Question 1

The labor supply curve may have a backward-bending portion if,at higher wages,the income effect is

Accepted Answer

A)   smaller than the substitution effect.
B)   larger than the substitution effect.
C)   negative.
D)   Any of the above could result in a backward-bending supply curve.E) A) and B)
F) None of the above

Question 2

When Jamar has an income of $2,000,he consumes 30 units of good A and 50 units of good B.After Jamar's income decreases to $1,500,he consumes 33 units of good A and 45 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) C) and D)
F) B) and D)

Question 3

Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack. 
-Refer to Figure 21-1.At his optimum,Jack is willing to give up about

Accepted Answer

A)   0.75 pounds of pears for 1 pound of apples.
B)   0.75 pounds of apples for 1 pound of pears.
C)   1.20 pounds of pears for 1 pound of apples.
D)   1.20 pounds of apples for 1 pound of pears.E) A) and B)
F) A) and C)

Question 4

Janet prefers cashews to almonds.She prefers macadamia nuts to peanuts,but she is indifferent between almonds and peanuts.Which of the following statements can we say for sure?

Accepted Answer

A)   Janet prefers cashews to macadamia nuts.
B)   Janet prefers peanuts to cashews.
C)   Janet prefers macadamia nuts to almonds.
D)   Janet prefers almonds to macadamia nuts.E) None of the above
F) C) and D)

Question 5

Figure 21-5

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

Accepted Answer

A)   $1.
B)   $3.
C)   $10.
D)   $30.E) B) and C)
F) All of the above

Question 6

When a consumer spends less time enjoying leisure and more time working,she has

Accepted Answer

A)   lower income and therefore cannot afford more consumption.
B)   lower income and therefore can afford more consumption.
C)   higher income and therefore cannot afford more consumption.
D)   higher income and therefore can afford more consumption.E) A) and C)
F) All of the above

Question 7

A consumer

Accepted Answer

A)   is equally satisfied with any indifference curve.
B)   prefers indifference curves with positive slopes.
C)   prefers higher indifference curves to lower indifference curves.
D)   prefers indifference curves that are straight lines to indifference curves that are right angles.E) A) and B)
F) A) and C)

Question 8

Suppose the price of good X falls and the consumption of good X increases.From this we can infer that X is a(n)  (i) 
Normal good.
(ii) 
Inferior good.
(iii) 
Giffen good.

Accepted Answer

A)   (i) only
B)   (i) or (ii) only
C)   (iii) only
D)   (ii) or (iii) onlyE) A) and B)
F) A) and C)

Question 9

When leisure is a normal good,the income effect from a decrease in wages is evident in

Accepted Answer

A)   a desire to consume more leisure.
B)   a desire to consume less leisure.
C)   an upward-sloping labor-supply curve.
D)   a shift in labor demand.E) All of the above
F) B) and C)

Question 10

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?

Accepted Answer

A)   a decrease in the price of X
B)   an increase in the price of Y
C)   a decrease in the price of Y
D)   More than one of the above could explain this change.E) C) and D)
F) B) and D)

Question 11

A typical consumer consumes both coffee and donuts.After the consumer's income decreases,the consumer consumes more coffee but fewer donuts than before.For this consumer,coffee is a normal good,but donuts are an inferior good.

Accepted Answer

A) True 
 B)False

Question 12

If a consumer purchases more of good A when her income falls,good A is an inferior good.

Accepted Answer

A) True 
 B)False

Question 13

Figure 21-14   
-Refer to Figure 21-14.Which of the graphs illustrates indifference curves for which the marginal rate of substitution varies?

Accepted Answer

A)   graph a
B)   graph b
C)   graph c
D)   All of the above are correct.E) All of the above
F) None of the above

Question 14

The consumer's optimal choice is the one in which the marginal utility per dollar spent on good X is

Accepted Answer

A)   equal to the marginal utility per dollar saved on good X.
B)   greater than the marginal utility per dollar spent on good Y.
C)   equal to the marginal utility per dollar spent on good Y.
D)   less than the marginal utility per dollar spent on good Y.E) None of the above
F) A) and D)

Question 15

Figure 21-5

-Refer to Figure 21-5.In graph (a) ,if income is equal to $120,the price of good X is

Accepted Answer

A)   $3.
B)   $4.
C)   $10.
D)   $12.E) All of the above
F) None of the above

Question 16

If goods X and Y are both normal goods for Brenda,then an increase in Brenda's income will lead her to __________.

Accepted Answer

buy more o...

Question 17

Figure 21-12 
-Refer to Figure 21-12.If the consumer moves from bundle V to bundle X,the

Accepted Answer

A)   marginal rate of substitution remains constant.
B)   total utility remains constant.
C)   total utility increases.
D)   Both a and b are correct.E) B) and C)
F) A) and B)

Question 18

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 a decrease in the price of good X only?

Accepted Answer

A)   graph a
B)   graph b
C)   graph c
D)   graph dE) All of the above
F) A) and D)

Question 19

A consumer is currently spending all of her available income on two goods: music CDs and DVDs.At her current consumption bundle,she is spending twice as much on CDs as she is on DVDs.If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs,what is the price of a CD?

Accepted Answer

A)   $4
B)   $8
C)   $12
D)   $20E) A) and D)
F) A) and B)

Question 20

Draw indifference curves that reflect the following preferences.
a.pencils with white erasers and pencils with pink erasers
b.left shoes and right shoes
c.potatoes and rice
d.income and polluted water

Accepted Answer

The answer of Draw indifference curves that reflect the following...

Exam 21: The Theory of Consumer Choice

Draw indifference curves that reflect the following preferences. a.pencils with white erasers and pencils with pink erasers b.left shoes and right shoes c.potatoes and rice d.income and polluted water

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The labor supply curve may have a backward-bending portion if,at higher wages,the income effect is

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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 a decrease in the price of good X only?

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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?

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Figure 21-14 -Refer to Figure 21-14.Which of the graphs illustrates indifference curves for which the marginal rate of substitution varies?

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If a consumer purchases more of good A when her income falls,good A is an inferior good.

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When Jamar has an income of $2,000,he consumes 30 units of good A and 50 units of good B.After Jamar's income decreases to $1,500,he consumes 33 units of good A and 45 units of good B.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

A consumer is currently spending all of her available income on two goods: music CDs and DVDs.At her current consumption bundle,she is spending twice as much on CDs as she is on DVDs.If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs,what is the price of a CD?

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Figure 21-5 -Refer to Figure 21-5.In graph (a) ,if income is equal to $120,the price of good X is

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A typical consumer consumes both coffee and donuts.After the consumer's income decreases,the consumer consumes more coffee but fewer donuts than before.For this consumer,coffee is a normal good,but donuts are an inferior good.

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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) (i) Normal good. (ii) Inferior good. (iii) Giffen good.

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A consumer

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Figure 21-12 -Refer to Figure 21-12.If the consumer moves from bundle V to bundle X,the

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When leisure is a normal good,the income effect from a decrease in wages is evident in

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

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Janet prefers cashews to almonds.She prefers macadamia nuts to peanuts,but she is indifferent between almonds and peanuts.Which of the following statements can we say for sure?

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The consumer's optimal choice is the one in which the marginal utility per dollar spent on good X is

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.At his optimum,Jack is willing to give up about

Correct AnswerverifiedShow Answer

If goods X and Y are both normal goods for Brenda,then an increase in Brenda's income will lead her to __________.

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When a consumer spends less time enjoying leisure and more time working,she has

Correct AnswerverifiedShow Answer

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