Question 1

A consumer consumes two normal goods, popcorn and Pepsi. The price of Pepsi rises. The substitution effect, by itself, suggests that the consumer will consume

Accepted Answer

A)  more popcorn and more Pepsi. 
B)  less popcorn and less Pepsi. 
C)  more popcorn and less Pepsi. 
D)  less popcorn and more Pepsi. 
A)  more popcorn and more Pepsi. 
B)  less popcorn and less Pepsi. 
C)  more popcorn and less Pepsi. 
D)  less popcorn and more Pepsi. C

Question 2

If the relative price of a concert ticket is three times the price of a meal at a good restaurant, then the opportunity cost of a concert ticket can be measured by the

Accepted Answer

A)  slope of the budget constraint. 
B)  slope of an indifference curve. 
C)  marginal rate of substitution. 
D)  income effect. 
A)  slope of the budget constraint. 
B)  slope of an indifference curve. 
C)  marginal rate of substitution. 
D)  income effect. A

Question 3

Suppose a consumer consumes two goods, X and Y. The slope of the budget constraint equals the

Accepted Answer

A)  marginal rate of substitution. 
B)  rate at which the consumer will give up X to gain Y while maintaining the same level of utility. 
C)  relative price of the two goods. 
D)  All of the above are correct. 
A)  marginal rate of substitution. 
B)  rate at which the consumer will give up X to gain Y while maintaining the same level of utility. 
C)  relative price of the two goods. 
D)  All of the above are correct. C

Question 4

If a consumer purchases more of good A when her income falls, good A is an inferior good.

Accepted Answer

A) True 
 B)False

Question 5

Figure 21-18  
-Refer to Figure 21-18. Given the budget constraint depicted in the graph, the consumer's optimal choice will be point

Accepted Answer

A)  B. 
B)  C. 
C)  D. 
D)  E. 
A)  B. 
B)  C. 
C)  D. 
D)  E.

Question 6

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

Accepted Answer

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

Question 7

If Chad's labor­supply curve is upward­sloping, then, for Chad,

Accepted Answer

A)  an increase in the wage creates an income effect that is greater than the substitution effect. 
B)  an increase in the wage creates a substitution effect that is greater than the income effect. 
C)  leisure and consumption are perfect substitutes. 
D)  leisure and consumption are perfect complements. 
A)  an increase in the wage creates an income effect that is greater than the substitution effect. 
B)  an increase in the wage creates a substitution effect that is greater than the income effect. 
C)  leisure and consumption are perfect substitutes. 
D)  leisure and consumption are perfect complements.

Question 8

A field experiment conducted by economists in the Chinese province of Hunan provided evidence that, for poor households in that province, rice is a good.

Accepted Answer

The answer of A field experiment conducted by economists in...

Question 9

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 10

Suppose that you have $100 today and expect to receive $100 one year from today. Your money market account pays an annual interest rate of 25%, and you may borrow money at that interest rate. Suppose that you borrow $60 and spend $160 today. After you repay your loan one year from today, how much money will you have available for consumption one year from today?

Accepted Answer

A)  $0 
B)  $25 
C)  $50 
D)  $75 
A)  $0 
B)  $25 
C)  $50 
D)  $75

Question 11

What is significant about a point on a graph at which an indifference curve is tangent to a budget constraint?

Accepted Answer

A point of tangency between an

Question 12

Pepsi and pizza are normal goods. When the price of pizza falls, the substitution effect by itself will cause a

Accepted Answer

A)  shift to a lower indifference curve so that the consumer buys less Pepsi. 
B)  shift to a higher indifference curve so that the consumer buys more Pepsi. 
C)  movement along the indifference curve so that the consumer buys more Pepsi. 
D)  movement along the indifference curve so that the consumer buys less Pepsi. 
A)  shift to a lower indifference curve so that the consumer buys less Pepsi. 
B)  shift to a higher indifference curve so that the consumer buys more Pepsi. 
C)  movement along the indifference curve so that the consumer buys more Pepsi. 
D)  movement along the indifference curve so that the consumer buys less Pepsi.

Question 13

If Suzette responds to an increase in the interest rate by decreasing her saving, then, for Suzette,

Accepted Answer

A)  the increase in the interest rate creates an income effect that is greater than the substitution effect. 
B)  the increase in the interest rate creates a substitution effect that is greater than the income effect. 
C)  consumption when young and consumption when old are perfect substitutes. 
D)  consumption when young and consumption when old are perfect complements. 
A)  the increase in the interest rate creates an income effect that is greater than the substitution effect. 
B)  the increase in the interest rate creates a substitution effect that is greater than the income effect. 
C)  consumption when young and consumption when old are perfect substitutes. 
D)  consumption when young and consumption when old are perfect complements.

Question 14

Figure 21-24
The figure shows three indifference curves and a budget constraint for a certain consumer named Steve.  
-Refer to Figure 21-24. Suppose the price of pears, the price of apples, and Steve's income remain constant, and Steve moves from point B to point C. In doing so, Steve

Accepted Answer

A)  becomes better off. 
B)  moves from a point that is not optimal to a point that is optimal. 
C)  gives up some apples to get some pears. 
D)  All of the above are correct. 
A)  becomes better off. 
B)  moves from a point that is not optimal to a point that is optimal. 
C)  gives up some apples to get some pears. 
D)  All of the above are correct.

Question 15

The following diagram shows two budget lines: A and B.   Which of the following could explain the change in the budget line from A to B?

Accepted Answer

A)  a simultaneous decrease in the price of X and the price of Y 
B)  an increase in income 
C)  a decrease in income and a decrease in the price of Y 
D)  Both a and b are correct. 
A)  a simultaneous decrease in the price of X and the price of Y 
B)  an increase in income 
C)  a decrease in income and a decrease in the price of Y 
D)  Both a and b are correct.

Question 16

You can think of an indifference curve as an

Accepted Answer

A)  equal-cost curve. 
B)  equal-marginal-cost curve. 
C)  equal-utility curve. 
D)  equal-marginal-utility curve. 
A)  equal-cost curve. 
B)  equal-marginal-cost curve. 
C)  equal-utility curve. 
D)  equal-marginal-utility curve.

Question 17

Energy drinks and granola bars are normal goods. When the price of energy drinks decreases, the income effect causes a

Accepted Answer

A)  shift to a lower indifference curve, and the consumer buys fewer granola bars. 
B)  shift to a higher indifference curve, and the consumer buys more granola bars. 
C)  movement along the indifference curve, and the consumer buys fewer granola bars. 
D)  movement along the indifference curve, and the consumer buys more granola bars. 
A)  shift to a lower indifference curve, and the consumer buys fewer granola bars. 
B)  shift to a higher indifference curve, and the consumer buys more granola bars. 
C)  movement along the indifference curve, and the consumer buys fewer granola bars. 
D)  movement along the indifference curve, and the consumer buys more granola bars.

Question 18

Figure 21-5
(a) (b)    
-Refer to Figure 21-5. In graph (b), what is the price of good X relative to the price of good Y (i.e., Px/Py)?

Accepted Answer

A)  1/3 
B)  1 
C)  3 
D)  10 
A)  1/3 
B)  1 
C)  3 
D)  10

Question 19

The relationship between the marginal utility that Casey gets from eating ice cream sundaes and the number of ice cream cones he eats per week is as follows:   Casey receives 3 units of utility from the last dollar spent on each of the other goods he consumes. If ice cream sundaes cost $4 each, how many ice cream sundaes will he consume per month if he maximizes utility?

Accepted Answer

A)  2 
B)  3 
C)  4 
D)  5 
A)  2 
B)  3 
C)  4 
D)  5

Question 20

The following diagram shows two budget lines: A and B.   Which of the following could explain the change in the budget line from A to B?

Accepted Answer

A)  a decrease in income and a decrease in the price of X 
B)  a decrease in income and an increase in the price of X 
C)  an increase in income and a decrease in the price of X 
D)  an increase in income and an increase in the price of X 
A)  a decrease in income and a decrease in the price of X 
B)  a decrease in income and an increase in the price of X 
C)  an increase in income and a decrease in the price of X 
D)  an increase in income and an increase in the price of X

Exam 21: The Theory of Consumer Choice

A consumer consumes two normal goods, popcorn and Pepsi. The price of Pepsi rises. The substitution effect, by itself, suggests that the consumer will consume

If the relative price of a concert ticket is three times the price of a meal at a good restaurant, then the opportunity cost of a concert ticket can be measured by the

Suppose a consumer consumes two goods, X and Y. The slope of the budget constraint equals the

If a consumer purchases more of good A when her income falls, good A is an inferior good.

Figure 21-18 -Refer to Figure 21-18. Given the budget constraint depicted in the graph, the consumer's optimal choice will be point

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

If Chad's labor­supply curve is upward­sloping, then, for Chad,

A field experiment conducted by economists in the Chinese province of Hunan provided evidence that, for poor households in that province, rice is a good.

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

What is significant about a point on a graph at which an indifference curve is tangent to a budget constraint?

Pepsi and pizza are normal goods. When the price of pizza falls, the substitution effect by itself will cause a

If Suzette responds to an increase in the interest rate by decreasing her saving, then, for Suzette,

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. Suppose the price of pears, the price of apples, and Steve's income remain constant, and Steve moves from point B to point C. In doing so, Steve

The following diagram shows two budget lines: A and B. Which of the following could explain the change in the budget line from A to B?

You can think of an indifference curve as an

Energy drinks and granola bars are normal goods. When the price of energy drinks decreases, the income effect causes a

Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (b), what is the price of good X relative to the price of good Y (i.e., Px/Py)?

The following diagram shows two budget lines: A and B. Which of the following could explain the change in the budget line from A to B?

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

Six Debates Over Macroeconomic Policy

Filters

If Chad's laborsupply curve is upwardsloping, then, for Chad,

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