Question 1

Figure 21-2
  
-Refer to Figure 21-2.Which of the graphs in the figure reflects a decrease in the price of good X 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 2

What the term for the point where the highest attainable indifference curve and the budget constraint are tangent

Accepted Answer

A) the consumer's equilibrium 
B) the consumer's utility minimum 
C) the consumer's efficient allocation of resources 
D) the consumer's optimum 
A) the consumer's equilibrium 
B) the consumer's utility minimum 
C) the consumer's efficient allocation of resources 
D) the consumer's optimum

Question 3

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

Accepted Answer

A) $30 
B) $32 
C) $34 
D) $36 
A) $30 
B) $32 
C) $34 
D) $36

Question 4

A rise in the interest rate will cause people to consume more when they are old.

Accepted Answer

A) True 
 B)False

Question 5

Giffen goods are inferior goods for which the income effect dominates the substitution effect.

Accepted Answer

A) True 
 B)False

Question 6

What does it mean when a budget constraint shifts outward

Accepted Answer

A) The outward shift could only have been caused by an increase in income. 
B) The budget constraint would move closer to the origin. 
C) The outward shift could only have been caused by an increase in the price of one of the goods. 
D) The consumer can reach a higher indifference curve. 
A) The outward shift could only have been caused by an increase in income. 
B) The budget constraint would move closer to the origin. 
C) The outward shift could only have been caused by an increase in the price of one of the goods. 
D) The consumer can reach a higher indifference curve.

Question 7

For normal goods like cola and pizza,what happens due to the substitution effect when the price of pizza falls

Accepted Answer

A) There is a shift to a lower indifference curve, so the consumer buys more cola. 
B) There is a shift to a higher indifference curve, so the consumer buys more cola. 
C) There is movement along the indifference curve, so the consumer buys more cola. 
D) There is movement along the indifference curve, so the consumer buys less cola. 
A) There is a shift to a lower indifference curve, so the consumer buys more cola. 
B) There is a shift to a higher indifference curve, so the consumer buys more cola. 
C) There is movement along the indifference curve, so the consumer buys more cola. 
D) There is movement along the indifference curve, so the consumer buys less cola.

Question 8

What is a property of indifference curves

Accepted Answer

A) Lower indifference curves are preferred to higher ones. 
B) The slope of indifference curves is positive. 
C) Indifference curves do not cross. 
D) Indifference curves are bowed outward. 
A) Lower indifference curves are preferred to higher ones. 
B) The slope of indifference curves is positive. 
C) Indifference curves do not cross. 
D) Indifference curves are bowed outward.

Question 9

As long as a consumer is on a given indifference curve,what can we say about her preferences

Accepted Answer

A) She is indifferent to all points that lie on any other indifference curves. 
B) Her preferences will not affect the marginal rate of substitution. 
C) She is unable to decide which bundle of goods to choose. 
D) She is indifferent among the points on that curve. 
A) She is indifferent to all points that lie on any other indifference curves. 
B) Her preferences will not affect the marginal rate of substitution. 
C) She is unable to decide which bundle of goods to choose. 
D) She is indifferent among the points on that curve.

Question 10

What does a bowed-in indifference curve reflect

Accepted Answer

A) a consumer's unwillingness to substitute one good for another 
B) a consumer's desire to specialize in the consumption of one good over another 
C) a consumer's decreasing willingness to give up a good that she has in abundance 
D) a consumer's increasing willingness to give up a good that she has in abundance 
A) a consumer's unwillingness to substitute one good for another 
B) a consumer's desire to specialize in the consumption of one good over another 
C) a consumer's decreasing willingness to give up a good that she has in abundance 
D) a consumer's increasing willingness to give up a good that she has in abundance

Question 11

What happens when indifference curves are bowed in toward the origin

Accepted Answer

A) A consumer is less willing to trade away any goods when his income decreases. 
B) A consumer is more willing to trade away goods when his income increases. 
C) A consumer is less willing to trade away goods that he has in abundance than the goods of which he has little. 
D) A consumer is more willing to trade away goods that he has in abundance than the goods of which he has little. 
A) A consumer is less willing to trade away any goods when his income decreases. 
B) A consumer is more willing to trade away goods when his income increases. 
C) A consumer is less willing to trade away goods that he has in abundance than the goods of which he has little. 
D) A consumer is more willing to trade away goods that he has in abundance than the goods of which he has little.

Question 12

When considering her budget,what is the highest indifference curve that a consumer can reach

Accepted Answer

A) the indifference curve to which the budget constraint is tangent 
B) the indifference curve farthest from the origin 
C) the indifference curve that intersects the budget constraint in at least two places 
D) the indifference curve for which all combinations of goods are affordable 
A) the indifference curve to which the budget constraint is tangent 
B) the indifference curve farthest from the origin 
C) the indifference curve that intersects the budget constraint in at least two places 
D) the indifference curve for which all combinations of goods are affordable

Question 13

Jonathan spent $10 buying sports drinks each week,and his preference is given by a utility function U = 10 × (2Q₀
 + QG),where Q₀
 is the bottles of orange drink he consumes and QG is the bottles of grape drink he consumes.
a.If the price of orange drink is $1 and grape drink is $0.6 dollar,how many bottles of each kind of drink will he buy and what is his total utility
b.Supposing grape drink is on a special discount of $0.25 and the price of the orange drink is still at $1,how many bottles of each kind of drink will he buy and what is his total utility

Accepted Answer

a.The two products are perfect substitut

Question 14

When two goods are perfect complements,of what form are the indifference curves

Accepted Answer

A) positively sloped 
B) negatively sloped 
C) vertical lines 
D) right angles 
A) positively sloped 
B) negatively sloped 
C) vertical lines 
D) right angles

Question 15

When are violations of the law of demand assumed to occur

Accepted Answer

A) commonly 
B) only when goods are Giffen goods 
C) only when the substitution effect dominates the income effect 
D) only when the income effect dominates the substitution effect 
A) commonly 
B) only when goods are Giffen goods 
C) only when the substitution effect dominates the income effect 
D) only when the income effect dominates the substitution effect

Question 16

Which term refers to the rate at which a consumer is willing to exchange one good for another,maintaining a constant level of satisfaction

Accepted Answer

A) the relative exchange ratio 
B) the value of marginal product 
C) the marginal rate of substitution 
D) the relative price ratio 
A) the relative exchange ratio 
B) the value of marginal product 
C) the marginal rate of substitution 
D) the relative price ratio

Question 17

Figure 21-8
  
-Refer to Figure 21-8.Assume that the consumer depicted has an income of $200.If the price of a bag of chocolate chips is $10 and the price of a bag of marshmallows is $10,what would the optimizing consumer choose to purchase

Accepted Answer

A) 3 bags of marshmallows and 9 bags of chocolate chips 
B) 5 bags of marshmallows and 5 bags of chocolate chips 
C) 8 bags of marshmallows and 6 bags of chocolate chips 
D) 10 bags of marshmallows and 10 bags of chocolate chips 
A) 3 bags of marshmallows and 9 bags of chocolate chips 
B) 5 bags of marshmallows and 5 bags of chocolate chips 
C) 8 bags of marshmallows and 6 bags of chocolate chips 
D) 10 bags of marshmallows and 10 bags of chocolate chips

Question 18

Figure 21-4
This figure shows a consumer's choice between popcorn and juice.
  
-Refer to Figure 21-4.What position is a person who chooses to consume bundle C likely to end up in

Accepted Answer

A) He will receive higher total utility than at point A. 
B) He will gain more satisfaction from bundle C than bundle A. 
C) He will receive higher marginal utility from popcorn than from juice. 
D) He will receive higher marginal utility from juice than from popcorn. 
A) He will receive higher total utility than at point A. 
B) He will gain more satisfaction from bundle C than bundle A. 
C) He will receive higher marginal utility from popcorn than from juice. 
D) He will receive higher marginal utility from juice than from popcorn.

Question 19

Figure 21-3
  
-Refer to Figure 21-3.In graph (b),if income is equal to $210,what is the price of good Y

Accepted Answer

A) $42 
B) $44 
C) $46 
D) $48 
A) $42 
B) $44 
C) $46 
D) $48

Question 20

Use graphs to demonstrate how an individual labour supply curve is derived.

Accepted Answer

@#IMG-DLM&
In figure (a),a person's maximum hours

Exam 21: The Theory of Consumer Choice

Figure 21-2 -Refer to Figure 21-2.Which of the graphs in the figure reflects a decrease in the price of good X only

What the term for the point where the highest attainable indifference curve and the budget constraint are tangent

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

A rise in the interest rate will cause people to consume more when they are old.

Giffen goods are inferior goods for which the income effect dominates the substitution effect.

What does it mean when a budget constraint shifts outward

For normal goods like cola and pizza,what happens due to the substitution effect when the price of pizza falls

What is a property of indifference curves

As long as a consumer is on a given indifference curve,what can we say about her preferences

What does a bowed-in indifference curve reflect

What happens when indifference curves are bowed in toward the origin

When considering her budget,what is the highest indifference curve that a consumer can reach

When two goods are perfect complements,of what form are the indifference curves

When are violations of the law of demand assumed to occur

Which term refers to the rate at which a consumer is willing to exchange one good for another,maintaining a constant level of satisfaction

Figure 21-8 -Refer to Figure 21-8.Assume that the consumer depicted has an income of $200.If the price of a bag of chocolate chips is $10 and the price of a bag of marshmallows is $10,what would the optimizing consumer choose to purchase

Figure 21-4 This figure shows a consumer's choice between popcorn and juice. -Refer to Figure 21-4.What position is a person who chooses to consume bundle C likely to end up in

Figure 21-3 -Refer to Figure 21-3.In graph (b),if income is equal to $210,what is the price of good Y

Use graphs to demonstrate how an individual labour supply curve is derived.

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