Question 1

Frannie spends her income on rice and beans. At her optimum, Frannie's

Accepted Answer

A) utility from consuming rice is equal to her utility from consuming beams. 
B) marginal utility of rice is equal to her marginal utility of beans. 
C) marginal utility per dollar spent on rice equals her marginal utility per dollar spent on beans. 
D) marginal rate of substitution is equal to 1. 
A) utility from consuming rice is equal to her utility from consuming beams. 
B) marginal utility of rice is equal to her marginal utility of beans. 
C) marginal utility per dollar spent on rice equals her marginal utility per dollar spent on beans. 
D) marginal rate of substitution is equal to 1.

Question 2

Bill consumes two goods: iced tea and spaghetti. The price of iced tea is $2 per bottle, and the price of spaghetti is $8 per serving. His income is $1,000 per month. He spends all of his income each month. He purchases 200 bottles of iced tea. How many servings of spaghetti does he purchase?

Accepted Answer

A) 125 
B) 75 
C) 50 
D) 10 
A) 125 
B) 75 
C) 50 
D) 10

Question 3

A consumer has preferences over two goods, X and Y. Suppose we graph this consumer's preferences (which satisfy the usual properties of indifference curves) and budget constraint on a diagram with X on the horizontal axis and Y on the vertical axis. At the consumer's current consumption bundle, the consumer is spending all available income, and the marginal rate of substitution is less than the slope of the budget constraint. We can conclude that the consumer

Accepted Answer

A) is currently maximizing satisfaction subject to the budget constraint. 
B) could increase satisfaction by consuming more X and less Y. 
C) could increase satisfaction by consuming less X and more Y. 
D) could purchase more X and more Y and increase total satisfaction. 
A) is currently maximizing satisfaction subject to the budget constraint. 
B) could increase satisfaction by consuming more X and less Y. 
C) could increase satisfaction by consuming less X and more Y. 
D) could purchase more X and more Y and increase total satisfaction.

Question 4

If a consumer purchases more of good X and good Y after her income increases, then neither good X nor good Y is an inferior good for her.

Accepted Answer

A) True 
 B)False

Question 5

A decrease in the price of DVD players leads consumers to buy more DVD players. From this information we can conclude that DVD players

Accepted Answer

A) are normal goods. 
B) are inferior goods. 
C) are luxury goods. 
D) could be any of the above. 
A) are normal goods. 
B) are inferior goods. 
C) are luxury goods. 
D) could be any of the above.

Question 6

Economists represent a consumer's preferences using

Accepted Answer

A) demand curves. 
B) budget constraints. 
C) indifference curves. 
D) supply curves. 
A) demand curves. 
B) budget constraints. 
C) indifference curves. 
D) supply curves.

Question 7

Which of the following statements is correct?

Accepted Answer

A) The theory of consumer choice provides a more complete understanding of supply, just as the theory of the competitive firm provides a more complete understanding of demand. 
B) The theory of consumer choice provides a more complete understanding of demand, just as the theory of the competitive firm provides a more complete understanding of supply. 
C) Monetary theory provides a more complete understanding of demand, just as the theory of the competitive firm provides a more complete understanding of supply. 
D) The theory of public choice provides a more complete understanding of supply, just as the theory of the competitive firm provides a more complete understanding of demand. 
A) The theory of consumer choice provides a more complete understanding of supply, just as the theory of the competitive firm provides a more complete understanding of demand. 
B) The theory of consumer choice provides a more complete understanding of demand, just as the theory of the competitive firm provides a more complete understanding of supply. 
C) Monetary theory provides a more complete understanding of demand, just as the theory of the competitive firm provides a more complete understanding of supply. 
D) The theory of public choice provides a more complete understanding of supply, just as the theory of the competitive firm provides a more complete understanding of demand.

Question 8

An indifference curve illustrates the

Accepted Answer

A) prices facing a consumer as she chooses how much of good X and good Y to consume. 
B) income facing a consumer as she chooses how much of good X and good Y to consume. 
C) trade-offs facing a consumer as she chooses how much of good X and good Y to consume. 
D) All of the above are correct. 
A) prices facing a consumer as she chooses how much of good X and good Y to consume. 
B) income facing a consumer as she chooses how much of good X and good Y to consume. 
C) trade-offs facing a consumer as she chooses how much of good X and good Y to consume. 
D) All of the above are correct.

Question 9

What does the slope of a consumer's indifference curve represent?

Accepted Answer

The slope of a consumer's indi

Question 10

​Suppose an individual knows that the marginal utility he receives from the next apple is 5 and that the price of an apple is $2. He also knows that the marginal utility he receives from the next orange is 3 and the price of an orange is $1. If the individual is choosing optimally, the next good he will buy is

Accepted Answer

A) ​an orange because the marginal utility per dollar spent on an orange is greater. 
B) ​an orange because the marginal utility of the orange is greater. 
C) ​an apple because the marginal utility per dollar spent on an apple is greater. 
D) ​an apple because the marginal utility of the apple is greater. 
A) ​an orange because the marginal utility per dollar spent on an orange is greater. 
B) ​an orange because the marginal utility of the orange is greater. 
C) ​an apple because the marginal utility per dollar spent on an apple is greater. 
D) ​an apple because the marginal utility of the apple is greater.

Question 11

Shelley wins $1 million in her state's lottery. If Shelley keeps working after she wins the money, we can infer that the substitution effect must exactly offset the income effect for her.

Accepted Answer

A) True 
 B)False

Question 12

For a typical consumer, most indifference curves are bowed inward.

Accepted Answer

A) True 
 B)False

Question 13

Figure 21-13  
-Refer to Figure 21-13. As the consumer moves from A to B to C, the consumer's total utility

Accepted Answer

A) increases. 
B) decreases. 
C) remains constant. 
D) first increases, then decreases. 
A) increases. 
B) decreases. 
C) remains constant. 
D) first increases, then decreases.

Question 14

Suppose a consumer consumes two goods, X and Y. The relative price of the two goods equals the

Accepted Answer

A) marginal rate of substitution. 
B) rate at which the consumer will give up X to gain Y while maintaining the same level of utility. 
C) slope of the budget constraint. 
D) All of the above are correct. 
A) marginal rate of substitution. 
B) rate at which the consumer will give up X to gain Y while maintaining the same level of utility. 
C) slope of the budget constraint. 
D) All of the above are correct.

Question 15

Figure 21-8  
-Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?

Accepted Answer

A) $3.33 
B) $5 
C) $15 
D) $30 
A) $3.33 
B) $5 
C) $15 
D) $30

Question 16

Because people are more willing to trade away goods that they have in abundance and less willing to trade away goods of which they have little, indifference curves are ___________.

Accepted Answer

bowed inwa

Question 17

Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst. The price of a pint of beer is $5, and the price of a bratwurst is $4. Which of the following combinations of beers and bratwursts represents a point that would lie directly on the consumer's budget constraint?

Accepted Answer

A) 160 beers and 200 bratwursts 
B) 40 beers and 50 bratwursts 
C) 80 beers and 100 bratwursts 
D) 80 beers and 0 bratwursts 
A) 160 beers and 200 bratwursts 
B) 40 beers and 50 bratwursts 
C) 80 beers and 100 bratwursts 
D) 80 beers and 0 bratwursts

Question 18

A consumer chooses an optimal consumption point where the

Accepted Answer

A) marginal rate of substitution is maximized. 
B) rate at which the consumer is willing to trade one good for another equals the price ratio. 
C) price ratio is minimized. 
D) All of the above are correct. 
A) marginal rate of substitution is maximized. 
B) rate at which the consumer is willing to trade one good for another equals the price ratio. 
C) price ratio is minimized. 
D) All of the above are correct.

Question 19

When indifference curves are bowed inward, the marginal rate of substitution varies at each point on the indifference curve.

Accepted Answer

A) True 
 B)False

Question 20

A decrease in income will cause a consumer's budget constraint to

Accepted Answer

A) shift outward, parallel to its initial position. 
B) shift inward, parallel to its initial position. 
C) pivot along the horizontal axis. 
D) pivot along the vertical axis. 
A) shift outward, parallel to its initial position. 
B) shift inward, parallel to its initial position. 
C) pivot along the horizontal axis. 
D) pivot along the vertical axis.

Frannie spends her income on rice and beans. At her optimum, Frannie's

Bill consumes two goods: iced tea and spaghetti. The price of iced tea is $2 per bottle, and the price of spaghetti is $8 per serving. His income is $1,000 per month. He spends all of his income each month. He purchases 200 bottles of iced tea. How many servings of spaghetti does he purchase?

If a consumer purchases more of good X and good Y after her income increases, then neither good X nor good Y is an inferior good for her.

A decrease in the price of DVD players leads consumers to buy more DVD players. From this information we can conclude that DVD players

Economists represent a consumer's preferences using

Which of the following statements is correct?

An indifference curve illustrates the

What does the slope of a consumer's indifference curve represent?

Shelley wins $1 million in her state's lottery. If Shelley keeps working after she wins the money, we can infer that the substitution effect must exactly offset the income effect for her.

For a typical consumer, most indifference curves are bowed inward.

Figure 21-13 -Refer to Figure 21-13. As the consumer moves from A to B to C, the consumer's total utility

Suppose a consumer consumes two goods, X and Y. The relative price of the two goods equals the

Figure 21-8 -Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?

Because people are more willing to trade away goods that they have in abundance and less willing to trade away goods of which they have little, indifference curves are ___________.

A consumer chooses an optimal consumption point where the

When indifference curves are bowed inward, the marginal rate of substitution varies at each point on the indifference curve.

A decrease in income will cause a consumer's budget constraint to

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

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Exam 21: The Theory of Consumer Choice

Frannie spends her income on rice and beans. At her optimum, Frannie's

Bill consumes two goods: iced tea and spaghetti. The price of iced tea is $2 per bottle, and the price of spaghetti is $8 per serving. His income is $1,000 per month. He spends all of his income each month. He purchases 200 bottles of iced tea. How many servings of spaghetti does he purchase?

If a consumer purchases more of good X and good Y after her income increases, then neither good X nor good Y is an inferior good for her.

A decrease in the price of DVD players leads consumers to buy more DVD players. From this information we can conclude that DVD players

Economists represent a consumer's preferences using

Which of the following statements is correct?

An indifference curve illustrates the

What does the slope of a consumer's indifference curve represent?

Shelley wins $1 million in her state's lottery. If Shelley keeps working after she wins the money, we can infer that the substitution effect must exactly offset the income effect for her.

For a typical consumer, most indifference curves are bowed inward.

Figure 21-13 -Refer to Figure 21-13. As the consumer moves from A to B to C, the consumer's total utility

Suppose a consumer consumes two goods, X and Y. The relative price of the two goods equals the

Figure 21-8 -Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?

Because people are more willing to trade away goods that they have in abundance and less willing to trade away goods of which they have little, indifference curves are ___________.

A consumer chooses an optimal consumption point where the

When indifference curves are bowed inward, the marginal rate of substitution varies at each point on the indifference curve.

A decrease in income will cause a consumer's budget constraint to

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