Question 1

Assume that goods X and Y are not Giffen goods. ​If the price of good X falls, a consumer will definitely

Accepted Answer

A)  ​consume more of good X because her budget constraint has rotated outward.
B)  consume more of good X because her budget ​constraint has shifted outward.
C)  ​consume more of good Y because her budget constraint has rotated outward.
D)  ​consume more of good Y because her budget constraint has shifted outward.E) A) and B)
F) C) and D)

Question 2

​Suppose an individual knows that the marginal utility he receives from the next apple is 5 and that the price of an apple is $2. He also knows that the marginal utility he receives from the next orange is 3 and the price of an orange is $1. If the individual is choosing optimally, the next good he will buy is

Accepted Answer

A)  ​an orange because the marginal utility per dollar spent on an orange is greater.
B)  ​an orange because the marginal utility of the orange is greater.
C)  ​an apple because the marginal utility per dollar spent on an apple is greater.
D)  ​an apple because the marginal utility of the apple is greater.E) B) and C)
F) All of the above

Question 3

Refer to Scenario 21-1. If the consumer's income rises to $60, then the budget line for hot wings and beer would

Accepted Answer

A)  now intersect the horizontal axis at 6 orders of hot wings and the vertical axis at 60 beers.
B)  not change.
C)  now intersect the horizontal axis at 4 orders of hot wings and the vertical axis at 16 beers.
D)  rotate outward along the beer axis.E) B) and C)
F) A) and B)

Question 4

The marginal rate of substitution is the slope of the indifference curve.

Accepted Answer

A) True 
 B)False

Question 5

A decrease in the price of DVD players leads consumers to buy more DVD players. From this information we can conclude that DVD players

Accepted Answer

A)  are normal goods.
B)  are inferior goods.
C)  are luxury goods.
D)  could be any of the above.E) All of the above
F) A) and B)

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Figure 21-6 
-Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of popcorn is $2, and the value of B is 100. What is the price of Mt. Dew?

Accepted Answer

A)  $1
B)  $2
C)  $5
D)  $100E) B) and D)
F) A) and B)

Question 8

A consumer has preferences over two goods, X and Y. Suppose we graph this consumer's preferences (which satisfy the usual properties of indifference curves)  and budget constraint on a diagram with X on the horizontal axis and Y on the vertical axis. At the consumer's current consumption bundle, the consumer is spending all available income, and the marginal rate of substitution is greater than the slope of the budget constraint. We can conclude that the consumer

Accepted Answer

A)  is currently maximizing satisfaction subject to the budget constraint.
B)  could increase satisfaction by consuming more X and less Y.
C)  could increase satisfaction by consuming less X and more Y.
D)  could purchase more X and more Y and increase total satisfaction.E) A) and D)
F) A) and C)

Question 9

Figure 21-12 
-Refer to Figure 21-12. Which of the following statements is correct?

Accepted Answer

A)  The consumer prefers bundle Y to bundle Z.
B)  The consumer is indifference between bundle X and bundle V.
C)  The consumer prefers bundle Y to bundle X.
D)  The consumer prefers bundle Z to bundle V.E) B) and C)
F) None of the above

Question 10

Figure 21-26 
-Refer to Figure 21-26. Rhonda experiences an increase in her hourly wage. Her optimal choice point moves from A to B. For Rhonda,

Accepted Answer

A)  her labor supply curve is backward bending.
B)  her labor supply curve is upward sloping.
C)  leisure is a normal good.
D)  both a and c are correct.E) C) and D)
F) A) and C)

Question 11

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. 
-Refer to Figure 21-24. Steve

Accepted Answer

A)  gains 1.1 pounds of pears and becomes better off by moving from point A to point B.
B)  gains 1.1 pounds of pears and becomes better off by moving from point A to point C.
C)  gains 1.1 pounds of pears and becomes better off by moving from point B to point C.
D)  gives up 1.1 pounds of pears and becomes better off by moving from point C to point B.E) All of the above
F) A) and C)

Question 12

Figure 21-12 
-Refer to Figure 21-12. If the consumer moves from bundle W to bundle Z, the

Accepted Answer

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

Question 13

Which of the following statements is correct?

Accepted Answer

A)  The theory of consumer choice provides a more complete understanding of supply, just as the theory of the competitive firm provides a more complete understanding of demand.
B)  The theory of consumer choice provides a more complete understanding of demand, just as the theory of the competitive firm provides a more complete understanding of supply.
C)  Monetary theory provides a more complete understanding of demand, just as the theory of the competitive firm provides a more complete understanding of supply.
D)  The theory of public choice provides a more complete understanding of supply, just as the theory of the competitive firm provides a more complete understanding of demand.E) B) and D)
F) A) and C)

Question 14

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

Question 15

Figure 21-29
The figure below illustrates the preferences of a representative consumer, Nathaniel. 
-Refer to Figure 21-29. Interest rates increase by 4 percent. Nathaniel's optimal choice point moves from A to B. Nathaniel consumes

Accepted Answer

A)  less while he is younger and saves more than he did before interest rates increased.
B)  more while he is younger and saves more than he did before interest rates increased.
C)  less while he is younger and saves less than he did before interest rates increased.
D)  more while he is younger and saves less than he did before interest rates increased.E) A) and B)
F) A) and C)

Question 16

When indifference curves are bowed inward, the marginal rate of substitution is

Accepted Answer

A)  the same at all points along an indifference curve.
B)  increasing as the consumer moves to the right along an indifference curve.
C)  decreasing as the consumer moves to the right along an indifference curve.
D)  constant.E) B) and C)
F) A) and B)

Question 17

Consider the indifference curve map and budget constraint for two goods, X and Y. Suppose the good on the horizontal axis, X, is normal. When the price of X increases, the substitution effect

Accepted Answer

A)  and income effect both cause an increase in the consumption of X.
B)  causes a decrease in the consumption of X, and the income effect causes an increase in the consumption of X. However, the substitution effect is greater than the income effect.
C)  causes an increase in the consumption of X, and the income effect causes a decrease in the consumption of X. However, the substitution effect is greater than the income effect.
D)  and income effect both cause a decrease in the consumption of X.E) A) and D)
F) A) and B)

Question 18

When the price of a normal 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) All of the above
F) None of the above

Question 19

The theory of consumer choice is representative of how consumers make decisions but is not intended to be a literal account of the process.

Accepted Answer

A) True 
 B)False

Question 20

Using indifference curves and budget constraints, graphically illustrate the substitution and income effect that would result from a change in the price of a normal good.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> The graph above illustrates a...

Exam 21: The Theory of Consumer Choice

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
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The marginal rate of substitution is the slope of the indifference curve.

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Figure 21-12 -Refer to Figure 21-12. If the consumer moves from bundle W to bundle Z, the

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Which of the following statements is correct?

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Figure 21-29 The figure below illustrates the preferences of a representative consumer, Nathaniel. -Refer to Figure 21-29. Interest rates increase by 4 percent. Nathaniel's optimal choice point moves from A to B. Nathaniel consumes

Correct Answer
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Refer to Scenario 21-1. If the consumer's income rises to $60, then the budget line for hot wings and beer would

Correct Answer
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Figure 21-6 -Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of popcorn is $2, and the value of B is 100. What is the price of Mt. Dew?

Correct Answer
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Figure 21-26 -Refer to Figure 21-26. Rhonda experiences an increase in her hourly wage. Her optimal choice point moves from A to B. For Rhonda,

Correct Answer
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When the price of a normal good increases,

Correct Answer
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When indifference curves are bowed inward, the marginal rate of substitution is

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

Correct Answer
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Using indifference curves and budget constraints, graphically illustrate the substitution and income effect that would result from a change in the price of a normal good.

Correct Answer
verified
The graph above illustrates a...
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Consider the indifference curve map and budget constraint for two goods, X and Y. Suppose the good on the horizontal axis, X, is normal. When the price of X increases, the substitution effect

Correct Answer
verified

The theory of consumer choice is representative of how consumers make decisions but is not intended to be a literal account of the process.

Correct Answer
verified

A decrease in the price of DVD players leads consumers to buy more DVD players. From this information we can conclude that DVD players

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. Steve

Correct Answer
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Figure 21-12 -Refer to Figure 21-12. Which of the following statements is correct?

Correct Answer
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Assume that goods X and Y are not Giffen goods. If the price of good X falls, a consumer will definitely

Correct Answer
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Exam 21: The Theory of Consumer Choice

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

The marginal rate of substitution is the slope of the indifference curve.

Correct AnswerverifiedShow Answer

Figure 21-12 -Refer to Figure 21-12. If the consumer moves from bundle W to bundle Z, the

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Figure 21-29 The figure below illustrates the preferences of a representative consumer, Nathaniel. -Refer to Figure 21-29. Interest rates increase by 4 percent. Nathaniel's optimal choice point moves from A to B. Nathaniel consumes

Correct AnswerverifiedShow Answer

Refer to Scenario 21-1. If the consumer's income rises to $60, then the budget line for hot wings and beer would

Correct AnswerverifiedShow Answer

Figure 21-6 -Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of popcorn is $2, and the value of B is 100. What is the price of Mt. Dew?

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Figure 21-26 -Refer to Figure 21-26. Rhonda experiences an increase in her hourly wage. Her optimal choice point moves from A to B. For Rhonda,

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When the price of a normal good increases,

Correct AnswerverifiedShow Answer

When indifference curves are bowed inward, the marginal rate of substitution is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Using indifference curves and budget constraints, graphically illustrate the substitution and income effect that would result from a change in the price of a normal good.

Correct Answerverified The graph above illustrates a...View AnswerShow Answer

Consider the indifference curve map and budget constraint for two goods, X and Y. Suppose the good on the horizontal axis, X, is normal. When the price of X increases, the substitution effect

Correct AnswerverifiedShow Answer

The theory of consumer choice is representative of how consumers make decisions but is not intended to be a literal account of the process.

Correct AnswerverifiedShow Answer

A decrease in the price of DVD players leads consumers to buy more DVD players. From this information we can conclude that DVD players

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. Steve

Correct AnswerverifiedShow Answer

Figure 21-12 -Refer to Figure 21-12. Which of the following statements is correct?

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Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assume that goods X and Y are not Giffen goods. ​If the price of good X falls, a consumer will definitely

Correct AnswerverifiedShow Answer

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The graph above illustrates a...
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Assume that goods X and Y are not Giffen goods. If the price of good X falls, a consumer will definitely

Correct Answer
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