Question 1

Which of the following is an example of a Giffen good?

Accepted Answer

A) fish in Japan 
B) rice in the Chinese province of Hunan 
C) pork in India 
D) Both a and b are correct. 
A) fish in Japan 
B) rice in the Chinese province of Hunan 
C) pork in India 
D) Both a and b are correct.

Question 2

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin.  
-Refer to Figure 21-31. If Kevin's income is $1,260, then what is the price of a sweater?

Accepted Answer

The price

Question 3

If Hector's marginal rate of substitution between pens and pencils is constant, regardless of how many pens and pencils he has, then his indifference curves

Accepted Answer

A) are right angles. 
B) are straight lines. 
C) slope upward. 
D) cross one another at certain points. 
A) are right angles. 
B) are straight lines. 
C) slope upward. 
D) cross one another at certain points.

Question 4

Taylor spends all of her income on tank tops and running shoes, and the price of a pair of running shoes is four times the price of a tank top. In order to maximize total utility, Taylor should buy

Accepted Answer

A) four times as many tank tops as pairs of running shoes. 
B) four times as many pairs of running shoes as tank tops. 
C) both items until the marginal utility of a pair of running shoes is four times the marginal utility of a tank top. 
D) both items until the marginal utility of a tank top is four times the marginal utility of a pair of running shoes. 
A) four times as many tank tops as pairs of running shoes. 
B) four times as many pairs of running shoes as tank tops. 
C) both items until the marginal utility of a pair of running shoes is four times the marginal utility of a tank top. 
D) both items until the marginal utility of a tank top is four times the marginal utility of a pair of running shoes.

Question 5

When two goods are perfect substitutes, the

Accepted Answer

A) indifference curve is a horizontal straight line. 
B) marginal rate of substitution is constant. 
C) indifference curve is a vertical straight line. 
D) Both a and b are correct. 
A) indifference curve is a horizontal straight line. 
B) marginal rate of substitution is constant. 
C) indifference curve is a vertical straight line. 
D) Both a and b are correct.

Question 6

Figure 21-10  
-Refer to Figure 21-10. A person who chooses to consume bundle C is likely to

Accepted Answer

A) receive higher total satisfaction at bundle C than at bundle A. 
B) spend more on bundle C than bundle A. 
C) receive higher marginal utility from cake than from donuts. 
D) receive higher marginal utility from donuts than from cake. 
A) receive higher total satisfaction at bundle C than at bundle A. 
B) spend more on bundle C than bundle A. 
C) receive higher marginal utility from cake than from donuts. 
D) receive higher marginal utility from donuts than from cake.

Question 7

Giffen goods are inferior goods for which the income effect dominates the substitution effect.

Accepted Answer

A) True 
 B)False

Question 8

If the market is offering consumers the trade-off of 3 pints of Pepsi for 1 pizza, and if the price of a pizza is $9, then what is the price of a pint of Pepsi?

Accepted Answer

The price

Question 9

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 10

If an increase in the interest rate raises savings, then

Accepted Answer

A) the substitution effect is greater than the income effect. 
B) the income effect is greater than the substitution effect. 
C) the income effect and the substitution effect move in the same direction. 
D) we are unable to determine the sizes of the income and substitution effects without more information. 
A) the substitution effect is greater than the income effect. 
B) the income effect is greater than the substitution effect. 
C) the income effect and the substitution effect move in the same direction. 
D) we are unable to determine the sizes of the income and substitution effects without more information.

Question 11

When considering household savings, the relative price between consuming when young and consuming when old is the

Accepted Answer

A) consumption rate. 
B) interest rate that individuals can earn on their private savings. 
C) prime rate. 
D) federal funds rate. 
A) consumption rate. 
B) interest rate that individuals can earn on their private savings. 
C) prime rate. 
D) federal funds rate.

Question 12

All of the following are properties of typical indifference curves except

Accepted Answer

A) higher indifference curves are preferred to lower ones. 
B) indifference curves are downward sloping. 
C) indifference curves do not cross. 
D) indifference curves are bowed outward. 
A) higher indifference curves are preferred to lower ones. 
B) indifference curves are downward sloping. 
C) indifference curves do not cross. 
D) indifference curves are bowed outward.

Question 13

Indifference curves that cross would suggest that

Accepted Answer

A) the consumer does not prefer more to less. 
B) the consumer is likely to prefer a redistribution of income from rich to poor. 
C) different individuals have different preferences for the same goods. 
D) the marginal rate of substitution is the same for both indifference curves. 
A) the consumer does not prefer more to less. 
B) the consumer is likely to prefer a redistribution of income from rich to poor. 
C) different individuals have different preferences for the same goods. 
D) the marginal rate of substitution is the same for both indifference curves.

Question 14

When indifference curves are downward sloping, the marginal rate of substitution is usually constant.

Accepted Answer

A) True 
 B)False

Question 15

Figure 21-14      
-Refer to Figure 21-14. Which of the following statements is correct?

Accepted Answer

A) The indifference curves represented in graph a are perfect complements. 
B) The indifference curves represented in graph b are perfect substitutes. 
C) The indifference curves represented in graph c are neither perfect substitutes not perfect complements. 
D) All of the above are correct. 
A) The indifference curves represented in graph a are perfect complements. 
B) The indifference curves represented in graph b are perfect substitutes. 
C) The indifference curves represented in graph c are neither perfect substitutes not perfect complements. 
D) All of the above are correct.

Question 16

​Suppose the price of good X increases and consumers purchase more of good Y. Which of the following statements is necessarily true about good Y?

Accepted Answer

A) ​Good Y is a normal good. 
B) ​Good Y is an inferior good, but not a Giffen good. 
C) ​Good Y is an inferior good and a Giffen good. 
D) ​Good Y could be a normal or inferior good. 
A) ​Good Y is a normal good. 
B) ​Good Y is an inferior good, but not a Giffen good. 
C) ​Good Y is an inferior good and a Giffen good. 
D) ​Good Y could be a normal or inferior good.

Question 17

A family on a trip budgets $800 for meals and hotel accommodations. Suppose the price of a meal is $40. In addition, suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals. How many meals could the family afford if they gave up two nights in the hotel?

Accepted Answer

A) 1 
B) 2 
C) 5 
D) 8 
A) 1 
B) 2 
C) 5 
D) 8

Question 18

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

Accepted Answer

In response to a hig

Question 19

Suppose that for Emily, DVDs and trips to the movie theater are perfect substitutes. Currently, Emily is spending all of her income on trips to the movie theater. If the price of DVDs doubles, the substitution effect will

Accepted Answer

A) be two times the income effect. 
B) be half the income effect. 
C) be zero. 
D) always increase the number of trips to the movie theater Emily makes. 
A) be two times the income effect. 
B) be half the income effect. 
C) be zero. 
D) always increase the number of trips to the movie theater Emily makes.

Question 20

Figure 21-23  
-Refer to Figure 21-23. When the price of X is $80, the price of Y is $20, and the consumer's income is $160, the consumer's optimal choice is D. Then the price of X decreases to $20. The income effect can be illustrated as the movement from

Accepted Answer

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

Exam 21: The Theory of Consumer Choice

Which of the following is an example of a Giffen good?

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. If Kevin's income is $1,260, then what is the price of a sweater?

If Hector's marginal rate of substitution between pens and pencils is constant, regardless of how many pens and pencils he has, then his indifference curves

Taylor spends all of her income on tank tops and running shoes, and the price of a pair of running shoes is four times the price of a tank top. In order to maximize total utility, Taylor should buy

When two goods are perfect substitutes, the

Figure 21-10 -Refer to Figure 21-10. A person who chooses to consume bundle C is likely to

Giffen goods are inferior goods for which the income effect dominates the substitution effect.

If the market is offering consumers the trade-off of 3 pints of Pepsi for 1 pizza, and if the price of a pizza is $9, then what is the price of a pint of Pepsi?

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

If an increase in the interest rate raises savings, then

When considering household savings, the relative price between consuming when young and consuming when old is the

All of the following are properties of typical indifference curves except

Indifference curves that cross would suggest that

When indifference curves are downward sloping, the marginal rate of substitution is usually constant.

Figure 21-14 -Refer to Figure 21-14. Which of the following statements is correct?

​Suppose the price of good X increases and consumers purchase more of good Y. Which of the following statements is necessarily true about good Y?

A family on a trip budgets $800 for meals and hotel accommodations. Suppose the price of a meal is $40. In addition, suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals. How many meals could the family afford if they gave up two nights in the hotel?

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

Suppose that for Emily, DVDs and trips to the movie theater are perfect substitutes. Currently, Emily is spending all of her income on trips to the movie theater. If the price of DVDs doubles, the substitution effect will

Figure 21-23 -Refer to Figure 21-23. When the price of X is $80, the price of Y is $20, and the consumer's income is $160, the consumer's optimal choice is D. Then the price of X decreases to $20. The income effect can be illustrated as the movement from

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

Suppose the price of good X increases and consumers purchase more of good Y. Which of the following statements is necessarily true about good Y?