Question 1

Figure 21-7
The following graph shows three possible indifference curves (I) for a consumer.   ​
-Refer to Figure 21-7. Which of the following statements is correct?

Accepted Answer

A) Bundle D contains more scones than bundle C. 
B) Bundle C provides the same utility as bundle D. 
C) Bundle B provides the same utility as bundle A. 
D) The bundles along I2 are preferred to those along I3. 
A) Bundle D contains more scones than bundle C. 
B) Bundle C provides the same utility as bundle D. 
C) Bundle B provides the same utility as bundle A. 
D) The bundles along I2 are preferred to those along I3. B

Question 2

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

Accepted Answer

A) True 
 B)False  True

Question 3

Explain the relationship between the budget constraint and indifference curve at a consumer's optimum.

Accepted Answer

Because the budget constraint is tangent to the indifference curve at a consumer's optimum, the slope of the budget constraint (relative market prices) and the slope of the indifference curve (the marginal rate of substitution) are equal at the optimal consumption point and only at that point.

Question 4

The substitution effect in the work-leisure model induces a person to work less in response to higher wages, which tends to make the labor-supply curve slope upward.

Accepted Answer

A) True 
 B)False

Question 5

Figure 21-18
The figure shows two indifference curves and two budget constraints for a consumer named Kevin.
   ​
-Refer to Figure 21-18. If Kevin's income is $1,260 and point A is his optimum, then what is the price of a shirt?

Accepted Answer

The price

Question 6

List and briefly explain each of the four properties of indifference curves.

Accepted Answer

1: Higher indifference curves are prefer

Question 7

Susie wins $2 million in her state's lottery. If Susie keeps working after she wins the money, we can infer that the income effect is larger than the substitution effect for her.

Accepted Answer

A) True 
 B)False

Question 8

Suppose Caroline is indifferent between tea and coffee as long as she consumes an equivalent amount of caffeine. Suppose that coffee has twice as much caffeine as tea. Which graph would illustrate a representative indifference curve?

Accepted Answer

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

Question 9

When two goods are perfect complements, the indifference curves are right angles.

Accepted Answer

A) True 
 B)False

Question 10

Consider the indifference curve map and budget constraint for two goods, beef and potatoes. Suppose the good measured on the horizontal axis, potatoes, is a Giffen good. Beef is measured on the vertical axis and is a normal good. When the price of potatoes increases, the substitution effect causes

Accepted Answer

A) an increase in the consumption of potatoes, and the income effect causes a decrease in the consumption of potatoes.The substitution effect is less than the income effect. 
B) a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes.The substitution effect is greater than the income effect. 
C) an increase in the consumption of potatoes, and the income effect causes a decrease in the consumption of potatoes.The substitution effect is greater than the income effect. 
D) a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes.The substitution effect is less than the income effect. 
A) an increase in the consumption of potatoes, and the income effect causes a decrease in the consumption of potatoes.The substitution effect is less than the income effect. 
B) a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes.The substitution effect is greater than the income effect. 
C) an increase in the consumption of potatoes, and the income effect causes a decrease in the consumption of potatoes.The substitution effect is greater than the income effect. 
D) a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes.The substitution effect is less than the income effect.

Question 11

A consumer maximizes utility at a point where multiple indifference curves intersect the budget line.

Accepted Answer

A) True 
 B)False

Question 12

Figure 21-5  
-Refer to Figure 21-5. You have $36 to spend on good X and good Y. If good X costs $6 and good Y costs $12, your budget constraint is

Accepted Answer

A) AB. 
B) BC. 
C) CD. 
D) DE. 
A) AB. 
B) BC. 
C) CD. 
D) DE.

Question 13

Figure 21-19
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 21-19. Of the four labeled points, which is (are) affordable to Hannah?

Accepted Answer

Points B a

Question 14

The indifference curves for nickels and dimes are straight lines.

Accepted Answer

A) True 
 B)False

Question 15

The indifference curves for left gloves and right gloves are straight lines.

Accepted Answer

A) True 
 B)False

Question 16

Figure 21-7
The following graph shows three possible indifference curves (I) for a consumer.   ​
-Refer to Figure 21-7. Which of the following comparisons is correct regarding the marginal rate of substitution (MRS) of scones for pudding?

Accepted Answer

A) The MRS is greater between bundles A and C than between bundles C and D. 
B) The MRS is greater between bundles C and D than between bundles A and C. 
C) The MRS is the same between bundles A and C and bundles C and D because all three bundles lie on the same indifference curve. 
D) The MRS is greater between bundles B and C than between bundles C and E. 
A) The MRS is greater between bundles A and C than between bundles C and D. 
B) The MRS is greater between bundles C and D than between bundles A and C. 
C) The MRS is the same between bundles A and C and bundles C and D because all three bundles lie on the same indifference curve. 
D) The MRS is greater between bundles B and C than between bundles C and E.

Question 17

Using indifference curves and budget constraints, graphically illustrate the substitution and income effect that would result from a change in the price of a normal good.

Accepted Answer

@#IMG-DLM& ​
The graph above illustrates a price d

Question 18

Using the graph shown, construct a demand curve for M&M's given an income of $10.
​

Accepted Answer

The answer of Using the graph shown, construct a demand...

Question 19

At a consumer's optimal choice, the consumer chooses the combination of goods that equates the marginal rate of substitution and the price ratio.

Accepted Answer

A) True 
 B)False

Question 20

For a typical consumer, indifference curves can intersect if they satisfy the property of transitivity.

Accepted Answer

A) True 
 B)False

Exam 21: The Theory of Consumer Choice

Figure 21-7 The following graph shows three possible indifference curves (I) for a consumer. ​ -Refer to Figure 21-7. Which of the following statements is correct?

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

Explain the relationship between the budget constraint and indifference curve at a consumer's optimum.

The substitution effect in the work-leisure model induces a person to work less in response to higher wages, which tends to make the labor-supply curve slope upward.

Figure 21-18 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. ​ -Refer to Figure 21-18. If Kevin's income is $1,260 and point A is his optimum, then what is the price of a shirt?

List and briefly explain each of the four properties of indifference curves.

Susie wins $2 million in her state's lottery. If Susie keeps working after she wins the money, we can infer that the income effect is larger than the substitution effect for her.

Suppose Caroline is indifferent between tea and coffee as long as she consumes an equivalent amount of caffeine. Suppose that coffee has twice as much caffeine as tea. Which graph would illustrate a representative indifference curve?

When two goods are perfect complements, the indifference curves are right angles.

Consider the indifference curve map and budget constraint for two goods, beef and potatoes. Suppose the good measured on the horizontal axis, potatoes, is a Giffen good. Beef is measured on the vertical axis and is a normal good. When the price of potatoes increases, the substitution effect causes

A consumer maximizes utility at a point where multiple indifference curves intersect the budget line.

Figure 21-5 -Refer to Figure 21-5. You have $36 to spend on good X and good Y. If good X costs $6 and good Y costs $12, your budget constraint is

Figure 21-19 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 21-19. Of the four labeled points, which is (are) affordable to Hannah?

The indifference curves for nickels and dimes are straight lines.

The indifference curves for left gloves and right gloves are straight lines.

Figure 21-7 The following graph shows three possible indifference curves (I) for a consumer. ​ -Refer to Figure 21-7. Which of the following comparisons is correct regarding the marginal rate of substitution (MRS) of scones for pudding?

Using indifference curves and budget constraints, graphically illustrate the substitution and income effect that would result from a change in the price of a normal good.

Using the graph shown, construct a demand curve for M&M's given an income of $10. ​

At a consumer's optimal choice, the consumer chooses the combination of goods that equates the marginal rate of substitution and the price ratio.

For a typical consumer, indifference curves can intersect if they satisfy the property of transitivity.

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

Applications: 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

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Figure 21-7 The following graph shows three possible indifference curves (I) for a consumer. -Refer to Figure 21-7. Which of the following statements is correct?

Figure 21-18 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-18. If Kevin's income is $1,260 and point A is his optimum, then what is the price of a shirt?

Figure 21-19 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 21-19. Of the four labeled points, which is (are) affordable to Hannah?

Figure 21-7 The following graph shows three possible indifference curves (I) for a consumer. -Refer to Figure 21-7. Which of the following comparisons is correct regarding the marginal rate of substitution (MRS) of scones for pudding?

Using the graph shown, construct a demand curve for M&M's given an income of $10.