Question 1

Figure 21-7
  
-Refer to Figure 21-7.Which effect would cause the shift from point B to point C

Accepted Answer

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

Question 2

Answer the following questions based on the table.A consumer is able to consume the following bundles of rice and beans when the price of rice is $2 and the price of beans is $3:
   
a.How much is this consumer's income?
b.Draw a budget constraint given this information.Label it B.
c.Construct a new budget constraint showing the change if the price of rice falls by $1.Label this C.
d.Given the original prices for rice ($2) and beans ($3), construct a new budget constraint if this consumer's income increased to $48.Label this D.

Accepted Answer

a.$24
b.,c

Question 3

When economists describe preferences,what concept do they often use

Accepted Answer

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

Question 4

The substitution effect of a wage decrease,in the work-leisure model,applies when the worker chooses which option

Accepted Answer

A) He wishes to work less. 
B) He wishes to work more. 
C) He is indifferent between working more or less. 
D) He wishes to work more but be less productive. 
A) He wishes to work less. 
B) He wishes to work more. 
C) He is indifferent between working more or less. 
D) He wishes to work more but be less productive.

Question 5

Figure 21-8
  
-Refer to Figure 21-8.Assume that the consumer depicted has an income of $100.Which price-quantity combination would be on her demand curve for marshmallows if the price of a bag of chocolate chips is $10

Accepted Answer

A) $2.50, 4 
B) $2.50, 9 
C) $5.00, 4 
D) $5.00, 8 
A) $2.50, 4 
B) $2.50, 9 
C) $5.00, 4 
D) $5.00, 8

Question 6

What effect is due to a price change that moves the consumer along the same indifference curve to a point with a new marginal rate of substitution

Accepted Answer

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

Question 7

Some economists have advocated reducing the taxation of interest and other capital income,arguing that such a policy change would raise the after-tax interest rate that savers can earn and would thereby encourage people to save more.

Accepted Answer

A) True 
 B)False

Question 8

Figure 21-1
  
-Refer to Figure 21-1.Which point in the figure represents the consumer's income divided by the price of Coke

Accepted Answer

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

Question 9

Assume that a university 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) 14 boxes of macaroni and 6 pounds of hamburger 
B) 15 boxes of macaroni and 7 pounds of hamburger 
C) 20 boxes of macaroni and 4 pounds of hamburger 
D) 22 boxes of macaroni and 3 pounds of hamburger 
A) 14 boxes of macaroni and 6 pounds of hamburger 
B) 15 boxes of macaroni and 7 pounds of hamburger 
C) 20 boxes of macaroni and 4 pounds of hamburger 
D) 22 boxes of macaroni and 3 pounds of hamburger

Question 10

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 11

What does a consumer's preferences provide

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 12

Figure 21-9
  
-Refer to Figure 21-9.If point B is the consumer's optimum and her income is $100,what is the price of a bag of marshmallows

Accepted Answer

A) $3 
B) $4 
C) $5 
D) $8 
A) $3 
B) $4 
C) $5 
D) $8

Question 13

What can we say about a consumer who doesn't spend all of her income

Accepted Answer

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

Question 14

If a consumer's income decreases,in what way will the budget constraint for cola and pizza change

Accepted Answer

A) It will shift outward, parallel to the old budget constraint. 
B) It will shift inward, parallel to the old budget constraint. 
C) It will rotate outward toward pizza because the consumer can afford more pizza. 
D) It will rotate outward toward cola because the consumer can afford more cola. 
A) It will shift outward, parallel to the old budget constraint. 
B) It will shift inward, parallel to the old budget constraint. 
C) It will rotate outward toward pizza because the consumer can afford more pizza. 
D) It will rotate outward toward cola because the consumer can afford more cola.

Question 15

What does the theory of consumer choice provide the foundation for understanding

Accepted Answer

A) the structure of a firm 
B) the profitability of a firm 
C) the product demand curve of a firm 
D) the product supply curve of a firm 
A) the structure of a firm 
B) the profitability of a firm 
C) the product demand curve of a firm 
D) the product supply curve of a firm

Question 16

Assume that a college student spends all of her income on macaroni and hamburger.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) 5boxes of macaroni and 9 pounds of hamburger 
B) 9 boxes of macaroni and 8 pounds of hamburger 
C) 10 boxes of macaroni and 9 pounds of hamburger 
D) 14 boxes of macaroni and 10 pounds of hamburger 
A) 5boxes of macaroni and 9 pounds of hamburger 
B) 9 boxes of macaroni and 8 pounds of hamburger 
C) 10 boxes of macaroni and 9 pounds of hamburger 
D) 14 boxes of macaroni and 10 pounds of hamburger

Question 17

How can we define the marginal rate of substitution on the graph of consumer choice model

Accepted Answer

A) It is the slope of a budget constraint. 
B) It is the ratio between the slope of a budget constraint and an indifference curve. 
C) It is the slope of an indifference curve. 
D) It is the point at which the budget constraint is tangent to the indifference curve. 
A) It is the slope of a budget constraint. 
B) It is the ratio between the slope of a budget constraint and an indifference curve. 
C) It is the slope of an indifference curve. 
D) It is the point at which the budget constraint is tangent to the indifference curve.

Question 18

If the consumption of one good is reduced,how must a consumer alter his consumption of another good in order to remain indifferent between two bundles

Accepted Answer

A) He can reduce, increase, or not change his consumption of another good. 
B) He must reduce his consumption of another good. 
C) He must increase his consumption of another good. 
D) He must not change his consumption of another good. 
A) He can reduce, increase, or not change his consumption of another good. 
B) He must reduce his consumption of another good. 
C) He must increase his consumption of another good. 
D) He must not change his consumption of another good.

Question 19

If leisure were an inferior good,what shape would labour supply curves be

Accepted Answer

A) negatively sloped 
B) positively sloped 
C) vertical 
D) horizontal 
A) negatively sloped 
B) positively sloped 
C) vertical 
D) horizontal

Question 20

What do indifference curves graphically represent

Accepted Answer

A) an income level sufficient to make an individual happy 
B) the constraints faced by individuals 
C) an individual's preferences 
D) the relative price of commodities 
A) an income level sufficient to make an individual happy 
B) the constraints faced by individuals 
C) an individual's preferences 
D) the relative price of commodities

Exam 21: The Theory of Consumer Choice

Figure 21-7 -Refer to Figure 21-7.Which effect would cause the shift from point B to point C

When economists describe preferences,what concept do they often use

The substitution effect of a wage decrease,in the work-leisure model,applies when the worker chooses which option

Figure 21-8 -Refer to Figure 21-8.Assume that the consumer depicted has an income of $100.Which price-quantity combination would be on her demand curve for marshmallows if the price of a bag of chocolate chips is $10

What effect is due to a price change that moves the consumer along the same indifference curve to a point with a new marginal rate of substitution

Some economists have advocated reducing the taxation of interest and other capital income,arguing that such a policy change would raise the after-tax interest rate that savers can earn and would thereby encourage people to save more.

Figure 21-1 -Refer to Figure 21-1.Which point in the figure represents the consumer's income divided by the price of Coke

Assume that a university 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

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

What does a consumer's preferences provide

Figure 21-9 -Refer to Figure 21-9.If point B is the consumer's optimum and her income is $100,what is the price of a bag of marshmallows

What can we say about a consumer who doesn't spend all of her income

If a consumer's income decreases,in what way will the budget constraint for cola and pizza change

What does the theory of consumer choice provide the foundation for understanding

Assume that a college student spends all of her income on macaroni and hamburger.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

How can we define the marginal rate of substitution on the graph of consumer choice model

If the consumption of one good is reduced,how must a consumer alter his consumption of another good in order to remain indifferent between two bundles

If leisure were an inferior good,what shape would labour supply curves be

What do indifference curves graphically represent

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