Exam 21: The Theory of Consumer Choice

Figure 21-18 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. ​ -Refer to Figure 21-18. Suppose Kevin is optimally purchasing 12 shirts and 28 sweaters, and he is spending $648 on shirts. What is the price of a sweater?

Figure 21-6 -Refer to Figure 21-6. If the price of good Y is $5, what is the price of good X?

Tyler consumes two goods, wheat and steak. When the price of steak rises, he consumes less steak. When the price of wheat rises, he consumes more wheat. For Tyler,

A family on a trip budgets $800 for meals and hotel accommodations. Suppose the price of a meal is $40. In addition, suppose the family could afford a total of eight nights in a hotel if they don't buy any meals. How many meals could the family afford if they gave up two nights in the hotel?

Figure 21-11 -Refer to Figure 21-11. Assume that the consumer depicted in the figure has an income of $10. The price of Twizzlers is $1 and the price of M&M's is $2. The consumer's optimal choice is point

When a consumer is purchasing the best combination of two goods, X and Y, subject to a budget constraint, we say that the consumer is at an optimal choice point. A graph of an optimal choice point shows that it occurs

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

Figure 21-12 -Refer to Figure 21-12. Suppose that a consumer is originally at point R. Then the price of good X decreases. Which of the following represents the substitution effect of the price decrease?

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 an increase in income?

Table 21-3 ​ Ethan consumes two goods, milk and pretzels. Milk costs $2 per glass, and he consumes it to the point where the marginal utility he receives from his last glass of milk is 6. Pretzels cost $4 per bag. The relationship between the marginal utility Ethan gets from eating a bag of pretzels and the number of bags he eats per month is as follows: ​ Bags of Pretzels Marginal Utility 1 30 2 20 3 12 4 6 5 2 6 0 ​ ​ -Refer to Table 21-3. If Ethan is maximizing his utility, how many bags of pretzels does he buy each month?

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. From the figure we can determine how much income Hannah earns when young and we can determine the interest rate. Could the interest rate rise to a level at which Hannah could afford to be at point D?

Figure 21-9 ​ Graph (a) Graph (b) Graph (c) ​ -Refer to Figure 21-9. Which of the graphs illustrates indifference curves for which the marginal rate of substitution varies?

Consumer will always consume more of a good if their income increases.

"Left" gloves and "right" gloves provide a good example of

If a good is a Giffen good, then

​Suppose an individual knows that the marginal utility he receives from the next apple is 5 and that the price of an apple is $2. He also knows that the marginal utility he receives from the next orange is 3 and the price of an orange is $1. If the individual is choosing optimally, the next good he will buy is

Liana consumes only beer and chips. Her indifference curves are all bowed inward. Consider the bundles (2,6), (4,4), and (6,2). If Liana is indifferent between (2,6) and (6,2), then Liana must

A consumer's budget constraint is drawn on a graph with the number of sandwiches measured along the horizontal axis and the number of bowls of soup measured along the vertical axis. Hold the consumer's income and the price of a sandwich fixed, and increase the price of a bowl of soup. Describe the effect on the budget constraint.

Figure 21-7 The following graph shows three possible indifference curves (I) for a consumer. ​ -Refer to Figure 21-7. When comparing bundle A to bundle C, the consumer

Figure 21-12 -Refer to Figure 21-12. Suppose that a consumer is originally at point R. Then the price of good X decreases. Which of the following represents the income effect of the price decrease?