Exam 21: The Theory of Consumer Choice

Alicia is a vegetarian,so she does not eat beef.That is,beef provides no additional utility to Alicia.She loves potatoes,however.If we illustrate Alicia's indifference curves by drawing beef on the horizontal axis and potatoes on the vertical axis,her indifference curves will

Figure 21-2 -Refer to Figure 21-2.Which of the following statements is correct?

A rational person can have a negatively-sloped labor supply curve.

If an indifference curve is bowed in toward the origin,the marginal rate of substitution is

List and briefly explain each of the four properties of indifference curves.

A family on a trip budgets $800 for meals and hotel accommodations.Suppose the price of a meal is $40.In addition,suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals.How many meals could the family afford if they gave up two nights in the hotel?

Answer the following questions based on the table.A consumer is able to consume the following bundles of rice and beans when the price of rice is $2 and the price of beans is $3. a. How much is this consumer's income? b. Draw a budget constraint given this information.Label it B. c. Construct a new budget constraint showing the change if the price of rice falls $1.Label this C. d. Given the original prices for rice ($2)and beans ($3),construct a new budget constraint if this consumer's income increased to $48.Label this D.

If the income effect counteracts the substitution effect,we know that the good in question is a(n)

A consumer's preferences for $1 bills and $20 bills can be represented by indifference curves that are

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 $126,what is the price of good X? c. If income in Panel A is $84,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.

A consumer is currently spending all of her available income on two goods: music CDs and DVDs.At her current consumption bundle she is spending twice as much on CDs as she is on DVDs.If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs,what is the price of a CD?

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

Figure 21-8 -Refer to Figure 21-8.Which of the following statements is correct?

Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst.The price of a pint of beer is $5,and the price of a bratwurst is $4.Which of the following combinations of beers and bratwursts represents a point that would lie to the exterior of the consumer's budget constraint?

Just as the theory of the competitive firm provides a more complete understanding of supply,the theory of consumer choice provides a more complete understanding of

Suppose Caroline is indifferent between tea and coffee as long as she consumes an equivalent amount of caffeine.Suppose that coffee has twice as much caffeine as tea.Which graph would illustrate a representative indifference curve? A) B) C) D)

Beer and pretzels are normal goods.When the price of beer falls,the substitution effect causes

Assume that a consumer's indifference curve is bowed inward and satisfies the other three properties of indifference curves.As the consumer moves from left to right along the horizontal axis,the consumer's marginal rate of substitution

When economists describe preferences,they often use the concept of

The bowed shape of the indifference curve reflects the consumer's