Question 1

When the price of an inferior good decreases,

Accepted Answer

A)  both the income and substitution effects encourage the consumer to purchase more of the good. 
B)  both the income and substitution effects encourage the consumer to purchase less of the good. 
C)  the income effect encourages the consumer to purchase more of the good,and the substitution effect encourages the consumer to purchase less of the good. 
D)  the income effect encourages the consumer to purchase less of the good,and the substitution effect encourages the consumer to purchase more of the good. 
A)  both the income and substitution effects encourage the consumer to purchase more of the good. 
B)  both the income and substitution effects encourage the consumer to purchase less of the good. 
C)  the income effect encourages the consumer to purchase more of the good,and the substitution effect encourages the consumer to purchase less of the good. 
D)  the income effect encourages the consumer to purchase less of the good,and the substitution effect encourages the consumer to purchase more of the good.

Question 2

A Giffen good is a good for which an increase in the price

Accepted Answer

A)  decreases the quantity supplied. 
B)  increases the quantity supplied. 
C)  decreases the quantity demanded. 
D)  increases the quantity demanded. 
A)  decreases the quantity supplied. 
B)  increases the quantity supplied. 
C)  decreases the quantity demanded. 
D)  increases the quantity demanded.

Question 3

When the price of a shirt falls,the

Accepted Answer

A)  quantity of shirts demanded falls. 
B)  quantity of shirts demanded rises. 
C)  quantity of shirts supplied rises. 
D)  demand for shirts falls. 
A)  quantity of shirts demanded falls. 
B)  quantity of shirts demanded rises. 
C)  quantity of shirts supplied rises. 
D)  demand for shirts falls.

Question 4

Which of the following is a property of a typical indifference curve?

Accepted Answer

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

Question 5

The theory of consumer choice provides a(n)

Accepted Answer

A)  literal account of how people make decisions. 
B)  unrealistic picture of how people make decisions. 
C)  model that is consistent with how people make decisions. 
D)  in-depth model that is based more in psychology than in economics. 
A)  literal account of how people make decisions. 
B)  unrealistic picture of how people make decisions. 
C)  model that is consistent with how people make decisions. 
D)  in-depth model that is based more in psychology than in economics.

Question 6

Which of the following statements is not correct?

Accepted Answer

A)  If Jane gets a higher wage and works more,the substitution effect is greater than the income effect for her. 
B)  If Spencer experiences a wage decrease and works less,the income effect is greater than the substitution effect for him. 
C)  If the substitution effect is greater than the income effect,the labor-supply curve is upward sloping. 
D)  If the income effect is greater than the substitution effect,the labor-supply curve is downward sloping. 
A)  If Jane gets a higher wage and works more,the substitution effect is greater than the income effect for her. 
B)  If Spencer experiences a wage decrease and works less,the income effect is greater than the substitution effect for him. 
C)  If the substitution effect is greater than the income effect,the labor-supply curve is upward sloping. 
D)  If the income effect is greater than the substitution effect,the labor-supply curve is downward sloping.

Question 7

Figure 21-9  
-Refer to Figure 21-9.Bundle C represents a point where

Accepted Answer

A)  MRSxy > Py/Px. 
B)  MRSxy = Px/Py. 
C)  MRSxy x/Py. 
D)  MRSxy > Px/Py. 
A)  MRSxy > Py/Px. 
B)  MRSxy = Px/Py. 
C)  MRSxy x/Py. 
D)  MRSxy > Px/Py.

Question 8

Jaime is currently consuming some of good X and some of good Y.If good Y is a normal good for this consumer,a rise in her income will definitely cause her to

Accepted Answer

A)  increase her consumption of X. 
B)  increase her consumption of Y. 
C)  decrease her consumption of X. 
D)  decrease her consumption of Y. 
A)  increase her consumption of X. 
B)  increase her consumption of Y. 
C)  decrease her consumption of X. 
D)  decrease her consumption of Y.

Question 9

Given a consumer's indifference map,the demand curve for a good can

Accepted Answer

A)  be derived by moving a consumer's budget constraint as her income falls. 
B)  be derived by moving a consumer's budget constraint as her income rises. 
C)  be derived by moving a consumer's budget constraint as the market price of one good changes. 
D)  not be derived from consumer theory. 
A)  be derived by moving a consumer's budget constraint as her income falls. 
B)  be derived by moving a consumer's budget constraint as her income rises. 
C)  be derived by moving a consumer's budget constraint as the market price of one good changes. 
D)  not be derived from consumer theory.

Question 10

The following diagram shows a budget constraint for a particular consumer.  
If the price of X is $5,what is the consumer's income?

Accepted Answer

A)  $2 
B)  $10 
C)  $30 
D)  $300 
A)  $2 
B)  $10 
C)  $30 
D)  $300

Question 11

A consumer has preferences over two goods: pizza and beer.The four bundles shown in the table below lie on the same indifference curve for the consumer.
 
Which of the following statements regarding these bundles is correct?

Accepted Answer

A)  The goods are perfect substitutes for this consumer. 
B)  The goods are perfect complements for this consumer. 
C)  These bundles violate the property that indifference curves are bowed inward. 
D)  These bundles violate the property that indifference curves do not cross. 
A)  The goods are perfect substitutes for this consumer. 
B)  The goods are perfect complements for this consumer. 
C)  These bundles violate the property that indifference curves are bowed inward. 
D)  These bundles violate the property that indifference curves do not cross.

Question 12

If we observe that a consumer's budget constraint has shifted outward,we can assume that the consumer will buy

Accepted Answer

A)  fewer normal goods and more inferior goods. 
B)  more normal goods and fewer inferior goods. 
C)  more normal goods and more inferior goods. 
D)  fewer normal goods and fewer inferior goods. 
A)  fewer normal goods and more inferior goods. 
B)  more normal goods and fewer inferior goods. 
C)  more normal goods and more inferior goods. 
D)  fewer normal goods and fewer inferior goods.

Question 13

An increase in income will cause a consumer's budget constraint to

Accepted Answer

A)  shift outward,parallel to its initial position. 
B)  shift inward,parallel to its initial position. 
C)  pivot around the horizontal axis. 
D)  pivot around the vertical axis. 
A)  shift outward,parallel to its initial position. 
B)  shift inward,parallel to its initial position. 
C)  pivot around the horizontal axis. 
D)  pivot around the vertical axis.

Question 14

When a consumer is purchasing the best combination of two goods,X and Y,subject to a budget constraint,we say that the consumer is at an optimal choice point.A graph of an optimal choice point shows that it occurs

Accepted Answer

A)  along the highest indifference curve. 
B)  along the lowest budget constraint. 
C)  where the indifference curve is tangent to the budget constraint. 
D)  All of the above are correct. 
A)  along the highest indifference curve. 
B)  along the lowest budget constraint. 
C)  where the indifference curve is tangent to the budget constraint. 
D)  All of the above are correct.

Question 15

Suppose that for Emily,DVDs and trips to the movie theater are perfect substitutes.Currently,Emily is spending all of her income on trips to the movie theater.If the price of DVDs doubles,the substitution effect will

Accepted Answer

A)  be two times the income effect. 
B)  be half the income effect. 
C)  be zero. 
D)  always increase the number of trips to the movie theater Emily makes. 
A)  be two times the income effect. 
B)  be half the income effect. 
C)  be zero. 
D)  always increase the number of trips to the movie theater Emily makes.

Question 16

Figure 21-11  
-Refer to Figure 21-11.Assume that the consumer depicted the figure has an income of $50.Based on the information available in the graph,which of the following price-quantity combinations would be on her demand curve for marshmallows if the price of chocolate chips is $2.50?

Accepted Answer

A)  P=$2.50,Q=6 
B)  P=$2.50,Q=10 
C)  P=$5.00,Q=3 
D)  P=$5.00,Q=5 
A)  P=$2.50,Q=6 
B)  P=$2.50,Q=10 
C)  P=$5.00,Q=3 
D)  P=$5.00,Q=5

Question 17

Jeffrey spends all of his income on warm-up suits and running shoes,and the price of a pair of shoes is four times the price of a warm-up suit.In order to maximize total utility,Jeffrey should

Accepted Answer

A)  buy four times as many warm-up suits as pairs of running shoes. 
B)  buy four times as many pairs of running shoes as warm-up suits. 
C)  buy both items until the marginal utility of a pair of running shoes is four times the marginal utility of a warm-up suit. 
D)  buy both items until the marginal utility of a warm-up suit is four times the marginal utility of a pair of running shoes. 
A)  buy four times as many warm-up suits as pairs of running shoes. 
B)  buy four times as many pairs of running shoes as warm-up suits. 
C)  buy both items until the marginal utility of a pair of running shoes is four times the marginal utility of a warm-up suit. 
D)  buy both items until the marginal utility of a warm-up suit is four times the marginal utility of a pair of running shoes.

Question 18

At a consumer's optimal choice,the consumer chooses the combination of goods that equates the marginal rate of substitution and the price ratio.

Accepted Answer

A) True 
 B)False

Question 19

Assume that a consumer's indifference curve is bowed outward but 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

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  increases,then decreases. 
A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  increases,then decreases.

Question 20

If the price of hamburgers increases,the substitution effect works to

Accepted Answer

A)  decrease the quantity of hamburgers supplied. 
B)  increase the number of hamburger buns demanded. 
C)  decrease the quantity of hamburgers demanded. 
D)  increase the number of hamburger buns supplied. 
A)  decrease the quantity of hamburgers supplied. 
B)  increase the number of hamburger buns demanded. 
C)  decrease the quantity of hamburgers demanded. 
D)  increase the number of hamburger buns supplied.

Exam 21: The Theory of Consumer Choice

When the price of an inferior good decreases,

A Giffen good is a good for which an increase in the price

When the price of a shirt falls,the

Which of the following is a property of a typical indifference curve?

The theory of consumer choice provides a(n)

Which of the following statements is not correct?

Figure 21-9 -Refer to Figure 21-9.Bundle C represents a point where

Jaime is currently consuming some of good X and some of good Y.If good Y is a normal good for this consumer,a rise in her income will definitely cause her to

Given a consumer's indifference map,the demand curve for a good can

The following diagram shows a budget constraint for a particular consumer. If the price of X is $5,what is the consumer's income?

A consumer has preferences over two goods: pizza and beer.The four bundles shown in the table below lie on the same indifference curve for the consumer. Which of the following statements regarding these bundles is correct?

If we observe that a consumer's budget constraint has shifted outward,we can assume that the consumer will buy

An increase in income will cause a consumer's budget constraint to

When a consumer is purchasing the best combination of two goods,X and Y,subject to a budget constraint,we say that the consumer is at an optimal choice point.A graph of an optimal choice point shows that it occurs

Suppose that for Emily,DVDs and trips to the movie theater are perfect substitutes.Currently,Emily is spending all of her income on trips to the movie theater.If the price of DVDs doubles,the substitution effect will

Figure 21-11 -Refer to Figure 21-11.Assume that the consumer depicted the figure has an income of $50.Based on the information available in the graph,which of the following price-quantity combinations would be on her demand curve for marshmallows if the price of chocolate chips is $2.50?

Jeffrey spends all of his income on warm-up suits and running shoes,and the price of a pair of shoes is four times the price of a warm-up suit.In order to maximize total utility,Jeffrey should

At a consumer's optimal choice,the consumer chooses the combination of goods that equates the marginal rate of substitution and the price ratio.

Assume that a consumer's indifference curve is bowed outward but 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

If the price of hamburgers increases,the substitution effect works to

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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