Exam 21: The Theory of Consumer Choice

Jane is maximizing total utility while consuming food and clothing.Her marginal utility from food and clothing are 50 utils and 25 utils,respectively.If clothing is priced at $10 per unit,the price of food must

The consumer's optimum choice is represented by

Figure 21-7 -Refer to Figure 21-7.Assume that the consumer depicted in the figure has an income of $20.The price of Skittles is $2 and the price of M&M's is $2.This consumer will choose to optimize by consuming

Figure 21-1 -Refer to Figure 21-1.Which point in the figure showing a consumer's budget constraint represents the consumer's income divided by the price of a CD?

Dave consumes two normal goods,X and Y,and is currently at an optimum.If the price of good X falls,we can predict with certainty that

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.If you save all your money,how much money will you have one year from today?

Draw a budget constraint that is consistent with the following prices and income. Income = 200 PY = 50 PX = 25 a.Demonstrate how your original budget constraint would change if income increases to 500. b.Demonstrate how your original budget constraint would change if PY decreases to 20. c.Demonstrate how your original budget constraint would change if PX increases to 40.

If the price of bread is zero,the budget constraint between bread (on the vertical axis)and cheese (on the horizontal axis)would

When a budget constraint shifts outward

Beer and pretzels are normal goods.When the price of beer falls,the substitution effect causes

Suppose a consumer is currently spending all of her available income on two goods: music CDs and DVDs.If the price of a CD is $9,the price of a DVD is $18,and she is currently consuming 10 CDs and 5 DVDs,what is the consumer's income?

Figure 21-4 -Refer to Figure 21-4.Which of the following statements is not true for a consumer who moves from point B to point C?

When two goods are perfect complements they will have

If the consumer's income and all prices simultaneously decrease by one-half,then

Figure 21-5 -Refer to Figure 21-5.Which of the graphs shown represent indifference curves for perfect substitutes?

Higher education is a normal good.If its price falls

Figure 21-6 -Refer to Figure 21-6.It would be possible for the consumer to reach I₂ if

Which of the following is most likely an inferior good?

What are the two effects of a change in a price that a consumer experiences?

Ken consumes two goods,beer and pretzels.A beer costs $1 per bottle and he consumes it to the point where the marginal utility he receives from his last beer is 3.Pretzels cost $2 per bag,and the relationship between the marginal utility he gets from eating a bag of pretzels and the number of bags he eats per month is as follows: If Ken is maximizing his utility,how much does he spend on pretzels each month?