Question 1

What is the slope of an indifference curve

Accepted Answer

A) the rate of change of consumer's preferences 
B) the marginal rate of exchange 
C) the marginal rate of substitution 
D) the slope of the budget constraint 
A) the rate of change of consumer's preferences 
B) the marginal rate of exchange 
C) the marginal rate of substitution 
D) the slope of the budget constraint

Question 2

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 3

What does the theory of consumer choice examine

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 4

Figure 21-5
  
-Refer to Figure 21-5.The consumer is likely to select the consumption bundle associated with which point

Accepted Answer

A) point B 
B) point C 
C) point D 
D) point E 
A) point B 
B) point C 
C) point D 
D) point E

Question 5

Figure 21-7
  
-Refer to Figure 21-7.If the consumer is currently at point B in the figure,what effect is represented by a movement to point C as a result of a decrease in the price of potato chips

Accepted Answer

A) the substitution effect 
B) the income effect 
C) the budget effect 
D) the price effect 
A) the substitution effect 
B) the income effect 
C) the budget effect 
D) the price effect

Question 6

Refer to Scenario 21-1 in your textbook.What is the implicit price that Fred pays for the satisfaction derived from playing an hour of volleyball

Accepted Answer

A) $0.00 
B) $37.50 
C) $85.00 
D) $150.00 
A) $0.00 
B) $37.50 
C) $85.00 
D) $150.00

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

What can we say about the amount of each good a consumer is currently consuming

Accepted Answer

A) It is only affected by price. 
B) It affects the rate at which she is willing to trade. 
C) It is only affected by income. 
D) It will not affect the marginal rate of substitution. 
A) It is only affected by price. 
B) It affects the rate at which she is willing to trade. 
C) It is only affected by income. 
D) It will not affect the marginal rate of substitution.

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

Figure 21-3
  
-Refer to Figure 21-3.In graph (b),if income is equal to $180,what is the price of good X

Accepted Answer

A) $6 
B) $8 
C) $10 
D) $12 
A) $6 
B) $8 
C) $10 
D) $12

Question 11

Figure 21-2
  
-Refer to Figure 21-2.Which of the graphs in the figure reflects an increase in consumer's income

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 12

In what direction will an increase 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 13

A consumer is currently consuming some of good X and some of good Y.If good Y is a normal good for this consumer,what will a rise in consumer income 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 14

Uta consumes two normal goods,X and Y,and is currently at an optimum.If the price of good X falls,what can we predict with certainty will occur,(aside from Uta's real income rising)

Accepted Answer

A) She will consume more of both goods. 
B) The substitution effect will ensure that she consumes more of good X and less of good Y. 
C) She will consume more of good X, but she might consume more, less, or the same of good Y. 
D) The substitution effect will negate the positive effect of the rise. 
A) She will consume more of both goods. 
B) The substitution effect will ensure that she consumes more of good X and less of good Y. 
C) She will consume more of good X, but she might consume more, less, or the same of good Y. 
D) The substitution effect will negate the positive effect of the rise.

Question 15

At the consumer's optimum,the consumer's valuation of the two goods equals the market valuation.

Accepted Answer

A) True 
 B)False

Question 16

Use consumer choice theory to explain why the demand curve is NOT always downward sloping.

Accepted Answer

In general,price changes lead to both in

Question 17

Assume that a college student spends all of her income on boxes of macaroni.During finals week,the price of a box of macaroni is $1.25 and a pound of hamburger costs $3.75.If she has $40 of income,what could she choose to consume

Accepted Answer

A) 3 boxes of macaroni and 5 pounds of hamburger 
B) 4 boxes of macaroni and 10 pounds of hamburger 
C) 7 boxes of macaroni and 8 pounds of hamburger 
D) 8 boxes of macaroni and 8 pounds of hamburger 
A) 3 boxes of macaroni and 5 pounds of hamburger 
B) 4 boxes of macaroni and 10 pounds of hamburger 
C) 7 boxes of macaroni and 8 pounds of hamburger 
D) 8 boxes of macaroni and 8 pounds of hamburger

Question 18

Table 21-1
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:

-Refer to Table 21-1.George receives three units of utility from the last dollar spent on each of the other goods he consumes.If cookies cost $4 per bag,how many bags of cookies will he consume per month if he maximizes utility

Accepted Answer

A) 2 
B) 3 
C) 4 
D) 5 
A) 2 
B) 3 
C) 4 
D) 5

Question 19

When both consumptions are considered "normal goods," what could result from the income effect of an increase in the interest rate

Accepted Answer

A) an increase in saving when young 
B) an increase in saving when old 
C) a decrease in saving when young, and a decrease in saving when old 
D) an increase in saving when young, and an increase in saving when old 
A) an increase in saving when young 
B) an increase in saving when old 
C) a decrease in saving when young, and a decrease in saving when old 
D) an increase in saving when young, and an increase in saving when old

Question 20

Evaluate the following statement: "Warren Buffet is the third richest person in the world.He doesn't face any constraint on his ability to purchase commodities he wants."

Accepted Answer

Everyone faces scarcity of res

Exam 21: The Theory of Consumer Choice

What is the slope of an indifference curve

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

What does the theory of consumer choice examine

Figure 21-5 -Refer to Figure 21-5.The consumer is likely to select the consumption bundle associated with which point

Figure 21-7 -Refer to Figure 21-7.If the consumer is currently at point B in the figure,what effect is represented by a movement to point C as a result of a decrease in the price of potato chips

Refer to Scenario 21-1 in your textbook.What is the implicit price that Fred pays for the satisfaction derived from playing an hour of volleyball

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

What can we say about the amount of each good a consumer is currently consuming

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

Figure 21-3 -Refer to Figure 21-3.In graph (b),if income is equal to $180,what is the price of good X

Figure 21-2 -Refer to Figure 21-2.Which of the graphs in the figure reflects an increase in consumer's income

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

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

Uta consumes two normal goods,X and Y,and is currently at an optimum.If the price of good X falls,what can we predict with certainty will occur,(aside from Uta's real income rising)

At the consumer's optimum,the consumer's valuation of the two goods equals the market valuation.

Use consumer choice theory to explain why the demand curve is NOT always downward sloping.

Assume that a college student spends all of her income on boxes of macaroni.During finals week,the price of a box of macaroni is $1.25 and a pound of hamburger costs $3.75.If she has $40 of income,what could she choose to consume

When both consumptions are considered "normal goods," what could result from the income effect of an increase in the interest rate

Evaluate the following statement: "Warren Buffet is the third richest person in the world.He doesn't face any constraint on his ability to purchase commodities he wants."

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