Question 1

When two goods are strong complements,such as nickels and dimes,the indifference curves are horizontal lines.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) $8 
B) $10 
C) $12 
D) $14 
A) $8 
B) $10 
C) $12 
D) $14

Question 3

When the budget constraint is tangent to the indifference curve,what is likely to be the case

Accepted Answer

A) The consumer cannot be made better off without increasing her income. 
B) The consumer is likely to be at a suboptimal level of consumption. 
C) Income is at its optimum for a consumer. 
D) Indifference curves are likely to intersect. 
A) The consumer cannot be made better off without increasing her income. 
B) The consumer is likely to be at a suboptimal level of consumption. 
C) Income is at its optimum for a consumer. 
D) Indifference curves are likely to intersect.

Question 4

Which property characterizes the consumption bundle selected by an optimizing consumer

Accepted Answer

A) The ratio of total utilities is equal to the relative price. 
B) The ratio of income to price equals the marginal rate of substitution. 
C) The marginal rate of substitution is equal to the relative price. 
D) The marginal rate of substitution is equal to income. 
A) The ratio of total utilities is equal to the relative price. 
B) The ratio of income to price equals the marginal rate of substitution. 
C) The marginal rate of substitution is equal to the relative price. 
D) The marginal rate of substitution is equal to income.

Question 5

Which characterization applies to a normal good

Accepted Answer

A) The average consumer chooses to consume the good at a normal level. 
B) The average consumer chooses to consume a normal good over a substitute good. 
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 to consume the good at a normal level. 
B) The average consumer chooses to consume a normal good over a substitute good. 
C) An increase in income increases consumption of the good. 
D) An increase in income decreases consumption of the good.

Question 6

Consider two goods: pizza and cola.What is the slope of the consumer's budget constraint measured by

Accepted Answer

A) the consumer's income divided by the price of cola 
B) the relative price of pizza and cola 
C) the relative income that the consumer spends on pizza and cola 
D) the consumer's spending on pizza divided by the consumer's income 
A) the consumer's income divided by the price of cola 
B) the relative price of pizza and cola 
C) the relative income that the consumer spends on pizza and cola 
D) the consumer's spending on pizza divided by the consumer's income

Question 7

Assume that a college student purchases only coffee and almonds.If coffee is an inferior good and almonds are a normal good,what will the income effect associated with an increase in the price of almonds result in

Accepted Answer

A) a decrease in the consumption of both almonds and coffee 
B) a decrease in the consumption of almonds and an increase in the consumption of coffee 
C) an increase in the consumption of both almonds and coffee 
D) an increase in the consumption of almonds and a decrease in the consumption of coffee 
A) a decrease in the consumption of both almonds and coffee 
B) a decrease in the consumption of almonds and an increase in the consumption of coffee 
C) an increase in the consumption of both almonds and coffee 
D) an increase in the consumption of almonds and a decrease in the consumption of coffee

Question 8

Jaelle is planning ahead for retirement and must decide how much to spend and how much to save while she is working in order to have money to spend when she retires.When the income effect dominates the substitution effect,how is an increase in the interest rate likely to influence saving

Accepted Answer

A) It is likely to decrease saving. 
B) It is likely to increase saving. 
C) It is likely to increase saving now and decrease saving later. 
D) It is likely to decrease saving now and increase saving later. 
A) It is likely to decrease saving. 
B) It is likely to increase saving. 
C) It is likely to increase saving now and decrease saving later. 
D) It is likely to decrease saving now and increase saving later.

Question 9

Which statement best explains the relationship between indifference curves and consumer preferences

Accepted Answer

A) A consumer is equally satisfied with any indifference curve. 
B) A consumer prefers indifference curves with positive slopes. 
C) A consumer prefers higher indifference curves to lower indifference curves. 
D) A consumer is generally unable to place all consumption bundles on an indifference curve. 
A) A consumer is equally satisfied with any indifference curve. 
B) A consumer prefers indifference curves with positive slopes. 
C) A consumer prefers higher indifference curves to lower indifference curves. 
D) A consumer is generally unable to place all consumption bundles on an indifference curve.

Question 10

Refer to Scenario 21-1 in your textbook.If Fred decides to spend 78 hours a week playing volleyball on the beach,and the rest of his time writing,how much income will he have available to spend on consumption goods each week

Accepted Answer

A) $900 
B) $1560 
C) $2890 
D) $3540 
A) $900 
B) $1560 
C) $2890 
D) $3540

Question 11

What is a rational consumer likely to have maximized

Accepted Answer

A) preferences 
B) marginal rate of substitution 
C) utility 
D) budget constraint 
A) preferences 
B) marginal rate of substitution 
C) utility 
D) budget constraint

Question 12

The consumer chooses consumption of the two goods so that the marginal rate of substitution equals the relative price ratio.

Accepted Answer

A) True 
 B)False

Question 13

Goods X and Y are perfect complements.If the price of good Y falls,what will the substitution effect acting by itself do

Accepted Answer

A) It will cause consumers to buy more of good Y and less of good X. 
B) It will cause consumers to buy more of good X and less of good Y. 
C) It will not affect the amount of goods X and Y that consumers buy. 
D) It will affect the amount of goods X and Y that consumers buy, but in an unpredictable way. 
A) It will cause consumers to buy more of good Y and less of good X. 
B) It will cause consumers to buy more of good X and less of good Y. 
C) It will not affect the amount of goods X and Y that consumers buy. 
D) It will affect the amount of goods X and Y that consumers buy, but in an unpredictable way.

Question 14

Figure 21-4
This figure shows a consumer's choice between popcorn and juice.
  
-Refer to Figure 21-4.Comparing all the points on the figure,which one is the best choice

Accepted Answer

A) If a consumer moves from point C to point A, her loss of popcorn cannot be compensated by an increase of juice. 
B) Point E is preferred to all other points identified in the figure. 
C) Because more is preferred to less, point C may be preferred to point E in some circumstances. 
D) Because point E and point B have basically equal units of juice and popcorn, a consumer would be indifferent between these two points. 
A) If a consumer moves from point C to point A, her loss of popcorn cannot be compensated by an increase of juice. 
B) Point E is preferred to all other points identified in the figure. 
C) Because more is preferred to less, point C may be preferred to point E in some circumstances. 
D) Because point E and point B have basically equal units of juice and popcorn, a consumer would be indifferent between these two points.

Question 15

Assume that your mother purchased two pairs of identical gloves for your birthday.What,in this case,do "left" gloves and "right" gloves provide a good example of

Accepted Answer

A) perfect substitutes 
B) perfect complements 
C) negatively sloped indifference curves 
D) positively sloped indifference curves 
A) perfect substitutes 
B) perfect complements 
C) negatively sloped indifference curves 
D) positively sloped indifference curves

Question 16

Assume that a consumer faces the following budget constraints:
a.Assuming that income is the same on both occasions,describe the difference in relative prices between panel (a) and panel (b).
b.If income in panel (b) is $154,what is the price of good X
c.If income in panel (a) is $98,what is the price of good Y
d.Assuming that the price of good X is the same on both occasions,describe the difference in income and price of good Y between panel (a) and panel (b).

Accepted Answer

a. The price of good Y is relatively hig

Question 17

If an indifference curve is bowed inward toward the origin,what do we know about the marginal rate of substitution

Accepted Answer

A) It is not likely to reflect the relative value of goods. 
B) It is likely to be constant for all bundles along the indifference curve. 
C) It is likely to be identical to the price ratio for each bundle along the indifference curve. 
D) It is different for each bundle along the indifference curve. 
A) It is not likely to reflect the relative value of goods. 
B) It is likely to be constant for all bundles along the indifference curve. 
C) It is likely to be identical to the price ratio for each bundle along the indifference curve. 
D) It is different for each bundle along the indifference curve.

Question 18

Which of the following is most likely an inferior good

Accepted Answer

A) an antique car 
B) gasoline 
C) a bus ticket 
D) an airline ticket 
A) an antique car 
B) gasoline 
C) a bus ticket 
D) an airline ticket

Question 19

If the price of a good increases,what do consumers perceive,all else being equal

Accepted Answer

A) an increase in purchasing power if the good is an inferior good 
B) an increase in income if the price increase occurs for a normal good 
C) a decrease in purchasing power 
D) a net gain in income if they increase consumption of some goods 
A) an increase in purchasing power if the good is an inferior good 
B) an increase in income if the price increase occurs for a normal good 
C) a decrease in purchasing power 
D) a net gain in income if they increase consumption of some goods

Question 20

Assume that a college student spends all of her income on 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) 5 boxes of macaroni and 4 pounds of hamburger 
B) 7 boxes of macaroni and 9 pounds of hamburger 
C) 11 boxes of macaroni and 6 pounds of hamburger 
D) 15 boxes of macaroni and 5pounds of hamburger 
A) 5 boxes of macaroni and 4 pounds of hamburger 
B) 7 boxes of macaroni and 9 pounds of hamburger 
C) 11 boxes of macaroni and 6 pounds of hamburger 
D) 15 boxes of macaroni and 5pounds of hamburger

Exam 21: The Theory of Consumer Choice

When two goods are strong complements,such as nickels and dimes,the indifference curves are horizontal lines.

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

When the budget constraint is tangent to the indifference curve,what is likely to be the case

Which property characterizes the consumption bundle selected by an optimizing consumer

Which characterization applies to a normal good

Consider two goods: pizza and cola.What is the slope of the consumer's budget constraint measured by

Assume that a college student purchases only coffee and almonds.If coffee is an inferior good and almonds are a normal good,what will the income effect associated with an increase in the price of almonds result in

Jaelle is planning ahead for retirement and must decide how much to spend and how much to save while she is working in order to have money to spend when she retires.When the income effect dominates the substitution effect,how is an increase in the interest rate likely to influence saving

Which statement best explains the relationship between indifference curves and consumer preferences

Refer to Scenario 21-1 in your textbook.If Fred decides to spend 78 hours a week playing volleyball on the beach,and the rest of his time writing,how much income will he have available to spend on consumption goods each week

What is a rational consumer likely to have maximized

The consumer chooses consumption of the two goods so that the marginal rate of substitution equals the relative price ratio.

Goods X and Y are perfect complements.If the price of good Y falls,what will the substitution effect acting by itself do

Figure 21-4 This figure shows a consumer's choice between popcorn and juice. -Refer to Figure 21-4.Comparing all the points on the figure,which one is the best choice

Assume that your mother purchased two pairs of identical gloves for your birthday.What,in this case,do "left" gloves and "right" gloves provide a good example of

If an indifference curve is bowed inward toward the origin,what do we know about the marginal rate of substitution

Which of the following is most likely an inferior good

If the price of a good increases,what do consumers perceive,all else being equal

Assume that a college student spends all of her income on 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

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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