Question 1

When the price of an inferior good increases,

Accepted Answer

A)   both the income and substitution effects encourage the consumer to purchase more of the good.
B)   both the income and substitution effects encourage the consumer to purchase less of the good.
C)   the income effect encourages the consumer to purchase more of the good,and the substitution effect encourages the consumer to purchase less of the good.
D)   the income effect encourages the consumer to purchase less of the good,and the substitution effect encourages the consumer to purchase more of the good.E) A) and B)
F) A) and C)

Question 2

Karen,Tara,and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days.Ice cream costs $5 per gallon,and paperback novels cost $8 each.Karen has a budget of $80,Tara has a budget of $60,and Chelsea has a budget of $40 to spend on ice cream and paperback novels.Who can afford to purchase 4 gallons of ice cream and 5 paperback novels?

Accepted Answer

A)   Karen,Tara,and Chelsea
B)   Karen only
C)   Karen and Tara but not Chelsea
D)   none of the womenE) C) and D)
F) A) and B)

Question 3

When a consumer experiences a price increase for an inferior good,if the income effect is

Accepted Answer

A)   greater than the substitution effect,the demand curve will be downward sloping.
B)   greater than the substitution effect,the demand curve will be upward sloping.
C)   less than the substitution effect,the demand curve will be upward sloping.
D)   less than the substitution effect but the substitution effect is positive,the demand curve will be upward sloping.E) A) and B)
F) A) and C)

Question 4

A consumer likes two goods: books and movies.The two bundles shown in the table below lie on the same indifference curve for the consumer.  Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four properties of indifference curves?

Accepted Answer

A)   1 movie and 5 books
B)   3 movies and 3 books
C)   5 movies and 1 book
D)   1 movie and 7 booksE) B) and D)
F) All of the above

Question 5

Figure 21-10 
-Refer to Figure 21-10.Which of the following statements is correct?

Accepted Answer

A)   Bundle A provides the same utility as bundle E.
B)   Bundle A provides the same utility as bundle C.
C)   Bundle B contains more cake than bundle C.
D)   The bundles along indifference curve Indifference Curve 2 are preferred to those along indifference curve Indifference Curve 3.E) None of the above
F) A) and B)

Question 6

A consumer chooses an optimal consumption point where the

Accepted Answer

A)   marginal rate of substitution equals the relative price ratio.
B)   slope of the indifference curve exceeds the slope of the budget constraint.
C)   ratios of all the marginal utilities are equal.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 7

Ryan experiences an increase in his wages.The hours of labor that he supplies to the market would increase if

Accepted Answer

A)   the income effect is larger than the substitution effect.
B)   the substitution effect is larger than the income effect.
C)   neither the income effect nor the substitution effect apply to Tom's labor-leisure tradeoff.
D)   Ryan views both labor and leisure as inferior goods.E) A) and D)
F) All of the above

Question 8

Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack. 
-Refer to Figure 21-1.Starting from point B,which of these events could result in point A becoming Jack's new optimum?

Accepted Answer

A)   a decrease in the price of apples,with no change in the price of pears or income
B)   a decrease in the price of pears,with no change in the price of apples or income
C)   an increase in income,with no change in the price of apples or the price of pears
D)   None of these events could result in point A becoming Jack's new optimum.E) C) and D)
F) B) and C)

Question 9

Which of the following is an example of a Giffen good?

Accepted Answer

A)   potatoes during the Irish potato famine
B)   rice in the Chinese province of Hunan
C)   fish in Japan
D)   Both a and b are correct.E) B) and D)
F) A) and C)

Question 10

Assume that a college student spends her income on books and pizza.The price of a pizza is $8,and the price of a book is $15.If she has $100 in income,she could choose to consume

Accepted Answer

A)   8 pizzas and 4 books.
B)   4 pizzas and 5 books.
C)   9 pizzas and 3 books.
D)   4 pizzas and 3 books.E) All of the above
F) None of the above

Question 11

Figure 21-14   
-Refer to Figure 21-14.Which of the graphs shown represent indifference curves for perfect substitutes?

Accepted Answer

A)   graph a
B)   graph b
C)   graph c
D)   All of the above are correct.E) B) and C)
F) All of the above

Question 12

Jack and Diane each buy pizza and paperback novels.Pizza costs $3 per slice,and paperback novels cost $5 each.Jack has a budget of $30,and Diane has a budget of $15 to spend on pizza and paperback novels.Which consumer(s) can afford to purchase 5 slices of pizza and 3 paperback novels?

Accepted Answer

A)   Jack only
B)   Diane only
C)   both Jack and Diane
D)   neither Jack nor DianeE) A) and B)
F) None of the above

Question 13

Which of the following is a property of a typical indifference curve?

Accepted Answer

A)   upward sloping
B)   bowed away from the origin
C)   does not intersect another indifference curve
D)   a higher one is preferred to a lower oneE) A) and B)
F) A) and C)

Question 14

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

Question 15

Suppose a consumer spends her income on two goods: music CDs and DVDs.The price of a CD is $8,and the price of a DVD is $20.If we graph the budget constraint by measuring the quantity of CDs purchased on the horizontal axis and the quantity of DVDs on the vertical axis,what is the slope of the budget constraint?

Accepted Answer

A)   -5.0
B)   -2.5
C)   -0.4
D)   The slope of the budget constraint cannot be determined without knowing the income the consumer has available to spend on the two goods.E) A) and D)
F) B) and C)

Question 16

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

Question 17

If the market is offering consumers the trade-off of 3 pints of Pepsi for 1 pizza,and if the price of a pizza is $9,then what is the price of a pint of Pepsi?

Accepted Answer

The price ...

Question 18

Figure 21-5
Y/PX) ? A)  1/3 B)  1 C)  3 D)  10" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-5.In graph (b) ,what is the price of good Y relative to good X (i.e. ,PY/PX) ?

Accepted Answer

A)   1/3
B)   1
C)   3
D)   10E) C) and D)
F) B) and D)

Question 19

Figure 21-11 
-Refer to Figure 21-11.What is the consumer's marginal rate of substitution as she moves from A to B?

Accepted Answer

A)   12
B)   6
C)   4
D)   1E) None of the above
F) All of the above

Question 20

The theory of consumer choice examines how

Accepted Answer

A)   firms make profit-maximizing decisions.
B)   consumers make utility-maximizing decisions.
C)   wages are determined in competitive labor markets.
D)   prices are determined in competitive goods markets.E) None of the above
F) A) and B)

Exam 21: The Theory of Consumer Choice

Figure 21-14 -Refer to Figure 21-14.Which of the graphs shown represent indifference curves for perfect substitutes?

Correct Answer
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When the price of an inferior good increases,

Correct Answer
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If the market is offering consumers the trade-off of 3 pints of Pepsi for 1 pizza,and if the price of a pizza is $9,then what is the price of a pint of Pepsi?

Correct Answer
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The price ...
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Which of the following is a property of a typical indifference curve?

Correct Answer
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Ryan experiences an increase in his wages.The hours of labor that he supplies to the market would increase if

Correct Answer
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When a consumer experiences a price increase for an inferior good,if the income effect is

Correct Answer
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Figure 21-11 -Refer to Figure 21-11.What is the consumer's marginal rate of substitution as she moves from A to B?

Correct Answer
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Figure 21-10 -Refer to Figure 21-10.Which of the following statements is correct?

Correct Answer
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A consumer chooses an optimal consumption point where the

Correct Answer
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Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack. -Refer to Figure 21-1.Starting from point B,which of these events could result in point A becoming Jack's new optimum?

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

Correct Answer
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Figure 21-5 -Refer to Figure 21-5.In graph (b) ,what is the price of good Y relative to good X (i.e. ,P_Y/P_X) ?

Correct Answer
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Correct Answer
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A consumer likes two goods: books and movies.The two bundles shown in the table below lie on the same indifference curve for the consumer. Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four properties of indifference curves?

Correct Answer
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Correct Answer
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Which of the following is an example of a Giffen good?

Correct Answer
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Jack and Diane each buy pizza and paperback novels.Pizza costs $3 per slice,and paperback novels cost $5 each.Jack has a budget of $30,and Diane has a budget of $15 to spend on pizza and paperback novels.Which consumer(s) can afford to purchase 5 slices of pizza and 3 paperback novels?

Correct Answer
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The theory of consumer choice examines how

Correct Answer
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Assume that a college student spends her income on books and pizza.The price of a pizza is $8,and the price of a book is $15.If she has $100 in income,she could choose to consume

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

Figure 21-14 -Refer to Figure 21-14.Which of the graphs shown represent indifference curves for perfect substitutes?

Correct AnswerverifiedShow Answer

When the price of an inferior good increases,

Correct AnswerverifiedShow Answer

If the market is offering consumers the trade-off of 3 pints of Pepsi for 1 pizza,and if the price of a pizza is $9,then what is the price of a pint of Pepsi?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Which of the following is a property of a typical indifference curve?

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Ryan experiences an increase in his wages.The hours of labor that he supplies to the market would increase if

Correct AnswerverifiedShow Answer

When a consumer experiences a price increase for an inferior good,if the income effect is

Correct AnswerverifiedShow Answer

Figure 21-11 -Refer to Figure 21-11.What is the consumer's marginal rate of substitution as she moves from A to B?

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Figure 21-10 -Refer to Figure 21-10.Which of the following statements is correct?

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A consumer chooses an optimal consumption point where the

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Correct AnswerverifiedShow Answer

Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack. -Refer to Figure 21-1.Starting from point B,which of these events could result in point A becoming Jack's new optimum?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A consumer likes two goods: books and movies.The two bundles shown in the table below lie on the same indifference curve for the consumer. Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four properties of indifference curves?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is an example of a Giffen good?

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Jack and Diane each buy pizza and paperback novels.Pizza costs $3 per slice,and paperback novels cost $5 each.Jack has a budget of $30,and Diane has a budget of $15 to spend on pizza and paperback novels.Which consumer(s) can afford to purchase 5 slices of pizza and 3 paperback novels?

Correct AnswerverifiedShow Answer

The theory of consumer choice examines how

Correct AnswerverifiedShow Answer

Assume that a college student spends her income on books and pizza.The price of a pizza is $8,and the price of a book is $15.If she has $100 in income,she could choose to consume

Correct AnswerverifiedShow Answer

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The price ...
View Answer

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

Correct Answer
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