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Figure 21-14 Figure 21-14 -Refer to Figure 21-14.Which of the graphs shown may represent indifference curves? A) graph a B) graph b C) graph c D) All of the above are correct. Figure 21-14 -Refer to Figure 21-14.Which of the graphs shown may represent indifference curves? A) graph a B) graph b C) graph c D) All of the above are correct. Figure 21-14 -Refer to Figure 21-14.Which of the graphs shown may represent indifference curves? A) graph a B) graph b C) graph c D) All of the above are correct. -Refer to Figure 21-14.Which of the graphs shown may represent indifference curves?


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

E) All of the above
F) A) and D)

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Which of the following is not correct?


A) Indifference curves are downward sloping.
B) Indifference curves that are closer to the origin are preferred to indifference curves that are further from the origin.
C) Indifference curves are bowed in toward the origin.
D) Indifference curves do not cross.

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

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


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

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Scenario 21-2 Fred has recently graduated from college with a degree in journalism and economics. He has decided to pursue a career as a freelance journalist writing for business newspapers and magazines. Fred is typically awake for 112 hours each week (he sleeps an average of 8 hours each day) . For each hour Fred spends writing, he can earn $75. Fred is such a good writer that he can get paid for as many hours of writing as he chooses to work. -Refer to Scenario 21-2.If Fred's wage increases to $90 per hour of writing,which of the following points would fall on his budget constraint?


A) 75 hours of leisure, $2,775 of consumption
B) 80 hours of leisure, $2,400 of consumption
C) 85 hours of leisure, $2,430 of consumption
D) 90 hours of leisure, $1,650 of consumption

E) A) and B)
F) All of the above

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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.Which of the following statements is correct?


A) Each woman faces the same budget constraint.
B) The slope of the budget constraint is the same for each woman.
C) The area underneath the budget constraint is larger for Chelsea than for Karen.
D) All of the above are correct.

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

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In the upward-sloping portion of the individual labor-supply curve,the substitution effect is


A) greater than the income effect.
B) less than the income effect.
C) equal to the income effect.
D) exactly offset by the income effect.

E) All of the above
F) A) and D)

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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 C)
F) None of the above

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Figure 21-18 Figure 21-18 -Refer to Figure 21-18.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 $4.The consumer will choose a consumption bundle where the marginal rate of substitution is A) 2. B) 2/3. C) 1/2. D) 1/3. -Refer to Figure 21-18.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 $4.The consumer will choose a consumption bundle where the marginal rate of substitution is


A) 2.
B) 2/3.
C) 1/2.
D) 1/3.

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

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Consider the indifference curve map and budget constraint for two goods,beef and potatoes.Suppose the good measured on the horizontal axis,potatoes,is a Giffen good.Beef is measured on the vertical axis and is a normal good.When the price of potatoes increases,the substitution effect causes


A) an increase in the consumption of potatoes, and the income effect causes a decrease in the consumption of potatoes. The substitution effect is less than the income effect.
B) a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes. The substitution effect is greater than the income effect.
C) an increase in the consumption of potatoes, and the income effect causes a decrease in the consumption of potatoes. The substitution effect is greater than the income effect.
D) a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes. The substitution effect is less than the income effect.

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

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When the price of a normal good increases,


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 D)
F) A) and C)

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Figure 21-3 In each case, the budget constraint moves from BC-1 to BC-2. Figure 21-3 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3.Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods? (i) graph a (ii) graph b (iii) graph c (iv) graph d A) (i) only B) (iv) only C) (ii) or (iii) only D) None of the above is correct. Figure 21-3 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3.Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods? (i) graph a (ii) graph b (iii) graph c (iv) graph d A) (i) only B) (iv) only C) (ii) or (iii) only D) None of the above is correct. Figure 21-3 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3.Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods? (i) graph a (ii) graph b (iii) graph c (iv) graph d A) (i) only B) (iv) only C) (ii) or (iii) only D) None of the above is correct. Figure 21-3 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3.Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods? (i) graph a (ii) graph b (iii) graph c (iv) graph d A) (i) only B) (iv) only C) (ii) or (iii) only D) None of the above is correct. -Refer to Figure 21-3.Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods? (i) graph a (ii) graph b (iii) graph c (iv) graph d


A) (i) only
B) (iv) only
C) (ii) or (iii) only
D) None of the above is correct.

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

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

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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?


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

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

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A budget constraint illustrates bundles that a consumer prefers equally,while an indifference curve illustrates bundles that are equally affordable to a consumer.

A) True
B) False

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Both Diana and Sarah like jazz music and music by the Beatles.Diana likes music by the Beatles much better than jazz music,whereas Sarah prefers jazz music to music by the Beatles.If we were to graph an indifference curve with cds by the Beatles on the horizontal axis and jazz cds on the vertical axis,then


A) Diana and Sarah would have identical indifference curves.
B) Diana's indifference curve would be steeper than Sarah's indifference curve.
C) Sarah's indifference curve would be steeper than Diana's indifference curve.
D) We do not have enough information to compare their indifference curves.

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

Correct Answer

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A normal good is one


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) None of the above
F) All of the above

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Figure 21-11 Figure 21-11 -Refer to Figure 21-11.What is the consumer's marginal rate of substitution? A) 12 B) 4 C) 1 D) We do not have enough information to answer the question because the MRS varies along the graph. -Refer to Figure 21-11.What is the consumer's marginal rate of substitution?


A) 12
B) 4
C) 1
D) We do not have enough information to answer the question because the MRS varies along the graph.

E) None of the above
F) A) and D)

Correct Answer

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Figure 21-7 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? A) $5 B) $10 C) $50 D) $100 -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?


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

E) None of the above
F) A) and D)

Correct Answer

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When two goods are perfect substitutes,the


A) indifference curve is a horizontal straight line.
B) marginal rate of substitution is constant.
C) indifference curve is a vertical straight line.
D) Both a and b are correct.

E) All of the above
F) B) and C)

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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


A) slope downward.
B) be vertical straight lines.
C) slope upward.
D) be horizontal straight lines.

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

Correct Answer

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