Question 1

A consumer consumes two normal goods, popcorn and Pepsi. The price of Pepsi rises. The substitution effect, by itself, suggests that the consumer will consume

Accepted Answer

A) more popcorn and more Pepsi. 
B) less popcorn and less Pepsi. 
C) more popcorn and less Pepsi. 
D) less popcorn and more Pepsi. 
A) more popcorn and more Pepsi. 
B) less popcorn and less Pepsi. 
C) more popcorn and less Pepsi. 
D) less popcorn and more Pepsi.

Question 2

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

Accepted Answer

In response to a hig

Question 3

Teresa faces prices of $6.00 for a unit of good X and $1.50 for a unit of good Y. At her optimum, Teresa is willing to give up 1 unit of good X for __________ units of good Y.

Accepted Answer

The answer of Teresa faces prices of $6.00 for a...

Question 4

The indifference curves for perfect substitutes are straight lines.

Accepted Answer

A) True 
 B)False

Question 5

The substitution effect of a price change is the change in consumption that results from the movement to a new indifference curve.

Accepted Answer

A) True 
 B)False

Question 6

If a consumer purchases more of good B when his income rises, good B is an inferior good.

Accepted Answer

A) True 
 B)False

Question 7

Figure 21-16
The following figure illustrates the preferences of a representative consumer, Nathaniel.  
-Refer to Figure 21-16. A change in Nathaniel's optimum from point A to point B results from

Accepted Answer

A) a change in Nathaniel's preferences. 
B) an increase in the income Nathaniel receives when he is young. 
C) an increase in the interest rate. 
D) a decrease in the interest rate. 
A) a change in Nathaniel's preferences. 
B) an increase in the income Nathaniel receives when he is young. 
C) an increase in the interest rate. 
D) a decrease in the interest rate.

Question 8

Indifference curves illustrate

Accepted Answer

A) a firm's profits. 
B) a consumer's budget. 
C) a consumer's preferences. 
D) the prices of two goods. 
A) a firm's profits. 
B) a consumer's budget. 
C) a consumer's preferences. 
D) the prices of two goods.

Question 9

Suppose a consumer is currently spending all of her available income on two goods: music CDs and DVDs. If the price of a CD is $9, the price of a DVD is $18, and she is currently consuming 10 CDs and 5 DVDs, what is the consumer's income?

Accepted Answer

A) $90 
B) $180 
C) $270 
D) $360 
A) $90 
B) $180 
C) $270 
D) $360

Question 10

For a typical consumer, most indifference curves are downward sloping.

Accepted Answer

A) True 
 B)False

Question 11

Suppose Jamie can choose between consuming two goods. If we observe that Jamie's budget constraint has moved outward, then we know for certain that

Accepted Answer

A) her income must have increased. 
B) she will be indifferent between the two goods. 
C) the price of one or both of the goods must have decreased. 
D) she can reach a higher indifference curve. 
A) her income must have increased. 
B) she will be indifferent between the two goods. 
C) the price of one or both of the goods must have decreased. 
D) she can reach a higher indifference curve.

Question 12

Figure 21-6  
-Refer to Figure 21-6. 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 13

Figure 21-17
The graph shows two budget constraints for a consumer.
​
   ​
-Refer to Figure 21-17. Suppose Budget Constraint B applies. If the consumer's income is $90 and if he is buying 5 light bulbs, then how much money is he spending on hamburgers?

Accepted Answer

If income is $90, then the price of a li

Question 14

The indifference curves for left shoes and right shoes are right angles.

Accepted Answer

A) True 
 B)False

Question 15

Assume that a consumer's indifference curve is bowed inward and negatively sloped. As the consumer moves from left to right along the horizontal axis, the consumer's 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 16

Figure 21-1  
-Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Accepted Answer

A) B. 
B) A. 
C) B and A. 
D) B, D, C, and A. 
A) B. 
B) A. 
C) B and A. 
D) B, D, C, and A.

Question 17

Figure 21-17
The graph shows two budget constraints for a consumer.
​
   ​
-Refer to Figure 21-17. What particular change would result in a rotation of the budget constraint from Budget Constraint A to Budget Constraint B?

Accepted Answer

A decrease in the pr

Question 18

Assume that a person consumes two goods, Coke and Snickers. Use a graph to demonstrate how the consumer adjusts his/her optimal consumption bundle when the price of Coke decreases. Carefully label all curves and axes. What will happen to consumption if Coke is a normal good? What will happen to consumption if Coke is an inferior good? (Remember to explain the possible change when the income effect dominates and when the substitution effect dominates.)

Accepted Answer

@#IMG-DLM& ​
If Coke is a normal good, the consump

Question 19

The income effect of a price change is unaffected by whether the good is a normal or inferior good.

Accepted Answer

A) True 
 B)False

Question 20

Figure 21-1  
-Refer to Figure 21-1. If the consumer's income is $285, then what is the price of a book?

Accepted Answer

A) $16 
B) $13 
C) $15 
D) $18 
A) $16 
B) $13 
C) $15 
D) $18

Exam 21: The Theory of Consumer Choice

A consumer consumes two normal goods, popcorn and Pepsi. The price of Pepsi rises. The substitution effect, by itself, suggests that the consumer will consume

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

Teresa faces prices of $6.00 for a unit of good X and $1.50 for a unit of good Y. At her optimum, Teresa is willing to give up 1 unit of good X for __________ units of good Y.

The indifference curves for perfect substitutes are straight lines.

The substitution effect of a price change is the change in consumption that results from the movement to a new indifference curve.

If a consumer purchases more of good B when his income rises, good B is an inferior good.

Figure 21-16 The following figure illustrates the preferences of a representative consumer, Nathaniel. -Refer to Figure 21-16. A change in Nathaniel's optimum from point A to point B results from

Indifference curves illustrate

Suppose a consumer is currently spending all of her available income on two goods: music CDs and DVDs. If the price of a CD is $9, the price of a DVD is $18, and she is currently consuming 10 CDs and 5 DVDs, what is the consumer's income?

For a typical consumer, most indifference curves are downward sloping.

Suppose Jamie can choose between consuming two goods. If we observe that Jamie's budget constraint has moved outward, then we know for certain that

Figure 21-6 -Refer to Figure 21-6. If the price of good X is $15, what is the price of good Y?

Figure 21-17 The graph shows two budget constraints for a consumer. ​ ​ -Refer to Figure 21-17. Suppose Budget Constraint B applies. If the consumer's income is $90 and if he is buying 5 light bulbs, then how much money is he spending on hamburgers?

The indifference curves for left shoes and right shoes are right angles.

Assume that a consumer's indifference curve is bowed inward and negatively sloped. As the consumer moves from left to right along the horizontal axis, the consumer's marginal rate of substitution

Figure 21-1 -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Figure 21-17 The graph shows two budget constraints for a consumer. ​ ​ -Refer to Figure 21-17. What particular change would result in a rotation of the budget constraint from Budget Constraint A to Budget Constraint B?

The income effect of a price change is unaffected by whether the good is a normal or inferior good.

Figure 21-1 -Refer to Figure 21-1. If the consumer's income is $285, then what is the price of a book?

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 Budget Constraint B applies. If the consumer's income is $90 and if he is buying 5 light bulbs, then how much money is he spending on hamburgers?

Figure 21-17 The graph shows two budget constraints for a consumer. -Refer to Figure 21-17. What particular change would result in a rotation of the budget constraint from Budget Constraint A to Budget Constraint B?