Question 1

A normal good is one

Accepted Answer

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

Question 2

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

Accepted Answer

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

Question 3

Figure 21-16 
-Refer to Figure 21-16. The price of X is $20, the price of Y is $5, and the consumer's income is $40. Which point represents the consumer's optimal choice?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) All of the above
F) A) and D)

Question 4

As more units of an item are purchased, everything else equal, marginal satisfaction from consuming additional units will tend to

Accepted Answer

A)  decrease at the same rate for all consumers.
B)  decrease but at different rates for different people.
C)  increase at the same rate for all consumers.
D)  increase but at a decreasing rate for all consumers.E) A) and B)
F) A) and C)

Question 5

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

Question 6

If consumers purchase more of a good when their income rises, the good is a normal good.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that Elmer's hourly wage increases, and he decides to work fewer hours. For Elmer, the substitution effect of the wage change is

Accepted Answer

A)  only partially offset by the income effect.
B)  more than offset by the income effect.
C)  exactly offset by the income effect.
D)  We do not have enough information with which to answer the question.E) A) and D)
F) B) and C)

Question 8

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

Question 9

Figure 21-23 
-Refer to Figure 21-23. When the price of X is $80, the price of Y is $20, and the consumer's income is $160, the consumer's optimal choice is D. Then the price of X decreases to $20. The demand curve can be illustrated as the movement from

Accepted Answer

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

Question 10

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 Steve's income is $12.60, then the price of a pound of apples is

Accepted Answer

A)  $4.50.
B)  $3.85.
C)  $3.00.
D)  $2.80.E) C) and D)
F) B) and D)

Question 11

Figure 21-32 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. 
-Refer to Figure 21-32. What is the value of the interest rate that Hannah earns on her saving?

Accepted Answer

The intere...

Question 12

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 Ramen noodles, 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) None of the above
F) B) and D)

Question 13

Which of the following does not represent a tradeoff facing a consumer?

Accepted Answer

A)  choosing to purchase more of all goods
B)  choosing to spend more time on leisure and less time on work
C)  choosing to spend more now and consume less in the future
D)  choosing to purchase less of one good in order to purchase more of another goodE) None of the above
F) A) and B)

Question 14

If two bundles of goods give a consumer the same satisfaction, the consumer must be

Accepted Answer

A)  on her budget constraint.
B)  in a position of equilibrium.
C)  indifferent between the bundles.
D)  Both a and c are correct.E) B) and C)
F) A) and C)

Question 15

Figure 21-9 
-Refer to Figure 21-9. If the consumer has $600 in income, what is the price of good X?

Accepted Answer

A)  $20
B)  $6
C)  $3
D)  $0.33E) B) and C)
F) A) and C)

Question 16

A consumer's budget constraint for goods X and Y is determined by how much the consumer likes good X relative to good Y.

Accepted Answer

A) True 
 B)False

Question 17

List and briefly explain each of the four properties of indifference curves.

Accepted Answer

1: Higher indifference curves are prefer...

Question 18

Suppose that Milton likes to consume one glass of milk with every three chocolate chip cookies. For Milton, an additional cookie has no value unless he can consume it with the appropriate proportion of milk. Milton's indifference curves for milk and cookies are

Accepted Answer

A)  right angles.
B)  bowed inward.
C)  bowed outward.
D)  downward-sloping straight lines.E) None of the above
F) B) and C)

Question 19

Traci consumes two goods, lemonade and pretzels. Lemonade costs $1 per glass, and she consumes it to the point where the marginal utility she receives from her last glass of lemonade is 3. Pretzels cost $2 per bag. The relationship between the marginal utility Traci gets from eating a bag of pretzels and the number of bags she eats per month is as follows:  If Traci is maximizing his utility, how much does she spend on pretzels each month?

Accepted Answer

A)  $2
B)  $6
C)  $8
D)  $12E) B) and C)
F) A) and D)

Question 20

When a consumer is purchasing the best combination of two goods, X and Y, subject to a budget constraint, we say that the consumer is at an optimal choice point. A graph of an optimal choice point shows that it occurs

Accepted Answer

A)  along the highest attainable indifference curve.
B)  where the indifference curve is tangent to the budget constraint.
C)  where the marginal utility per dollar spent is the same for both X and Y.
D)  All of the above are correct.E) A) and B)
F) B) and C)

Exam 21: The Theory of Consumer Choice

Suppose that Milton likes to consume one glass of milk with every three chocolate chip cookies. For Milton, an additional cookie has no value unless he can consume it with the appropriate proportion of milk. Milton's indifference curves for milk and cookies are

Correct Answer
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Figure 21-9 -Refer to Figure 21-9. If the consumer has $600 in income, what is the price of good X?

Correct Answer
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A consumer's budget constraint for goods X and Y is determined by how much the consumer likes good X relative to good Y.

Correct Answer
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Suppose that Elmer's hourly wage increases, and he decides to work fewer hours. For Elmer, the substitution effect of the wage change is

Correct Answer
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Figure 21-32 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. -Refer to Figure 21-32. What is the value of the interest rate that Hannah earns on her saving?

Correct Answer
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The intere...
View Answer

Which of the following does not represent a tradeoff facing a consumer?

Correct Answer
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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 21-23 -Refer to Figure 21-23. When the price of X is $80, the price of Y is $20, and the consumer's income is $160, the consumer's optimal choice is D. Then the price of X decreases to $20. The demand curve can be illustrated as the movement from

Correct Answer
verified

Correct Answer
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If consumers purchase more of a good when their income rises, the good is a normal good.

Correct Answer
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Figure 21-16 -Refer to Figure 21-16. The price of X is $20, the price of Y is $5, and the consumer's income is $40. Which point represents the consumer's optimal choice?

Correct Answer
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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 Ramen noodles, by itself, will result in

Correct Answer
verified

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

Correct Answer
verified

A normal good is one

Correct Answer
verified

If two bundles of goods give a consumer the same satisfaction, the consumer must be

Correct Answer
verified

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

Correct Answer
verified

List and briefly explain each of the four properties of indifference curves.

Correct Answer
verified
1: Higher indifference curves are prefer...
View 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 Steve's income is $12.60, then the price of a pound of apples is

Correct Answer
verified

When a consumer is purchasing the best combination of two goods, X and Y, subject to a budget constraint, we say that the consumer is at an optimal choice point. A graph of an optimal choice point shows that it occurs

Correct Answer
verified

As more units of an item are purchased, everything else equal, marginal satisfaction from consuming additional units will tend to

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

Suppose that Milton likes to consume one glass of milk with every three chocolate chip cookies. For Milton, an additional cookie has no value unless he can consume it with the appropriate proportion of milk. Milton's indifference curves for milk and cookies are

Correct AnswerverifiedShow Answer

Figure 21-9 -Refer to Figure 21-9. If the consumer has $600 in income, what is the price of good X?

Correct AnswerverifiedShow Answer

A consumer's budget constraint for goods X and Y is determined by how much the consumer likes good X relative to good Y.

Correct AnswerverifiedShow Answer

Suppose that Elmer's hourly wage increases, and he decides to work fewer hours. For Elmer, the substitution effect of the wage change is

Correct AnswerverifiedShow Answer

Figure 21-32 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. -Refer to Figure 21-32. What is the value of the interest rate that Hannah earns on her saving?

Correct AnswerverifiedThe intere...View AnswerShow Answer

Which of the following does not represent a tradeoff facing a consumer?

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 21-23 -Refer to Figure 21-23. When the price of X is $80, the price of Y is $20, and the consumer's income is $160, the consumer's optimal choice is D. Then the price of X decreases to $20. The demand curve can be illustrated as the movement from

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If consumers purchase more of a good when their income rises, the good is a normal good.

Correct AnswerverifiedShow Answer

Figure 21-16 -Refer to Figure 21-16. The price of X is $20, the price of Y is $5, and the consumer's income is $40. Which point represents the consumer's optimal choice?

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 Ramen noodles, by itself, will result in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A normal good is one

Correct AnswerverifiedShow Answer

If two bundles of goods give a consumer the same satisfaction, the consumer must be

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

List and briefly explain each of the four properties of indifference curves.

Correct Answerverified1: Higher indifference curves are prefer...View AnswerShow 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 Steve's income is $12.60, then the price of a pound of apples is

Correct AnswerverifiedShow Answer

When a consumer is purchasing the best combination of two goods, X and Y, subject to a budget constraint, we say that the consumer is at an optimal choice point. A graph of an optimal choice point shows that it occurs

Correct AnswerverifiedShow Answer

As more units of an item are purchased, everything else equal, marginal satisfaction from consuming additional units will tend to

Correct AnswerverifiedShow Answer

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

Correct Answer
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1: Higher indifference curves are prefer...
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