Question 1

When indifference curves are bowed in toward the origin,

Accepted Answer

A)  consumers are less inclined to trade away goods they are lacking.
B)  consumers' willingness to trade away goods they have in abundance diminishes.
C)  an increase in income will shift the indifference curve away from the origin.
D)  a decrease in income will shift the indifference curve toward the origin.E) B) and D)
F) A) and B)

Question 2

If we observe that a consumer's budget constraint has shifted inward, we can assume that the consumer will buy

Accepted Answer

A)  fewer normal goods and more inferior goods.
B)  more normal goods and fewer inferior goods.
C)  more normal goods and more inferior goods.
D)  fewer normal goods and fewer inferior goods.E) A) and D)
F) A) and C)

Question 3

When considering her budget, the highest indifference curve that a consumer can reach is the

Accepted Answer

A)  one that is tangent to the budget constraint.
B)  indifference curve farthest from the origin
C)  indifference curve that intersects the budget constraint in at least two places.
D)  None of the above is correct.E) All of the above
F) C) and D)

Question 4

The indifference curves for perfect substitutes are straight lines.

Accepted Answer

A) True 
 B)False

Question 5

Pepsi and pizza are normal goods. When the price of pizza rises, the substitution effect causes Pepsi to be relatively

Accepted Answer

A)  more expensive, so the consumer buys more Pepsi.
B)  more expensive, so the consumer buys less Pepsi.
C)  less expensive, so the consumer buys more Pepsi.
D)  less expensive, so the consumer buys less Pepsi.E) A) and D)
F) B) and C)

Question 6

The change in consumption that results when a price change moves the consumer along a given indifference curve to a point illustrating the new marginal rate of substitution is called the

Accepted Answer

A)  income effect.
B)  substitution effect.
C)  Giffen good effect.
D)  inferior good effect.E) A) and D)
F) None of the above

Question 7

The theory of consumer choice examines how

Accepted Answer

A)  firms make profit-maximizing decisions.
B)  consumers make utility-maximizing decisions.
C)  wages are determined in competitive labor markets.
D)  prices are determined in competitive goods markets.E) B) and D)
F) A) and C)

Question 8

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. 
-Refer to Figure 21-24. Suppose the price of pears, the price of apples, and Steve's income remain constant, and Steve moves from point B to point C. In doing so, Steve

Accepted Answer

A)  becomes better off.
B)  moves from a point that is not optimal to a point that is optimal.
C)  gives up some apples to get some pears.
D)  All of the above are correct.E) C) and D)
F) A) and B)

Question 9

Scenario 21-4 Frank spends all of his income of $240 per month on shirts and hats. The price of a shirt is $40 and the price of a hat is $30.
-Refer to Scenario 21-4. If Frank uses all of his income to buy hats during a certain month, then how many hats does he buy?

Accepted Answer

Frank buys...

Question 10

When two goods are perfect substitutes, the marginal rate of substitution

Accepted Answer

A)  is constant along the indifference curve.
B)  decreases as the scarcity of one good increases.
C)  increases as the scarcity of one good increases.
D)  changes to reflect the consumer's changing preferences for the goods.E) B) and C)
F) A) and C)

Question 11

Scenario 21-2
Lawrence 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. Lawrence is typically awake for 112 hours each week (he sleeps an average of 8 hours each day) . For each hour Lawrence spends writing, he can earn $75. Lawrence 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 Lawrence decides to spend 80 hours a week playing volleyball on the beach and the rest of his time writing, how much income will he have available to spend on consumption goods?

Accepted Answer

A)  $900
B)  $1,500
C)  $2,400
D)  $3,000E) C) and D)
F) A) and C)

Question 12

Figure 21-8 
-Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?

Accepted Answer

A)  $3.33
B)  $5
C)  $15
D)  $30E) A) and B)
F) A) and C)

Question 13

Thomas faces prices of $6 for a unit of good X and $30 for a unit of good Y. At his optimum, Thomas is willing to give up 1 unit of good Y for __________ units of good X.

Accepted Answer

The answer of Thomas faces prices of $6 for a...

Question 14

If Priscilla regards cheese and crackers as perfect complements, then

Accepted Answer

A)  her indifference curves slope upward.
B)  her indifference curves are straight lines.
C)  Priscilla prefers lower indifference curves to higher ones.
D)  for Priscilla a bundle of 5 crackers and 5 ounces of cheese is just as good as a bundle of 5 crackers and 8 ounces of cheese.E) A) and C)
F) None of the above

Question 15

Using our model of consumer choice, is it possible for a consumer to buy less of a particular good when his income rises? Briefly explain.

Accepted Answer

Yes, an increase in ...

Question 16

Figure 21-1 The downward-sloping line on the figure represents a consumer's budget
constraint. 
-Refer to Figure 21-1. If the price of a CD is $12, then the consumer's income amounts to

Accepted Answer

A)  $140.
B)  $180.
C)  $210.
D)  $240.E) A) and D)
F) B) and C)

Question 17

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 income and a decrease in the price of X
B)  a decrease in income and an increase in the price of X
C)  an increase in income and a decrease in the price of X
D)  an increase in income and an increase in the price of XE) C) and D)
F) B) and D)

Question 18

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. 
-Refer to Figure 21-31. Suppose Kevin is optimally purchasing 21 shirts and 28 sweaters, and he is spending $1,680 on sweaters. What is the price of a shirt?

Accepted Answer

Given that Kevin is optimally purchasing...

Question 19

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) None of the above
F) All of the above

Question 20

Jack and Diane each buy pizza and paperback novels. Pizza costs $3 per slice, and paperback novels cost $5 each. Jack has a budget of $30, and Diane has a budget of $15 to spend on pizza and paperback novels. Which consumer(s)  can afford to purchase 3 slices of pizza and 4 paperback novels?

Accepted Answer

A)  Jack only
B)  Diane only
C)  both Jack and Diane
D)  neither Jack nor DianeE) B) and C)
F) C) and D)

Exam 21: The Theory of Consumer Choice

The indifference curves for perfect substitutes are straight lines.

Correct Answer
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The change in consumption that results when a price change moves the consumer along a given indifference curve to a point illustrating the new marginal rate of substitution is called the

Correct Answer
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Pepsi and pizza are normal goods. When the price of pizza rises, the substitution effect causes Pepsi to be relatively

Correct Answer
verified

Thomas faces prices of $6 for a unit of good X and $30 for a unit of good Y. At his optimum, Thomas is willing to give up 1 unit of good Y for __________ units of good X.

Correct Answer
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When considering her budget, the highest indifference curve that a consumer can reach is the

Correct Answer
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When indifference curves are bowed in toward the origin,

Correct Answer
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Scenario 21-4 Frank spends all of his income of $240 per month on shirts and hats. The price of a shirt is $40 and the price of a hat is $30. -Refer to Scenario 21-4. If Frank uses all of his income to buy hats during a certain month, then how many hats does he buy?

Correct Answer
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Frank buys...
View Answer

Figure 21-8 -Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?

Correct Answer
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Using our model of consumer choice, is it possible for a consumer to buy less of a particular good when his income rises? Briefly explain.

Correct Answer
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Yes, an increase in ...
View Answer

Jack and Diane each buy pizza and paperback novels. Pizza costs $3 per slice, and paperback novels cost $5 each. Jack has a budget of $30, and Diane has a budget of $15 to spend on pizza and paperback novels. Which consumer(s) can afford to purchase 3 slices of pizza and 4 paperback novels?

Correct Answer
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Correct Answer
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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 Answer
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Figure 21-1 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the price of a CD is $12, then the consumer's income amounts to

Correct Answer
verified

When two goods are perfect substitutes, the marginal rate of substitution

Correct Answer
verified

If we observe that a consumer's budget constraint has shifted inward, we can assume that the consumer will buy

Correct Answer
verified

The theory of consumer choice examines how

Correct Answer
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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?

Correct Answer
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Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. Suppose the price of pears, the price of apples, and Steve's income remain constant, and Steve moves from point B to point C. In doing so, Steve

Correct Answer
verified

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. Suppose Kevin is optimally purchasing 21 shirts and 28 sweaters, and he is spending $1,680 on sweaters. What is the price of a shirt?

Correct Answer
verified
Given that Kevin is optimally purchasing...
View Answer

If Priscilla regards cheese and crackers as perfect complements, then

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

The indifference curves for perfect substitutes are straight lines.

Correct AnswerverifiedShow Answer

The change in consumption that results when a price change moves the consumer along a given indifference curve to a point illustrating the new marginal rate of substitution is called the

Correct AnswerverifiedShow Answer

Pepsi and pizza are normal goods. When the price of pizza rises, the substitution effect causes Pepsi to be relatively

Correct AnswerverifiedShow Answer

Thomas faces prices of $6 for a unit of good X and $30 for a unit of good Y. At his optimum, Thomas is willing to give up 1 unit of good Y for __________ units of good X.

Correct AnswerverifiedShow Answer

When considering her budget, the highest indifference curve that a consumer can reach is the

Correct AnswerverifiedShow Answer

When indifference curves are bowed in toward the origin,

Correct AnswerverifiedShow Answer

Scenario 21-4 Frank spends all of his income of $240 per month on shirts and hats. The price of a shirt is $40 and the price of a hat is $30. -Refer to Scenario 21-4. If Frank uses all of his income to buy hats during a certain month, then how many hats does he buy?

Correct AnswerverifiedFrank buys...View AnswerShow Answer

Figure 21-8 -Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?

Correct AnswerverifiedShow Answer

Using our model of consumer choice, is it possible for a consumer to buy less of a particular good when his income rises? Briefly explain.

Correct AnswerverifiedYes, an increase in ...View AnswerShow Answer

Jack and Diane each buy pizza and paperback novels. Pizza costs $3 per slice, and paperback novels cost $5 each. Jack has a budget of $30, and Diane has a budget of $15 to spend on pizza and paperback novels. Which consumer(s) can afford to purchase 3 slices of pizza and 4 paperback novels?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Figure 21-1 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the price of a CD is $12, then the consumer's income amounts to

Correct AnswerverifiedShow Answer

When two goods are perfect substitutes, the marginal rate of substitution

Correct AnswerverifiedShow Answer

If we observe that a consumer's budget constraint has shifted inward, we can assume that the consumer will buy

Correct AnswerverifiedShow Answer

The theory of consumer choice examines how

Correct AnswerverifiedShow Answer

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?

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. Suppose the price of pears, the price of apples, and Steve's income remain constant, and Steve moves from point B to point C. In doing so, Steve

Correct AnswerverifiedShow Answer

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. Suppose Kevin is optimally purchasing 21 shirts and 28 sweaters, and he is spending $1,680 on sweaters. What is the price of a shirt?

Correct AnswerverifiedGiven that Kevin is optimally purchasing...View AnswerShow Answer

If Priscilla regards cheese and crackers as perfect complements, then

Correct AnswerverifiedShow Answer

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Frank buys...
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Yes, an increase in ...
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Given that Kevin is optimally purchasing...
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