Question 1

Each of the following are characteristics of an indifference curve map except

Accepted Answer

A) moving northeast to a new indifference curve will increase utility. 
B) points on the same indifference curve yield equal utility. 
C) the axes represent levels of utility for each of the goods. 
D) indifference curves cannot cross. 
A) moving northeast to a new indifference curve will increase utility. 
B) points on the same indifference curve yield equal utility. 
C) the axes represent levels of utility for each of the goods. 
D) indifference curves cannot cross.

Question 2

Evaluate the following statement,"Warren Buffet is the second richest person in the world.He doesn't face any constraint on his ability to purchase commodities he wants."

Accepted Answer

Everyone faces scarcity of res

Question 3

Suppose that you have $100 today and expect to receive $100 one year from today.Your money market account pays an annual interest rate of 25%,and you may borrow money at that interest rate.Consider the budget constraint between "spending today" on the horizontal axis and "spending a year from today" on the vertical axis.What is the slope of this budget constraint?

Accepted Answer

A) -0.75 
B) -1.00 
C) -1.25 
D) -2.25 
A) -0.75 
B) -1.00 
C) -1.25 
D) -2.25

Question 4

Figure 21-9
  
-Refer to Figure 21-9.Assume that the consumer depicted in the figure has an income of $40,the price of a bag of marshmallows is $2,and the price of a bag of chocolate chips is $2.The optimizing 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 5

Given a consumer's indifference map,the demand curve for a good can

Accepted Answer

A) be derived by moving a consumer's budget constraint as her income rises. 
B) be derived by moving a consumer's budget constraint as her income rises and she makes choices. 
C) be derived by moving a consumer's budget constraint as the market price changes. 
D) not be derived from consumer theory. 
A) be derived by moving a consumer's budget constraint as her income rises. 
B) be derived by moving a consumer's budget constraint as her income rises and she makes choices. 
C) be derived by moving a consumer's budget constraint as the market price changes. 
D) not be derived from consumer theory.

Question 6

A consumer is currently spending all of her available income on two goods: music CDs and DVDs.At her current consumption bundle she is spending twice as much on CDs as she is on DVDs.If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs,what is the price of a CD?

Accepted Answer

A) $4 
B) $8 
C) $12 
D) $20 
A) $4 
B) $8 
C) $12 
D) $20

Question 7

The substitution effect in the work-leisure model induces a person to work less in response to higher wages,which tends to make the labor supply curve slope upward.

Accepted Answer

A) True 
 B)False

Question 8

Scenario 21-2
Fred has recently graduated from college with a degree in journalism and economics. He has decided to pursue a career as a freelance journalist writing for business newspapers and magazines. Fred is typically awake for 112 hours each week (he sleeps an average of 8 hours each day). For each hour Fred spends writing, he can earn $75.
-Refer to Scenario 21-2.If Fred decides to spend 80 hours a week playing volleyball on the beach,and the rest of his time writing,how much income will he have available to spend on consumption goods?

Accepted Answer

A) $900 
B) $1,500 
C) $2,400 
D) $3,000 
A) $900 
B) $1,500 
C) $2,400 
D) $3,000

Question 9

A normal good is one in which

Accepted Answer

A) the average consumer chooses to consume at a normal level. 
B) the average consumer chooses to consume the good over other similar goods. 
C) an increase in income increases consumption of the good. 
D) an increase in income decreases consumption of the good. 
A) the average consumer chooses to consume at a normal level. 
B) the average consumer chooses to consume the good over other similar goods. 
C) an increase in income increases consumption of the good. 
D) an increase in income decreases consumption of the good.

Question 10

Assume that a college student purchases only coffee and Snickers.The substitution effect associated with a decrease in the price of a Snickers will result in

Accepted Answer

A) an increase in the consumption of coffee only. 
B) a decrease in the consumption of coffee only. 
C) an increase in the consumption of Snickers and a decrease in the consumption of coffee. 
D) a decrease in the consumption of Snickers and an increase in the consumption of coffee. 
A) an increase in the consumption of coffee only. 
B) a decrease in the consumption of coffee only. 
C) an increase in the consumption of Snickers and a decrease in the consumption of coffee. 
D) a decrease in the consumption of Snickers and an increase in the consumption of coffee.

Question 11

Jonathan is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires.When the income effect dominates the substitution effect,an increase in the interest rate on savings is likely to

Accepted Answer

A) decrease saving. 
B) increase saving. 
C) have no effect on saving. 
D) All of the above are correct. 
A) decrease saving. 
B) increase saving. 
C) have no effect on saving. 
D) All of the above are correct.

Question 12

A consumer has preferences over two goods: x and y.Suppose we graph this consumer's preferences (which satisfy the usual properties of indifference curves)and budget constraint on a diagram with x on the horizontal axis and y on the vertical axis.At the consumer's current consumption bundle,the consumer is spending all available income,and the marginal rate of substitution is less than the slope of the budget constraint.We can conclude that

Accepted Answer

A) the consumer is currently maximizing satisfaction. 
B) the consumer could increase satisfaction by consuming more x and less y. 
C) the consumer could increase satisfaction by consuming less x and more y. 
D) the consumer could purchase more x and more y and increase total satisfaction. 
A) the consumer is currently maximizing satisfaction. 
B) the consumer could increase satisfaction by consuming more x and less y. 
C) the consumer could increase satisfaction by consuming less x and more y. 
D) the consumer could purchase more x and more y and increase total satisfaction.

Question 13

Assume that a college student purchases only coffee and Snickers.If both coffee and Snickers are normal goods,then the income effect associated with a decrease in the price of a Snickers will result in

Accepted Answer

A) a decrease in the consumption of Snickers and an increase in the consumption of coffee. 
B) a decrease in the consumption of Snickers and a decrease in the consumption of coffee. 
C) an increase in the consumption of Snickers and a decrease in the consumption of coffee. 
D) an increase in the consumption of Snickers and an increase in the consumption of coffee. 
A) a decrease in the consumption of Snickers and an increase in the consumption of coffee. 
B) a decrease in the consumption of Snickers and a decrease in the consumption of coffee. 
C) an increase in the consumption of Snickers and a decrease in the consumption of coffee. 
D) an increase in the consumption of Snickers and an increase in the consumption of coffee.

Question 14

An increase in a consumer's income

Accepted Answer

A) increases the slope of the consumer's budget constraint. 
B) has no effect on the slope of the consumer's budget constraint. 
C) decreases the slope of the consumer's budget constraint. 
D) has no effect on the consumer's budget constraint. 
A) increases the slope of the consumer's budget constraint. 
B) has no effect on the slope of the consumer's budget constraint. 
C) decreases the slope of the consumer's budget constraint. 
D) has no effect on the consumer's budget constraint.

Question 15

Using indifference curves and budget constraints,graphically illustrate the substitution and income effect that would result from a change in the price of a normal good.

Accepted Answer

The answer of Using indifference curves and budget constraints,graphically illustrate...

Question 16

Consider two goods,books and hamburgers.The slope of the consumer's budget constraint is measured by the

Accepted Answer

A) consumer's income divided by the price of hamburgers. 
B) relative price of books and hamburgers. 
C) consumer's marginal rate of substitution. 
D) number of books purchased divided by the number of hamburgers purchased. 
A) consumer's income divided by the price of hamburgers. 
B) relative price of books and hamburgers. 
C) consumer's marginal rate of substitution. 
D) number of books purchased divided by the number of hamburgers purchased.

Question 17

Scenario 21-2
Fred has recently graduated from college with a degree in journalism and economics. He has decided to pursue a career as a freelance journalist writing for business newspapers and magazines. Fred is typically awake for 112 hours each week (he sleeps an average of 8 hours each day). For each hour Fred spends writing, he can earn $75.
-Refer to Scenario 21-2.If Fred's wage increases to $90 per hour of writing,which of the following points would fall on his budget constraint?

Accepted Answer

A) 75 hours of leisure, $2,775 of consumption 
B) 80 hours of leisure, $2,400 of consumption 
C) 85 hours of leisure, $2,430 of consumption 
D) 90 hours of leisure, $1,650 of consumption 
A) 75 hours of leisure, $2,775 of consumption 
B) 80 hours of leisure, $2,400 of consumption 
C) 85 hours of leisure, $2,430 of consumption 
D) 90 hours of leisure, $1,650 of consumption

Question 18

Suppose a consumer spends her income on two goods: music CDs and DVDs.If the price of a CD is $8,the price of a DVD is $20,and we graph the budget constraint by placing the quantity of CDs purchased on the horizontal axis,what is the slope of the budget constraint?

Accepted Answer

A) -5.0 
B) -2.5 
C) -0.4 
D) The slope of the budget constraint cannot be determined without knowing the income the consumer has available to spend on the two goods. 
A) -5.0 
B) -2.5 
C) -0.4 
D) The slope of the budget constraint cannot be determined without knowing the income the consumer has available to spend on the two goods.

Question 19

Consider the indifference curve map for nickels and quarters.Assume nickels are on the vertical axis and quarters are on the horizontal axis.The indifference curves for nickels and quarters

Accepted Answer

A) are straight lines with slope of -1/5 
B) are straight lines with a slope of -1. 
C) are straight lines with a slope of -5. 
D) are L shaped. 
A) are straight lines with slope of -1/5 
B) are straight lines with a slope of -1. 
C) are straight lines with a slope of -5. 
D) are L shaped.

Question 20

Which effect of a price change moves the consumer along the same indifference curve to a point with a new marginal rate of substitution?

Accepted Answer

A) Budget effect 
B) Preference effect 
C) Substitution effect 
D) Income effect 
A) Budget effect 
B) Preference effect 
C) Substitution effect 
D) Income effect

Exam 21: The Theory of Consumer Choice

Each of the following are characteristics of an indifference curve map except

Evaluate the following statement,"Warren Buffet is the second richest person in the world.He doesn't face any constraint on his ability to purchase commodities he wants."

Figure 21-9 -Refer to Figure 21-9.Assume that the consumer depicted in the figure has an income of $40,the price of a bag of marshmallows is $2,and the price of a bag of chocolate chips is $2.The optimizing consumer will choose to purchase which bundle of marshmallows and chocolate chips?

Given a consumer's indifference map,the demand curve for a good can

A consumer is currently spending all of her available income on two goods: music CDs and DVDs.At her current consumption bundle she is spending twice as much on CDs as she is on DVDs.If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs,what is the price of a CD?

The substitution effect in the work-leisure model induces a person to work less in response to higher wages,which tends to make the labor supply curve slope upward.

A normal good is one in which

Assume that a college student purchases only coffee and Snickers.The substitution effect associated with a decrease in the price of a Snickers will result in

Jonathan is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires.When the income effect dominates the substitution effect,an increase in the interest rate on savings is likely to

Assume that a college student purchases only coffee and Snickers.If both coffee and Snickers are normal goods,then the income effect associated with a decrease in the price of a Snickers will result in

An increase in a consumer's income

Using indifference curves and budget constraints,graphically illustrate the substitution and income effect that would result from a change in the price of a normal good.

Consider two goods,books and hamburgers.The slope of the consumer's budget constraint is measured by the

Suppose a consumer spends her income on two goods: music CDs and DVDs.If the price of a CD is $8,the price of a DVD is $20,and we graph the budget constraint by placing the quantity of CDs purchased on the horizontal axis,what is the slope of the budget constraint?

Consider the indifference curve map for nickels and quarters.Assume nickels are on the vertical axis and quarters are on the horizontal axis.The indifference curves for nickels and quarters

Which effect of a price change moves the consumer along the same indifference curve to a point with a new marginal rate of substitution?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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