Question 1

When two goods are perfect substitutes they will have:

Accepted Answer

A) indifference curves with a positive slope 
B) indifference curves that cross 
C) linear indifference curves 
D) indifference curves that are right angles 
A) indifference curves with a positive slope 
B) indifference curves that cross 
C) linear indifference curves 
D) indifference curves that are right angles

Question 2

Suppose Amy normally buys sushi and miso.There is an increase in the price of miso.If Amy stays on the same indifference curve there has been:

Accepted Answer

A) an income effect that means she consumes more miso 
B) an income effect that means she consumes less miso 
C) a substitution effect that means she consumes more sushi 
D) a substitution effect that means she consumes less sushi 
A) an income effect that means she consumes more miso 
B) an income effect that means she consumes less miso 
C) a substitution effect that means she consumes more sushi 
D) a substitution effect that means she consumes less sushi

Question 3

The marginal rate of substitution is the rate at which a consumer is willing to trade one good for another.

Accepted Answer

A) True 
 B)False

Question 4

Graph 22-7  
-Refer to Graph 22-7.Assume that the consumer depicted in the graph faces prices and income such that she optimises at point A.According to the graph, what change allows the consumer to move to point B?

Accepted Answer

A) a decrease in the price of M&Ms 
B) an increase in the price of M&Ms 
C) an increase in the price of Skittles 
D) a decrease in the price of Skittles 
A) a decrease in the price of M&Ms 
B) an increase in the price of M&Ms 
C) an increase in the price of Skittles 
D) a decrease in the price of Skittles

Question 5

The slope of a budget constraint is equal to the relative prices of the two goods.

Accepted Answer

A) True 
 B)False

Question 6

Bundles of goods on a consumer's indifference curve have the same total cost.

Accepted Answer

A) True 
 B)False

Question 7

The amount of a good that an individual has:

Accepted Answer

A) is only affected by prices 
B) affects the rate at which she is willing to trade 
C) is only affected by income 
D) will not affect the marginal rate of substitution 
A) is only affected by prices 
B) affects the rate at which she is willing to trade 
C) is only affected by income 
D) will not affect the marginal rate of substitution

Question 8

An increase in income changes the slope of the budget constraint towards the cheaper good.

Accepted Answer

A) True 
 B)False

Question 9

The theory of consumer choice has limited application to the work-leisure decision, as leisure time does not have a monetary value.

Accepted Answer

A) True 
 B)False

Question 10

A Giffen good is a good for which a(n):

Accepted Answer

A) increase in the price raises the quantity demanded 
B) increase in the price lowers the quantity demanded 
C) increase in the price raises the quantity supplied 
D) decrease in the price raises the quantity supplied 
A) increase in the price raises the quantity demanded 
B) increase in the price lowers the quantity demanded 
C) increase in the price raises the quantity supplied 
D) decrease in the price raises the quantity supplied

Question 11

The indifference curve maps out the consumption bundles that give the consumer the same level of satisfaction.

Accepted Answer

A) True 
 B)False

Question 12

Graph 22-4  
-Refer to Graph 22-4.Which of the following statements is NOT true for a consumer who moves from point B to point A?

Accepted Answer

A) the consumer is equally well-off 
B) the consumer is willing to sacrifice croissants to obtain coffee 
C) the marginal rate of substitution at points A and B differ 
D) the consumer is better off since point A is higher than point B 
A) the consumer is equally well-off 
B) the consumer is willing to sacrifice croissants to obtain coffee 
C) the marginal rate of substitution at points A and B differ 
D) the consumer is better off since point A is higher than point B

Question 13

The income effect is weakly linked to what measure of elasticity?

Accepted Answer

The income effect measures the change in

Question 14

The highest indifference curve that a consumer can reach is:

Accepted Answer

A) the one farthest from the origin 
B) the one that is tangent to the budget constraint 
C) the one that intersects the budget constraint in at least two places 
D) all of the above 
A) the one farthest from the origin 
B) the one that is tangent to the budget constraint 
C) the one that intersects the budget constraint in at least two places 
D) all of the above

Question 15

Assume that a consumer faces the budget constraints shown.   
a.Assuming that income is the same on both occasions, describe the difference in relative prices between panel a and panel
b.
b.If income in panel b is $320, what is the price of good X?
c.If income in panel a is $175, what is the price of good Y?
d.Give an example of prices that may produce the graphs in panel A and panel B (hint: what are the relative prices?)

Accepted Answer

a.The price of good Y is relatively lowe

Question 16

The point at which the indifference curve is tangent to the budget constraint is called an optimum.

Accepted Answer

A) True 
 B)False

Question 17

Graph 22-2  
-Refer to Graph 22-2.Which of the graphs shown reflects a decrease in the price of good X only?

Accepted Answer

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

Question 18

Graph 22-9  
-Refer to Graph 22-9.Assume that the consumer depicted in the graph has an income of $50 and currently optimises at point B.When the price of chocolate chips decreases to $2.50, the optimising consumer will choose to purchase how many units of marshmallows?

Accepted Answer

A) four 
B) five 
C) 10 
D) 15 
A) four 
B) five 
C) 10 
D) 15

Exam 22: The Theory of Consumer Choice

When two goods are perfect substitutes they will have:

Suppose Amy normally buys sushi and miso.There is an increase in the price of miso.If Amy stays on the same indifference curve there has been:

The marginal rate of substitution is the rate at which a consumer is willing to trade one good for another.

Graph 22-7 -Refer to Graph 22-7.Assume that the consumer depicted in the graph faces prices and income such that she optimises at point A.According to the graph, what change allows the consumer to move to point B?

The slope of a budget constraint is equal to the relative prices of the two goods.

Bundles of goods on a consumer's indifference curve have the same total cost.

The amount of a good that an individual has:

An increase in income changes the slope of the budget constraint towards the cheaper good.

The theory of consumer choice has limited application to the work-leisure decision, as leisure time does not have a monetary value.

A Giffen good is a good for which a(n):

The indifference curve maps out the consumption bundles that give the consumer the same level of satisfaction.

Graph 22-4 -Refer to Graph 22-4.Which of the following statements is NOT true for a consumer who moves from point B to point A?

The income effect is weakly linked to what measure of elasticity?

The highest indifference curve that a consumer can reach is:

The point at which the indifference curve is tangent to the budget constraint is called an optimum.

Graph 22-2 -Refer to Graph 22-2.Which of the graphs shown reflects a decrease in the price of good X only?

Graph 22-9 -Refer to Graph 22-9.Assume that the consumer depicted in the graph has an income of $50 and currently optimises at point B.When the price of chocolate chips decreases to $2.50, the optimising consumer will choose to purchase how many units of marshmallows?

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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