Question 1

Figure 21-2  
-Refer to Figure 21-2.A consumer that chooses to spend all of her income could be at which point(s)on the budget constraint?

Accepted Answer

A)  V only 
B)  Z only 
C)  V,W,X,or Y only 
D)  W,X,or Y only 
A)  V only 
B)  Z only 
C)  V,W,X,or Y only 
D)  W,X,or Y only

Question 2

Wilbur consumes two goods,bacon and eggs.He has maximized his utility given his income.Eggs costs $2 per dozen,and he consumes them to the point where the marginal utility he receives is 6.Bacon cost $4 per serving,and the relationship between the marginal utility that Wilbur gets from eating bacon and the number of servings he eats per month is as follows:
 
How many servings of bacon does Wilbur buy each month?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 3

Scenario 21-1
Suppose the price of hot wings is $10,the price of beer is $1,and the consumer's income is $50.In addition,suppose the consumer's budget constraint illustrates hot wings on the horizontal axis and beer on the vertical axis.
-Refer to Scenario 21-1.If the consumer's income rises to $60,then the budget line for hot wings and beer would

Accepted Answer

A)  now intersect the horizontal axis at 6 orders of hot wings and the vertical axis at 60 beers. 
B)  not change. 
C)  now intersect the horizontal axis at 4 orders of hot wings and the vertical axis at 16 beers. 
D)  rotate outward along the beer axis. 
A)  now intersect the horizontal axis at 6 orders of hot wings and the vertical axis at 60 beers. 
B)  not change. 
C)  now intersect the horizontal axis at 4 orders of hot wings and the vertical axis at 16 beers. 
D)  rotate outward along the beer axis.

Question 4

Consider the indifference curve map and budget constraint for two goods,X and Y.Suppose the good on the horizontal axis,X,is normal.When the price of X increases

Accepted Answer

A)  the substitution effect and income effect both cause an increase in the consumption of X. 
B)  the substitution effect causes a decrease in the consumption of X,and the income effect causes an increase in the consumption of X.However,the substitution effect is greater than the income effect. 
C)  the substitution effect causes an increase in the consumption of X,and the income effect causes a decrease in the consumption of X.However,the substitution effect is greater than the income effect. 
D)  the substitution effect and income effect both cause a decrease in the consumption of X. 
A)  the substitution effect and income effect both cause an increase in the consumption of X. 
B)  the substitution effect causes a decrease in the consumption of X,and the income effect causes an increase in the consumption of X.However,the substitution effect is greater than the income effect. 
C)  the substitution effect causes an increase in the consumption of X,and the income effect causes a decrease in the consumption of X.However,the substitution effect is greater than the income effect. 
D)  the substitution effect and income effect both cause a decrease in the consumption of X.

Question 5

Assume that a college student purchases only coffee and Snickers bars.The substitution effect associated with a decrease in the price of a Snickers bar will 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 Snickers bars and a decrease in the consumption of coffee. 
D)  a decrease in the consumption of Snickers bars 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 Snickers bars and a decrease in the consumption of coffee. 
D)  a decrease in the consumption of Snickers bars and an increase in the consumption of coffee.

Question 6

The following diagram shows a budget constraint for a particular consumer.  
If the price of X is $10,what is the price of Y?

Accepted Answer

A)  $15 
B)  $25 
C)  $35 
D)  $70 
A)  $15 
B)  $25 
C)  $35 
D)  $70

Question 7

The consumer's optimum is where

Accepted Answer

A)  MUx/MUy = Py/Px. 
B)  MUx/Py = MUy/Px. 
C)  Px/MUx = Py/MUy. 
D)  MUx/MUy = Px/Py. 
A)  MUx/MUy = Py/Px. 
B)  MUx/Py = MUy/Px. 
C)  Px/MUx = Py/MUy. 
D)  MUx/MUy = Px/Py.

Question 8

Suppose that you have $100 today and expect to receive $100 one year from today.Your money market account pays an annual interest rate of 25%,and you may borrow money at that interest rate.If you save all your money,how much money will you have one year from today?

Accepted Answer

A)  $100 
B)  $125 
C)  $200 
D)  $225 
A)  $100 
B)  $125 
C)  $200 
D)  $225

Question 9

The income effect of a price change is depicted by

Accepted Answer

A)  a parallel shift of the budget constraint at the old set of prices. 
B)  a parallel shift of the budget constraint at the new set of prices. 
C)  a movement along the budget constraint holding the level of satisfaction constant. 
D)  not observable and is therefore neither a shift nor a change in the slope of the budget constraint. 
A)  a parallel shift of the budget constraint at the old set of prices. 
B)  a parallel shift of the budget constraint at the new set of prices. 
C)  a movement along the budget constraint holding the level of satisfaction constant. 
D)  not observable and is therefore neither a shift nor a change in the slope of the budget constraint.

Question 10

Figure 21-12  
-Refer to Figure 21-12.If the consumer is currently at point A in the figure,a movement to point B as a result of a decrease in the price of potato chips represents the

Accepted Answer

A)  substitution effect. 
B)  income effect. 
C)  budget effect. 
D)  price effect. 
A)  substitution effect. 
B)  income effect. 
C)  budget effect. 
D)  price effect.

Question 11

Figure 21-2  
-Refer to Figure 21-2.Which points are affordable?

Accepted Answer

A)  W,X,and Y only 
B)  Z only 
C)  V,W,X,and Y only 
D)  V,W,X,Y,and Z 
A)  W,X,and Y only 
B)  Z only 
C)  V,W,X,and Y only 
D)  V,W,X,Y,and Z

Question 12

Figure 21-8      
-Refer to Figure 21-8.Which of the graphs shown represent indifference curves for perfect complements?

Accepted Answer

A)  graph a 
B)  graph b 
C)  graph c 
D)  All of the above are correct. 
A)  graph a 
B)  graph b 
C)  graph c 
D)  All of the above are correct.

Question 13

If a consumer purchases more of good A when her income falls,good A is an inferior good.

Accepted Answer

A) True 
 B)False

Question 14

If the relative price of a concert ticket is three times the price of a meal at a good restaurant,then the opportunity cost of a concert ticket can be measured by the

Accepted Answer

A)  slope of the budget constraint. 
B)  slope of an indifference curve. 
C)  marginal rate of substitution. 
D)  income effect. 
A)  slope of the budget constraint. 
B)  slope of an indifference curve. 
C)  marginal rate of substitution. 
D)  income effect.

Question 15

Jake faces tradeoffs between consuming in the current period when he is young and consuming in a future period when he is old.Jake experiences a decrease in the current interest rate he earns on his savings.Jake will save

Accepted Answer

A)  less in the current period if the substitution effect is greater than the income effect. 
B)  less in the current period if the income effect is greater than the substitution effect. 
C)  more in the current period if the substitution effect is greater than the income effect. 
D)  more in the current period,regardless of the sizes of the income and substitution effects. 
A)  less in the current period if the substitution effect is greater than the income effect. 
B)  less in the current period if the income effect is greater than the substitution effect. 
C)  more in the current period if the substitution effect is greater than the income effect. 
D)  more in the current period,regardless of the sizes of the income and substitution effects.

Question 16

As long as a consumer remains on the same indifference curve,

Accepted Answer

A)  she is indifferent to all points that lie on any other indifference curve. 
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 curve. 
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 17

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 income effect dominates the substitution effect,an increase in the interest rate on savings will cause him to

Accepted Answer

A)  decrease his savings rate. 
B)  increase his savings rate. 
C)  continue saving at the current rate. 
D)  Any of the above could be correct. 
A)  decrease his savings rate. 
B)  increase his savings rate. 
C)  continue saving at the current rate. 
D)  Any of the above could be correct.

Question 18

Utility measures the

Accepted Answer

A)  income a consumer receives from consuming a bundle of goods. 
B)  satisfaction a consumer receives from consuming a bundle of goods. 
C)  satisfaction a consumer places on her budget constraint. 
D)  All of the above are correct. 
A)  income a consumer receives from consuming a bundle of goods. 
B)  satisfaction a consumer receives from consuming a bundle of goods. 
C)  satisfaction a consumer places on her budget constraint. 
D)  All of the above are correct.

Question 19

All of the following are properties of indifference curves except

Accepted Answer

A)  higher indifference curves are preferred to lower ones. 
B)  indifference curves are downward sloping. 
C)  indifference curves do not cross. 
D)  indifference curves are bowed outward. 
A)  higher indifference curves are preferred to lower ones. 
B)  indifference curves are downward sloping. 
C)  indifference curves do not cross. 
D)  indifference curves are bowed outward.

Question 20

The indifference curves for nickels and dimes are straight lines.

Accepted Answer

A) True 
 B)False

Exam 21: The Theory of Consumer Choice

Figure 21-2 -Refer to Figure 21-2.A consumer that chooses to spend all of her income could be at which point(s)on the budget constraint?

Consider the indifference curve map and budget constraint for two goods,X and Y.Suppose the good on the horizontal axis,X,is normal.When the price of X increases

Assume that a college student purchases only coffee and Snickers bars.The substitution effect associated with a decrease in the price of a Snickers bar will result in

The following diagram shows a budget constraint for a particular consumer. If the price of X is $10,what is the price of Y?

The consumer's optimum is where

Suppose that you have $100 today and expect to receive $100 one year from today.Your money market account pays an annual interest rate of 25%,and you may borrow money at that interest rate.If you save all your money,how much money will you have one year from today?

The income effect of a price change is depicted by

Figure 21-12 -Refer to Figure 21-12.If the consumer is currently at point A in the figure,a movement to point B as a result of a decrease in the price of potato chips represents the

Figure 21-2 -Refer to Figure 21-2.Which points are affordable?

Figure 21-8 -Refer to Figure 21-8.Which of the graphs shown represent indifference curves for perfect complements?

If a consumer purchases more of good A when her income falls,good A is an inferior good.

If the relative price of a concert ticket is three times the price of a meal at a good restaurant,then the opportunity cost of a concert ticket can be measured by the

Jake faces tradeoffs between consuming in the current period when he is young and consuming in a future period when he is old.Jake experiences a decrease in the current interest rate he earns on his savings.Jake will save

As long as a consumer remains on the same indifference curve,

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 income effect dominates the substitution effect,an increase in the interest rate on savings will cause him to

Utility measures the

All of the following are properties of indifference curves except

The indifference curves for nickels and dimes are straight lines.

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

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

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

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