Question 1

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. 
-Refer to Figure 21-24. If the price of a pound of pears is $3, then Steve's income is

Accepted Answer

A)  $12.00.
B)  $13.50.
C)  $16.20.
D)  $18.80.E) None of the above
F) All of the above

Question 2

The substitution effect of a wage decrease in the work-leisure model results in the worker choosing to

Accepted Answer

A)  work less than before.
B)  work more than before.
C)  possibly work more or less than before.
D)  work more with a higher level of consumption.E) A) and C)
F) C) and D)

Question 3

Indifference curves that cross violate the property of

Accepted Answer

A)  the marginal rate of substitution.
B)  transitivity.
C)  indifference curves bowing inward.
D)  They do not violate any properties of indifference curves.E) All of the above
F) A) and B)

Question 4

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. From the figure we can determine how much income Hannah earns when young and we can determine the interest rate. Could the interest rate rise to a level at which Hannah could afford to be at point A?

Accepted Answer

Yes. The point (0, 40000) is the horizon...

Question 5

Irene is a vegetarian, so she does not eat pork. That is, pork provides no additional utility to Irene. She loves broccoli, however. If we illustrate Irene's indifference curves by drawing broccoli on the horizontal axis and pork on the vertical axis, her indifference curves will

Accepted Answer

A)  slope downward.
B)  be vertical straight lines.
C)  slope upward.
D)  be horizontal straight lines.E) C) and D)
F) None of the above

Question 6

If an indifference curve is bowed in toward the origin, the marginal rate of substitution is

Accepted Answer

A)  not likely to reflect the relative value of goods.
B)  likely to be constant for all bundles along the indifference curve.
C)  likely to be identical to the price ratio for each bundle along the indifference curve.
D)  different for each bundle along the indifference curve.E) A) and B)
F) B) and C)

Question 7

Figure 21-7 
-Refer to Figure 21-7. Suppose a consumer has $200 in income, the price of a book is $5, and the price of a DVD is $10. What is the value of B?

Accepted Answer

A)  40
B)  20
C)  10
D)  2E) B) and C)
F) None of the above

Question 8

Figure 21-25 The figure pertains to a particular consumer. On the axes, X represents the quantity of good X and Y represents the quantity of good Y. 1 B) I2 C) I3 D) I4" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-25. Suppose the price of good X is $10, the price of good Y is $5, and the consumer's income is $210. Then the consumer's optimal choice is represented by a point on which curve?

Accepted Answer

A)  I1
B)  I2
C)  I3
D)  I4E) A) and B)
F) A) and C)

Question 9

Figure 21-8 
-Refer to Figure 21-8. You have $600 to spend on good X and good Y. If good X costs $100 and good Y costs $100, your budget constraint is

Accepted Answer

A)  AB.
B)  BC.
C)  CD.
D)  DE.E) A) and D)
F) None of the above

Question 10

Michael faces tradeoffs between consuming in the current period when he is young and consuming in a future period when he is old. Michael experiences a decrease in the current interest rate he earns on his savings. Michael will save

Accepted Answer

A)  less in the current period if the substitution effect is greater than the income effect.
B)  less in the current period if the income effect is greater than the substitution effect.
C)  more in the current period if the substitution effect is greater than the income effect.
D)  more in the current period, regardless of the sizes of the income and substitution effects.E) B) and C)
F) A) and D)

Question 11

Figure 21-10 
-Refer to Figure 21-10. Which of the following comparisons is correct regarding the marginal rate of substitution (MRS)  of donuts for cake?

Accepted Answer

A)  The MRS is greater between bundles A and B than between bundles B and C.
B)  The MRS is greater between bundles B and C than between bundles A and B.
C)  The MRS is the same between bundles A and B and bundles B and C because all three bundles lie on the same indifference curve.
D)  The MRS is greater between bundles E and B than between bundles B and D.E) None of the above
F) All of the above

Question 12

If a good is a Giffen good, then

Accepted Answer

A)  the supply curve is downward sloping.
B)  the demand curve is upward sloping.
C)  the demand curve is horizontal.
D)  there is no optimal level of consumption for the consumer.E) A) and B)
F) None of the above

Question 13

Figure 21-9 
-Refer to Figure 21-9. If the consumer has $600 in income, what is the price of good X?

Accepted Answer

A)  $20
B)  $6
C)  $3
D)  $0.33E) C) and D)
F) All of the above

Question 14

A decrease in income will cause a consumer's budget constraint to

Accepted Answer

A)  shift outward, parallel to its initial position.
B)  shift inward, parallel to its initial position.
C)  pivot along the horizontal axis.
D)  pivot along the vertical axis.E) B) and D)
F) None of the above

Question 15

Using the graph shown, construct a demand curve for M&M's given an income of $10.

Accepted Answer

The answer of Using the graph shown, construct a demand...

Question 16

Billie spends all of her income on soccer balls and jeans, and the price of a pair of jeans is three times the price of soccer balls. In order to maximize total utility, Billie should

Accepted Answer

A)  buy three times as many soccer balls as pairs of jeans.
B)  buy three times as many pairs of jeans as soccer balls.
C)  buy both items until the marginal utility of soccer balls is three times the marginal utility of a pair of jeans.
D)  buy both items until the marginal utility of a pair of jeans is three times the marginal utility of soccer balls.E) A) and B)
F) C) and D)

Question 17

When we draw Katie's indifference curves to represent her preferences for books and movies, we find that her indifference curves are upward-sloping. What does this tell us about Katie's preferences?

Accepted Answer

Either Katie dislike...

Question 18

The substitution effect of an increase in the interest rate will result in an increase in

Accepted Answer

A)  consumption when young and increase in savings when young.
B)  consumption when old and an increase in savings when young.
C)  consumption when young and an increase in savings when old.
D)  savings when old and an increase in consumption when old.E) A) and D)
F) B) and C)

Question 19

A normal good is one

Accepted Answer

A)  the average consumer chooses to consume at a normal level.
B)  the average consumer chooses to consume over other similar goods.
C)  for which an increase in income increases consumption of the good.
D)  for which an increase in income decreases consumption of the good.E) A) and C)
F) None of the above

Question 20

Suppose a consumer spends her income on two goods: iTunes music downloads and books. The consumer has $100 to allocate to these two goods, the price of a downloaded song is $1, and the price of a book is $20. What is the maximum number of books the consumer can purchase?

Accepted Answer

A)  100
B)  20
C)  10
D)  5E) All of the above
F) A) and C)

Exam 21: The Theory of Consumer Choice

Correct Answer
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Billie spends all of her income on soccer balls and jeans, and the price of a pair of jeans is three times the price of soccer balls. In order to maximize total utility, Billie should

Correct Answer
verified

A decrease in income will cause a consumer's budget constraint to

Correct Answer
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Figure 21-9 -Refer to Figure 21-9. If the consumer has $600 in income, what is the price of good X?

Correct Answer
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Suppose a consumer spends her income on two goods: iTunes music downloads and books. The consumer has $100 to allocate to these two goods, the price of a downloaded song is $1, and the price of a book is $20. What is the maximum number of books the consumer can purchase?

Correct Answer
verified

When we draw Katie's indifference curves to represent her preferences for books and movies, we find that her indifference curves are upward-sloping. What does this tell us about Katie's preferences?

Correct Answer
verified
Either Katie dislike...
View Answer

If a good is a Giffen good, then

Correct Answer
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Figure 21-8 -Refer to Figure 21-8. You have $600 to spend on good X and good Y. If good X costs $100 and good Y costs $100, your budget constraint is

Correct Answer
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Figure 21-7 -Refer to Figure 21-7. Suppose a consumer has $200 in income, the price of a book is $5, and the price of a DVD is $10. What is the value of B?

Correct Answer
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Michael faces tradeoffs between consuming in the current period when he is young and consuming in a future period when he is old. Michael experiences a decrease in the current interest rate he earns on his savings. Michael will save

Correct Answer
verified

The substitution effect of an increase in the interest rate will result in an increase in

Correct Answer
verified

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. If the price of a pound of pears is $3, then Steve's income is

Correct Answer
verified

Correct Answer
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Yes. The point (0, 40000) is the horizon...
View Answer

Indifference curves that cross violate the property of

Correct Answer
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Figure 21-10 -Refer to Figure 21-10. Which of the following comparisons is correct regarding the marginal rate of substitution (MRS) of donuts for cake?

Correct Answer
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The substitution effect of a wage decrease in the work-leisure model results in the worker choosing to

Correct Answer
verified

If an indifference curve is bowed in toward the origin, the marginal rate of substitution is

Correct Answer
verified

Using the graph shown, construct a demand curve for M&M's given an income of $10.

Correct Answer
verified

Irene is a vegetarian, so she does not eat pork. That is, pork provides no additional utility to Irene. She loves broccoli, however. If we illustrate Irene's indifference curves by drawing broccoli on the horizontal axis and pork on the vertical axis, her indifference curves will

Correct Answer
verified

A normal good is one

Correct Answer
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Exam 21: The Theory of Consumer Choice

Correct AnswerverifiedShow Answer

Billie spends all of her income on soccer balls and jeans, and the price of a pair of jeans is three times the price of soccer balls. In order to maximize total utility, Billie should

Correct AnswerverifiedShow Answer

A decrease in income will cause a consumer's budget constraint to

Correct AnswerverifiedShow Answer

Figure 21-9 -Refer to Figure 21-9. If the consumer has $600 in income, what is the price of good X?

Correct AnswerverifiedShow Answer

Suppose a consumer spends her income on two goods: iTunes music downloads and books. The consumer has $100 to allocate to these two goods, the price of a downloaded song is $1, and the price of a book is $20. What is the maximum number of books the consumer can purchase?

Correct AnswerverifiedShow Answer

When we draw Katie's indifference curves to represent her preferences for books and movies, we find that her indifference curves are upward-sloping. What does this tell us about Katie's preferences?

Correct AnswerverifiedEither Katie dislike...View AnswerShow Answer

If a good is a Giffen good, then

Correct AnswerverifiedShow Answer

Figure 21-8 -Refer to Figure 21-8. You have $600 to spend on good X and good Y. If good X costs $100 and good Y costs $100, your budget constraint is

Correct AnswerverifiedShow Answer

Figure 21-7 -Refer to Figure 21-7. Suppose a consumer has $200 in income, the price of a book is $5, and the price of a DVD is $10. What is the value of B?

Correct AnswerverifiedShow Answer

Michael faces tradeoffs between consuming in the current period when he is young and consuming in a future period when he is old. Michael experiences a decrease in the current interest rate he earns on his savings. Michael will save

Correct AnswerverifiedShow Answer

The substitution effect of an increase in the interest rate will result in an increase in

Correct AnswerverifiedShow Answer

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. If the price of a pound of pears is $3, then Steve's income is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedYes. The point (0, 40000) is the horizon...View AnswerShow Answer

Indifference curves that cross violate the property of

Correct AnswerverifiedShow Answer

Figure 21-10 -Refer to Figure 21-10. Which of the following comparisons is correct regarding the marginal rate of substitution (MRS) of donuts for cake?

Correct AnswerverifiedShow Answer

The substitution effect of a wage decrease in the work-leisure model results in the worker choosing to

Correct AnswerverifiedShow Answer

If an indifference curve is bowed in toward the origin, the marginal rate of substitution is

Correct AnswerverifiedShow Answer

Using the graph shown, construct a demand curve for M&M's given an income of $10.

Correct AnswerverifiedShow Answer

Irene is a vegetarian, so she does not eat pork. That is, pork provides no additional utility to Irene. She loves broccoli, however. If we illustrate Irene's indifference curves by drawing broccoli on the horizontal axis and pork on the vertical axis, her indifference curves will

Correct AnswerverifiedShow Answer

A normal good is one

Correct AnswerverifiedShow Answer

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Either Katie dislike...
View Answer

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Correct Answer
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Correct Answer
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Yes. The point (0, 40000) is the horizon...
View Answer

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