Question 1

Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will

Accepted Answer

A)  cause the consumer to buy more of good Y and less of good X. 
B)  cause the consumer to buy more of good X and less of good Y. 
C)  not affect the amount of goods X and Y that the consumer buys. 
D)  result in an upward-sloping demand for good Y if the substitution effect is positive. 
A)  cause the consumer to buy more of good Y and less of good X. 
B)  cause the consumer to buy more of good X and less of good Y. 
C)  not affect the amount of goods X and Y that the consumer buys. 
D)  result in an upward-sloping demand for good Y if the substitution effect is positive.

Question 2

The consumer's optimum is where

Accepted Answer

A)  MUx/MUy = Py/Px. 
B)  MUx/Py = MUy/Px. 
C)  MUx/MUy = Px/Py. 
D)  None of the above is correct. 
A)  MUx/MUy = Py/Px. 
B)  MUx/Py = MUy/Px. 
C)  MUx/MUy = Px/Py. 
D)  None of the above is correct.

Question 3

If the consumer's income and all prices simultaneously double, then the optimum consumption bundle will

Accepted Answer

A)  shift outward relative to the original optimum. 
B)  move leftward along the original budget constraint. 
C)  not change. 
D)  shift inward relative to the original optimum. 
A)  shift outward relative to the original optimum. 
B)  move leftward along the original budget constraint. 
C)  not change. 
D)  shift inward relative to the original optimum.

Question 4

Consider the budget constraint between "spending today" on the horizontal axis and "spending a year from today" on the vertical axis. 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 now that the interest rate decreases to 10%. What happens to the slope of your budget constraint relative to when the interest rate was 25%? The slope

Accepted Answer

A)  becomes steeper. 
B)  becomes flatter. 
C)  doesn't change because the budget constraint shifts in parallel to the original budget constraint. 
D)  doesn't change because the budget constraint shifts out parallel to the original budget constraint. 
A)  becomes steeper. 
B)  becomes flatter. 
C)  doesn't change because the budget constraint shifts in parallel to the original budget constraint. 
D)  doesn't change because the budget constraint shifts out parallel to the original budget constraint.

Question 5

When Jamar has an income of $2,000, he consumes 30 units of good A and 50 units of good B. After Jamar's income decreases to $1,500, he consumes 33 units of good A and 45 units of good B. Which of the following statements is correct?

Accepted Answer

A)  Both goods A and B are normal goods. 
B)  Both goods A and B are inferior goods. 
C)  Good A is a normal good, and good B is an inferior good. 
D)  Good A is an inferior good, and good B is a normal good. 
A)  Both goods A and B are normal goods. 
B)  Both goods A and B are inferior goods. 
C)  Good A is a normal good, and good B is an inferior good. 
D)  Good A is an inferior good, and good B is a normal good.

Question 6

Figure 21-20
The following graph illustrates a representative consumer's preferences for marshmallows and chocolate chip cookies:  
-Refer to Figure 21-20. Assume that the consumer has an income of $100 and currently optimizes at bundle A. When the price of marshmallows decreases to $5, which bundle will the optimizing consumer choose?

Accepted Answer

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

Question 7

Traci consumes two goods, lemonade and pretzels. Lemonade costs $2 per glass, and she consumes it to the point where the marginal utility she receives from her last glass of lemonade is 4. Pretzels cost $3 per bag. The relationship between the marginal utility Traci gets from eating a bag of pretzels and the number of bags she eats per month is as follows:   If Traci is maximizing her utility, how many bags of pretzels does she buy each month?

Accepted Answer

A)  3 
B)  4 
C)  5 
D)  6 
A)  3 
B)  4 
C)  5 
D)  6

Question 8

When two goods are perfect complements, the indifference curves are right angles.

Accepted Answer

A) True 
 B)False

Question 9

A typical consumer consumes both coffee and donuts. After the consumer's income decreases, the consumer consumes more coffee but fewer donuts than before. For this consumer, donuts are a normal good, but coffee is an inferior good.

Accepted Answer

A) True 
 B)False

Question 10

Figure 21-7  
-Refer to Figure 21-7. Suppose a consumer has $500 in income, the price of a book is $10, and the value of B is 50. What is the price of a DVD?

Accepted Answer

A)  $5 
B)  $10 
C)  $50 
D)  $100 
A)  $5 
B)  $10 
C)  $50 
D)  $100

Question 11

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

Accepted Answer

A)  1/3 
B)  1/4 
C)  3 
D)  4 
A)  1/3 
B)  1/4 
C)  3 
D)  4

Question 12

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 13

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. If you save all your money, how much money will you have one year from today?

Accepted Answer

A)  $100 
B)  $125 
C)  $200 
D)  $225 
A)  $100 
B)  $125 
C)  $200 
D)  $225

Question 14

Bill consumes two goods: iced tea and spaghetti. The price of iced tea is $2 per bottle, and the price of spaghetti is $8 per serving. His income is $1,000 per month. He spends all of his income each month. He purchases 200 bottles of iced tea. How many servings of spaghetti does he purchase?

Accepted Answer

A)  125 
B)  75 
C)  50 
D)  10 
A)  125 
B)  75 
C)  50 
D)  10

Question 15

An optimizing consumer will select a consumption bundle in which

Accepted Answer

A)  income is maximized, and prices are minimized. 
B)  utility is maximized, and prices are minimized. 
C)  utility is maximized, subject to budget constraints. 
D)  utility is maximized, and indifference curves are linear. 
A)  income is maximized, and prices are minimized. 
B)  utility is maximized, and prices are minimized. 
C)  utility is maximized, subject to budget constraints. 
D)  utility is maximized, and indifference curves are linear.

Question 16

Figure 21-19  
-Refer to Figure 21-19. Assume that the consumer depicted in the figure has an income of $20. The price of Skittles is $2 and the price of M&M's is $2. The consumer's optimal choice is point

Accepted Answer

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

Question 17

The indifference curves for nickels and dimes are straight lines.

Accepted Answer

A) True 
 B)False

Question 18

Figure 21-4
In each case, the budget constraint moves from BC-1 to BC-2.  
-Refer to Figure 21-4. Which of the graphs in the figure could reflect a decrease in income?

Accepted Answer

A)  graph a 
B)  graph b 
C)  graph d 
D)  None of the above is correct. 
A)  graph a 
B)  graph b 
C)  graph d 
D)  None of the above is correct.

Question 19

Figure 21-24
The figure shows three indifference curves and a budget constraint for a certain consumer named Steve.  
-Refer to Figure 21-24. At his optimum, Steve is buying

Accepted Answer

A)  0.6 pounds of apples. 
B)  2.0 pounds of apples. 
C)  4.5 pounds of apples. 
D)  5.5 pounds of apples. 
A)  0.6 pounds of apples. 
B)  2.0 pounds of apples. 
C)  4.5 pounds of apples. 
D)  5.5 pounds of apples.

Question 20

A consumer's indifference curves are straight lines when, for the consumer, the goods in question are__________________________.

Accepted Answer

The answer of A consumer's indifference curves are straight lines...

Exam 21: The Theory of Consumer Choice

Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will

The consumer's optimum is where

If the consumer's income and all prices simultaneously double, then the optimum consumption bundle will

When Jamar has an income of $2,000, he consumes 30 units of good A and 50 units of good B. After Jamar's income decreases to $1,500, he consumes 33 units of good A and 45 units of good B. Which of the following statements is correct?

When two goods are perfect complements, the indifference curves are right angles.

A typical consumer consumes both coffee and donuts. After the consumer's income decreases, the consumer consumes more coffee but fewer donuts than before. For this consumer, donuts are a normal good, but coffee is an inferior good.

Figure 21-7 -Refer to Figure 21-7. Suppose a consumer has $500 in income, the price of a book is $10, and the value of B is 50. What is the price of a DVD?

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

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

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. If you save all your money, how much money will you have one year from today?

Bill consumes two goods: iced tea and spaghetti. The price of iced tea is $2 per bottle, and the price of spaghetti is $8 per serving. His income is $1,000 per month. He spends all of his income each month. He purchases 200 bottles of iced tea. How many servings of spaghetti does he purchase?

An optimizing consumer will select a consumption bundle in which

Figure 21-19 -Refer to Figure 21-19. Assume that the consumer depicted in the figure has an income of $20. The price of Skittles is $2 and the price of M&M's is $2. The consumer's optimal choice is point

The indifference curves for nickels and dimes are straight lines.

Figure 21-4 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-4. Which of the graphs in the figure could reflect a decrease in income?

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. At his optimum, Steve is buying

A consumer's indifference curves are straight lines when, for the consumer, the goods in question are__________________________.

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