Exam 5: Using Consumer Choice Theory

The government of Lilliput wants to ensure food security for all its citizens.Explain how each of these policies will affect the consumption of food and other goods using indifference curves. ( A)Providing each Lilliputian with a food voucher for $50

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Question 1

Correct Answer:

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The budget line for a fixed-quantity subsidy is shown in bold in the figure.Up to $50 worth of food can be consumed at no extra cost to the consumer.If the consumer wishes to consume more than $50 worth of food,he will have to forego the subsidized quantity entirely and consume only along the RZ portion of the budget line,paying the full cost of the food.The fixed-quantity subsidy does not benefit a consumer who does not wish to avail of the food supplied by the government.

Figure 5-1 shows the preferences of a consumer for food and other goods.He is initially in equilibrium at point A where the budget line MN is tangent to the indifference curve. Figure 5-1 -In Figure 5-1,the total outlays on other goods under a lump-sum grant equal in cost to the excise subsidy is given by _____.

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Question 2

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In a two-year period,if a higher interest rate causes consumption in year 1 to rise:

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Question 3

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Which of the following groups are better off under an annual fee system of garbage disposal?

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Question 4

Fred is considering consumption between two periods and is earning an income of $1,000 in both periods.If the interest rate is 8 percent,Fred borrows $500,but if the interest rate rises to 18 percent,Fred saves $500.Is this behavior economically reasonable?

(Multiple Choice)

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Question 5

Figure 5-1 shows the preferences of a consumer for food and other goods.He is initially in equilibrium at point A where the budget line MN is tangent to the indifference curve. Figure 5-1 -In Figure 5-1,the total outlays on other goods after the excise subsidy is given by _____.

(Multiple Choice)

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Question 6

For a risk-averse individual,with return on the X-axis and total utility on the Y-axis,the slope of the total utility curve:

(Multiple Choice)

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Question 7

A reduction in an individual's future income will cause:

(Multiple Choice)

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Question 8

Given a choice between an equal-cost cash grant and an excise subsidy,a consumer will:

(Multiple Choice)

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Question 9

Suppose a local government decides to increase taxes on its residents and use that money to provide meals to each individual in the community.The scheme provides each individual with a small frozen dinner.Compared to a voucher system that allows individuals to purchase meals at a private restaurant,the frozen dinner scheme:

(Multiple Choice)

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Question 10

Consider an individual for whom consumption in two periods is a normal good.Other things remaining the same,if the interest rate increases,then:

(Multiple Choice)

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Question 11

Compared to a system of providing education free of cost at government schools,a voucher program that provides the means for parents to send their school-age children to private schools at government expense:

(Multiple Choice)

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Question 12

Figure 5-1 shows the preferences of a consumer for food and other goods.He is initially in equilibrium at point A where the budget line MN is tangent to the indifference curve. Figure 5-1 -In Figure 5-1,the total consumption of food under a lump-sum grant equal in cost to the excise subsidy is given by _____.

(Multiple Choice)

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Question 13

Being a member of the government-sponsored MediSave scheme entitles employees to a lump-sum payment in cash towards medical expenses.This scheme would:

(Multiple Choice)

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Question 14

Figure 5-4 shows a family's preferences for public and private healthcare. -Refer to Figure 5-4.Suppose the government offers a fixed quantity subsidy of healthcare valued at $B0.The new budget line becomes _____.

(Multiple Choice)

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Question 15

A fixed-quantity subsidy differs from food stamps in that:

(Multiple Choice)

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Question 16

Which of the following policies would work best towards reducing traffic jams?

(Multiple Choice)

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Question 17

Describe the relationship among total utility,marginal utility,and preferences toward risk.

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Question 18

One of the possible explanations for why more trash is generated in cities is that _____.

(Multiple Choice)

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Question 19

Which of the following is true of an excise subsidy?

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Question 20

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The government of Lilliput wants to ensure food security for all its citizens.Explain how each of these policies will affect the consumption of food and other goods using indifference curves. ( A)Providing each Lilliputian with a food voucher for $50

In a two-year period,if a higher interest rate causes consumption in year 1 to rise:

Which of the following groups are better off under an annual fee system of garbage disposal?

Fred is considering consumption between two periods and is earning an income of $1,000 in both periods.If the interest rate is 8 percent,Fred borrows $500,but if the interest rate rises to 18 percent,Fred saves $500.Is this behavior economically reasonable?

Figure 5-1 shows the preferences of a consumer for food and other goods.He is initially in equilibrium at point A where the budget line MN is tangent to the indifference curve. Figure 5-1 -In Figure 5-1,the total outlays on other goods after the excise subsidy is given by _____.

For a risk-averse individual,with return on the X-axis and total utility on the Y-axis,the slope of the total utility curve:

A reduction in an individual's future income will cause:

Given a choice between an equal-cost cash grant and an excise subsidy,a consumer will:

Consider an individual for whom consumption in two periods is a normal good.Other things remaining the same,if the interest rate increases,then:

Compared to a system of providing education free of cost at government schools,a voucher program that provides the means for parents to send their school-age children to private schools at government expense:

Being a member of the government-sponsored MediSave scheme entitles employees to a lump-sum payment in cash towards medical expenses.This scheme would:

Figure 5-4 shows a family's preferences for public and private healthcare. -Refer to Figure 5-4.Suppose the government offers a fixed quantity subsidy of healthcare valued at $B0.The new budget line becomes _____.

A fixed-quantity subsidy differs from food stamps in that:

Which of the following policies would work best towards reducing traffic jams?

Describe the relationship among total utility,marginal utility,and preferences toward risk.

One of the possible explanations for why more trash is generated in cities is that _____.

Which of the following is true of an excise subsidy?

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

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