Question 1

If two bundles of goods satisfy a consumer equally well,what can we say about the consumer

Accepted Answer

A) She is on her budget constraint. 
B) She is in a position of equilibrium. 
C) She is indifferent between the bundles. 
D) She is optimally satisfied. 
A) She is on her budget constraint. 
B) She is in a position of equilibrium. 
C) She is indifferent between the bundles. 
D) She is optimally satisfied.

Question 2

Why could a labour supply curve be backward bending

Accepted Answer

A) As wage increases, the opportunity cost of leisure increases even more. 
B) As wage increases, a person can enjoy more leisure because of the income effect 
C) As wage increases, the substitution effect dominates, then the income effect dominates. 
D) As wage increases, the income effect dominates, then the substitution effect dominates. 
A) As wage increases, the opportunity cost of leisure increases even more. 
B) As wage increases, a person can enjoy more leisure because of the income effect 
C) As wage increases, the substitution effect dominates, then the income effect dominates. 
D) As wage increases, the income effect dominates, then the substitution effect dominates.

Question 3

Figure 21-3
  
-Refer to Figure 21-3.In graph (a),what is the price of good Y relative to good X (i.e.,PY/PX)

Accepted Answer

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

Question 4

When considering household saving,what is the relative price between "consuming when young" and "consuming when old"

Accepted Answer

A) the consumption rate 
B) the interest rate 
C) the prime rate 
D) the bank rate 
A) the consumption rate 
B) the interest rate 
C) the prime rate 
D) the bank rate

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

What type of indifference curve would represent nickels and dimes

Accepted Answer

A) bowed out 
B) bowed in 
C) vertical lines 
D) right angles 
A) bowed out 
B) bowed in 
C) vertical lines 
D) right angles

Question 7

Assume that a college student spends all of her income on cola and macaroni and hamburger.During exam week,the price of a box of macaroni is $1.50 and a pound of hamburger costs $4.00.If she has $41 of income,what could she choose to consume

Accepted Answer

A) 6 boxes of macaroni and 8 pounds of hamburger 
B) 7 boxes of macaroni and 9 pounds of hamburger 
C) 12 boxes of macaroni and 6 pounds of hamburger 
D) 14 boxes of macaroni and 5 pounds of hamburger 
A) 6 boxes of macaroni and 8 pounds of hamburger 
B) 7 boxes of macaroni and 9 pounds of hamburger 
C) 12 boxes of macaroni and 6 pounds of hamburger 
D) 14 boxes of macaroni and 5 pounds of hamburger

Question 8

Which conclusion would crossing indifference curves suggest

Accepted Answer

A) It is possible to demonstrate that a consumer does not prefer more to less. 
B) Consumers are likely to prefer a redistribution of income from rich to poor. 
C) Differences in consumption choices across individuals are more easily explained than with noncrossing indifference curves. 
D) It is possible to demonstrate that all standard properties of indifference curves are typically satisfied. 
A) It is possible to demonstrate that a consumer does not prefer more to less. 
B) Consumers are likely to prefer a redistribution of income from rich to poor. 
C) Differences in consumption choices across individuals are more easily explained than with noncrossing indifference curves. 
D) It is possible to demonstrate that all standard properties of indifference curves are typically satisfied.

Question 9

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 10

When two goods are perfect complements,what types of indifference curves will they have

Accepted Answer

A) indifference curves with a positive slope 
B) indifference curves that are vertical 
C) indifference curves that are horizontal 
D) indifference curves that are right angles 
A) indifference curves with a positive slope 
B) indifference curves that are vertical 
C) indifference curves that are horizontal 
D) indifference curves that are right angles

Question 11

What would happen to an individual's labour supply schedule if leisure were an inferior good?

Accepted Answer

If leisure were an inferior go

Question 12

Figure 21-8
  
-Refer to Figure 21-8.If point B is the consumer's optimum and the price of chocolate chips is $4 per bag,what is the price of a bag of marshmallows

Accepted Answer

A) $1.50 
B) $2.00 
C) $3.00 
D) $6.00 
A) $1.50 
B) $2.00 
C) $3.00 
D) $6.00

Question 13

The income effect (in the work-leisure model) induces a person to work harder in response to higher wages,which tends to make the labour supply curve slope upward.

Accepted Answer

A) True 
 B)False

Question 14

What does economic theory predict will be the result of an increase in wages

Accepted Answer

A) It will cause a wage earner to work more if there is a dominant income effect. 
B) It will cause a wage earner to work less if there is a dominant substitution effect. 
C) It will cause a wage earner to enjoy less leisure if there is a dominant income effect. 
D) It will cause a wage earner to enjoy more leisure if there is a dominant income effect. 
A) It will cause a wage earner to work more if there is a dominant income effect. 
B) It will cause a wage earner to work less if there is a dominant substitution effect. 
C) It will cause a wage earner to enjoy less leisure if there is a dominant income effect. 
D) It will cause a wage earner to enjoy more leisure if there is a dominant income effect.

Question 15

Figure 21-4
This figure shows a consumer's choice between popcorn and juice.
  
-Refer to Figure 21-4.Which statement best describes a consumer's preference

Accepted Answer

A) Point A is preferred equally to point E. 
B) Point A is preferred equally to point C. 
C) The bundle associated with point B contains more popcorn than that associated with point C. 
D) The bundles along indifference curve I1 are preferred to those along indifference curve I2. 
A) Point A is preferred equally to point E. 
B) Point A is preferred equally to point C. 
C) The bundle associated with point B contains more popcorn than that associated with point C. 
D) The bundles along indifference curve I1 are preferred to those along indifference curve I2.

Question 16

The substitution effect (in the work-leisure model) induces a person to work less in response to higher wages,which tends to make the labour supply curve slope upward.

Accepted Answer

A) True 
 B)False

Question 17

Draw a budget constraint that is consistent with the following prices and income:
Income = $200
PY = $50
PX = $25
a.Demonstrate how your original budget constraint would change if income increases to $500.
b.Demonstrate how your original budget constraint would change if PY decreases to $20.
c.Demonstrate how your original budget constraint would change if PX increases to $40.

Accepted Answer

The answer of Draw a budget constraint that is consistent...

Question 18

What type of indifference curve would represent right shoes and left shoes

Accepted Answer

A) bowed out 
B) bowed in 
C) vertical lines 
D) right angles 
A) bowed out 
B) bowed in 
C) vertical lines 
D) right angles

Question 19

Which characterization applies to an inferior good

Accepted Answer

A) The average consumer chooses not to consume the good. 
B) The good is not equally valued by all consumers. 
C) An increase in income increases consumption of the good. 
D) An increase in income decreases consumption of the good. 
A) The average consumer chooses not to consume the good. 
B) The good is not equally valued by all consumers. 
C) An increase in income increases consumption of the good. 
D) An increase in income decreases consumption of the good.

Question 20

Explain the relationship between the budget constraint and the indifference curve at consumer optimum.

Accepted Answer

Since the budget constraint is tangent t

Exam 21: The Theory of Consumer Choice

If two bundles of goods satisfy a consumer equally well,what can we say about the consumer

Why could a labour supply curve be backward bending

Figure 21-3 -Refer to Figure 21-3.In graph (a),what is the price of good Y relative to good X (i.e.,PY/PX)

When considering household saving,what is the relative price between "consuming when young" and "consuming when old"

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

What type of indifference curve would represent nickels and dimes

Assume that a college student spends all of her income on cola and macaroni and hamburger.During exam week,the price of a box of macaroni is $1.50 and a pound of hamburger costs $4.00.If she has $41 of income,what could she choose to consume

Which conclusion would crossing indifference curves suggest

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

When two goods are perfect complements,what types of indifference curves will they have

What would happen to an individual's labour supply schedule if leisure were an inferior good?

Figure 21-8 -Refer to Figure 21-8.If point B is the consumer's optimum and the price of chocolate chips is $4 per bag,what is the price of a bag of marshmallows

The income effect (in the work-leisure model) induces a person to work harder in response to higher wages,which tends to make the labour supply curve slope upward.

What does economic theory predict will be the result of an increase in wages

Figure 21-4 This figure shows a consumer's choice between popcorn and juice. -Refer to Figure 21-4.Which statement best describes a consumer's preference

The substitution effect (in the work-leisure model) induces a person to work less in response to higher wages,which tends to make the labour supply curve slope upward.

What type of indifference curve would represent right shoes and left shoes

Which characterization applies to an inferior good

Explain the relationship between the budget constraint and the indifference curve at consumer optimum.

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

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