FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 21: The Theory of Consumer Choice

Show Answer

Share

---

All types

Filters

Study Flashcards

Question 61

Multiple Choice

Review LaterAdd Note

Review Later

Assume that a consumer's indifference curve is a downward-sloping straight line.As the consumer moves from left to right along the horizontal axis,the consumer's marginal rate of substitution

A) increases.
B) decreases.
C) remains constant.
D) increases,then decreases.

E) A) and B)
F) A) and C)

Correct Answer

verified

Show Answer

Question 62

Multiple Choice

Review LaterAdd Note

Review Later

Bundle A contains 10 units of good X and 5 units of good Y.Bundle B contains 5 units of good X and 10 units of good Y.Bundle C contains 10 units of good X and 10 units of good Y.The consumer is indifferent between bundle A and bundle B.Assume that the consumer's preferences satisfy the four properties of indifference curves.Which of the following statements is correct?

A) The consumer must prefer bundle C to either bundle A or B.
B) Bundle A and bundle B lie on the same indifference curve.
C) The consumer must prefer bundle B to bundle C.
D) Both a) and b) are correct.

E) A) and B)
F) A) and C)

Correct Answer

verified

Show Answer

Question 63

Multiple Choice

Review LaterAdd Note

Figure 21-7 -Refer to Figure 21-7.Which of the following comparisons is correct regarding the marginal rate of substitution (MRS) of donuts for cake?

Figure 21-8 -Refer to Figure 21-8.Which of the graphs shown may represent indifference curves?

Which of the following does not represent a tradeoff facing a consumer?

Figure 21-7 -Refer to Figure 21-7.When comparing bundle B to bundle C,the consumer

Explain the difference between inferior and normal goods.As a developing economy experiences increases in income (measured by GDP),what would you predict to happen to demand for inferior goods?

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?

If we observe that Rae's budget constraint has shifted inward,then we know for certain that

A consumer has preferences over two goods,X and Y.Suppose we graph this consumer's preferences (which satisfy the usual properties of indifference curves) and budget constraint on a diagram with X on the horizontal axis and Y on the vertical axis.At the consumer's current consumption bundle,the consumer is spending all available income,and the marginal rate of substitution is less than the slope of the budget constraint.We can conclude that the consumer

Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst.The price of a pint of beer is $5,and the price of a bratwurst is $4.Which of the following combinations of beers and bratwursts represents a point that would lie directly on the consumer's budget constraint?

Assume that a college student spends her income on mac-n-cheese and CDs.The price of one box of mac-n-cheese is $1,and the price of one CD is $12.If she has $100 of income,she could choose to consume

Suppose the only two goods that Brett consumes are wine and cheese.When wine sells for $10 a bottle and cheese sell for $10 a pound,he buys 6 bottles of wine and 4 pounds of cheese - spending his entire income of $100.One day the price of wine falls to $5 a bottle and the price of cheese increases to $20 a pound,while his income does not change.The bundle of wine and cheese that he purchased at the old prices now costs

Figure 21-11 -Refer to Figure 21-11.Assume that the consumer depicted in the figure has an income of $40.Based on the information available in the graph,which of the following price-quantity combinations would be on her demand curve for marshmallows if the price of chocolate chips is $4?

Scenario 21-3 Diane knows that she will ultimately face retirement.Assume that Diane will experience two periods in her life,one in which she works and earns income,and one in which she is retired and earns no income.Diane can earn $250,000 during her working period and nothing in her retirement period.She must both save and consume in her work period with an interest rate of 10 percent on savings. -Refer to Scenario 21-3.If the interest rate on savings increases,it is possible that

When we derive the demand curve for a good,we should remember that the

Figure 21-11 -Refer to Figure 21-11.Assume that the consumer depicted in the figure has an income of $40.If the price of chocolate chips is $4 and the price of marshmallows is $4,the optimizing consumer would choose to purchase

If we observe that a consumer's budget constraint has shifted inward,we can assume that the consumer will buy

Explain the relationship between the budget constraint and indifference curve at a consumer's optimum.

A family on a trip budgets $800 for meals and gasoline.If the price of a meal for the family is $50,how many meals can the family buy if they do not buy any gasoline?