Question 1

Figure 21-5
  
-Refer to Figure 21-5.What occurs at point B

Accepted Answer

A) MRSXY > PY/Px 
B) MRSXY = PX/PY 
C) MRSXY  PX/PY 
A) MRSXY > PY/Px 
B) MRSXY = PX/PY 
C) MRSXY  PX/PY

Question 2

Why do Giffen goods have positively sloped demand curves

Accepted Answer

A) They are inferior goods with no substitution effect. 
B) They are normal goods with no substitution effect. 
C) They are inferior goods for which the substitution effect outweighs the income effect. 
D) They are inferior goods for which the income effect outweighs the substitution effect. 
A) They are inferior goods with no substitution effect. 
B) They are normal goods with no substitution effect. 
C) They are inferior goods for which the substitution effect outweighs the income effect. 
D) They are inferior goods for which the income effect outweighs the substitution effect.

Question 3

If goods are perfect substitutes,what is the income effect of a price change on the other good

Accepted Answer

A) positive only 
B) zero only 
C) negative only 
D) zero or positive 
A) positive only 
B) zero only 
C) negative only 
D) zero or positive

Question 4

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 who moves from point B to point C

Accepted Answer

A) The consumer is better off since he has more popcorn. 
B) The consumer is worse off since he has less juice. 
C) The consumer is willing to sacrifice juice to obtain popcorn. 
D) The consumer has the same preferences between juice and popcorn. 
A) The consumer is better off since he has more popcorn. 
B) The consumer is worse off since he has less juice. 
C) The consumer is willing to sacrifice juice to obtain popcorn. 
D) The consumer has the same preferences between juice and popcorn.

Question 5

Figure 21-8
  
-Refer to Figure 21-8.Assume that the consumer depicted has an income of $120 and the price of a bag of marshmallows is $6.Which bundle of marshmallows and chocolate chips will the optimizing consumer choose to purchase

Accepted Answer

A) bundle A 
B) bundle B 
C) bundle C 
D) bundle D 
A) bundle A 
B) bundle B 
C) bundle C 
D) bundle D

Question 6

Assume that a college student purchases only coffee and almonds.What will the substitution effect associated with a decrease in the price of almonds result in

Accepted Answer

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

Question 7

If the relative price of a lift ticket at a ski resort is two times the price of a meal at a good restaurant,what is the opportunity cost of a lift ticket

Accepted Answer

A) the slope of the budget constraint 
B) the slope of the indifference curve 
C) the intercept on the lift ticket axis 
D) the intercept on the meal axis 
A) the slope of the budget constraint 
B) the slope of the indifference curve 
C) the intercept on the lift ticket axis 
D) the intercept on the meal axis

Question 8

What could be caused by the substitution effect of an increase in the interest rate

Accepted Answer

A) an increase in consumption and saving when young 
B) an increase in consumption when old and saving when young 
C) an increase in consumption when young and saving when old 
D) an increase in consumption and saving when old 
A) an increase in consumption and saving when young 
B) an increase in consumption when old and saving when young 
C) an increase in consumption when young and saving when old 
D) an increase in consumption and saving when old

Question 9

When two goods are perfect substitutes,what do we know about the marginal rate of substitution

Accepted Answer

A) It is constant. 
B) It decreases as the scarcity of one good increases. 
C) It increases as the scarcity of one good increases. 
D) It increases as the abundance of one good increases. 
A) It is constant. 
B) It decreases as the scarcity of one good increases. 
C) It increases as the scarcity of one good increases. 
D) It increases as the abundance of one good increases.

Question 10

What does an upward-sloping individual labour supply curve indicate

Accepted Answer

A) dominant income effects 
B) dominant substitution effects 
C) individuals that reduce work effort (hours) as income rises 
D) individuals that increase work efforts (hours) as income falls 
A) dominant income effects 
B) dominant substitution effects 
C) individuals that reduce work effort (hours) as income rises 
D) individuals that increase work efforts (hours) as income falls

Question 11

What is a property of indifference curves

Accepted Answer

A) Indifference curves are upward sloping. 
B) Indifference curves that are farther from the origin are preferable to indifference curves closer to the origin. 
C) Indifference curves are bowed outward from the origin. 
D) Indifference curves may or may not cross. 
A) Indifference curves are upward sloping. 
B) Indifference curves that are farther from the origin are preferable to indifference curves closer to the origin. 
C) Indifference curves are bowed outward from the origin. 
D) Indifference curves may or may not cross.

Question 12

If a consumer's income increases,the budget constraint will pivot on the X axis so that the consumer will be able to consumer more of both goods.

Accepted Answer

A) True 
 B)False

Question 13

What are the two effects a consumer experiences from a change in the price

Accepted Answer

A) the income effect and the budget effect 
B) the complement effect and the substitute effect 
C) the price effect and the preference effect 
D) the income effect and the substitution effect 
A) the income effect and the budget effect 
B) the complement effect and the substitute effect 
C) the price effect and the preference effect 
D) the income effect and the substitution effect

Question 14

Figure 21-6
  
-Refer to Figure 21-6.Assume that the consumer depicted in the figure has an income of $20 to spend entirely on yogurt and granola bars.The price of a tub of yogurt is $2,and the price of a pack of granola bars is $4.This consumer will choose a consumption bundle where the marginal rate of substitution is equal to which of the following

Accepted Answer

A) 1/3 
B) 1/2 
C) 2/3 
D) 3 
A) 1/3 
B) 1/2 
C) 2/3 
D) 3

Question 15

The marginal rate of substitution is the slope of the budget constraint.

Accepted Answer

A) True 
 B)False

Question 16

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 who moves from point A to point D

Accepted Answer

A) The consumer has a stronger preference for popcorn. 
B) The consumer is indifferent between point A and point D. 
C) The consumer is definitely worse off. 
D) The consumer is likely to place a higher relative value on juice at point A than at point D. 
A) The consumer has a stronger preference for popcorn. 
B) The consumer is indifferent between point A and point D. 
C) The consumer is definitely worse off. 
D) The consumer is likely to place a higher relative value on juice at point A than at point D.

Question 17

What happens at the consumer's optimum

Accepted Answer

A) The budget constraint has a slope of MUX/PX. 
B) It is still possible for the consumer to increase his consumption of both goods. 
C) The indifference curve would intersect the budget constraint at its centre point. 
D) The slope of the indifference curve is equal to the slope of the budget constraint. 
A) The budget constraint has a slope of MUX/PX. 
B) It is still possible for the consumer to increase his consumption of both goods. 
C) The indifference curve would intersect the budget constraint at its centre point. 
D) The slope of the indifference curve is equal to the slope of the budget constraint.

Question 18

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

Accepted Answer

A) It is likely to increase saving. 
B) It is likely to decrease 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 increase saving. 
B) It is likely to decrease 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 19

What does a consumer's choice of goods depend on

Accepted Answer

A) her budget constraint and income 
B) her budget constraint and preferences 
C) her budget constraint, income, and preferences 
D) her preferences and income 
A) her budget constraint and income 
B) her budget constraint and preferences 
C) her budget constraint, income, and preferences 
D) her preferences and income

Question 20

What are the two "goods" used when economists analyze labour supply

Accepted Answer

A) work and leisure 
B) work and consumption 
C) saving and consumption 
D) leisure and consumption 
A) work and leisure 
B) work and consumption 
C) saving and consumption 
D) leisure and consumption

Exam 21: The Theory of Consumer Choice

Figure 21-5 -Refer to Figure 21-5.What occurs at point B

Why do Giffen goods have positively sloped demand curves

If goods are perfect substitutes,what is the income effect of a price change on the other good

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 who moves from point B to point C

Figure 21-8 -Refer to Figure 21-8.Assume that the consumer depicted has an income of $120 and the price of a bag of marshmallows is $6.Which bundle of marshmallows and chocolate chips will the optimizing consumer choose to purchase

Assume that a college student purchases only coffee and almonds.What will the substitution effect associated with a decrease in the price of almonds result in

If the relative price of a lift ticket at a ski resort is two times the price of a meal at a good restaurant,what is the opportunity cost of a lift ticket

What could be caused by the substitution effect of an increase in the interest rate

When two goods are perfect substitutes,what do we know about the marginal rate of substitution

What does an upward-sloping individual labour supply curve indicate

What is a property of indifference curves

If a consumer's income increases,the budget constraint will pivot on the X axis so that the consumer will be able to consumer more of both goods.

What are the two effects a consumer experiences from a change in the price

The marginal rate of substitution is the slope of the budget constraint.

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 who moves from point A to point D

What happens at the consumer's optimum

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

What does a consumer's choice of goods depend on

What are the two "goods" used when economists analyze labour supply

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