Question 1

For a Giffen good,what effect does an increase in its price have

Accepted Answer

A) It decreases the quantity supplied. 
B) It increases the quantity supplied. 
C) It decreases the quantity demanded. 
D) It increases the quantity demanded. 
A) It decreases the quantity supplied. 
B) It increases the quantity supplied. 
C) It decreases the quantity demanded. 
D) It increases the quantity demanded. D

Question 2

To derive the demand curve for a good,which of the following must be the case

Accepted Answer

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

Question 3

Figure 21-8
  
-Refer to Figure 21-8.Assume that the consumer depicted has an income of $120 and currently optimizes at point A.When the price of marshmallows decreases to $6,how many bags of marshmallows will the optimizing consumer choose to purchase

Accepted Answer

A) 4 
B) 8 
C) 10 
D) 20 
A) 4 
B) 8 
C) 10 
D) 20 B

Question 4

What can we say about the marginal utility per dollar spent at the consumer's optimal choice

Accepted Answer

A) The marginal utility per dollar spent is equal to the marginal utility per dollar saved. 
B) The marginal utility per dollar spent on good X is greater than the marginal utility per dollar spent on good Y. 
C) The marginal utility per dollar spent on good X is equal to the marginal utility per dollar spent on good Y. 
D) The marginal utility per dollar spent on good X is less than the marginal utility per dollar spent on good Y. 
A) The marginal utility per dollar spent is equal to the marginal utility per dollar saved. 
B) The marginal utility per dollar spent on good X is greater than the marginal utility per dollar spent on good Y. 
C) The marginal utility per dollar spent on good X is equal to the marginal utility per dollar spent on good Y. 
D) The marginal utility per dollar spent on good X is less than the marginal utility per dollar spent on good Y.

Question 5

Which relationship represents the consumer's optimum choice

Accepted Answer

A) MUX/MUY = PY/PX 
B) MUX/PY = MUY/PX 
C) MRSXY = PY/PX 
D) MUX/PX = MUY/PY 
A) MUX/MUY = PY/PX 
B) MUX/PY = MUY/PX 
C) MRSXY = PY/PX 
D) MUX/PX = MUY/PY

Question 6

In what direction will a decrease in income cause a shift in the budget constraint

Accepted Answer

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

Question 7

The properties of consumer's preferences do NOT allow a consumer to be completely satisfied.

Accepted Answer

A) True 
 B)False

Question 8

For normal goods like cola and pizza,what is a likely result of the substitution effect when the price of pizza rises

Accepted Answer

A) Cola becomes relatively more expensive, so the consumer buys more cola. 
B) Cola becomes relatively more expensive, so the consumer buys less cola. 
C) Cola becomes relatively less expensive, so the consumer buys more cola. 
D) Cola becomes relatively less expensive, so the consumer buys less cola. 
A) Cola becomes relatively more expensive, so the consumer buys more cola. 
B) Cola becomes relatively more expensive, so the consumer buys less cola. 
C) Cola becomes relatively less expensive, so the consumer buys more cola. 
D) Cola becomes relatively less expensive, so the consumer buys less cola.

Question 9

What do economists use to represent a consumer's preferences

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 10

The theory of consumer choice can often provide insight into the behaviour of which of the following types of individuals

Accepted Answer

A) individuals who make rational choices 
B) individuals who make constrained choices 
C) individuals who are unaware of how to maximize their well-being 
D) individuals who are irrational consumers 
A) individuals who make rational choices 
B) individuals who make constrained choices 
C) individuals who are unaware of how to maximize their well-being 
D) individuals who are irrational consumers

Question 11

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

Accepted Answer

Giffen goods are extremely rar

Question 12

What is the expected impact on the labour supply of married women by changing the following conditions
 Analyze the income and the substitution effects related to your answers.
a.an increase in the education of women
b.an increase in the earnings of the husband
c.allowing daycare expenses to be tax deductible

Accepted Answer

a.  It will increase labour supply. High

Question 13

Assume that a college student spends all of her income on macaroni and hamburger.The price of a box of macaroni is $1.50 and a pound of hamburger costs $3.50.If she has $42 of income,what could she choose to consume

Accepted Answer

A) 10 boxes of macaroni and 9 pounds of hamburger 
B) 12 boxes of macaroni and 7 pounds of hamburger 
C) 14 boxes of macaroni and 6 pounds of hamburger 
D) 11 boxes of macaroni and 8 pounds of hamburger 
A) 10 boxes of macaroni and 9 pounds of hamburger 
B) 12 boxes of macaroni and 7 pounds of hamburger 
C) 14 boxes of macaroni and 6 pounds of hamburger 
D) 11 boxes of macaroni and 8 pounds of hamburger

Question 14

Figure 21-9
  
-Refer to Figure 21-9.If point B is the consumer's optimum and the price of marshmallows is $2 per bag,what is the price of a bag of chocolate chips

Accepted Answer

A) $1.50 
B) $2.70 
C) $4.00 
D) $6.00 
A) $1.50 
B) $2.70 
C) $4.00 
D) $6.00

Question 15

Figure 21-2
  
-Refer to Figure 21-2.Which of the graphs in the figure reflects an increase in the price of good Y only

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 16

What does a budget constraint show

Accepted Answer

A) the prices that a consumer chooses to pay for products he consumes 
B) the consumption bundles that are offered by the producer 
C) the consumption bundles that a consumer can afford 
D) the bundles of consumption that makes a consumer equally happy 
A) the prices that a consumer chooses to pay for products he consumes 
B) the consumption bundles that are offered by the producer 
C) the consumption bundles that a consumer can afford 
D) the bundles of consumption that makes a consumer equally happy

Question 17

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.

Question 18

A fall in the price of widgets leads consumers to buy more widgets.What can we conclude from this information

Accepted Answer

A) Substitution effect is positive. 
B) Income effect is negative. 
C) Demand is upward sloped. 
D) Demand is downward sloped. 
A) Substitution effect is positive. 
B) Income effect is negative. 
C) Demand is upward sloped. 
D) Demand is downward sloped.

Question 19

List and briefly explain each of the four properties of indifference curves.

Accepted Answer

1:   Higher indifference curves are pref

Question 20

When the price of a good increases,the higher price has what result,all else being equal

Accepted Answer

A) It contracts the consumer's set of buying opportunities. 
B) It leads to a parallel shift of the linear budget constraint. 
C) It will necessarily lead to an increase in the consumption of goods whose price did not change. 
D) It generally discourages the consumption of inferior goods. 
A) It contracts the consumer's set of buying opportunities. 
B) It leads to a parallel shift of the linear budget constraint. 
C) It will necessarily lead to an increase in the consumption of goods whose price did not change. 
D) It generally discourages the consumption of inferior goods.

Exam 21: The Theory of Consumer Choice

For a Giffen good,what effect does an increase in its price have

To derive the demand curve for a good,which of the following must be the case

Figure 21-8 -Refer to Figure 21-8.Assume that the consumer depicted has an income of $120 and currently optimizes at point A.When the price of marshmallows decreases to $6,how many bags of marshmallows will the optimizing consumer choose to purchase

What can we say about the marginal utility per dollar spent at the consumer's optimal choice

Which relationship represents the consumer's optimum choice

In what direction will a decrease in income cause a shift in the budget constraint

The properties of consumer's preferences do NOT allow a consumer to be completely satisfied.

For normal goods like cola and pizza,what is a likely result of the substitution effect when the price of pizza rises

What do economists use to represent a consumer's preferences

The theory of consumer choice can often provide insight into the behaviour of which of the following types of individuals

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

Assume that a college student spends all of her income on macaroni and hamburger.The price of a box of macaroni is $1.50 and a pound of hamburger costs $3.50.If she has $42 of income,what could she choose to consume

Figure 21-9 -Refer to Figure 21-9.If point B is the consumer's optimum and the price of marshmallows is $2 per bag,what is the price of a bag of chocolate chips

Figure 21-2 -Refer to Figure 21-2.Which of the graphs in the figure reflects an increase in the price of good Y only

What does a budget constraint show

Which of the following is a property of indifference curves

A fall in the price of widgets leads consumers to buy more widgets.What can we conclude from this information

List and briefly explain each of the four properties of indifference curves.

When the price of a good increases,the higher price has what result,all else being equal

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

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

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

Frontiers of Microeconomics

Filters