Question 1

When economists describe preferences,they often use the concept of

Accepted Answer

A) markets. 
B) income. 
C) utility. 
D) prices. 
A) markets. 
B) income. 
C) utility. 
D) prices.

Question 2

The theory of consumer choice provides the foundation for understanding

Accepted Answer

A) the structure of a firm. 
B) the profitability of a firm. 
C) a firm's product demand. 
D) a firm's product supply. 
A) the structure of a firm. 
B) the profitability of a firm. 
C) a firm's product demand. 
D) a firm's product supply.

Question 3

The slope at any point on an indifference curve equals the absolute price at which one consumer is willing to substitute one good for the other.

Accepted Answer

A) True 
 B)False

Question 4

A rise in the interest rate will generally result in people consuming more when they are old.

Accepted Answer

A) True 
 B)False

Question 5

Figure 21-8
  
-Refer to Figure 21-8.The shift from point B to point C in the figure is due to the

Accepted Answer

A) substitution effect of an increase in the price of potato chips. 
B) income effect of an increase in the price of potato chips. 
C) substitution effect of a decrease in the price of potato chips. 
D) income effect of a decrease in the price of potato chips. 
A) substitution effect of an increase in the price of potato chips. 
B) income effect of an increase in the price of potato chips. 
C) substitution effect of a decrease in the price of potato chips. 
D) income effect of a decrease in the price of potato chips.

Question 6

Figure 21-9
  
-Refer to Figure 21-9.Assume that the consumer depicted in the figure has an income of $40.Which of the following price-quantity combinations would be on her demand curve for marshmallows if the price of chocolate chips is $4?

Accepted Answer

A) $2.00, 3 
B) $2.00, 9 
C) $4.00, 3 
D) $4.00, 9 
A) $2.00, 3 
B) $2.00, 9 
C) $4.00, 3 
D) $4.00, 9

Question 7

A consumer's preferences provide a

Accepted Answer

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

Question 8

Figure 21-3
  
-Refer to Figure 21-3.In graph (a),if income is equal to $120,the price of good y is

Accepted Answer

A) $1 
B) $2 
C) $3 
D) $4 
A) $1 
B) $2 
C) $3 
D) $4

Question 9

One of the primary research results in tax policy analysis over the last 20 years is that

Accepted Answer

A) an increase in interest rates will increase saving. 
B) an increase in interest rates will decrease saving. 
C) lowering taxes on interest income will increase saving. 
D) None of the above. 
A) an increase in interest rates will increase saving. 
B) an increase in interest rates will decrease saving. 
C) lowering taxes on interest income will increase saving. 
D) None of the above.

Question 10

A consumer has preferences over two goods: books and movies.Two bundles,which lie on the same indifference curve for this consumer,are shown in the table below.  
Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four properties of indifference curves?

Accepted Answer

A) One movie and five books 
B) Three movies and three books 
C) Five movies and one book 
D) One movie and seven books 
A) One movie and five books 
B) Three movies and three books 
C) Five movies and one book 
D) One movie and seven books

Question 11

An increase in income will cause a shift in the budget constraint

Accepted Answer

A) outward. 
B) towards the good most consumed. 
C) towards the good least consumed. 
D) inward. 
A) outward. 
B) towards the good most consumed. 
C) towards the good least consumed. 
D) inward.

Question 12

Figure 21-9
  
-Refer to Figure 21-9.Assume that the consumer depicted in the figure has an income of $40.If the price of chocolate chips is $4.00 and the price of marshmallows is $4.00,the optimizing consumer would choose to purchase

Accepted Answer

A) 9 marshmallows and 6 chocolate chips. 
B) 10 marshmallows and 10 chocolate chips. 
C) 5 marshmallows and 5 chocolate chips. 
D) 3 marshmallows and 9 chocolate chips. 
A) 9 marshmallows and 6 chocolate chips. 
B) 10 marshmallows and 10 chocolate chips. 
C) 5 marshmallows and 5 chocolate chips. 
D) 3 marshmallows and 9 chocolate chips.

Question 13

Figure 21-1
  
-Refer to Figure 21-1.All of the points identified in the figure represent possible consumption options with the exception of

Accepted Answer

A) A 
B) E 
C) A and E 
D) None.All points are possible consumption options. 
A) A 
B) E 
C) A and E 
D) None.All points are possible consumption options.

Question 14

Indifference curves that cross would suggest that

Accepted Answer

A) the consumer does not prefer more to less. 
B) the consumer is likely to prefer a redistribution of income from rich to poor. 
C) different individuals have different preferences for the same goods. 
D) the marginal rate of substitution is the same for both indifference curves. 
A) the consumer does not prefer more to less. 
B) the consumer is likely to prefer a redistribution of income from rich to poor. 
C) different individuals have different preferences for the same goods. 
D) the marginal rate of substitution is the same for both indifference curves.

Question 15

Draw indifference curves that reflect the following preferences.
a.Pencils with white erasers and pencils with pink erasers
b.Left shoes and right shoes
c.Potatoes and rice
d.Income and polluted water

Accepted Answer

The answer of Draw indifference curves that reflect the following...

Question 16

The following diagram shows two budget lines: A and B.  
Which of the following could explain the change in the budget line from A to B?

Accepted Answer

A) A decrease in income and a decrease in the price of x. 
B) A decrease in income and an increase in the price of x. 
C) An increase in income and a decrease in the price of x. 
D) An increase in income and an increase in the price of x. 
A) A decrease in income and a decrease in the price of x. 
B) A decrease in income and an increase in the price of x. 
C) An increase in income and a decrease in the price of x. 
D) An increase in income and an increase in the price of x.

Question 17

A decrease in a consumer's income

Accepted Answer

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

Question 18

Figure 21-2
  
-Refer to Figure 21-2.Which of the graphs in the figure could reflect a decrease in the prices of both goods?

Accepted Answer

A) graph (a) 
B) graph (b) 
C) graph (c) 
D) graph (d) 
A) graph (a) 
B) graph (b) 
C) graph (c) 
D) graph (d)

Question 19

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

Accepted Answer

A) graph (a) 
B) graph (b) 
C) graph (c) 
D) All of the above are correct. 
A) graph (a) 
B) graph (b) 
C) graph (c) 
D) All of the above are correct.

Question 20

Which of the following is a property of indifference curves?

Accepted Answer

A) Indifference curves cross to explain higher preferences. 
B) Indifference curves have positive slopes. 
C) Indifference curves are downward sloping and always linear. 
D) Indifference curves are bowed in toward the origin. 
A) Indifference curves cross to explain higher preferences. 
B) Indifference curves have positive slopes. 
C) Indifference curves are downward sloping and always linear. 
D) Indifference curves are bowed in toward the origin.

Exam 21: The Theory of Consumer Choice

When economists describe preferences,they often use the concept of

The theory of consumer choice provides the foundation for understanding

The slope at any point on an indifference curve equals the absolute price at which one consumer is willing to substitute one good for the other.

A rise in the interest rate will generally result in people consuming more when they are old.

Figure 21-8 -Refer to Figure 21-8.The shift from point B to point C in the figure is due to the

Figure 21-9 -Refer to Figure 21-9.Assume that the consumer depicted in the figure has an income of $40.Which of the following price-quantity combinations would be on her demand curve for marshmallows if the price of chocolate chips is $4?

A consumer's preferences provide a

Figure 21-3 -Refer to Figure 21-3.In graph (a),if income is equal to $120,the price of good y is

One of the primary research results in tax policy analysis over the last 20 years is that

An increase in income will cause a shift in the budget constraint

Figure 21-9 -Refer to Figure 21-9.Assume that the consumer depicted in the figure has an income of $40.If the price of chocolate chips is $4.00 and the price of marshmallows is $4.00,the optimizing consumer would choose to purchase

Figure 21-1 -Refer to Figure 21-1.All of the points identified in the figure represent possible consumption options with the exception of

Indifference curves that cross would suggest that

Draw indifference curves that reflect the following preferences. a.Pencils with white erasers and pencils with pink erasers b.Left shoes and right shoes c.Potatoes and rice d.Income and polluted water

The following diagram shows two budget lines: A and B. Which of the following could explain the change in the budget line from A to B?

A decrease in a consumer's income

Figure 21-2 -Refer to Figure 21-2.Which of the graphs in the figure could reflect a decrease in the prices of both goods?

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

Which of the following is a property of indifference curves?

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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