Question 1

A Giffen good is a good for which

Accepted Answer

A) a decrease in the price decreases the quantity demanded. 
B) the income effect outweighs the substitution effect. 
C) an increase in the price decreases the quantity demanded. 
D) Both a) and b) are correct. 
A) a decrease in the price decreases the quantity demanded. 
B) the income effect outweighs the substitution effect. 
C) an increase in the price decreases the quantity demanded. 
D) Both a) and b) are correct.

Question 2

All points on a demand curve are optimal consumption points.

Accepted Answer

A) True 
 B)False

Question 3

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve.  
-Refer to Figure 21-24. Which of the following pairs of prices matches the appearance of the budget constraint?

Accepted Answer

A) price of apples = $6/pound; price of pears = $4/pound 
B) price of apples = $4/pound; price of pears = $6/pound 
C) price of apples = $6/pound; price of pears = $5/pound 
D) price of apples = $5/pound; price of pears = $6/pound 
A) price of apples = $6/pound; price of pears = $4/pound 
B) price of apples = $4/pound; price of pears = $6/pound 
C) price of apples = $6/pound; price of pears = $5/pound 
D) price of apples = $5/pound; price of pears = $6/pound

Question 4

For Molly, the substitution effect of a wage increase is stronger than the income effect. In response to a wage increase, will Sally work more hours or will she work fewer hours?

Accepted Answer

In response to a wag

Question 5

Figure 21-18  
-Refer to Figure 21-18. Bundle D represents a point where

Accepted Answer

A) MRSxy > Py/Px. 
B) MRSxy = Px/Py. 
C) MRSxy x/Py. 
D) MRSxy y/Px. 
A) MRSxy > Py/Px. 
B) MRSxy = Px/Py. 
C) MRSxy x/Py. 
D) MRSxy y/Px.

Question 6

Figure 21-11  
-Refer to Figure 21-11. The graph illustrates

Accepted Answer

A) a typical budget constraint. 
B) a typical indifference curve. 
C) an indifference curve where goods X and Y are perfect complements. 
D) an indifference curve where goods X and Y are perfect substitutes. 
A) a typical budget constraint. 
B) a typical indifference curve. 
C) an indifference curve where goods X and Y are perfect complements. 
D) an indifference curve where goods X and Y are perfect substitutes.

Question 7

Figure 21-9  
-Refer to Figure 21-9. If the price of good X is $15, what is the price of good Y?

Accepted Answer

A) $1,500 
B) $50 
C) $5 
D) $0.50 
A) $1,500 
B) $50 
C) $5 
D) $0.50

Question 8

Ryan experiences an increase in his wages. The hours of labor that he supplies to the market would increase if

Accepted Answer

A) the income effect is larger than the substitution effect. 
B) the substitution effect is larger than the income effect. 
C) neither the income effect nor the substitution effect apply to Tom's labor-leisure tradeoff. 
D) Ryan views both labor and leisure as inferior goods. 
A) the income effect is larger than the substitution effect. 
B) the substitution effect is larger than the income effect. 
C) neither the income effect nor the substitution effect apply to Tom's labor-leisure tradeoff. 
D) Ryan views both labor and leisure as inferior goods.

Question 9

The labor supply curve may have a backward-bending portion if, at higher wages, the income effect is

Accepted Answer

A) smaller than the substitution effect. 
B) larger than the substitution effect. 
C) negative. 
D) Any of the above could result in a backward-bending supply curve. 
A) smaller than the substitution effect. 
B) larger than the substitution effect. 
C) negative. 
D) Any of the above could result in a backward-bending supply curve.

Question 10

When two goods are perfect complements, the indifference curve is

Accepted Answer

A) a horizontal straight line. 
B) bowed outward. 
C) a downward-sloping straight line. 
D) a right angle. 
A) a horizontal straight line. 
B) bowed outward. 
C) a downward-sloping straight line. 
D) a right angle.

Question 11

Figure 21-11  
-Refer to Figure 21-11. What is the consumer's marginal rate of substitution as she moves from B to C?

Accepted Answer

A) 12 
B) 6 
C) 4 
D) 1 
A) 12 
B) 6 
C) 4 
D) 1

Question 12

Abby, Bobbi, and Deborah each buy ice cream and paperback novels to enjoy on hot summer days. Ice cream costs $5 per gallon, and paperback novels cost $8 each. Abby has a budget of $80, Bobbi has a budget of $60, and Deborah has a budget of $40 to spend on ice cream and paperback novels. Who can afford to purchase 4 gallons of ice cream and 5 paperback novels?

Accepted Answer

A) Abby, Bobbi, and Deborah 
B) Abby only 
C) Abby and Bobbi, but not Deborah 
D) None of the women can afford to purchase 4 gallons of ice cream and 5 paperback novels. 
A) Abby, Bobbi, and Deborah 
B) Abby only 
C) Abby and Bobbi, but not Deborah 
D) None of the women can afford to purchase 4 gallons of ice cream and 5 paperback novels.

Question 13

Assume Victoria's indifference curves are bowed outward but her indifference curves satisfy the other three properties of indifference curves. As Victoria moves from right to left along the horizontal axis, her marginal rate of substitution

Accepted Answer

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

Question 14

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 $2,520 and point B is his optimum, then what is the price of a shirt?

Accepted Answer

The price

Question 15

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. How much income does Hannah earn when she is young?

Accepted Answer

Hannah ear

Question 16

Each of the following are characteristics of a typical indifference curve map except

Accepted Answer

A) moving northeast to a new indifference curve will increase utility. 
B) points on the same indifference curve yield equal utility. 
C) the axes represent levels of utility for each of the goods. 
D) indifference curves cannot cross. 
A) moving northeast to a new indifference curve will increase utility. 
B) points on the same indifference curve yield equal utility. 
C) the axes represent levels of utility for each of the goods. 
D) indifference curves cannot cross.

Question 17

A consumer chooses an optimal consumption point where the

Accepted Answer

A) marginal rate of substitution is maximized. 
B) slope of the indifference curve exceeds the slope of the budget constraint by the greatest amount. 
C) ratio of the marginal utilities equals the ratio of the prices. 
D) All of the above are correct. 
A) marginal rate of substitution is maximized. 
B) slope of the indifference curve exceeds the slope of the budget constraint by the greatest amount. 
C) ratio of the marginal utilities equals the ratio of the prices. 
D) All of the above are correct.

Question 18

If the consumer's income and all prices simultaneously double, then the optimum consumption bundle will

Accepted Answer

A) shift outward relative to the original optimum. 
B) move leftward along the original budget constraint. 
C) not change. 
D) shift inward relative to the original optimum. 
A) shift outward relative to the original optimum. 
B) move leftward along the original budget constraint. 
C) not change. 
D) shift inward relative to the original optimum.

Question 19

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve.  
-Refer to Figure 21-24. Steve

Accepted Answer

A) gains 1.1 pounds of pears and becomes better off by moving from point A to point B. 
B) gains 1.1 pounds of pears and becomes better off by moving from point A to point C. 
C) gains 1.1 pounds of pears and becomes better off by moving from point B to point C. 
D) gives up 1.1 pounds of pears and becomes better off by moving from point C to point B. 
A) gains 1.1 pounds of pears and becomes better off by moving from point A to point B. 
B) gains 1.1 pounds of pears and becomes better off by moving from point A to point C. 
C) gains 1.1 pounds of pears and becomes better off by moving from point B to point C. 
D) gives up 1.1 pounds of pears and becomes better off by moving from point C to point B.

Question 20

Suppose a consumer knows that at her current bundle, MUx/Px > MUy/Py. Is this individual choosing a bundle that maximizes utility? ​

Accepted Answer

A) ​Yes, because this individual values good X more than good Y. 
B) ​Yes, because this individual values good Y more than good X. 
C) ​No. This individual should shift consumption from good X to good Y. 
D) ​No. This individual should shift consumption from good Y to good X. 
A) ​Yes, because this individual values good X more than good Y. 
B) ​Yes, because this individual values good Y more than good X. 
C) ​No. This individual should shift consumption from good X to good Y. 
D) ​No. This individual should shift consumption from good Y to good X.

Exam 21: The Theory of Consumer Choice

A Giffen good is a good for which

All points on a demand curve are optimal consumption points.

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. Which of the following pairs of prices matches the appearance of the budget constraint?

For Molly, the substitution effect of a wage increase is stronger than the income effect. In response to a wage increase, will Sally work more hours or will she work fewer hours?

Figure 21-18 -Refer to Figure 21-18. Bundle D represents a point where

Figure 21-11 -Refer to Figure 21-11. The graph illustrates

Figure 21-9 -Refer to Figure 21-9. If the price of good X is $15, what is the price of good Y?

Ryan experiences an increase in his wages. The hours of labor that he supplies to the market would increase if

The labor supply curve may have a backward-bending portion if, at higher wages, the income effect is

When two goods are perfect complements, the indifference curve is

Figure 21-11 -Refer to Figure 21-11. What is the consumer's marginal rate of substitution as she moves from B to C?

Assume Victoria's indifference curves are bowed outward but her indifference curves satisfy the other three properties of indifference curves. As Victoria moves from right to left along the horizontal axis, her marginal rate of substitution

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 $2,520 and point B is his optimum, then what is the price of a shirt?

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. How much income does Hannah earn when she is young?

Each of the following are characteristics of a typical indifference curve map except

A consumer chooses an optimal consumption point where the

If the consumer's income and all prices simultaneously double, then the optimum consumption bundle will

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. Steve

Suppose a consumer knows that at her current bundle, MUx/Px > MUy/Py. Is this individual choosing a bundle that maximizes utility? ​

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 a consumer knows that at her current bundle, MUx/Px > MUy/Py. Is this individual choosing a bundle that maximizes utility?