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

Figure 21-6  
-Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of popcorn is $2, and the value of B is 100. What is the price of Mt. Dew?

Accepted Answer

A)  $1 
B)  $2 
C)  $5 
D)  $100 
A)  $1 
B)  $2 
C)  $5 
D)  $100

Question 3

Figure 21-9  
-Refer to Figure 21-9. If the price of good Y is $5, what is the price of good X?

Accepted Answer

A)  $500 
B)  $150 
C)  $16.67 
D)  $1.50 
A)  $500 
B)  $150 
C)  $16.67 
D)  $1.50

Question 4

Teresa faces prices of $6.00 for a unit of good X and $1.50 for a unit of good Y. At her optimum, Teresa is willing to give up 1 unit of good X for units of good Y.

Accepted Answer

The answer of Teresa faces prices of $6.00 for a...

Question 5

Suppose a consumer spends her income on two goods: music CDs and DVDs. The price of a CD is $8, and the price of a DVD is $20. If we graph the budget constraint by measuring the quantity of CDs purchased on the vertical axis and the quantity of DVDs on the horizontal axis, what is the slope of the budget constraint?

Accepted Answer

A)  -5.0 
B)  -2.5 
C)  -0.4 
D)  The slope of the budget constraint cannot be determined without knowing the income the consumer has available to spend on the two goods. 
A)  -5.0 
B)  -2.5 
C)  -0.4 
D)  The slope of the budget constraint cannot be determined without knowing the income the consumer has available to spend on the two goods.

Question 6

The theory of consumer choice examines

Accepted Answer

A)  the determination of output in competitive markets. 
B)  the tradeoffs inherent in decisions made by consumers. 
C)  how consumers select inputs into manufacturing production processes. 
D)  the determination of prices in competitive markets. 
A)  the determination of output in competitive markets. 
B)  the tradeoffs inherent in decisions made by consumers. 
C)  how consumers select inputs into manufacturing production processes. 
D)  the determination of prices in competitive markets.

Question 7

A Giffen good is one for which the quantity demanded rises as the price rises because the income effect

Accepted Answer

A)  reinforces the substitution effect. 
B)  reinforces and is greater than the substitution effect. 
C)  counteracts but is smaller than the substitution effect. 
D)  counteracts and is greater than the substitution effect. 
A)  reinforces the substitution effect. 
B)  reinforces and is greater than the substitution effect. 
C)  counteracts but is smaller than the substitution effect. 
D)  counteracts and is greater than the substitution effect.

Question 8

The theory of consumer choice illustrates the

Accepted Answer

A)  importance of property rights in creating efficient markets. 
B)  ability of a single economic actor to have a substantial influence on market prices. 
C)  the trade-offs that people face in their role as purchasers. 
D)  All of the above are correct. 
A)  importance of property rights in creating efficient markets. 
B)  ability of a single economic actor to have a substantial influence on market prices. 
C)  the trade-offs that people face in their role as purchasers. 
D)  All of the above are correct.

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 price of beer doubles to $2, then the

Accepted Answer

A)  budget constraint intersects the vertical axis at 25 beers. 
B)  slope of the budget constraint rises to -2. 
C)  slope of the budget constraint falls to -4. 
D)  budget constraint shifts inward in a parallel fashion. 
A)  budget constraint intersects the vertical axis at 25 beers. 
B)  slope of the budget constraint rises to -2. 
C)  slope of the budget constraint falls to -4. 
D)  budget constraint shifts inward in a parallel fashion.

Question 10

Figure 21-32
The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income.  
-Refer to Figure 21-32. What is the value of the interest rate that Hannah earns on her saving?

Accepted Answer

The interest rate is

Question 11

Which of the following statements is not correct?

Accepted Answer

A)  If Fiona gets a higher wage and works more, the substitution effect is greater than the income effect for her. 
B)  If Miguel 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 Fiona gets a higher wage and works more, the substitution effect is greater than the income effect for her. 
B)  If Miguel 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 12

Figure 21-29
The figure below illustrates the preferences of a representative consumer, Nathaniel.  
-Refer to Figure 21-29. A change in Nathaniel's optimum from point A to point B results from

Accepted Answer

A)  a change in Nathaniel's preferences. 
B)  an increase in the income Nathaniel receives when he is young. 
C)  an increase in the interest rate. 
D)  a decrease in the interest rate. 
A)  a change in Nathaniel's preferences. 
B)  an increase in the income Nathaniel receives when he is young. 
C)  an increase in the interest rate. 
D)  a decrease in the interest rate.

Question 13

Preston goes to the movies every Sunday afternoon. The movie theater offers 4 combinations of popcorn and beverages: the "mini­combo" costs $5 and includes a small popcorn and a small drink, the "medium­combo" costs $7 and includes a medium popcorn and a medium drink, the "value­combo" also costs $7 and includes a small popcorn and a large drink, and the "large­combo" costs $9 and includes a large popcorn and a large drink. Preston always purchases the "value­combo." We can conclude that

Accepted Answer

A)  Preston cannot afford the "large­combo." 
B)  Preston cannot afford the "medium­combo." 
C)  Preston prefers a combo with a larger popcorn-to-beverage ratio. 
D)  Preston prefers a combo with a smaller popcorn-to-beverage ratio. 
A)  Preston cannot afford the "large­combo." 
B)  Preston cannot afford the "medium­combo." 
C)  Preston prefers a combo with a larger popcorn-to-beverage ratio. 
D)  Preston prefers a combo with a smaller popcorn-to-beverage ratio.

Question 14

If the market is offering consumers the trade-off of 3 pints of Pepsi for 1 pizza, and if the price of a pizza is $9, then what is the price of a pint of Pepsi?

Accepted Answer

The price

Question 15

Figure 21-19  
-Refer to Figure 21-19. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, which of the following would cause the consumer to move to point A?

Accepted Answer

A)  a decrease in the price of Skittles 
B)  a decrease in the price of M&M's 
C)  an increase in the price of Skittles 
D)  an increase in the price of M&M's 
A)  a decrease in the price of Skittles 
B)  a decrease in the price of M&M's 
C)  an increase in the price of Skittles 
D)  an increase in the price of M&M's

Question 16

Which of the following is an example of a Giffen good?

Accepted Answer

A)  potatoes during the Irish potato famine 
B)  rice in the Chinese province of Hunan 
C)  fish in Japan 
D)  Both a and b are correct. 
A)  potatoes during the Irish potato famine 
B)  rice in the Chinese province of Hunan 
C)  fish in Japan 
D)  Both a and b are correct.

Question 17

The slope of the budget constraint is determined by the

Accepted Answer

A)  relative price of the goods measured on the axes. 
B)  relative price of the goods measured on the axes and the consumer's income. 
C)  endowment of productive resources. 
D)  preferences of the consumer. 
A)  relative price of the goods measured on the axes. 
B)  relative price of the goods measured on the axes and the consumer's income. 
C)  endowment of productive resources. 
D)  preferences of the consumer.

Question 18

Suppose a consumer has preferences over two goods, X and Y, which are perfect substitutes. In particular, two units of X is equivalent to one unit of Y. If the price of X is $1, the price of Y is $3, and the consumer has $30 of income to allocate to these two goods, how much of each good should the consumer purchase to maximize satisfaction?

Accepted Answer

A)  30 units of X and 0 units of Y 
B)  0 units of X and 10 units of Y 
C)  15 units of X and 5 units of Y 
D)  15 units of X and 0 units of Y 
A)  30 units of X and 0 units of Y 
B)  0 units of X and 10 units of Y 
C)  15 units of X and 5 units of Y 
D)  15 units of X and 0 units of Y

Question 19

Figure 21-32
The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income.  
-Refer to Figure 21-32. At two of the four labeled points, Hannah is equally happy. Identify those two points.

Accepted Answer

Hannah is

Question 20

If goods A and B are perfect substitutes, then the marginal rate of substitution of good A for good B is constant.

Accepted Answer

A) True 
 B)False

When the price of an inferior good decreases,

Figure 21-6 -Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of popcorn is $2, and the value of B is 100. What is the price of Mt. Dew?

Figure 21-9 -Refer to Figure 21-9. If the price of good Y is $5, what is the price of good X?

Teresa faces prices of $6.00 for a unit of good X and $1.50 for a unit of good Y. At her optimum, Teresa is willing to give up 1 unit of good X for units of good Y.

The theory of consumer choice examines

A Giffen good is one for which the quantity demanded rises as the price rises because the income effect

The theory of consumer choice illustrates the

Figure 21-32 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. -Refer to Figure 21-32. What is the value of the interest rate that Hannah earns on her saving?

Which of the following statements is not correct?

Figure 21-29 The figure below illustrates the preferences of a representative consumer, Nathaniel. -Refer to Figure 21-29. A change in Nathaniel's optimum from point A to point B results from

If the market is offering consumers the trade-off of 3 pints of Pepsi for 1 pizza, and if the price of a pizza is $9, then what is the price of a pint of Pepsi?

Figure 21-19 -Refer to Figure 21-19. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, which of the following would cause the consumer to move to point A?

Which of the following is an example of a Giffen good?

The slope of the budget constraint is determined by the

If goods A and B are perfect substitutes, then the marginal rate of substitution of good A for good B is constant.

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

When the price of an inferior good decreases,

Figure 21-6 -Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of popcorn is $2, and the value of B is 100. What is the price of Mt. Dew?

Figure 21-9 -Refer to Figure 21-9. If the price of good Y is $5, what is the price of good X?

Teresa faces prices of $6.00 for a unit of good X and $1.50 for a unit of good Y. At her optimum, Teresa is willing to give up 1 unit of good X for units of good Y.

The theory of consumer choice examines

A Giffen good is one for which the quantity demanded rises as the price rises because the income effect

The theory of consumer choice illustrates the

Figure 21-32 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. -Refer to Figure 21-32. What is the value of the interest rate that Hannah earns on her saving?

Which of the following statements is not correct?

Figure 21-29 The figure below illustrates the preferences of a representative consumer, Nathaniel. -Refer to Figure 21-29. A change in Nathaniel's optimum from point A to point B results from

If the market is offering consumers the trade-off of 3 pints of Pepsi for 1 pizza, and if the price of a pizza is $9, then what is the price of a pint of Pepsi?

Figure 21-19 -Refer to Figure 21-19. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, which of the following would cause the consumer to move to point A?

Which of the following is an example of a Giffen good?

The slope of the budget constraint is determined by the

If goods A and B are perfect substitutes, then the marginal rate of substitution of good A for good B is constant.

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