Question 1

Figure 21-8   ​
​
-Refer to Figure 21-8. As the consumer moves from A to B to C, the marginal rate of substitution

Accepted Answer

A) increases. 
B) decreases. 
C) remains constant. 
D) first increases, then decreases. 
A) increases. 
B) decreases. 
C) remains constant. 
D) first increases, then decreases.

Question 2

The marginal rate of substitution is the slope of the budget constraint.

Accepted Answer

A) True 
 B)False

Question 3

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 to buy

Accepted Answer

A) 15 units of good X and 24 units of good Y. 
B) 20 units of good X and 20 units of good Y. 
C) 30 units of good X and 12 units of good Y. 
D) 40 units of good X and 4 units of good Y. 
A) 15 units of good X and 24 units of good Y. 
B) 20 units of good X and 20 units of good Y. 
C) 30 units of good X and 12 units of good Y. 
D) 40 units of good X and 4 units of good Y.

Question 4

If a consumer purchases more of good X and good Y after her income increases, then neither good X nor good Y is an inferior good for her.

Accepted Answer

A) True 
 B)False

Question 5

A consumer's budget constraint is drawn with the quantity of pizza measured along the horizontal axis and the price of Pepsi measured along the vertical axis. If the market is offering the consumer the trade-off of 3 pints of Pepsi for 1 pizza, then what is the slope of the consumer's budget constraint?

Accepted Answer

A pizza costs three times as m

Question 6

A good is a normal good if the consumer buys less of it when

Accepted Answer

A) his income falls. 
B) the price of the good rises. 
C) the price of a substitute good falls. 
D) his income rises. 
A) his income falls. 
B) the price of the good rises. 
C) the price of a substitute good falls. 
D) his income rises.

Question 7

Figure 21-13  
-Refer to Figure 21-13. When the price of X is $40, the price of Y is $10, and the consumer's income is $80, the consumer's optimal choice is C. Then the price of X decreases to $10. The income effect can be illustrated as the movement from

Accepted Answer

A) C to E. 
B) C to D. 
C) D to E. 
D) E to C. 
A) C to E. 
B) C to D. 
C) D to E. 
D) E to C.

Question 8

Figure 21-15  
-Refer to Figure 21-15. Shemar experiences an increase in his hourly wage. His optimal choice point moves from A to B. For Shemar,

Accepted Answer

A) his labor supply curve is upward sloping. 
B) his labor supply curve is backward bending. 
C) leisure is a normal good. 
D) labor is an inferior good. 
A) his labor supply curve is upward sloping. 
B) his labor supply curve is backward bending. 
C) leisure is a normal good. 
D) labor is an inferior good.

Question 9

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. If Hannah chose to spend $30,000 on consumption when young, then how much could she spend on consumption when old?

Accepted Answer

The interest rate is
 @#IMG-DLM& or 25 p

Question 10

A budget constraint illustrates bundles that a consumer prefers equally, while an indifference curve illustrates bundles that are equally affordable to a consumer.

Accepted Answer

A) True 
 B)False

Question 11

A typical consumer consumes both coffee and donuts. After the consumer's income decreases, the consumer consumes more coffee but fewer donuts than before. For this consumer, donuts are a normal good, but coffee is an inferior good.

Accepted Answer

A) True 
 B)False

Question 12

Giffen goods violate the law of demand.

Accepted Answer

A) True 
 B)False

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. Which of the four labeled points is Hannah's optimum?

Accepted Answer

Point B is

Question 14

A budget constraint illustrates the

Accepted Answer

A) prices that a consumer chooses to pay for products he consumes. 
B) purchases made by consumers. 
C) consumption bundles that a consumer can afford. 
D) consumption bundles that give a consumer equal satisfaction. 
A) prices that a consumer chooses to pay for products he consumes. 
B) purchases made by consumers. 
C) consumption bundles that a consumer can afford. 
D) consumption bundles that give a consumer equal satisfaction.

Question 15

At a consumer's optimal choice, the consumer chooses the combination of goods such that the ratio of the marginal utilities equals the ratio of the prices.

Accepted Answer

A) True 
 B)False

Question 16

Figure 21-8   ​
​
-Refer to Figure 21-8. As the consumer moves from A to B to C, the consumer's total utility

Accepted Answer

A) increases. 
B) decreases. 
C) remains constant. 
D) first increases, then decreases. 
A) increases. 
B) decreases. 
C) remains constant. 
D) first increases, then decreases.

Question 17

Scenario 21-1
Suppose the price of nachos is $12, the price of water is $3, and the consumer's income is $216. In addition, suppose the consumer's budget constraint illustrates nachos on the horizontal axis and water on the vertical axis.
-Refer to Scenario 21-1. If the consumer's income rises to $288, then the budget line for nachos and water would

Accepted Answer

A) now intersect the horizontal axis at 24 orders of nachos and the vertical axis at 96 waters. 
B) not change. 
C) now intersect the horizontal axis at 17 orders of nachos and the vertical axis at 67 waters. 
D) rotate outward along the water axis. 
A) now intersect the horizontal axis at 24 orders of nachos and the vertical axis at 96 waters. 
B) not change. 
C) now intersect the horizontal axis at 17 orders of nachos and the vertical axis at 67 waters. 
D) rotate outward along the water axis.

Question 18

The theory of consumer choice is representative of how consumers make decisions but is not intended to be a literal account of the process.

Accepted Answer

A) True 
 B)False

Question 19

Using our model of consumer choice, is it possible for a consumer to buy less of a particular good when his income rises? Briefly explain.

Accepted Answer

Yes, an increase in

Question 20

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

Accepted Answer

A) prefers bundle E because it contains more scones. 
B) prefers bundle B because it lies on a higher indifference curve. 
C) prefers bundle B because it contains more scones. 
D) is indifferent between the two bundles. 
A) prefers bundle E because it contains more scones. 
B) prefers bundle B because it lies on a higher indifference curve. 
C) prefers bundle B because it contains more scones. 
D) is indifferent between the two bundles.

Exam 21: The Theory of Consumer Choice

Figure 21-8 ​ ​ -Refer to Figure 21-8. As the consumer moves from A to B to C, the marginal rate of substitution

The marginal rate of substitution is the slope of the 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 to buy

If a consumer purchases more of good X and good Y after her income increases, then neither good X nor good Y is an inferior good for her.

A good is a normal good if the consumer buys less of it when

Figure 21-13 -Refer to Figure 21-13. When the price of X is $40, the price of Y is $10, and the consumer's income is $80, the consumer's optimal choice is C. Then the price of X decreases to $10. The income effect can be illustrated as the movement from

Figure 21-15 -Refer to Figure 21-15. Shemar experiences an increase in his hourly wage. His optimal choice point moves from A to B. For Shemar,

A budget constraint illustrates bundles that a consumer prefers equally, while an indifference curve illustrates bundles that are equally affordable to a consumer.

A typical consumer consumes both coffee and donuts. After the consumer's income decreases, the consumer consumes more coffee but fewer donuts than before. For this consumer, donuts are a normal good, but coffee is an inferior good.

Giffen goods violate the law of demand.

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. Which of the four labeled points is Hannah's optimum?

A budget constraint illustrates the

At a consumer's optimal choice, the consumer chooses the combination of goods such that the ratio of the marginal utilities equals the ratio of the prices.

Figure 21-8 ​ ​ -Refer to Figure 21-8. As the consumer moves from A to B to C, the consumer's total utility

The theory of consumer choice is representative of how consumers make decisions but is not intended to be a literal account of the process.

Using our model of consumer choice, is it possible for a consumer to buy less of a particular good when his income rises? Briefly explain.

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

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 21-8 -Refer to Figure 21-8. As the consumer moves from A to B to C, the marginal rate of substitution

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. Which of the four labeled points is Hannah's optimum?

Figure 21-8 -Refer to Figure 21-8. As the consumer moves from A to B to C, the consumer's total utility

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