Question 1

If consumers purchase more of a good when their income rises, the good is a normal good.

Accepted Answer

A) True 
 B)False

Question 2

The marginal rate of substitution is the slope of the indifference curve.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

In response to a wag

Question 4

A typical indifference curve is upward sloping.

Accepted Answer

A) True 
 B)False

Question 5

For Meg, the substitution effect of an interest-rate increase is stronger than the income effect. In response to a higher interest rate, will Meg save more or will she save less?

Accepted Answer

In response to a hig

Question 6

On a graph we draw a consumer's budget constraint, measuring the number of pineapples on the horizontal axis and the number of pencils on the vertical axis. If the slope of the budget constraint is -6, then

Accepted Answer

A) a pencil costs six times as much as a pineapple. 
B) the opportunity cost of a pineapple is one-sixth of a pencil. 
C) the opportunity cost of a pencil is six pineapples. 
D) a pineapple costs six times as much as a pencil. 
A) a pencil costs six times as much as a pineapple. 
B) the opportunity cost of a pineapple is one-sixth of a pencil. 
C) the opportunity cost of a pencil is six pineapples. 
D) a pineapple costs six times as much as a pencil.

Question 7

Figure 21-6  
-Refer to Figure 21-6. If the consumer has $600 in income, what is the price of good Y?

Accepted Answer

A) $20 
B) $6 
C) $3 
D) $0.33 
A) $20 
B) $6 
C) $3 
D) $0.33

Question 8

Suppose Joshua has budgeted $300 of his monthly income toward two goods: t-shirts and jeans. If the price of a pair of jeans is $60 and last month he spent his $300 on a bundle containing 2 pairs of jeans and 12 t-shirts, which of the following is another point on Joshua's budget line?

Accepted Answer

A) 3 pairs of jeans and 10 t-shirts 
B) 1 pair of jeans and 18 t-shirts 
C) 0 pairs of jeans and 24 t-shirts 
D) 4 pairs of jeans and 4 t-shirts 
A) 3 pairs of jeans and 10 t-shirts 
B) 1 pair of jeans and 18 t-shirts 
C) 0 pairs of jeans and 24 t-shirts 
D) 4 pairs of jeans and 4 t-shirts

Question 9

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 10

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 to the interior of 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) 160 beers and 0 bratwursts 
A) 160 beers and 200 bratwursts 
B) 40 beers and 50 bratwursts 
C) 80 beers and 100 bratwursts 
D) 160 beers and 0 bratwursts

Question 11

Suppose William can choose between the consumption of two goods. If we observe that William's budget constraint has moved inward, then we know for certain that

Accepted Answer

A) his income must have decreased. 
B) he will be indifferent between the two goods. 
C) the price of one or both of the goods must have increased. 
D) his utility will decrease. 
A) his income must have decreased. 
B) he will be indifferent between the two goods. 
C) the price of one or both of the goods must have increased. 
D) his utility will decrease.

Question 12

Figure 21-17
The graph shows two budget constraints for a consumer.
​
   ​
-Refer to Figure 21-17. Suppose the consumer's income is $90 and Budget Constraint A applies. What is the price of a light bulb?

Accepted Answer

The price

Question 13

When the price of a normal good increases,

Accepted Answer

A) both the income and substitution effects encourage the consumer to purchase more of the good. 
B) both the income and substitution effects encourage the consumer to purchase less of the good. 
C) the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good. 
D) the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good. 
A) both the income and substitution effects encourage the consumer to purchase more of the good. 
B) both the income and substitution effects encourage the consumer to purchase less of the good. 
C) the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good. 
D) the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good.

Question 14

Table 21-2
A consumer likes two goods: pizza and beer. The five bundles shown in the following table lie on the same indifference curve for the consumer.
​
 $$\begin{array} { | c | c | c | } 
\hline \text { Bundle } & \text { Pizza } & \text { Beer } \
\hline \text { A } & 6 & 9 \
\hline \text { B } & 6 & 7 \
\hline \text { C } & 6 & 5 \
\hline \text { D } & 9 & 5 \
\hline \text { E } & 10 & 5 \
\hline
\end{array}$$
-Suppose that Akiko likes to consume one glass of chocolate milk with every three peanut butter cookies. For Akiko, an additional cookie has no value unless she can consume it with the appropriate proportion of chocolate milk. Akiko's indifference curves for chocolate milk and cookies are

Accepted Answer

A) right angles. 
B) bowed inward, but not to a 90-degree angle. 
C) bowed outward. 
D) downward-sloping straight lines. 
A) right angles. 
B) bowed inward, but not to a 90-degree angle. 
C) bowed outward. 
D) downward-sloping straight lines.

Question 15

Table 21-2
A consumer likes two goods: pizza and beer. The five bundles shown in the following table lie on the same indifference curve for the consumer.
​
 $$\begin{array} { | c | c | c | } 
\hline \text { Bundle } & \text { Pizza } & \text { Beer } \
\hline \text { A } & 6 & 9 \
\hline \text { B } & 6 & 7 \
\hline \text { C } & 6 & 5 \
\hline \text { D } & 9 & 5 \
\hline \text { E } & 10 & 5 \
\hline
\end{array}$$
-Refer to Table 21-2. Which of the following statements regarding these bundles is correct?

Accepted Answer

A) The goods are perfect substitutes for this consumer. 
B) The goods are perfect complements for this consumer. 
C) These bundles illustrate the property that indifference curves are bowed inward, but not to a 90-degree angle. 
D) These bundles violate the property that indifference curves do not cross. 
A) The goods are perfect substitutes for this consumer. 
B) The goods are perfect complements for this consumer. 
C) These bundles illustrate the property that indifference curves are bowed inward, but not to a 90-degree angle. 
D) These bundles violate the property that indifference curves do not cross.

Question 16

The indifference curves for perfect substitutes are right angles.

Accepted Answer

A) True 
 B)False

Question 17

Suppose at the consumer's current consumption bundle the marginal rate of substitution of cheese for wine is 1/2 bottle of wine per pound of cheese. The price of one pound of cheese is $6, and the price of a bottle of wine is $10. The consumer should increase his consumption of

Accepted Answer

A) cheese, decrease his consumption of wine, and move to a lower indifference curve. 
B) cheese, decrease his consumption of wine, and move to a higher indifference curve. 
C) wine, decrease consumption of cheese, and move to a higher indifference curve. 
D) cheese, decrease consumption of wine, and remain on the same indifference curve. 
A) cheese, decrease his consumption of wine, and move to a lower indifference curve. 
B) cheese, decrease his consumption of wine, and move to a higher indifference curve. 
C) wine, decrease consumption of cheese, and move to a higher indifference curve. 
D) cheese, decrease consumption of wine, and remain on the same indifference curve.

Question 18

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 reflects an increase in the price of good X only?

Accepted Answer

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

Question 19

Figure 21-9
​
Graph (a)
Graph (b)
Graph (c)       ​
-Refer to Figure 21-9. Which of the following statements is correct?

Accepted Answer

A) The indifference curves represented in graph (a) are perfect complements. 
B) The indifference curves represented in graph (b) are perfect substitutes. 
C) The indifference curves represented in graph (c) are neither perfect substitutes not perfect complements. 
D) The indifference curves represented in graph (c) are perfect complements. 
A) The indifference curves represented in graph (a) are perfect complements. 
B) The indifference curves represented in graph (b) are perfect substitutes. 
C) The indifference curves represented in graph (c) are neither perfect substitutes not perfect complements. 
D) The indifference curves represented in graph (c) are perfect complements.

Question 20

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

Accepted Answer

A) True 
 B)False

Exam 21: The Theory of Consumer Choice

If consumers purchase more of a good when their income rises, the good is a normal good.

The marginal rate of substitution is the slope of the indifference curve.

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

A typical indifference curve is upward sloping.

For Meg, the substitution effect of an interest-rate increase is stronger than the income effect. In response to a higher interest rate, will Meg save more or will she save less?

On a graph we draw a consumer's budget constraint, measuring the number of pineapples on the horizontal axis and the number of pencils on the vertical axis. If the slope of the budget constraint is -6, then

Figure 21-6 -Refer to Figure 21-6. If the consumer has $600 in income, what is the price of good Y?

Suppose Joshua has budgeted $300 of his monthly income toward two goods: t-shirts and jeans. If the price of a pair of jeans is $60 and last month he spent his $300 on a bundle containing 2 pairs of jeans and 12 t-shirts, which of the following is another point on Joshua's budget line?

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.

Suppose William can choose between the consumption of two goods. If we observe that William's budget constraint has moved inward, then we know for certain that

Figure 21-17 The graph shows two budget constraints for a consumer. ​ ​ -Refer to Figure 21-17. Suppose the consumer's income is $90 and Budget Constraint A applies. What is the price of a light bulb?

When the price of a normal good increases,

Table 21-2 A consumer likes two goods: pizza and beer. The five bundles shown in the following table lie on the same indifference curve for the consumer. ​ Bundle Pizza Beer A 6 9 B 6 7 C 6 5 D 9 5 E 10 5 -Refer to Table 21-2. Which of the following statements regarding these bundles is correct?

The indifference curves for perfect substitutes are right angles.

Suppose at the consumer's current consumption bundle the marginal rate of substitution of cheese for wine is 1/2 bottle of wine per pound of cheese. The price of one pound of cheese is $6, and the price of a bottle of wine is $10. The consumer should increase his consumption of

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 reflects an increase in the price of good X only?

Figure 21-9 ​ Graph (a) Graph (b) Graph (c) ​ -Refer to Figure 21-9. Which of the following statements is correct?

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

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 21-17 The graph shows two budget constraints for a consumer. -Refer to Figure 21-17. Suppose the consumer's income is $90 and Budget Constraint A applies. What is the price of a light bulb?

Table 21-2 A consumer likes two goods: pizza and beer. The five bundles shown in the following table lie on the same indifference curve for the consumer. Bundle Pizza Beer A 6 9 B 6 7 C 6 5 D 9 5 E 10 5 -Refer to Table 21-2. Which of the following statements regarding these bundles is correct?

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 reflects an increase in the price of good X only?

Figure 21-9 Graph (a) Graph (b) Graph (c) -Refer to Figure 21-9. Which of the following statements is correct?