Question 1

Graph 22-4  
-Refer to Graph 22-4.A person who chooses to consume bundle C rather than bundle A is likely to:

Accepted Answer

A) place a higher relative value on croissants than on coffee 
B) place a higher relative value on coffee than on croissants 
C) gain more satisfaction from bundle C than bundle A 
D) gain more satisfaction from bundle B than bundle A 
A) place a higher relative value on croissants than on coffee 
B) place a higher relative value on coffee than on croissants 
C) gain more satisfaction from bundle C than bundle A 
D) gain more satisfaction from bundle B than bundle A A

Question 2

The substitution effect is the change in consumption that results when a price change moves the consumer along the same indifference curve.

Accepted Answer

A) True 
 B)False  True

Question 3

Amy buys sushi and miso for lunch.Her weekly budget for lunch is $48.If the price of sushi is $1.50 a piece and the price of miso is $1.20 a cup, then during the week Amy could choose to consume:

Accepted Answer

A) 48 sushi pieces and 20 cups of miso 
B) 25 sushi pieces and 10 cups of miso 
C) 20 sushi pieces and 15 cups of miso 
D) 12 sushi pieces and 26 cups of miso 
A) 48 sushi pieces and 20 cups of miso 
B) 25 sushi pieces and 10 cups of miso 
C) 20 sushi pieces and 15 cups of miso 
D) 12 sushi pieces and 26 cups of miso C

Question 4

Consider the following graphs depicting budget constraints, then answer the questions below.   
a.Which panel shows an increase in the price of X?
b.Does panel C show an increase or decrease in the price of good Y?
c.Which panel shows an increase in the consumers income, if prices remain unchanged?
d.Which panel - if any - shows an equally propionate decrease in the price of both goods?

Accepted Answer

a.panel A
b.increase

Question 5

A consumer who chooses to consume at a point inside her budget constraint will have to borrow money to pay for her consumption.

Accepted Answer

A) True 
 B)False

Question 6

Photographic negative film has to be developed by using chemicals in precise, fixed proportions.This means that film and developing chemicals are:

Accepted Answer

A) perfect complements 
B) Giffen goods 
C) perfect substitutes 
D) obsolete because everyone uses digital cameras 
A) perfect complements 
B) Giffen goods 
C) perfect substitutes 
D) obsolete because everyone uses digital cameras

Question 7

An increase in income will cause the budget constraint to shift outward and will allow the consumer to be able to choose between two possible optimum choices.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not a property of indifference curves?
(i) indifference curves do not cross
(ii) indifference curves are bowed inward toward the origin
(iii) lower indifference curves are preferable to higher indifference curves

Accepted Answer

A) (i) only 
B) (i) and (ii) 
C) (i) and (iii) 
D) (ii) and (iii) 
A) (i) only 
B) (i) and (ii) 
C) (i) and (iii) 
D) (ii) and (iii)

Question 9

Graph 22-9  
-Refer to Graph 22-9.Assume that the consumer depicted in the graph has an income of $80.If the price of marshmallows is $4, the optimising consumer would choose to purchase:

Accepted Answer

A) five marshmallows and five chocolate chips 
B) 10 marshmallows and 10 chocolate chips 
C) nine marshmallows and six chocolate chips 
D) three marshmallows and nine chocolate chips 
A) five marshmallows and five chocolate chips 
B) 10 marshmallows and 10 chocolate chips 
C) nine marshmallows and six chocolate chips 
D) three marshmallows and nine chocolate chips

Question 10

Graph 22-1  
-Refer to Graph 22-1.A consumer who chooses to spend all of her income will be at point(s):

Accepted Answer

A) C 
B) E 
C) C or E 
D) A, B or C 
A) C 
B) E 
C) C or E 
D) A, B or C

Question 11

The law of demand may be violated:

Accepted Answer

A) often in the case of many food products 
B) only when goods are Giffen goods 
C) typically when the good has a high price elasticity 
D) in all of the above cases 
A) often in the case of many food products 
B) only when goods are Giffen goods 
C) typically when the good has a high price elasticity 
D) in all of the above cases

Question 12

When a consumer experiences a change in price, what two effects do economists consider?

Accepted Answer

A) the preference effect and the budget effect 
B) the income effect and the substitution effect 
C) the price effect and the preference effect 
D) the complement effect and the substitute effect 
A) the preference effect and the budget effect 
B) the income effect and the substitution effect 
C) the price effect and the preference effect 
D) the complement effect and the substitute effect

Question 13

If an indifference curve is bowed in toward the origin, the marginal rate of substitution is:

Accepted Answer

A) different for each bundle along the indifference curve 
B) likely to be constant for all bundles along the indifference curve 
C) likely to be identical to the price ratio for each bundle along the indifference curve 
D) not likely to reflect relative value of goods 
A) different for each bundle along the indifference curve 
B) likely to be constant for all bundles along the indifference curve 
C) likely to be identical to the price ratio for each bundle along the indifference curve 
D) not likely to reflect relative value of goods

Question 14

A consumer's set of indifference curves provides a:

Accepted Answer

A) complete ranking of all possible consumption bundles 
B) ranking of the set of bundles that happen to fall on indifference curves 
C) framework for evaluating market equilibriums 
D) relative ranking of bundles that provide more of all goods 
A) complete ranking of all possible consumption bundles 
B) ranking of the set of bundles that happen to fall on indifference curves 
C) framework for evaluating market equilibriums 
D) relative ranking of bundles that provide more of all goods

Question 15

If demand for a good falls as income rises, this is known as a:

Accepted Answer

A) normal good 
B) inferior good 
C) Giffen good 
D) the law of demand 
A) normal good 
B) inferior good 
C) Giffen good 
D) the law of demand

Question 16

Indifference curves provide a way to graphically represent:

Accepted Answer

A) the constraints faced by individuals 
B) an individual's preferences 
C) the relative price of commodities 
D) an income level sufficient to make an individual happy 
A) the constraints faced by individuals 
B) an individual's preferences 
C) the relative price of commodities 
D) an income level sufficient to make an individual happy

Question 17

When a budget constraint shifts out:
(i) the consumer is better off
(ii) the consumer can now reach a higher indifference curve
(iii) it could only have been caused by an increase in income

Accepted Answer

A) (i) only 
B) (i) and (ii) 
C) (i) and (iii) 
D) (ii) and (iii) 
A) (i) only 
B) (i) and (ii) 
C) (i) and (iii) 
D) (ii) and (iii)

Question 18

As long as a consumer is on the same indifference curve:

Accepted Answer

A) her preferences will not affect the marginal rate of substitution 
B) she is unable to decide which bundle of goods to choose 
C) she is indifferent among the points on that indifference curve 
D) she is indifferent to all points which lie on any other indifference curves 
A) her preferences will not affect the marginal rate of substitution 
B) she is unable to decide which bundle of goods to choose 
C) she is indifferent among the points on that indifference curve 
D) she is indifferent to all points which lie on any other indifference curves

Question 19

Graph 22-2  
-Refer to Graph 22-2.Which of the graphs shown reflects an increase in income?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 20

Which of the following statements is correct? For a good to be a Giffen good we must have:
(i) the substitution effect larger than the income effect
(ii) the income effect larger than the substitution effect
(iii) the good as an inferior good

Accepted Answer

A) (i) only 
B) (ii) only 
C) (i) and (iii) only 
D) (ii) and (iii) only 
A) (i) only 
B) (ii) only 
C) (i) and (iii) only 
D) (ii) and (iii) only

Exam 22: The Theory of Consumer Choice

Graph 22-4 -Refer to Graph 22-4.A person who chooses to consume bundle C rather than bundle A is likely to:

The substitution effect is the change in consumption that results when a price change moves the consumer along the same indifference curve.

Amy buys sushi and miso for lunch.Her weekly budget for lunch is $48.If the price of sushi is $1.50 a piece and the price of miso is $1.20 a cup, then during the week Amy could choose to consume:

A consumer who chooses to consume at a point inside her budget constraint will have to borrow money to pay for her consumption.

Photographic negative film has to be developed by using chemicals in precise, fixed proportions.This means that film and developing chemicals are:

An increase in income will cause the budget constraint to shift outward and will allow the consumer to be able to choose between two possible optimum choices.

Which of the following is not a property of indifference curves? (i) indifference curves do not cross (ii) indifference curves are bowed inward toward the origin (iii) lower indifference curves are preferable to higher indifference curves

Graph 22-9 -Refer to Graph 22-9.Assume that the consumer depicted in the graph has an income of $80.If the price of marshmallows is $4, the optimising consumer would choose to purchase:

Graph 22-1 -Refer to Graph 22-1.A consumer who chooses to spend all of her income will be at point(s):

The law of demand may be violated:

When a consumer experiences a change in price, what two effects do economists consider?

If an indifference curve is bowed in toward the origin, the marginal rate of substitution is:

A consumer's set of indifference curves provides a:

If demand for a good falls as income rises, this is known as a:

Indifference curves provide a way to graphically represent:

When a budget constraint shifts out: (i) the consumer is better off (ii) the consumer can now reach a higher indifference curve (iii) it could only have been caused by an increase in income

As long as a consumer is on the same indifference curve:

Graph 22-2 -Refer to Graph 22-2.Which of the graphs shown reflects an increase in income?

Which of the following statements is correct? For a good to be a Giffen good we must have: (i) the substitution effect larger than the income effect (ii) the income effect larger than the substitution effect (iii) the good as an inferior good

Ten Lessons From 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

Application: 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

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

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 Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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