Question 1

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

Accepted Answer

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

Question 2

If the relative price of a concert ticket is 3 times the price of a meal at a good restaurant,then the opportunity cost of a concert ticket can be measured by the

Accepted Answer

A) slope of the budget constraint. 
B) slope of an indifference curve. 
C) marginal rate of substitution. 
D) income effect. 
A) slope of the budget constraint. 
B) slope of an indifference curve. 
C) marginal rate of substitution. 
D) income effect.

Question 3

If a consumer wants more of a good when his income rises,economists call it an inferior good.

Accepted Answer

A) True 
 B)False

Question 4

Suppose Rich always uses two packets of sugar with his coffee.Rich's indifference curves for sugar and coffee are

Accepted Answer

A) bowed inward. 
B) bowed outward. 
C) straight lines. 
D) L shaped. 
A) bowed inward. 
B) bowed outward. 
C) straight lines. 
D) L shaped.

Question 5

The marginal rate of substitution is the slope of the budget constraint.

Accepted Answer

A) True 
 B)False

Question 6

A consumer that doesn't spend all of her income

Accepted Answer

A) would be at a point outside of her budget constraint. 
B) would be at a point inside her budget constraint. 
C) must not be consuming positive quantities of all goods. 
D) must be consuming at a point where her budget constraint touches one of the axes. 
A) would be at a point outside of her budget constraint. 
B) would be at a point inside her budget constraint. 
C) must not be consuming positive quantities of all goods. 
D) must be consuming at a point where her budget constraint touches one of the axes.

Question 7

The goal of the consumer is to

Accepted Answer

A) maximize utility. 
B) be on the highest indifference curve. 
C) maximize satisfaction. 
D) All of the above are the goals of the consumer. 
A) maximize utility. 
B) be on the highest indifference curve. 
C) maximize satisfaction. 
D) All of the above are the goals of the consumer.

Question 8

To derive the demand curve for a good the

Accepted Answer

A) income effect must be greater than the substitution effect. 
B) substitution effect must be greater than the income effect. 
C) substitution effect must be in the same direction as the income effect. 
D) income effect and the substitution effect may work in the same or in opposite directions. 
A) income effect must be greater than the substitution effect. 
B) substitution effect must be greater than the income effect. 
C) substitution effect must be in the same direction as the income effect. 
D) income effect and the substitution effect may work in the same or in opposite directions.

Question 9

Economists use the term Giffen good to describe a good that violates the law of demand.

Accepted Answer

A) True 
 B)False

Question 10

When two goods are easily substitutable,such as right and left shoes,the indifference curves are right angles.

Accepted Answer

A) True 
 B)False

Question 11

The following diagram shows a budget constraint for a particular consumer.  
If the price of x is $10,what is the price of y?

Accepted Answer

A) $15 
B) $25 
C) $35 
D) $70 
A) $15 
B) $25 
C) $35 
D) $70

Question 12

The consumer's optimum is where

Accepted Answer

A) MUₓ/MUᵧ = Pᵧ/Pₓ 
B) MUₓ/Pᵧ = MUᵧ/Pₓ 
C) Pₓ/MUₓ = Pᵧ/MUᵧ 
D) MUₓ/MUᵧ = Pₓ/Pᵧ 
A) MUₓ/MUᵧ = Pᵧ/Pₓ 
B) MUₓ/Pᵧ = MUᵧ/Pₓ 
C) Pₓ/MUₓ = Pᵧ/MUᵧ 
D) MUₓ/MUᵧ = Pₓ/Pᵧ

Question 13

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

Accepted Answer

A) If a consumer moves from point C to point A, her loss of Ho-Ho's cannot be compensated for by an increase in Twinkies. 
B) Point E is preferred to all other points identified in the figure. 
C) Since more is preferred to less, point C may be preferred to point E in some circumstances for this consumer. 
D) Even though point E has more of both goods than point B, we could draw a different set of indifference curves in which point B is preferred to point E. 
A) If a consumer moves from point C to point A, her loss of Ho-Ho's cannot be compensated for by an increase in Twinkies. 
B) Point E is preferred to all other points identified in the figure. 
C) Since more is preferred to less, point C may be preferred to point E in some circumstances for this consumer. 
D) Even though point E has more of both goods than point B, we could draw a different set of indifference curves in which point B is preferred to point E.

Question 14

"Left" gloves and "right" gloves provide a good example of

Accepted Answer

A) perfect substitutes. 
B) perfect complements. 
C) negatively sloped indifference curves. 
D) positively sloped indifference curves. 
A) perfect substitutes. 
B) perfect complements. 
C) negatively sloped indifference curves. 
D) positively sloped indifference curves.

Question 15

Evaluate the following statement: "Giffen goods violate the 'law of demand,' therefore,the 'law of demand' can't really be considered a 'law.'"

Accepted Answer

Giffen goods are extremely rar

Question 16

The opportunity cost of current household consumption is the

Accepted Answer

A) wage rate. 
B) market interest rate. 
C) price of the goods consumed. 
D) explicit cost of consumption. 
A) wage rate. 
B) market interest rate. 
C) price of the goods consumed. 
D) explicit cost of consumption.

Question 17

The rate at which a consumer is willing to trade one good for another to maintain the same level of satisfaction is affected by

Accepted Answer

A) the prices of the products. 
B) the amount of each good the consumer is currently consuming. 
C) the consumer's income. 
D) the marginal value product. 
A) the prices of the products. 
B) the amount of each good the consumer is currently consuming. 
C) the consumer's income. 
D) the marginal value product.

Question 18

Violations of the law of demand are assumed to occur

Accepted Answer

A) regularly. 
B) only when goods are Giffen goods. 
C) only when the substitution effect dominates the income effect. 
D) All of the above are correct. 
A) regularly. 
B) only when goods are Giffen goods. 
C) only when the substitution effect dominates the income effect. 
D) All of the above are correct.

Question 19

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 substitution effect dominates the income effect,an increase in the interest rate on savings is likely to

Accepted Answer

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

Question 20

Consider a consumer who purchases two goods,X and Y.If the price of good Y falls,then the substitution effect by itself will

Accepted Answer

A) cause the consumer to buy more of good Y and less of good X. 
B) cause the consumer to buy more of good X and less of good Y. 
C) not affect the amount of goods X and Y that the consumer buys. 
D) result in an upward-sloping demand for good Y if the substitution effect is positive. 
A) cause the consumer to buy more of good Y and less of good X. 
B) cause the consumer to buy more of good X and less of good Y. 
C) not affect the amount of goods X and Y that the consumer buys. 
D) result in an upward-sloping demand for good Y if the substitution effect is positive.

Exam 21: The Theory of Consumer Choice

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

If the relative price of a concert ticket is 3 times the price of a meal at a good restaurant,then the opportunity cost of a concert ticket can be measured by the

If a consumer wants more of a good when his income rises,economists call it an inferior good.

Suppose Rich always uses two packets of sugar with his coffee.Rich's indifference curves for sugar and coffee are

The marginal rate of substitution is the slope of the budget constraint.

A consumer that doesn't spend all of her income

The goal of the consumer is to

To derive the demand curve for a good the

Economists use the term Giffen good to describe a good that violates the law of demand.

When two goods are easily substitutable,such as right and left shoes,the indifference curves are right angles.

The following diagram shows a budget constraint for a particular consumer. If the price of x is $10,what is the price of y?

The consumer's optimum is where

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

"Left" gloves and "right" gloves provide a good example of

Evaluate the following statement: "Giffen goods violate the 'law of demand,' therefore,the 'law of demand' can't really be considered a 'law.'"

The opportunity cost of current household consumption is the

The rate at which a consumer is willing to trade one good for another to maintain the same level of satisfaction is affected by

Violations of the law of demand are assumed to occur

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 substitution effect dominates the income effect,an increase in the interest rate on savings is likely to

Consider a consumer who purchases two goods,X and Y.If the price of good Y falls,then the substitution effect by itself will

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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