answer

A) consumption when young and increase in savings when young. 
B) consumption when old and an increase in savings when young. 
C) consumption when young and an increase in savings when old. 
D) savings when old and an increase in consumption when old. 
A) consumption when young and increase in savings when young. 
B) consumption when old and an increase in savings when young. 
C) consumption when young and an increase in savings when old. 
D) savings when old and an increase in consumption when old.

Question 13

An increase in a consumer's income

Accepted Answer

A) increases the slope of the consumer's budget constraint. 
B) has no effect on the slope of the consumer's budget constraint. 
C) decreases the slope of the consumer's budget constraint. 
D) has no effect on the consumer's budget constraint. 
A) increases the slope of the consumer's budget constraint. 
B) has no effect on the slope of the consumer's budget constraint. 
C) decreases the slope of the consumer's budget constraint. 
D) has no effect on the consumer's budget constraint.

Question 14

Figure 21-12  
-Refer to Figure 21-12. Which of the following statements is correct?

Accepted Answer

A) The consumer prefers bundle Y to bundle Z. 
B) The consumer is indifference between bundle X and bundle V. 
C) The consumer prefers bundle Y to bundle X. 
D) The consumer prefers bundle Z to bundle V. 
A) The consumer prefers bundle Y to bundle Z. 
B) The consumer is indifference between bundle X and bundle V. 
C) The consumer prefers bundle Y to bundle X. 
D) The consumer prefers bundle Z to bundle V.

Question 15

Indifference curves that cross violate the property of

Accepted Answer

A) the marginal rate of substitution. 
B) transitivity. 
C) indifference curves bowing inward. 
D) They do not violate any properties of indifference curves. 
A) the marginal rate of substitution. 
B) transitivity. 
C) indifference curves bowing inward. 
D) They do not violate any properties of indifference curves.

Question 16

The consumer's optimal choice is the one in which the marginal utility per dollar spent on good X is

Accepted Answer

A) equal to the marginal utility per dollar saved on good X. 
B) greater than the marginal utility per dollar spent on good Y. 
C) equal to the marginal utility per dollar spent on good Y. 
D) less than the marginal utility per dollar spent on good Y. 
A) equal to the marginal utility per dollar saved on good X. 
B) greater than the marginal utility per dollar spent on good Y. 
C) equal to the marginal utility per dollar spent on good Y. 
D) less than the marginal utility per dollar spent on good Y.

Question 17

Consumer will always consume more of a good if their income increases.

Accepted Answer

A) True 
 B)False

Question 18

Figure 21-15 On the graph, QS1U1B1xS1U1B0 represents the quantity of good x and QS1U1B1yS1U1B0 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, goods x and y are

Accepted Answer

A) imperfect complements. 
B) imperfect substitutes. 
C) perfect substitutes. 
D) perfect complements. 
A) imperfect complements. 
B) imperfect substitutes. 
C) perfect substitutes. 
D) perfect complements.

Question 19

The indifference curves for perfect substitutes are straight lines.

Accepted Answer

A) True 
 B)False

Question 20

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 correct?

Accepted Answer

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

Exam 21: The Theory of Consumer Choice

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.

When the price of an inferior good decreases,

Hold the prices of goods, as well as Amy's preferences, constant. If Amy's income increases, then

Figure 21-18 -Refer to Figure 21-18. Given the budget constraint depicted in the graph, the consumer's optimal choice will be point

A consumer chooses an optimal consumption point where the

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 B?

Which of the following statements is not correct?

The direction of the substitution effect is not influenced by whether the good is normal or inferior.

An optimizing consumer will select a consumption bundle in which

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. If the price of a shirt is $36 and point A is Kevin's optimum, then what is Kevin's income?

Just as the theory of the competitive firm provides a more complete understanding of supply, the theory of consumer choice provides a more complete understanding of

The substitution effect of an increase in the interest rate will result in an increase in

An increase in a consumer's income

Figure 21-12 -Refer to Figure 21-12. Which of the following statements is correct?

Indifference curves that cross violate the property of

The consumer's optimal choice is the one in which the marginal utility per dollar spent on good X is

Consumer will always consume more of a good if their income increases.

Figure 21-15 On the graph, Qx represents the quantity of good x and Qy 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, goods x and y are

The indifference curves for perfect substitutes are straight lines.

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 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

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, goods x and y are