Exam 21: The Theory of Consumer Choice

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 buying

Figure 21-1 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

When Jamar has an income of $2,000, he consumes 30 units of good A and 50 units of good B. After Jamar's income decreases to $1,500, he consumes 33 units of good A and 45 units of good B. Which of the following statements is correct?

When leisure is a normal good, the income effect from a decrease in wages is evident in

Dave consumes two normal goods, X and Y, and is currently at an optimum. If the price of good X falls, we can predict with certainty that

John is planning ahead for retirement in a two-period world. When John is young he will earn $1 million, and when John is old and retired he will be given $50,000 from Social Security. If the interest rate between the two time periods is 7 percent, what is the slope of John's budget constraint when considering the consumption possibilities between the two periods if consumption when young is graphed on the horizontal axis and consumption when old is graphed on the vertical axis?

A consumer likes two goods: pizza and beer. The four bundles shown in the table below lie on the same indifference curve for the consumer. Which of the following statements regarding these bundles is correct?

A consumer likes two goods: books and movies. The two bundles shown in the table below lie on the same indifference curve for the consumer. Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four properties of indifference curves?

In order to represent a consumer's choices on a graph, we draw her budget constraint as well as her __________ curves.

Figure 21-20 The following graph illustrates a representative consumer's preferences for marshmallows and chocolate chip cookies: -Refer to Figure 21-20. Assume that the consumer has an income of $40, the price of a bag of marshmallows is $2, and the price of a bag of chocolate chips is $2. The optimizing consumer will choose to purchase which bundle of marshmallows and chocolate chips?

Suppose a consumer spends her income on two goods: music CDs and DVDs. The consumer has $200 to allocate to these two goods, the price of a CD is $10, and the price of a DVD is $20. What is the maximum number of DVDs the consumer can purchase?

When two goods are perfect substitutes, the marginal rate of substitution

Figure 21-8 -Refer to Figure 21-8. You have $300 to spend on good X and good Y. If good X costs $30 and good Y costs $50, your budget constraint is

Suppose a consumer spends her income on two goods: iTunes music downloads and books. The consumer has $100 to allocate to these two goods, the price of a downloaded song is $1, and the price of a book is $20. What is the maximum number of books the consumer can purchase?

A consumer consumes two normal goods, sandwiches and milk. When the price of milk is $0.50 per glass, the consumer purchases 40 glasses. When the price rises to $0.65 per glass, the consumer purchases 30 glasses. We can use the information provided by the consumer's optimum choices to derive the

When the price of an inferior good increases,

The theory of consumer choice is to demand as the theory of

Figure 21-12 -Refer to Figure 21-12. If the consumer moves from bundle V to bundle X, the

Suppose Dave always uses two lemon wedges with his glass of iced tea. Dave's indifference curves for lemon wedges and iced tea are

If we observe that William's budget constraint has moved inward, then we know for certain that