Question 1

Figure 21-11 
-Refer to Figure 21-11. As the consumer moves from point A to B to C to D, the consumer's total utility

Accepted Answer

A)  remains constant.
B)  increases.
C)  decreases.
D)  first increases, then decreases.E) C) and D)
F) All of the above

Question 2

Figure 21-28
The figure below illustrates the preferences for a representative consumer, Christopher. 
-Refer to Figure 21-28. Interest rates increase by 3 percent. Christopher's optimal choice point moves from A to B. Christopher consumes

Accepted Answer

A)  less while he is younger and saves more than he did before interest rates increased.
B)  more while he is younger and saves more than he did before interest rates increased.
C)  less while he is younger and saves less than he did before interest rates increased.
D)  more while he is younger and saves less than he did before interest rates increased.E) A) and D)
F) A) and B)

Question 3

An indifference curve illustrates the

Accepted Answer

A)  prices facing a consumer as she chooses how much of good X and good Y to consume.
B)  income facing a consumer as she chooses how much of good X and good Y to consume.
C)  trade-offs facing a consumer as she chooses how much of good X and good Y to consume.
D)  All of the above are correct.E) A) and B)
F) C) and D)

Question 4

Indifference curves illustrate

Accepted Answer

A)  a firm's profits.
B)  a consumer's budget.
C)  a consumer's preferences.
D)  the prices of two goods.E) None of the above
F) A) and C)

Question 5

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?

Accepted Answer

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) None of the above
F) B) and C)

Question 6

A Giffen good is a good for which

Accepted Answer

A)  an increase in the price raises the quantity demanded.
B)  the income effect outweighs the substitution effect.
C)  an increase in the price decreases the quantity demanded.
D)  Both a)  and b)  are correct.E) A) and B)
F) B) and D)

Question 7

Assume that consumption when young and consumption when old are both normal goods. The income effect of an increase in the interest rate will result in

Accepted Answer

A)  an increase in saving when young.
B)  an increase in saving when old.
C)  a decrease in saving when young.
D)  a decrease in saving when old.E) All of the above
F) None of the above

Question 8

The substitution effect in the work-leisure model induces a person to work less in response to higher wages, which tends to make the labor-supply curve slope upward.

Accepted Answer

A) True 
 B)False

Question 9

Figure 21-5
(a) 
(b)   
-Refer to Figure 21-5. In graph (b) , if income is equal to $420, then the price of good X is

Accepted Answer

A)  $1.
B)  $3.
C)  $10.
D)  $30.E) C) and D)
F) None of the above

Question 10

The theory of consumer choice is to demand as the theory of

Accepted Answer

A)  public goods is to supply.
B)  oligopoly is to supply.
C)  the competitive firm is to supply.
D)  comparative advantage is to supply.E) C) and D)
F) B) and C)

Question 11

Figure 21-30 The graph shows two budget constraints for a consumer. 
-Refer to Figure 21-30. Suppose the consumer's income is $90 and Budget Constraint A applies. What is the price of a light bulb?

Accepted Answer

The price ...

Question 12

A family on a trip budgets $800 for meals and hotel accommodations. Suppose the price of a meal is $40. In addition, suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals. How many meals could the family afford if they gave up two nights in the hotel?

Accepted Answer

A)  1
B)  2
C)  5
D)  8E) A) and D)
F) C) and D)

Question 13

Suppose Caroline will only drink a cup of coffee if she can add two packets of sugar to it. Which graph would illustrate a representative indifference curve?

Accepted Answer

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

Question 14

As long as a consumer remains on the same indifference curve,

Accepted Answer

A)  she is indifferent to all points that lie on any other indifference curve.
B)  her preferences will not affect the marginal rate of substitution.
C)  she is unable to decide which bundle of goods to choose.
D)  she is indifferent among the points on that curve.E) None of the above
F) A) and B)

Question 15

The theory of consumer choice illustrates that people face tradeoffs, which is one of the Ten Principles of Economics.

Accepted Answer

A) True 
 B)False

Question 16

When Matt has an income of $2,000, he consumes 30 units of good A and 50 units of good B. After Matt's income increases to $3,000, he consumes 25 units of good A and 95 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.E) B) and C)
F) All of the above

Question 17

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 $8, the price of good Y is $10, and the consumer's income is $360. Then the consumer's optimal choice is represented by a point on which curve?

Accepted Answer

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

Question 18

Figure 21-10 
-Refer to Figure 21-10. Which of the following statements is not true for a consumer who moves from bundle B to bundle C?

Accepted Answer

A)  At bundle C the consumer would be willing to give up a larger amount of cake in exchange for a donut than at bundle B.
B)  The marginal rate of substitution at bundles B and C are the same since the points lie on the same indifference curve.
C)  The consumer is willing to sacrifice donuts to obtain cake.
D)  The consumer receives the same level of satisfaction at bundles B and C.E) A) and C)
F) A) and B)

Question 19

The slope of an indifference curve is

Accepted Answer

A)  the rate of change of consumer's preferences.
B)  the marginal rate of preference.
C)  the marginal rate of substitution.
D)  always equal to the slope of the budget constraint.E) All of the above
F) A) and B)

Question 20

Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the income effect associated with an increase in the price of a textbook will result in

Accepted Answer

A)  a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles.
B)  a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles.
C)  an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles.
D)  an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles.E) B) and D)
F) All of the above

Exam 21: The Theory of Consumer Choice

Suppose Caroline will only drink a cup of coffee if she can add two packets of sugar to it. Which graph would illustrate a representative indifference curve?

Correct Answer
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As long as a consumer remains on the same indifference curve,

Correct Answer
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A family on a trip budgets $800 for meals and hotel accommodations. Suppose the price of a meal is $40. In addition, suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals. How many meals could the family afford if they gave up two nights in the hotel?

Correct Answer
verified

Figure 21-28 The figure below illustrates the preferences for a representative consumer, Christopher. -Refer to Figure 21-28. Interest rates increase by 3 percent. Christopher's optimal choice point moves from A to B. Christopher consumes

Correct Answer
verified

The theory of consumer choice is to demand as the theory of

Correct Answer
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The slope of an indifference curve is

Correct Answer
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Figure 21-10 -Refer to Figure 21-10. Which of the following statements is not true for a consumer who moves from bundle B to bundle C?

Correct Answer
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Figure 21-30 The graph shows two budget constraints for a consumer. -Refer to Figure 21-30. Suppose the consumer's income is $90 and Budget Constraint A applies. What is the price of a light bulb?

Correct Answer
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The price ...
View Answer

Indifference curves illustrate

Correct Answer
verified

Assume that consumption when young and consumption when old are both normal goods. The income effect of an increase in the interest rate will result in

Correct Answer
verified

Figure 21-11 -Refer to Figure 21-11. As the consumer moves from point A to B to C to D, the consumer's total utility

Correct Answer
verified

An indifference curve illustrates the

Correct Answer
verified

Correct Answer
verified

A Giffen good is a good for which

Correct Answer
verified

Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the income effect associated with an increase in the price of a textbook will result in

Correct Answer
verified

Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (b) , if income is equal to $420, then the price of good X is

Correct Answer
verified

The substitution effect in the work-leisure model induces a person to work less in response to higher wages, which tends to make the labor-supply curve slope upward.

Correct Answer
verified

When Matt has an income of $2,000, he consumes 30 units of good A and 50 units of good B. After Matt's income increases to $3,000, he consumes 25 units of good A and 95 units of good B. Which of the following statements is correct?

Correct Answer
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Correct Answer
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The theory of consumer choice illustrates that people face tradeoffs, which is one of the Ten Principles of Economics.

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

Suppose Caroline will only drink a cup of coffee if she can add two packets of sugar to it. Which graph would illustrate a representative indifference curve?

Correct AnswerverifiedShow Answer

As long as a consumer remains on the same indifference curve,

Correct AnswerverifiedShow Answer

A family on a trip budgets $800 for meals and hotel accommodations. Suppose the price of a meal is $40. In addition, suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals. How many meals could the family afford if they gave up two nights in the hotel?

Correct AnswerverifiedShow Answer

Figure 21-28 The figure below illustrates the preferences for a representative consumer, Christopher. -Refer to Figure 21-28. Interest rates increase by 3 percent. Christopher's optimal choice point moves from A to B. Christopher consumes

Correct AnswerverifiedShow Answer

The theory of consumer choice is to demand as the theory of

Correct AnswerverifiedShow Answer

The slope of an indifference curve is

Correct AnswerverifiedShow Answer

Figure 21-10 -Refer to Figure 21-10. Which of the following statements is not true for a consumer who moves from bundle B to bundle C?

Correct AnswerverifiedShow Answer

Figure 21-30 The graph shows two budget constraints for a consumer. -Refer to Figure 21-30. Suppose the consumer's income is $90 and Budget Constraint A applies. What is the price of a light bulb?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Indifference curves illustrate

Correct AnswerverifiedShow Answer

Assume that consumption when young and consumption when old are both normal goods. The income effect of an increase in the interest rate will result in

Correct AnswerverifiedShow Answer

Figure 21-11 -Refer to Figure 21-11. As the consumer moves from point A to B to C to D, the consumer's total utility

Correct AnswerverifiedShow Answer

An indifference curve illustrates the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A Giffen good is a good for which

Correct AnswerverifiedShow Answer

Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the income effect associated with an increase in the price of a textbook will result in

Correct AnswerverifiedShow Answer

Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (b) , if income is equal to $420, then the price of good X is

Correct AnswerverifiedShow Answer

The substitution effect in the work-leisure model induces a person to work less in response to higher wages, which tends to make the labor-supply curve slope upward.

Correct AnswerverifiedShow Answer

When Matt has an income of $2,000, he consumes 30 units of good A and 50 units of good B. After Matt's income increases to $3,000, he consumes 25 units of good A and 95 units of good B. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The theory of consumer choice illustrates that people face tradeoffs, which is one of the Ten Principles of Economics.

Correct AnswerverifiedShow Answer

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The price ...
View Answer

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