Exam 5: Using Consumer Choice Theory

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

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

The welfare effect of an excise subsidy indicates that:

Other things remaining the same,in the intertemporal consumer choice model a change in the endowment point:

All-you-can-eat restaurants charge a fixed price that permits unlimited access to prepared food.Suppose food consumption is on the horizontal axis and all other goods on the vertical axis.If the restaurant charges $10 per meal while the price of all other goods is $20,restaurant patrons will consume to a point on their indifference curve where their marginal rate of substitution of food for all other goods is equal to _____.

The U.S.government in effect subsidizes health care of workers by:

Which of the following leads to the diversification of risk?

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

In the intertemporal consumer choice model,an increase in _____ will alter the slope of the budget line.

An individual is considering consumption in two periods.He has decided to borrow $1,000 in period 1,given his endowment and the interest rate.Other things remaining the same,if the interest rate increases,he will:

Use the following figure to answer the questions : Figure : 5-5 shows a family's preferences toward schooling,before and after a fixed-quantity subsidy. -Prior to the subsidy,the family is in equilibrium at point J.Assume that public schooling cannot be supplemented with private tutoring.Refer to Figure 5-5.After the fixed-quantity subsidy has been introduced,the family consumes:

Compared to an equal-cost cash grant,an excise subsidy on clothing results in the purchase of:

An increase in the price per unit for trash disposal from zero to a positive quantity causes the budget line to change from:

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 b)Transferring $50 in cash to each Lilliputian's bank account c)Subsidizing the price of food with a per-unit subsidy d)Providing $50 worth of food per head free of cost at government-run food agencies.(Assume that an individual cannot supplement this quantity with any extra food)

Expected return is defined as _____.

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

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:

A risk-neutral individual _____.

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

Consider a two-year period where a consumer has an income of $10,000 in year 1 and $8,000 in year 2.The consumer can borrow or lend at a rate of 10 percent.If the consumer decides to save $1,000 in year 1,it means: