Question 1

All points on a demand curve are optimal consumption points.

Accepted Answer

A) True 
 B)False

Question 2

Is it possible for a normal good to be a Giffen good? Briefly explain.

Accepted Answer

No, only i

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

A consumer's optimal choice is affected by income, prices of goods, and preferences.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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

Accepted Answer

Hannah ear

Question 7

Both Diana and Sarah like Classical music and music by Beyoncé. Diana likes music by Beyoncé much better than Classical music, whereas Sarah prefers Classical music to music by Beyoncé. If we were to graph an indifference curve with CDs by Beyoncé on the horizontal axis and Classical music CDs on the vertical axis, then

Accepted Answer

A) Diana and Sarah would have identical indifference curves. 
B) Diana's indifference curve would be steeper than Sarah's indifference curve. 
C) Sarah's indifference curve would be steeper than Diana's indifference curve. 
D) We do not have enough information to compare their indifference curves. 
A) Diana and Sarah would have identical indifference curves. 
B) Diana's indifference curve would be steeper than Sarah's indifference curve. 
C) Sarah's indifference curve would be steeper than Diana's indifference curve. 
D) We do not have enough information to compare their indifference curves.

Question 8

Figure 21-3
In each case, the budget constraint moves from BCS1U1B11S1U1B0 to BCS1U1B12S1U1B0.
​
Graph (a)
Graph (b)
Graph (c)
Graph (d)        
-Refer to Figure 21-3. Which of the graphs in the figure could reflect a simultaneous increase in the price of good X and decrease in the price of good Y?

Accepted Answer

A) Graph (a) 
B) Graph (b) 
C) Graph (c) 
D) Graph (d) 
A) Graph (a) 
B) Graph (b) 
C) Graph (c) 
D) Graph (d)

Question 9

Figure 21-1  
-Refer to Figure 21-1. If the price of a book is $14, then the consumer's income amounts to

Accepted Answer

A) $276. 
B) $286. 
C) $236. 
D) $266. 
A) $276. 
B) $286. 
C) $236. 
D) $266.

Question 10

A worker with a backward-bending labor supply curve responds to an increase in wages by working more hours.

Accepted Answer

A) True 
 B)False

Question 11

Figure 21-11  
-Refer to Figure 21-11. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, which of the following would cause the consumer to move to point A?

Accepted Answer

A) A decrease in the price of Twizzlers 
B) A decrease in the price of M&M's 
C) An increase in the price of Twizzlers 
D) An increase in the price of M&M's 
A) A decrease in the price of Twizzlers 
B) A decrease in the price of M&M's 
C) An increase in the price of Twizzlers 
D) An increase in the price of M&M's

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

Question 13

A rational person can have a negatively-sloped labor supply curve.

Accepted Answer

A) True 
 B)False

Question 14

A consumer's budget constraint for goods X and Y is determined by how much the consumer likes good X relative to good Y.

Accepted Answer

A) True 
 B)False

Question 15

Figure 21-4  
-Refer to Figure 21-4. Suppose a consumer has $600 in income, the price of pretzels is $2, and the price of lemonade is $3. What is the value of B?

Accepted Answer

A) 200 
B) 300 
C) 500 
D) 50 
A) 200 
B) 300 
C) 500 
D) 50

Question 16

Figure 21-5  
-Refer to Figure 21-5. If the price of good X is $5, and your budget constraint is DE, what is the price of good Y?

Accepted Answer

A) $10 
B) $5 
C) $2.50 
D) $1.67 
A) $10 
B) $5 
C) $2.50 
D) $1.67

Question 17

Alicia is a vegetarian, so she does not eat beef. That is, beef provides no additional utility to Alicia. She loves potatoes, however. If we illustrate Alicia's indifference curves by drawing beef on the horizontal axis and potatoes on the vertical axis, her indifference curves will

Accepted Answer

A) slope downward. 
B) be vertical straight lines. 
C) slope upward. 
D) be horizontal straight lines. 
A) slope downward. 
B) be vertical straight lines. 
C) slope upward. 
D) be horizontal straight lines.

Question 18

What is significant about a point on a graph at which an indifference curve is tangent to a budget constraint?

Accepted Answer

A point of tangency between an

Question 19

Figure 21-14  
-Refer to Figure 21-14. Suppose the price of good X is $8, the price of good Y is $10, and the consumer's income is $360. Then the consumer's optimal choice is represented by a point on which curve?

Accepted Answer

A) I1 
B) I2 
C) I3 
D) I4 
A) I1 
B) I2 
C) I3 
D) I4

Question 20

Figure 21-2
In each case, the budget constraint moves from BCS1U1B11S1U1B0 to BCS1U1B12S1U1B0.
Graph (a)
Graph (b)
Graph (c)
Graph (d)        
-Refer to Figure 21-2. Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods?

Accepted Answer

A) Only graph (a) 
B) Only graph (d) 
C) Graph (b) or graph (c) 
D) None of the graphs in the figure can reflect this. 
A) Only graph (a) 
B) Only graph (d) 
C) Graph (b) or graph (c) 
D) None of the graphs in the figure can reflect this.

Exam 21: The Theory of Consumer Choice

All points on a demand curve are optimal consumption points.

Is it possible for a normal good to be a Giffen good? Briefly explain.

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

A consumer's optimal choice is affected by income, prices of goods, and preferences.

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?

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

Figure 21-3 In each case, the budget constraint moves from BC1 to BC2. ​ Graph (a) Graph (b) Graph (c) Graph (d) -Refer to Figure 21-3. Which of the graphs in the figure could reflect a simultaneous increase in the price of good X and decrease in the price of good Y?

Figure 21-1 -Refer to Figure 21-1. If the price of a book is $14, then the consumer's income amounts to

A worker with a backward-bending labor supply curve responds to an increase in wages by working more hours.

Figure 21-11 -Refer to Figure 21-11. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, which of the following would cause the consumer to move to point A?

All of the following are properties of typical indifference curves except

A rational person can have a negatively-sloped labor supply curve.

A consumer's budget constraint for goods X and Y is determined by how much the consumer likes good X relative to good Y.

Figure 21-4 -Refer to Figure 21-4. Suppose a consumer has $600 in income, the price of pretzels is $2, and the price of lemonade is $3. What is the value of B?

Figure 21-5 -Refer to Figure 21-5. If the price of good X is $5, and your budget constraint is DE, what is the price of good Y?

Alicia is a vegetarian, so she does not eat beef. That is, beef provides no additional utility to Alicia. She loves potatoes, however. If we illustrate Alicia's indifference curves by drawing beef on the horizontal axis and potatoes on the vertical axis, her indifference curves will

What is significant about a point on a graph at which an indifference curve is tangent to a budget constraint?

Figure 21-14 -Refer to Figure 21-14. Suppose the price of good X is $8, the price of good Y is $10, and the consumer's income is $360. Then the consumer's optimal choice is represented by a point on which curve?

Figure 21-2 In each case, the budget constraint moves from BC1 to BC2. Graph (a) Graph (b) Graph (c) Graph (d) -Refer to Figure 21-2. Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods?

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 21-19 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. How much income does Hannah earn when she is young?

Figure 21-3 In each case, the budget constraint moves from BC₁ to BC₂. Graph (a) Graph (b) Graph (c) Graph (d) -Refer to Figure 21-3. Which of the graphs in the figure could reflect a simultaneous increase in the price of good X and decrease in the price of good Y?

Figure 21-2 In each case, the budget constraint moves from BC₁ to BC₂. Graph (a) Graph (b) Graph (c) Graph (d) -Refer to Figure 21-2. Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods?