Question 1

Figure 21-7  
-Refer to Figure 21-7.Which of the following statements is not true for a consumer who moves from bundle B to bundle C?

Accepted Answer

A)  At bundle C the consumer would be willing to give up a larger amount of cake in exchange for a donut than at bundle B. 
B)  The marginal rate of substitution at bundles B and C are the same since the points lie on the same indifference curve. 
C)  The consumer is willing to sacrifice donuts to obtain cake. 
D)  The consumer receives the same level of satisfaction at bundles B and C. 
A)  At bundle C the consumer would be willing to give up a larger amount of cake in exchange for a donut than at bundle B. 
B)  The marginal rate of substitution at bundles B and C are the same since the points lie on the same indifference curve. 
C)  The consumer is willing to sacrifice donuts to obtain cake. 
D)  The consumer receives the same level of satisfaction at bundles B and C.

Question 2

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

Accepted Answer

A)  slope downward. 
B)  be vertical straight lines. 
C)  slope upward. 
D)  be horizontal straight lines. 
A)  slope downward. 
B)  be vertical straight lines. 
C)  slope upward. 
D)  be horizontal straight lines.

Question 3

Figure 21-2  
-Refer to Figure 21-2.Which of the following statements is not correct?

Accepted Answer

A)  Points W,X,and Y all cost the consumer the same amount of money. 
B)  Point Z is unaffordable for the consumer given his budget constraint. 
C)  Point V costs less than point Z. 
D)  Points W,X,and Y give the consumer the same level of satisfaction. 
A)  Points W,X,and Y all cost the consumer the same amount of money. 
B)  Point Z is unaffordable for the consumer given his budget constraint. 
C)  Point V costs less than point Z. 
D)  Points W,X,and Y give the consumer the same level of satisfaction.

Question 4

A consumer has preferences over two goods: books and movies.The two bundles shown in the table below lie on the same indifference curve for the consumer.
 
Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four properties of indifference curves?

Accepted Answer

A)  1 movie and 5 books 
B)  3 movies and 3 books 
C)  5 movies and 1 book 
D)  1 movie and 7 books 
A)  1 movie and 5 books 
B)  3 movies and 3 books 
C)  5 movies and 1 book 
D)  1 movie and 7 books

Question 5

Giffen goods are inferior goods for which the income effect dominates the substitution effect.

Accepted Answer

A) True 
 B)False

Question 6

If the consumer's income and all prices simultaneously double,then the optimum consumption bundle will

Accepted Answer

A)  shift outward relative to the old optimum. 
B)  move leftward along the old budget constraint. 
C)  not change. 
D)  shift inward relative to the old optimum. 
A)  shift outward relative to the old optimum. 
B)  move leftward along the old budget constraint. 
C)  not change. 
D)  shift inward relative to the old optimum.

Question 7

Consider the budget constraint between "spending today" on the horizontal axis and "spending a year from today" on the vertical axis.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.Suppose now that the interest rate decreases to 10%.What happens to the slope of your budget constraint relative to when the interest rate was $25%? The slope

Accepted Answer

A)  becomes steeper. 
B)  becomes flatter. 
C)  doesn't change because the budget constraint shifts in parallel to the original budget constraint. 
D)  doesn't change because the budget constraint shifts out parallel to the original budget constraint. 
A)  becomes steeper. 
B)  becomes flatter. 
C)  doesn't change because the budget constraint shifts in parallel to the original budget constraint. 
D)  doesn't change because the budget constraint shifts out parallel to the original budget constraint.

Question 8

Good X is an inferior good but not a Giffen good.When the price of X increases,the consumer will consume

Accepted Answer

A)  more X. 
B)  the same amount of X. 
C)  less X. 
D)  more or less X depending on the size of the income effect relative to the size of the substitution effect. 
A)  more X. 
B)  the same amount of X. 
C)  less X. 
D)  more or less X depending on the size of the income effect relative to the size of the substitution effect.

Question 9

A consumer who doesn't spend all of her income

Accepted Answer

A)  would be at a point outside of her budget constraint. 
B)  would be at a point inside her budget constraint. 
C)  must not be consuming positive quantities of all goods. 
D)  must be consuming at a point where her budget constraint touches one of the axes. 
A)  would be at a point outside of her budget constraint. 
B)  would be at a point inside her budget constraint. 
C)  must not be consuming positive quantities of all goods. 
D)  must be consuming at a point where her budget constraint touches one of the axes.

Question 10

Which of the following is not a property of a typical indifference curve?

Accepted Answer

A)  downward sloping 
B)  bowed away from the origin 
C)  do not intersect 
D)  higher ones are preferred to lower ones 
A)  downward sloping 
B)  bowed away from the origin 
C)  do not intersect 
D)  higher ones are preferred to lower ones

Question 11

For a typical consumer,most indifference curves are bowed inward.

Accepted Answer

A) True 
 B)False

Question 12

How are the following three questions related: 1)Do all demand curves slope downward? 2)How do wages affect labor supply? 3)How do interest rates affect household saving?

Accepted Answer

A)  They all relate to macroeconomics. 
B)  They all relate to monetary economics. 
C)  They all relate to the theory of consumer choice. 
D)  They are not related to each other in any way. 
A)  They all relate to macroeconomics. 
B)  They all relate to monetary economics. 
C)  They all relate to the theory of consumer choice. 
D)  They are not related to each other in any way.

Question 13

In the work-leisure model,suppose consumption and leisure are both normal goods.The income effect of a wage increase results in the worker choosing to

Accepted Answer

A)  work less than before. 
B)  work more than before. 
C)  possibly work more or less than before. 
D)  work more than before with a higher level of consumption. 
A)  work less than before. 
B)  work more than before. 
C)  possibly work more or less than before. 
D)  work more than before with a higher level of consumption.

Question 14

When considering household saving,the relative price between consuming when young and consuming when old is the

Accepted Answer

A)  consumption rate. 
B)  interest rate that individuals can earn on their private savings. 
C)  prime rate. 
D)  federal funds rate. 
A)  consumption rate. 
B)  interest rate that individuals can earn on their private savings. 
C)  prime rate. 
D)  federal funds rate.

Question 15

Economic theory predicts that an increase in wages

Accepted Answer

A)  will cause a wage earner to work more. 
B)  will cause a wage earner to work less. 
C)  will cause a wage earner to be more productive. 
D)  might cause a wage earner to work more or work less. 
A)  will cause a wage earner to work more. 
B)  will cause a wage earner to work less. 
C)  will cause a wage earner to be more productive. 
D)  might cause a wage earner to work more or work less.

Question 16

The marginal rate of substitution between goods A and B measures the price of A relative to the price of B.

Accepted Answer

A) True 
 B)False

Question 17

Katie wins $1 million in her state's lottery.If Katie drastically reduces the number of hours she works after she wins the money,we can infer that the income effect is larger than the substitution effect for her.

Accepted Answer

A) True 
 B)False

Question 18

If income decreases and prices are unchanged,the consumer's budget constraint

Accepted Answer

A)  remains the same. 
B)  shifts outward. 
C)  shifts inward. 
D)  rotates outward along the horizontal axis. 
A)  remains the same. 
B)  shifts outward. 
C)  shifts inward. 
D)  rotates outward along the horizontal axis.

Question 19

If consumers purchase more of a good when their income rises,the good is a normal good.

Accepted Answer

A) True 
 B)False

Question 20

A normal good is one in which

Accepted Answer

A)  the average consumer chooses to consume at a normal level. 
B)  the average consumer chooses to consume the good over other similar goods. 
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 at a normal level. 
B)  the average consumer chooses to consume the good over other similar goods. 
C)  an increase in income increases consumption of the good. 
D)  an increase in income decreases consumption of the good.

Exam 21: The Theory of Consumer Choice

Figure 21-7 -Refer to Figure 21-7.Which of the following statements is not true for a consumer who moves from bundle B to bundle C?

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

Figure 21-2 -Refer to Figure 21-2.Which of the following statements is not correct?

A consumer has preferences over two goods: books and movies.The two bundles shown in the table below lie on the same indifference curve for the consumer. Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four properties of indifference curves?

Giffen goods are inferior goods for which the income effect dominates the substitution effect.

If the consumer's income and all prices simultaneously double,then the optimum consumption bundle will

Good X is an inferior good but not a Giffen good.When the price of X increases,the consumer will consume

A consumer who doesn't spend all of her income

Which of the following is not a property of a typical indifference curve?

For a typical consumer,most indifference curves are bowed inward.

How are the following three questions related: 1)Do all demand curves slope downward? 2)How do wages affect labor supply? 3)How do interest rates affect household saving?

In the work-leisure model,suppose consumption and leisure are both normal goods.The income effect of a wage increase results in the worker choosing to

When considering household saving,the relative price between consuming when young and consuming when old is the

Economic theory predicts that an increase in wages

The marginal rate of substitution between goods A and B measures the price of A relative to the price of B.

Katie wins $1 million in her state's lottery.If Katie drastically reduces the number of hours she works after she wins the money,we can infer that the income effect is larger than the substitution effect for her.

If income decreases and prices are unchanged,the consumer's budget constraint

If consumers purchase more of a good when their income rises,the good is a normal good.

A normal good is one in which

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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