Question 1

A Giffen good is a good for which a(n):

Accepted Answer

A)  increase in the price raises the quantity demanded 
B)  increase in the price lowers the quantity demanded 
C)  increase in the price raises the quantity supplied 
D)  decrease in the price raises the quantity supplied 
A)  increase in the price raises the quantity demanded 
B)  increase in the price lowers the quantity demanded 
C)  increase in the price raises the quantity supplied 
D)  decrease in the price raises the quantity supplied

Question 2

American hotdogs are made by combining one bun with one sausage. American hotdog buns and sausages are a good example of:

Accepted Answer

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

Question 3

The optimum represents the:

Accepted Answer

A)  centre point on the highest indifference curve possible for the consumer 
B)  best combination of two goods that is attainable by the consumer 
C)  point at which an indifference curve crosses the consumer's budget constraint 
D)  intersection of the consumer's demand curve and the market supply curve 
A)  centre point on the highest indifference curve possible for the consumer 
B)  best combination of two goods that is attainable by the consumer 
C)  point at which an indifference curve crosses the consumer's budget constraint 
D)  intersection of the consumer's demand curve and the market supply curve

Question 4

A consumer who finds herself on the highest indifference curve possible is likely to have maximised her:

Accepted Answer

A)  income 
B)  preferences 
C)  marginal rate of substitution 
D)  utility 
A)  income 
B)  preferences 
C)  marginal rate of substitution 
D)  utility

Question 5

At the optimum:

Accepted Answer

A)  the slope of the indifference curve is equal to the slope of the budget constraint 
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 
D)  the budget constraint would have a slope of 1 
A)  the slope of the indifference curve is equal to the slope of the budget constraint 
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 
D)  the budget constraint would have a slope of 1

Question 6

If two goods are perfect substitutes, their indifference curves will be right-angled; if two goods are perfect complements, their indifference curves will be linear.

Accepted Answer

A) True 
 B)False

Question 7

As long as a consumer is on the same indifference curve:

Accepted Answer

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

Question 8

Graph 22-6
  
-Refer to Graph 22-6. If a consumer is at point C and moved to point B they would be:

Accepted Answer

A)  better off because he or she is consuming more Y 
B)  better off because he or she is consuming less X 
C)  be no better off because they are still on the same budget line 
D)  worse off because they are on a lower indifference curve 
A)  better off because he or she is consuming more Y 
B)  better off because he or she is consuming less X 
C)  be no better off because they are still on the same budget line 
D)  worse off because they are on a lower indifference curve

Question 9

If the budget constraint crosses an indifference curve in two places, both these points will be below the consumer's optimal level of consumption.

Accepted Answer

A) True 
 B)False

Question 10

The substitution effect from an increase in wages is manifest in a:

Accepted Answer

A)  decrease in labour demand 
B)  desire to consume less leisure 
C)  desire to consume more leisure 
D)  backward-bending labour supply curve 
A)  decrease in labour demand 
B)  desire to consume less leisure 
C)  desire to consume more leisure 
D)  backward-bending labour supply curve

Question 11

Use a diagram to demonstrate the circumstances under which a consumer is indifferent between an in-kind transfer and a cash transfer of equal dollar value. If a cash transfer is always at least as preferred as an in-kind transfer, what do you think are the reasons for maintaining programs that rely on in-kind transfers? Explain your answer.

Accepted Answer

Transfer programs are typicall

Question 12

Higher indifference curves are preferred to lower ones as long as the:

Accepted Answer

A)  commodities in the bundle are 'healthy' 
B)  commodities in the bundle are 'goods' 
C)  price of both commodities do not change 
D)  budget constraint does not shift 
A)  commodities in the bundle are 'healthy' 
B)  commodities in the bundle are 'goods' 
C)  price of both commodities do not change 
D)  budget constraint does not shift

Question 13

Utility measures:

Accepted Answer

A)  the satisfaction a consumer receives from consuming a bundle of goods 
B)  how much a bundle of goods costs 
C)  the importance of a given resource to the production of a good 
D)  all of the above 
A)  the satisfaction a consumer receives from consuming a bundle of goods 
B)  how much a bundle of goods costs 
C)  the importance of a given resource to the production of a good 
D)  all of the above

Question 14

When a budget constraint shifts out: (i) the consumer is better off
(ii) the consumer can now reach a higher indifference curve
(iii) it could only have been caused by an increase in income

Accepted Answer

A)  (i) only 
B)  (i) and (ii) 
C)  (i) and (iii) 
D)  (ii) and (iii) 
A)  (i) only 
B)  (i) and (ii) 
C)  (i) and (iii) 
D)  (ii) and (iii)

Question 15

Which of the commodities below is most likely to be categorised as an inferior good?

Accepted Answer

A)  a Ming-dynasty vase 
B)  lobster 
C)  instant noodles 
D)  airline travel 
A)  a Ming-dynasty vase 
B)  lobster 
C)  instant noodles 
D)  airline travel

Question 16

Amy purchases only coffee and croissants. The substitution effect associated with a decrease in the price of a croissant will result in:

Accepted Answer

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

Question 17

The substitution effect is the change in consumption that results when a price change moves the consumer along the same indifference curve.

Accepted Answer

A) True 
 B)False

Question 18

Graph 22-9
  
-Refer to Graph 22-9. Assume that the consumer depicted in the graph has an income of $50 and the price of marshmallows is $5. The optimising consumer will choose to purchase which bundle of marshmallows and chocolate chips?

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 19

Graph 22-1
  
-Refer to Graph 22-1. A consumer who chooses to spend all of her income will be at point(s):

Accepted Answer

A)  C 
B)  E 
C)  C or E 
D)  A, B or C 
A)  C 
B)  E 
C)  C or E 
D)  A, B or C

Question 20

Graph 22-2
  
-Refer to Graph 22-2. Which of the graphs shown reflects an increase in income?

Accepted Answer

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

Exam 22: The Theory of Consumer Choice

A Giffen good is a good for which a(n):

American hotdogs are made by combining one bun with one sausage. American hotdog buns and sausages are a good example of:

The optimum represents the:

A consumer who finds herself on the highest indifference curve possible is likely to have maximised her:

At the optimum:

If two goods are perfect substitutes, their indifference curves will be right-angled; if two goods are perfect complements, their indifference curves will be linear.

As long as a consumer is on the same indifference curve:

Graph 22-6 -Refer to Graph 22-6. If a consumer is at point C and moved to point B they would be:

If the budget constraint crosses an indifference curve in two places, both these points will be below the consumer's optimal level of consumption.

The substitution effect from an increase in wages is manifest in a:

Higher indifference curves are preferred to lower ones as long as the:

Utility measures:

When a budget constraint shifts out: (i) the consumer is better off (ii) the consumer can now reach a higher indifference curve (iii) it could only have been caused by an increase in income

Which of the commodities below is most likely to be categorised as an inferior good?

Amy purchases only coffee and croissants. The substitution effect associated with a decrease in the price of a croissant will result in:

The substitution effect is the change in consumption that results when a price change moves the consumer along the same indifference curve.

Graph 22-9 -Refer to Graph 22-9. Assume that the consumer depicted in the graph has an income of $50 and the price of marshmallows is $5. The optimising consumer will choose to purchase which bundle of marshmallows and chocolate chips?

Graph 22-1 -Refer to Graph 22-1. A consumer who chooses to spend all of her income will be at point(s):

Graph 22-2 -Refer to Graph 22-2. Which of the graphs shown reflects an increase in income?

Ten Lessons From 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

Business Strategy

Competition Policy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters