Question 1

The rate at which a consumer is willing to trade off one good for another is called the .

Accepted Answer

marginal r

Question 2

In order to represent a consumer's choices on a graph, we draw her budget constraint as well as her curves.

Accepted Answer

The answer of In order to represent a consumer's choices...

Question 3

Figure 21-1
The downward­sloping line on the figure represents a consumer's budget constraint.  
-Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Accepted Answer

A)  A. 
B)  E. 
C)  A and E. 
D)  None of the above are correct. All of the points identified on the figure are affordable. 
A)  A. 
B)  E. 
C)  A and E. 
D)  None of the above are correct. All of the points identified on the figure are affordable.

Question 4

Figure 21-1
The downward­sloping line on the figure represents a consumer's budget constraint.  
-Refer to Figure 21-1. If the consumer's income is $140, then what is the price of a CD?

Accepted Answer

A)  $3 
B)  $5 
C)  $7 
D)  $9 
A)  $3 
B)  $5 
C)  $7 
D)  $9

Question 5

Giffen goods are

Accepted Answer

A)  normal goods for which the income effect dominates the substitution effect. 
B)  normal goods for which the substitution effect dominates the income effect. 
C)  inferior goods for which the income effect dominates the substitution effect. 
D)  inferior goods for which the substitution effect dominates the income effect. 
A)  normal goods for which the income effect dominates the substitution effect. 
B)  normal goods for which the substitution effect dominates the income effect. 
C)  inferior goods for which the income effect dominates the substitution effect. 
D)  inferior goods for which the substitution effect dominates the income effect.

Question 6

Cashews and asparagus are normal goods. When the price of asparagus falls, the substitution effect by itself causes

Accepted Answer

A)  the consumer to feel richer, so the consumer buys more cashews. 
B)  the consumer to feel richer, so the consumer buys less cashews. 
C)  cashews to be relatively more expensive, so the consumer buys less cashews. 
D)  cashews to be relatively less expensive, so the consumer buys more cashews. 
A)  the consumer to feel richer, so the consumer buys more cashews. 
B)  the consumer to feel richer, so the consumer buys less cashews. 
C)  cashews to be relatively more expensive, so the consumer buys less cashews. 
D)  cashews to be relatively less expensive, so the consumer buys more cashews.

Question 7

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

Accepted Answer

1: Higher indifference curves are prefer

Question 8

Figure 21-16  
-Refer to Figure 21-16. The price of X is $20, the price of Y is $5, and the consumer's income is $40. Which point represents the consumer's optimal choice?

Accepted Answer

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

Question 9

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 10

A consumer has preferences over two goods, X and Y. Suppose we graph this consumer's preferences (which satisfy the usual properties of indifference curves) and budget constraint on a diagram with X on the horizontal axis and Y on the vertical axis. At the consumer's current consumption bundle, the consumer is spending all available income, and the marginal rate of substitution is greater than the slope of the budget constraint. We can conclude that the consumer

Accepted Answer

A)  is currently maximizing satisfaction subject to the budget constraint. 
B)  could increase satisfaction by consuming more X and less Y. 
C)  could increase satisfaction by consuming less X and more Y. 
D)  could purchase more X and more Y and increase total satisfaction. 
A)  is currently maximizing satisfaction subject to the budget constraint. 
B)  could increase satisfaction by consuming more X and less Y. 
C)  could increase satisfaction by consuming less X and more Y. 
D)  could purchase more X and more Y and increase total satisfaction.

Question 11

The following diagram shows a budget constraint for a particular consumer.   If the price of X is $12, then what is the price of Y?

Accepted Answer

A)  $9 
B)  $16 
C)  $24 
D)  $30 
A)  $9 
B)  $16 
C)  $24 
D)  $30

Question 12

Figure 21-3
In each case, the budget constraint moves from BC-1 to BC-2.
  
-Refer to Figure 21-3. Which of the graphs in the figure reflects an increase in the price of good Y only?

Accepted Answer

A)  graph a 
B)  graph b 
C)  graph c 
D)  graph d 
A)  graph a 
B)  graph b 
C)  graph c 
D)  graph d

Question 13

When we derive the demand curve for a good, we should remember that the

Accepted Answer

A)  income effect must be greater than the substitution effect. 
B)  substitution effect must be greater than the income effect. 
C)  substitution effect must be in the same direction as the income effect. 
D)  income effect and the substitution effect may work in the same or in opposite directions. 
A)  income effect must be greater than the substitution effect. 
B)  substitution effect must be greater than the income effect. 
C)  substitution effect must be in the same direction as the income effect. 
D)  income effect and the substitution effect may work in the same or in opposite directions.

Question 14

The change in consumption that results when a price change moves the consumer along a given indifference curve to a point illustrating the new marginal rate of substitution is called the

Accepted Answer

A)  income effect. 
B)  substitution effect. 
C)  Giffen good effect. 
D)  inferior good effect. 
A)  income effect. 
B)  substitution effect. 
C)  Giffen good effect. 
D)  inferior good effect.

Question 15

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

Accepted Answer

A)  complementary good. 
B)  inferior good. 
C)  luxury good. 
D)  normal good. 
A)  complementary good. 
B)  inferior good. 
C)  luxury good. 
D)  normal good.

Question 16

A good is an inferior good if the consumer buys more of it when

Accepted Answer

A)  his income rises. 
B)  the price of the good falls. 
C)  the price of a substitute good rises. 
D)  his income falls. 
A)  his income rises. 
B)  the price of the good falls. 
C)  the price of a substitute good rises. 
D)  his income falls.

Question 17

Is it possible for a normal good to be a Giffen good? Briefly explain.

Accepted Answer

No, only i

Question 18

Assume that consumption when young and consumption when old are both normal goods. The income effect of an increase in the interest rate will result in

Accepted Answer

A)  an increase in saving when young. 
B)  an increase in saving when old. 
C)  a decrease in saving when young. 
D)  a decrease in saving when old. 
A)  an increase in saving when young. 
B)  an increase in saving when old. 
C)  a decrease in saving when young. 
D)  a decrease in saving when old.

Question 19

Figure 21-18  
-Refer to Figure 21-18. Bundle C represents a point where

Accepted Answer

Question 20

A consumer consumes two normal goods, coffee and chocolate. The price of coffee rises. The income effect, by itself, suggests that the consumer will consume

Accepted Answer

A)  more coffee and more chocolate. 
B)  less coffee and less chocolate. 
C)  more coffee and less chocolate. 
D)  less coffee and more chocolate. 
A)  more coffee and more chocolate. 
B)  less coffee and less chocolate. 
C)  more coffee and less chocolate. 
D)  less coffee and more chocolate.

The rate at which a consumer is willing to trade off one good for another is called the .

In order to represent a consumer's choices on a graph, we draw her budget constraint as well as her curves.

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the consumer's income is $140, then what is the price of a CD?

Giffen goods are

Cashews and asparagus are normal goods. When the price of asparagus falls, the substitution effect by itself causes

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

Figure 21-16 -Refer to Figure 21-16. The price of X is $20, the price of Y is $5, and the consumer's income is $40. Which point represents the consumer's optimal choice?

The following diagram shows a budget constraint for a particular consumer. If the price of X is $12, then what is the price of Y?

Figure 21-3 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3. Which of the graphs in the figure reflects an increase in the price of good Y only?

When we derive the demand curve for a good, we should remember that the

The change in consumption that results when a price change moves the consumer along a given indifference curve to a point illustrating the new marginal rate of substitution is called the

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

A good is an inferior good if the consumer buys more of it when

Is it possible for a normal good to be a Giffen good? Briefly explain.

Assume that consumption when young and consumption when old are both normal goods. The income effect of an increase in the interest rate will result in

Figure 21-18 -Refer to Figure 21-18. Bundle C represents a point where

A consumer consumes two normal goods, coffee and chocolate. The price of coffee rises. The income effect, by itself, suggests that the consumer will consume

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

Filters

Exam 21: The Theory of Consumer Choice

The rate at which a consumer is willing to trade off one good for another is called the .

In order to represent a consumer's choices on a graph, we draw her budget constraint as well as her curves.

Figure 21-1 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Figure 21-1 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the consumer's income is $140, then what is the price of a CD?

Giffen goods are

Cashews and asparagus are normal goods. When the price of asparagus falls, the substitution effect by itself causes

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

Figure 21-16 -Refer to Figure 21-16. The price of X is $20, the price of Y is $5, and the consumer's income is $40. Which point represents the consumer's optimal choice?

The following diagram shows a budget constraint for a particular consumer. If the price of X is $12, then what is the price of Y?

Figure 21-3 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3. Which of the graphs in the figure reflects an increase in the price of good Y only?

When we derive the demand curve for a good, we should remember that the

The change in consumption that results when a price change moves the consumer along a given indifference curve to a point illustrating the new marginal rate of substitution is called the

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

A good is an inferior good if the consumer buys more of it when

Is it possible for a normal good to be a Giffen good? Briefly explain.

Assume that consumption when young and consumption when old are both normal goods. The income effect of an increase in the interest rate will result in

Figure 21-18 -Refer to Figure 21-18. Bundle C represents a point where

A consumer consumes two normal goods, coffee and chocolate. The price of coffee rises. The income effect, by itself, suggests that the consumer will consume

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

Filters

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the consumer's income is $140, then what is the price of a CD?