Question 1

Graph 22-4  
-Refer to Graph 22-4.Based on this graph, which of the following statements is correct?

Accepted Answer

A) point A is valued more than point B 
B) point B is valued the same as point E 
C) the bundle associated with point D contains more croissants than that associated with point 
D) the bundles along indifference curve I1 are preferred to those along indifference curve I2 
A) point A is valued more than point B 
B) point B is valued the same as point E 
C) the bundle associated with point D contains more croissants than that associated with point 
D) the bundles along indifference curve I1 are preferred to those along indifference curve I2

Question 2

It is plausible for the labour supply curve to slope either upwards or downwards.

Accepted Answer

A) True 
 B)False

Question 3

Graph 22-8  
-Refer to Graph 22-8.If the consumer is currently at point B on the graph shown, a change to point C as a result of a decrease in the price of potato chips would show the:

Accepted Answer

A) price effect 
B) budget effect 
C) substitution effect 
D) income effect 
A) price effect 
B) budget effect 
C) substitution effect 
D) income effect

Question 4

A budget constraint:

Accepted Answer

A) represents the bundles of consumption that makes a consumer equally happy 
B) shows the consumption bundles that a consumer can afford 
C) reflects the desire by consumers to increase their income 
D) shows the prices that a consumer chooses to pay for products he consumes 
A) represents the bundles of consumption that makes a consumer equally happy 
B) shows the consumption bundles that a consumer can afford 
C) reflects the desire by consumers to increase their income 
D) shows the prices that a consumer chooses to pay for products he consumes

Question 5

If a good is a perfect substitute, then the MRS will be constant no matter how much of any one good the consumer possesses.

Accepted Answer

A) True 
 B)False

Question 6

If the marginal rate of substitution of pepsi for pizza is six litres of pepsi for one pizza slice, and the price of pepsi is $1 per litre and the price of pizza is $3 per slice, then this consumer should:

Accepted Answer

A) trade pepsi for pizza and end up on a higher indifference curve 
B) trade pizza for pepsi and end up on a higher indifference curve 
C) do nothing as they are already maximizing utility 
D) we cannot say without more information 
A) trade pepsi for pizza and end up on a higher indifference curve 
B) trade pizza for pepsi and end up on a higher indifference curve 
C) do nothing as they are already maximizing utility 
D) we cannot say without more information

Question 7

Graph 22-9  
-Refer to Graph 22-9.Assume that the consumer depicted in the graph has an income of $20.Using the information above, which of the following price-quantity combinations would be on her demand curve for marshmallows if the price of chocolate chips is $2?

Accepted Answer

A) $1, eight 
B) $1, 14 
C) $2, seven 
D) $2, three 
A) $1, eight 
B) $1, 14 
C) $2, seven 
D) $2, three

Question 8

Which of the following is a property of indifference curves?

Accepted Answer

A) indifference curves have positive slopes 
B) indifference curves that cross are helpful in explaining differences in consumption choices 
C) indifference curves are bowed in toward the origin 
D) indifference curves are always linear and downward-sloping 
A) indifference curves have positive slopes 
B) indifference curves that cross are helpful in explaining differences in consumption choices 
C) indifference curves are bowed in toward the origin 
D) indifference curves are always linear and downward-sloping

Question 9

Graph 22-3  
-Refer to Graph 22-3.Using the figure in panel (a), what is ratio of the price of X to the price of Y (i.e.PX/PY)?

Accepted Answer

A) 50/1 
B) 5/1 
C) 1/5 
D) 1/50 
A) 50/1 
B) 5/1 
C) 1/5 
D) 1/50

Question 10

Graph 22-9  
-Refer to Graph 22-9.Assume that the consumer depicted in the graph has an income of $50, and the price of marshmallows is $2.50, and the price of chocolate chips is $5.The optimising consumer will choose to purchase which bundle of marshmallows and chocolate chips?

Accepted Answer

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

Question 11

Graph 22-5  
-Refer to Graph 22-5.Which of the graphs shown represent(s) indifference curves for perfect complements?

Accepted Answer

A) panel a 
B) panel b 
C) panel c 
D) all of the above 
A) panel a 
B) panel b 
C) panel c 
D) all of the above

Question 12

Indifference curves can:

Accepted Answer

A) cross, but only if one good is a Giffen good 
B) cross, but only if one good is an inferior good 
C) cross, but only if both goods are inferior goods 
D) can never cross 
A) cross, but only if one good is a Giffen good 
B) cross, but only if one good is an inferior good 
C) cross, but only if both goods are inferior goods 
D) can never cross

Question 13

Refer to the information provided.If Amy decides to spend 80 hours a week playing tennis, and the rest of her time photographing, how much income will she have available to spend on consumption goods?

Accepted Answer

A) $600 
B) $1600 
C) $6000 
D) $16 000 
A) $600 
B) $1600 
C) $6000 
D) $16 000

Question 14

The income effect is the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is correct? A consumer will be maximising utility when:
(i) the indifference curve is tangent to the budget constraint
(ii) the marginal rate of substitution equals the ratio of the prices
(iii) the marginal utility per dollar spent on good x is equal to the marginal utility per dollar spent on good Y

Accepted Answer

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

Question 16

Giffen goods are characterised by upward sloping indifference curves.

Accepted Answer

A) True 
 B)False

Question 17

The indifference curves of perfect substitutes are:

Accepted Answer

A) straight lines 
B) at right angles 
C) bowed inwards 
D) bowed outwards 
A) straight lines 
B) at right angles 
C) bowed inwards 
D) bowed outwards

Question 18

Second-hand clothing is an example of a normal good.

Accepted Answer

A) True 
 B)False

Question 19

The substitution effect from an increase in wages is manifest in a:

Accepted Answer

A) decrease in labour demand 
B) desire to consume less leisure 
C) desire to consume more leisure 
D) backward-bending labour supply curve 
A) decrease in labour demand 
B) desire to consume less leisure 
C) desire to consume more leisure 
D) backward-bending labour supply curve

Question 20

Refer to the information provided.If the interest rate on Diane's savings increases, it is possible that:

Accepted Answer

A) she will increase her savings in the work period 
B) she will decrease her savings in the work period 
C) she will not change her consumption in the work period 
D) all of the above are possible 
A) she will increase her savings in the work period 
B) she will decrease her savings in the work period 
C) she will not change her consumption in the work period 
D) all of the above are possible

Exam 22: The Theory of Consumer Choice

Graph 22-4 -Refer to Graph 22-4.Based on this graph, which of the following statements is correct?

It is plausible for the labour supply curve to slope either upwards or downwards.

Graph 22-8 -Refer to Graph 22-8.If the consumer is currently at point B on the graph shown, a change to point C as a result of a decrease in the price of potato chips would show the:

A budget constraint:

If a good is a perfect substitute, then the MRS will be constant no matter how much of any one good the consumer possesses.

If the marginal rate of substitution of pepsi for pizza is six litres of pepsi for one pizza slice, and the price of pepsi is $1 per litre and the price of pizza is $3 per slice, then this consumer should:

Graph 22-9 -Refer to Graph 22-9.Assume that the consumer depicted in the graph has an income of $20.Using the information above, which of the following price-quantity combinations would be on her demand curve for marshmallows if the price of chocolate chips is $2?

Which of the following is a property of indifference curves?

Graph 22-3 -Refer to Graph 22-3.Using the figure in panel (a), what is ratio of the price of X to the price of Y (i.e.PX/PY)?

Graph 22-9 -Refer to Graph 22-9.Assume that the consumer depicted in the graph has an income of $50, and the price of marshmallows is $2.50, and the price of chocolate chips is $5.The optimising consumer will choose to purchase which bundle of marshmallows and chocolate chips?

Graph 22-5 -Refer to Graph 22-5.Which of the graphs shown represent(s) indifference curves for perfect complements?

Indifference curves can:

Refer to the information provided.If Amy decides to spend 80 hours a week playing tennis, and the rest of her time photographing, how much income will she have available to spend on consumption goods?

The income effect is the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve.

Giffen goods are characterised by upward sloping indifference curves.

The indifference curves of perfect substitutes are:

Second-hand clothing is an example of a normal good.

The substitution effect from an increase in wages is manifest in a:

Refer to the information provided.If the interest rate on Diane's savings increases, it is possible that:

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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