Question 1

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

Question 2

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 substitution effect associated with a decrease in the price of a textbook, by itself, 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) A) and B)
F) All of the above

Question 3

Economic theory predicts that an increase in wages

Accepted Answer

A)   will cause a wage earner to work more.
B)   will cause a wage earner to work less.
C)   will cause a wage earner to be more productive.
D)   might cause a wage earner to work more or work less.E) C) and D)
F) A) and C)

Question 4

An individual's demand curve for a good is derived by varying the

Accepted Answer

A)   income level and observing the resulting total utility derived from both goods.
B)   price of one good and observing the resulting quantities of the other good.
C)   budget line to the left and calculating the loss in total utility.
D)   price of one good and observing the resulting quantities demanded of that good.E) C) and D)
F) A) and B)

Question 5

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

Question 6

Suppose the price of good X falls and the consumption of good X increases. From this we can infer that X is a(n)

Accepted Answer

A)   (i)  only
B)   (i)  or (ii)  only
C)   (iii)  only
D)   (ii)  or (iii)  onlyE) A) and D)
F) None of the above

Question 7

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

Accepted Answer

A)   fish in Japan
B)   rice in the Chinese province of Hunan
C)   pork in India
D)   Both a and b are correct.E) None of the above
F) All of the above

Question 8

The indifference curves for left gloves and right gloves are straight lines.

Accepted Answer

A) True 
 B)False

Question 9

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 5 gallons of ice cream and 8 paperback novels?

Accepted Answer

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

Question 10

Good X is an inferior good but not a Giffen good. When the price of X increases, the consumer will consume

Accepted Answer

A)   more X.
B)   the same amount of X.
C)   less X.
D)   more or less X depending on the size of the income effect relative to the size of the substitution effect.E) B) and D)
F) B) and C)

Question 11

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 reflects an increase in the price of good X only?

Accepted Answer

A)   graph a
B)   graph b
C)   graph c
D)   graph dE) A) and C)
F) A) and B)

Question 12

Figure 21-1
The downward­sloping line on the figure represents a consumer's budget constraint. 
-Refer to Figure 21-1. A consumer who chooses to spend all of her income could be at which point(s)  on the figure?

Accepted Answer

A)   A only
B)   E only
C)   B, C, or D only
D)   A, B, C, or D onlyE) B) and C)
F) All of the above

Question 13

A consumer's optimal choice is affected by income, prices of goods, and preferences.

Accepted Answer

A) True 
 B)False

Question 14

A budget constraint illustrates the

Accepted Answer

A)   prices that a consumer chooses to pay for products he consumes.
B)   purchases made by consumers.
C)   consumption bundles that a consumer can afford.
D)   consumption bundles that give a consumer equal satisfaction.E) A) and B)
F) None of the above

Question 15

Suppose at the consumer's current consumption bundle the marginal rate of substitution of cheese for wine is ½ bottle of wine per pound of cheese. The price of one pound of cheese is $6, and the price of a bottle of wine is $10. The consumer should increase his consumption of

Accepted Answer

A)   cheese, decrease his consumption of wine, and move to a lower indifference curve.
B)   cheese, decrease his consumption of wine, and move to a higher indifference curve.
C)   wine, decrease consumption of cheese, and move to a higher indifference curve.
D)   cheese, decrease consumption of wine, and remain on the same indifference curve.E) All of the above
F) A) and D)

Question 16

The theory of consumer choice

Accepted Answer

A)   underlies the concept of the demand for a particular good.
B)   underlies the concept of the supply of a particular good.
C)   ignores, for the sake of simplicity, the trade-offs that consumers face.
D)   can be applied to many questions about household decisions, but it cannot be applied to questions concerning wages and labor supply.E) B) and D)
F) A) and B)

Question 17

When economists describe preferences, they often use the concept of

Accepted Answer

A)   markets.
B)   income.
C)   utility.
D)   prices.E) B) and C)
F) All of the above

Question 18

At the consumer's optimum

Accepted Answer

A)   the budget constraint will have a slope of MUx/Px.
B)   it is still possible for the consumer to increase his consumption of both goods.
C)   the indifference curve will intersect the budget constraint at the midpoint of the budget constraint.
D)   the slope of the indifference curve is equal to the slope of the budget constraint.E) B) and D)
F) A) and B)

Question 19

Higher education is a normal good. If its price falls,

Accepted Answer

A)   the quantity demanded of higher education will fall.
B)   the substitution and income effects work in opposite directions.
C)   the income effect is positive.
D)   higher education will be a Giffen good.E) All of the above
F) A) and B)

Question 20

Figure 21-5
(a)  (b)   
-Refer to Figure 21-5. Assume that a consumer faces the budget constraint shown in graph (a)  in January and the budget constraint shown in graph (b)  in February. If the consumer's income has remained constant, then what has happened to prices between January and February?

Accepted Answer

A)   The price of X has fallen, but there could not have been a change in the price of Y.
B)   The price of Y has fallen, but there could not have been a change in the price of X.
C)   The price of X has fallen, and the price of Y has risen.
D)   The price of Y has fallen, and the price of X has risen.E) A) and D)
F) None of the above

Exam 21: The Theory of Consumer Choice

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 reflects an increase in the price of good X only?

Correct Answer
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A budget constraint illustrates the

Correct Answer
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Good X is an inferior good but not a Giffen good. When the price of X increases, the consumer will consume

Correct Answer
verified

Correct Answer
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A consumer's optimal choice is affected by income, prices of goods, and preferences.

Correct Answer
verified

When economists describe preferences, they often use the concept of

Correct Answer
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Suppose the price of good X falls and the consumption of good X increases. From this we can infer that X is a(n)

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 substitution effect associated with a decrease in the price of a textbook, by itself, will result in

Correct Answer
verified

Figure 21-5 (a) (b) -Refer to Figure 21-5. Assume that a consumer faces the budget constraint shown in graph (a) in January and the budget constraint shown in graph (b) in February. If the consumer's income has remained constant, then what has happened to prices between January and February?

Correct Answer
verified

The theory of consumer choice

Correct Answer
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Higher education is a normal good. If its price falls,

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

Economic theory predicts that an increase in wages

Correct Answer
verified

Suppose at the consumer's current consumption bundle the marginal rate of substitution of cheese for wine is ½ bottle of wine per pound of cheese. The price of one pound of cheese is $6, and the price of a bottle of wine is $10. The consumer should increase his consumption of

Correct Answer
verified

The indifference curves for left gloves and right gloves are straight lines.

Correct Answer
verified

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

Correct Answer
verified

An individual's demand curve for a good is derived by varying the

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

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

Correct Answer
verified

At the consumer's optimum

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

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 reflects an increase in the price of good X only?

Correct AnswerverifiedShow Answer

A budget constraint illustrates the

Correct AnswerverifiedShow Answer

Good X is an inferior good but not a Giffen good. When the price of X increases, the consumer will consume

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A consumer's optimal choice is affected by income, prices of goods, and preferences.

Correct AnswerverifiedShow Answer

When economists describe preferences, they often use the concept of

Correct AnswerverifiedShow Answer

Suppose the price of good X falls and the consumption of good X increases. From this we can infer that X is a(n)

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 substitution effect associated with a decrease in the price of a textbook, by itself, will result in

Correct AnswerverifiedShow Answer

Figure 21-5 (a) (b) -Refer to Figure 21-5. Assume that a consumer faces the budget constraint shown in graph (a) in January and the budget constraint shown in graph (b) in February. If the consumer's income has remained constant, then what has happened to prices between January and February?

Correct AnswerverifiedShow Answer

The theory of consumer choice

Correct AnswerverifiedShow Answer

Higher education is a normal good. If its price falls,

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

Economic theory predicts that an increase in wages

Correct AnswerverifiedShow Answer

Suppose at the consumer's current consumption bundle the marginal rate of substitution of cheese for wine is ½ bottle of wine per pound of cheese. The price of one pound of cheese is $6, and the price of a bottle of wine is $10. The consumer should increase his consumption of

Correct AnswerverifiedShow Answer

The indifference curves for left gloves and right gloves are straight lines.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An individual's demand curve for a good is derived by varying the

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

Figure 21-1 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

Correct AnswerverifiedShow Answer

At the consumer's optimum

Correct AnswerverifiedShow Answer

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Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

Correct Answer
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Correct Answer
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