Question 1

A consumer is currently consuming some of good X and some of good Y.If good Y is a normal good for this consumer,a rise in consumer income will definitely cause

Accepted Answer

A) an increase in the consumption of X. 
B) an increase in the consumption of Y. 
C) a decrease in the consumption of X. 
D) a decrease in the consumption of Y. 
A) an increase in the consumption of X. 
B) an increase in the consumption of Y. 
C) a decrease in the consumption of X. 
D) a decrease in the consumption of Y.

Question 2

A consumer has preferences over two goods: books and movies.Three bundles,which all lie on the same indifference curve for this consumer,are shown in the table below.  
Assuming that these goods are neither perfect substitutes nor perfect complements for this consumer,which of the following properties of indifference curves would this consumer's preferences violate?

Accepted Answer

A) Indifference curves are downward sloping. 
B) Indifference curves do not cross. 
C) Indifference curves are bowed inward. 
D) These bundles do not violate any of the properties of indifference curves. 
A) Indifference curves are downward sloping. 
B) Indifference curves do not cross. 
C) Indifference curves are bowed inward. 
D) These bundles do not violate any of the properties of indifference curves.

Question 3

A consumer has preferences over consumption and leisure.When the wage decreases,the consumer chooses to consume less leisure.For this consumer the labor supply curve will

Accepted Answer

A) slope upward. 
B) slope backward. 
C) be horizontal. 
D) be vertical. 
A) slope upward. 
B) slope backward. 
C) be horizontal. 
D) be vertical.

Question 4

The marginal rate of substitution does not change for perfect substitutes.

Accepted Answer

A) True 
 B)False

Question 5

The rate at which a consumer is willing to exchange one good for another,and maintain a constant level of satisfaction,is called the

Accepted Answer

A) relative expenditure ratio. 
B) value of marginal product. 
C) marginal rate of substitution. 
D) relative price ratio. 
A) relative expenditure ratio. 
B) value of marginal product. 
C) marginal rate of substitution. 
D) relative price ratio.

Question 6

A consumer has preferences over two goods: x and y.Three bundles,which all lie on the same indifference curve for this consumer,are shown in the following table.  
Which of the following statements regarding these bundles is correct?

Accepted Answer

A) The goods are perfect substitutes for this consumer. 
B) The goods are perfect complements for this consumer. 
C) These bundles violate the property that indifference curves are bowed inward. 
D) These bundles violate the property that indifference curves do not cross. 
A) The goods are perfect substitutes for this consumer. 
B) The goods are perfect complements for this consumer. 
C) These bundles violate the property that indifference curves are bowed inward. 
D) These bundles violate the property that indifference curves do not cross.

Question 7

The substitution effect from an increase in wages is evident in

Accepted Answer

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

Question 8

Using the graph shown,construct a demand curve for M&M's given an income of $10.

Accepted Answer

The answer of Using the graph shown,construct a demand curve...

Question 9

Which of the following statements is false?

Accepted Answer

A) Reducing taxes on interest income might encourage people to save more. 
B) Reducing taxes on interest income might reduce saving. 
C) A price increase will create income and substitution effects that will both always work to reduce consumption of the good. 
D) Utility is maximized when the marginal rate of substitution between any two goods equals the relative prices of the two goods. 
A) Reducing taxes on interest income might encourage people to save more. 
B) Reducing taxes on interest income might reduce saving. 
C) A price increase will create income and substitution effects that will both always work to reduce consumption of the good. 
D) Utility is maximized when the marginal rate of substitution between any two goods equals the relative prices of the two goods.

Question 10

Laura consumes only beer and chips.Her indifference curves are all bowed inward.Consider the bundles (2,6),(4,4),and (6,2).If Laura is indifferent between (2,6)and (6,2),then Laura must

Accepted Answer

A) prefer (4,4) to (6,2). 
B) be indifferent between (4,4) and (6,2). 
C) prefer (6,2) to (4,4). 
D) prefer (2,6) to (4,4). 
A) prefer (4,4) to (6,2). 
B) be indifferent between (4,4) and (6,2). 
C) prefer (6,2) to (4,4). 
D) prefer (2,6) to (4,4).

Question 11

If the price of hamburgers increases,the substitution effect works to

Accepted Answer

A) decrease the quantity of hamburgers supplied. 
B) increase the number of hamburger buns demanded. 
C) decrease the quantity of hamburgers demanded. 
D) increase the number of hamburger buns supplied. 
A) decrease the quantity of hamburgers supplied. 
B) increase the number of hamburger buns demanded. 
C) decrease the quantity of hamburgers demanded. 
D) increase the number of hamburger buns supplied.

Question 12

Figure 21-4
  
-Refer to Figure 21-4.Which of the following statements is correct?

Accepted Answer

A) Point A is preferred equally to point E. 
B) Point A is preferred equally to point C. 
C) The bundle associated with point B contains more Ho-Ho's than that associated with point C. 
D) The bundles along indifference curve I₁ are preferred to those along indifference curve I₂. 
A) Point A is preferred equally to point E. 
B) Point A is preferred equally to point C. 
C) The bundle associated with point B contains more Ho-Ho's than that associated with point C. 
D) The bundles along indifference curve I₁ are preferred to those along indifference curve I₂.

Question 13

Scenario 21-1
Suppose the price of pizza is $10, the price of cola is $1, and the consumer's income is $50. In addition, suppose the consumer's budget constraint measures pizza on the horizontal axis and cola on the vertical axis.
-Refer to Scenario 21-1.If the price of cola doubles to $2,then the

Accepted Answer

A) budget constraint intersects the vertical axis at 25 colas. 
B) slope of the budget constraint rises to -2. 
C) budget constraint intersects the vertical axis at 100 colas. 
D) budget constraint shifts inward in a parallel fashion. 
A) budget constraint intersects the vertical axis at 25 colas. 
B) slope of the budget constraint rises to -2. 
C) budget constraint intersects the vertical axis at 100 colas. 
D) budget constraint shifts inward in a parallel fashion.

Question 14

George consumes two goods,milk and cookies.He has maximized his utility given his income.Milk costs $2 per gallon and he consumes it to the point where the marginal utility he receives from drinking a gallon of milk is 6.Cookies cost $4 per bag and the relationship between the marginal utility that George gets from eating a bag of cookies and the number of bags he eats per month is as follows:  
How many bags of cookies does George buy each month?

Accepted Answer

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

Question 15

The theory of consumer choice examines

Accepted Answer

A) the determination of output in competitive markets. 
B) the tradeoffs inherent in decisions made by consumers. 
C) how consumers select inputs into manufacturing production processes. 
D) the determination of prices in competitive markets. 
A) the determination of output in competitive markets. 
B) the tradeoffs inherent in decisions made by consumers. 
C) how consumers select inputs into manufacturing production processes. 
D) the determination of prices in competitive markets.

Question 16

Economists represent a consumer's preferences using

Accepted Answer

A) demand curves. 
B) budget constraints. 
C) indifference curves. 
D) supply curves. 
A) demand curves. 
B) budget constraints. 
C) indifference curves. 
D) supply curves.

Question 17

A consumer

Accepted Answer

A) is equally satisfied with any indifference curve. 
B) prefers indifference curves with positive slopes. 
C) prefers higher indifference curves to lower indifference curves. 
D) is generally unable to place all consumption bundles on an indifference curve. 
A) is equally satisfied with any indifference curve. 
B) prefers indifference curves with positive slopes. 
C) prefers higher indifference curves to lower indifference curves. 
D) is generally unable to place all consumption bundles on an indifference curve.

Question 18

The income effect of a price change is the change in consumption that results from the movement to a different indifference curve.

Accepted Answer

A) True 
 B)False

Question 19

The substitution effect of a price change is depicted by

Accepted Answer

A) a movement along the budget constraint holding satisfaction constant. 
B) a shift in the budget constraint at the old prices. 
C) a movement along the consumer's new indifference curve at the new prices. 
D) a movement along the original indifference curve to the point where the marginal rate of substitution equals the price ratio for the new set of prices. 
A) a movement along the budget constraint holding satisfaction constant. 
B) a shift in the budget constraint at the old prices. 
C) a movement along the consumer's new indifference curve at the new prices. 
D) a movement along the original indifference curve to the point where the marginal rate of substitution equals the price ratio for the new set of prices.

Question 20

Figure 21-3
  
-Refer to Figure 21-3.In graph (b),what is the price of good x relative to good y (i.e.,Pₓ/Pᵧ)?

Accepted Answer

A) 2/7 
B) 3/6 
C) 7/2 
D) 7 
A) 2/7 
B) 3/6 
C) 7/2 
D) 7

Exam 21: The Theory of Consumer Choice

A consumer is currently consuming some of good X and some of good Y.If good Y is a normal good for this consumer,a rise in consumer income will definitely cause

A consumer has preferences over consumption and leisure.When the wage decreases,the consumer chooses to consume less leisure.For this consumer the labor supply curve will

The marginal rate of substitution does not change for perfect substitutes.

The rate at which a consumer is willing to exchange one good for another,and maintain a constant level of satisfaction,is called the

A consumer has preferences over two goods: x and y.Three bundles,which all lie on the same indifference curve for this consumer,are shown in the following table. Which of the following statements regarding these bundles is correct?

The substitution effect from an increase in wages is evident in

Using the graph shown,construct a demand curve for M&M's given an income of $10.

Which of the following statements is false?

Laura consumes only beer and chips.Her indifference curves are all bowed inward.Consider the bundles (2,6),(4,4),and (6,2).If Laura is indifferent between (2,6)and (6,2),then Laura must

If the price of hamburgers increases,the substitution effect works to

Figure 21-4 -Refer to Figure 21-4.Which of the following statements is correct?

Scenario 21-1 Suppose the price of pizza is $10, the price of cola is $1, and the consumer's income is $50. In addition, suppose the consumer's budget constraint measures pizza on the horizontal axis and cola on the vertical axis. -Refer to Scenario 21-1.If the price of cola doubles to $2,then the

The theory of consumer choice examines

Economists represent a consumer's preferences using

A consumer

The income effect of a price change is the change in consumption that results from the movement to a different indifference curve.

The substitution effect of a price change is depicted by

Figure 21-3 -Refer to Figure 21-3.In graph (b),what is the price of good x relative to good y (i.e.,Pₓ/Pᵧ)?

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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