Question 1

Consider the indifference curve map for nickels and quarters.Assume nickels are on the vertical axis and quarters are on the horizontal axis.The indifference curves for nickels and quarters are

Accepted Answer

A)   straight lines with slope of -1/5
B)   straight lines with a slope of -1.
C)   straight lines with a slope of -5.
D)   L shaped.E) None of the above
F) B) and C)

Question 2

Bundle J contains 10 units of good X and 5 units of good Y.Bundle K contains 5 units of good X and 10 units of good Y.Bundle L contains 10 units of good X and 10 units of good Y.Assume that the consumer's preferences satisfy the four properties of indifference curves.The price of X is $1,the price of Y is $2,and the consumer has an income of $20.Which bundle will the consumer choose?

Accepted Answer

A)   bundle J
B)   bundle K
C)   bundle L
D)   either bundle J or bundle KE) All of the above
F) C) and D)

Question 3

The substitution effect of a price change is the change in consumption that results from the movement to a new indifference curve.

Accepted Answer

A) True 
 B)False

Question 4

Diana and Sarah each like jewelry and music by the Rolling Stones.If we were to graph an indifference curve with jewelry on the horizontal axis and cd's by the Rolling Stones on the vertical axis,then

Accepted Answer

A)   Diana and Sarah would have identical indifference curves.
B)   Diana's indifference curve would be higher than Sarah's indifference curve.
C)   Sarah's indifference curve would be higher than Diana's indifference curve.
D)   Because we do not know the intensity of each woman's preferences,we do not have enough information to compare their indifference curves.E) B) and D)
F) A) and B)

Question 5

A Giffen good is one in which the quantity demanded rises as the price rises because the income effect

Accepted Answer

A)   reinforces the substitution effect.
B)   reinforces and is greater than the substitution effect.
C)   counteracts but is smaller than the substitution effect.
D)   counteracts and is greater than the substitution effect.E) A) and B)
F) B) and D)

Question 6

A consumer consumes two normal goods,pretzels and Mt.Dew.The price of pretzels rises.The income effect,by itself,suggests that the consumer will consume

Accepted Answer

A)   more pretzels and more Mt.Dews.
B)   fewer pretzels and fewer Mt.Dews.
C)   more pretzels and fewer Mt.Dews.
D)   fewer pretzels and more Mt.Dews.E) None of the above
F) C) and D)

Question 7

Suppose a consumer spends her income on two goods: iTunes music downloads and books.The consumer has $100 to allocate to these two goods,the price of a downloaded song is $1,and the price of a book is $20.What is the maximum number of books the consumer can purchase?

Accepted Answer

A)   100
B)   20
C)   10
D)   5E) All of the above
F) A) and D)

Question 8

Figure 21-8   
-Refer to Figure 21-8.Which of the following statements is correct?

Accepted Answer

A)   The indifference curves represented in graph a are perfect substitutes.
B)   The indifference curves represented in graph b are perfect complements.
C)   The indifference curves represented in graph c are neither perfect substitutes not perfect complements.
D)   All of the above are correct.E) All of the above
F) B) and C)

Question 9

Figure 21-8   
-Refer to Figure 21-8.Which of the graphs shown represent indifference curves for perfect substitutes?

Accepted Answer

A)   graph a
B)   graph b
C)   graph c
D)   All of the above are correct.E) All of the above
F) B) and C)

Question 10

Evaluate the following statement,"Warren Buffet is the second richest person in the world.He doesn't face any constraint on his ability to purchase commodities he wants."

Accepted Answer

Everyone faces scarcity of res...

Question 11

A consumer chooses an optimal consumption point where the

Accepted Answer

A)   marginal rate of substitution equals the relative price ratio.
B)   slope of the indifference curve equals the slope of the budget constraint.
C)   ratio of the marginal utilities equals the ratio of the prices.
D)   All of the above are correct.E) A) and D)
F) C) and D)

Question 12

Assume that a college student spends her income on books and pizza.The price of a pizza is $8,and the price of a book is $15.If she has $100 of income,she could choose to consume

Accepted Answer

A)   8 pizzas and 4 books.
B)   4 pizzas and 5 books.
C)   9 pizzas and 3 books.
D)   4 pizzas and 3 books.E) None of the above
F) B) and C)

Question 13

A budget constraint illustrates bundles that a consumer prefers equally,while an indifference curve illustrates bundles that are equally affordable to a consumer.

Accepted Answer

A) True 
 B)False

Question 14

A Giffen good is a good for which

Accepted Answer

A)   a decrease in the price decreases the quantity demanded.
B)   the income effect outweighs the substitution effect.
C)   an increase in the price decreases the quantity demanded.
D)   Both a) and b) are correct.E) All of the above
F) B) and C)

Question 15

We can use the theory of consumer choice to analyze

Accepted Answer

A)   why most demand curves slope downward.
B)   the tradeoff between work and leisure
C)   how interest rates affect household saving.
D)   All of the above are correct.E) A) and D)
F) B) and C)

Question 16

Figure 21-1 
-Refer to Figure 21-1.All of the points identified in the figure represent affordable consumption options with the exception of

Accepted Answer

A)   A.
B)   E.
C)   A and E.
D)   None.All points are affordable.E) None of the above
F) B) and D)

Question 17

A rise in the interest rate will generally result in people consuming less when they are old if the substitution effect outweighs the income effect.

Accepted Answer

A) True 
 B)False

Question 18

Consider two goods,books and hamburgers.The slope of the consumer's budget constraint is measured by the

Accepted Answer

A)   consumer's income divided by the price of hamburgers.
B)   relative price of books and hamburgers.
C)   consumer's marginal rate of substitution.
D)   number of books purchased divided by the number of hamburgers purchased.E) None of the above
F) B) and C)

Question 19

Suppose a consumer has preferences over two goods,X and Y,which are perfect substitutes.In particular,two units of X is equivalent to one unit of Y.If the price of X is $1,the price of Y is $3,and the consumer has $30 of income to allocate to these two goods,how much of each good should the consumer purchase to maximize satisfaction?

Accepted Answer

A)   30 units of X and 0 units of Y
B)   0 units of X and 10 units of Y
C)   15 units of X and 5 units of Y
D)   12 units of X and 6 units of YE) A) and C)
F) All of the above

Question 20

When two goods are perfect substitutes,the indifference curve is

Accepted Answer

A)   a horizontal straight line.
B)   bowed outward.
C)   a downward-sloping straight line.
D)   a right angle.E) None of the above
F) A) and C)

Exam 21: The Theory of Consumer Choice

The substitution effect of a price change is the change in consumption that results from the movement to a new indifference curve.

Correct Answer
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Correct Answer
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Figure 21-8 -Refer to Figure 21-8.Which of the following statements is correct?

Correct Answer
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A consumer chooses an optimal consumption point where the

Correct Answer
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A Giffen good is one in which the quantity demanded rises as the price rises because the income effect

Correct Answer
verified

Consider the indifference curve map for nickels and quarters.Assume nickels are on the vertical axis and quarters are on the horizontal axis.The indifference curves for nickels and quarters are

Correct Answer
verified

Diana and Sarah each like jewelry and music by the Rolling Stones.If we were to graph an indifference curve with jewelry on the horizontal axis and cd's by the Rolling Stones on the vertical axis,then

Correct Answer
verified

Evaluate the following statement,"Warren Buffet is the second richest person in the world.He doesn't face any constraint on his ability to purchase commodities he wants."

Correct Answer
verified
Everyone faces scarcity of res...
View Answer

We can use the theory of consumer choice to analyze

Correct Answer
verified

A rise in the interest rate will generally result in people consuming less when they are old if the substitution effect outweighs the income effect.

Correct Answer
verified

A budget constraint illustrates bundles that a consumer prefers equally,while an indifference curve illustrates bundles that are equally affordable to a consumer.

Correct Answer
verified

A Giffen good is a good for which

Correct Answer
verified

Assume that a college student spends her income on books and pizza.The price of a pizza is $8,and the price of a book is $15.If she has $100 of income,she could choose to consume

Correct Answer
verified

Consider two goods,books and hamburgers.The slope of the consumer's budget constraint is measured by the

Correct Answer
verified

Suppose a consumer spends her income on two goods: iTunes music downloads and books.The consumer has $100 to allocate to these two goods,the price of a downloaded song is $1,and the price of a book is $20.What is the maximum number of books the consumer can purchase?

Correct Answer
verified

Figure 21-8 -Refer to Figure 21-8.Which of the graphs shown represent indifference curves for perfect substitutes?

Correct Answer
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Figure 21-1 -Refer to Figure 21-1.All of the points identified in the figure represent affordable consumption options with the exception of

Correct Answer
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When two goods are perfect substitutes,the indifference curve is

Correct Answer
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A consumer consumes two normal goods,pretzels and Mt.Dew.The price of pretzels rises.The income effect,by itself,suggests that the consumer will consume

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

The substitution effect of a price change is the change in consumption that results from the movement to a new indifference curve.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 21-8 -Refer to Figure 21-8.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

A consumer chooses an optimal consumption point where the

Correct AnswerverifiedShow Answer

A Giffen good is one in which the quantity demanded rises as the price rises because the income effect

Correct AnswerverifiedShow Answer

Consider the indifference curve map for nickels and quarters.Assume nickels are on the vertical axis and quarters are on the horizontal axis.The indifference curves for nickels and quarters are

Correct AnswerverifiedShow Answer

Diana and Sarah each like jewelry and music by the Rolling Stones.If we were to graph an indifference curve with jewelry on the horizontal axis and cd's by the Rolling Stones on the vertical axis,then

Correct AnswerverifiedShow Answer

Evaluate the following statement,"Warren Buffet is the second richest person in the world.He doesn't face any constraint on his ability to purchase commodities he wants."

Correct AnswerverifiedEveryone faces scarcity of res...View AnswerShow Answer

We can use the theory of consumer choice to analyze

Correct AnswerverifiedShow Answer

A rise in the interest rate will generally result in people consuming less when they are old if the substitution effect outweighs the income effect.

Correct AnswerverifiedShow Answer

A budget constraint illustrates bundles that a consumer prefers equally,while an indifference curve illustrates bundles that are equally affordable to a consumer.

Correct AnswerverifiedShow Answer

A Giffen good is a good for which

Correct AnswerverifiedShow Answer

Assume that a college student spends her income on books and pizza.The price of a pizza is $8,and the price of a book is $15.If she has $100 of income,she could choose to consume

Correct AnswerverifiedShow Answer

Consider two goods,books and hamburgers.The slope of the consumer's budget constraint is measured by the

Correct AnswerverifiedShow Answer

Suppose a consumer spends her income on two goods: iTunes music downloads and books.The consumer has $100 to allocate to these two goods,the price of a downloaded song is $1,and the price of a book is $20.What is the maximum number of books the consumer can purchase?

Correct AnswerverifiedShow Answer

Figure 21-8 -Refer to Figure 21-8.Which of the graphs shown represent indifference curves for perfect substitutes?

Correct AnswerverifiedShow Answer

Figure 21-1 -Refer to Figure 21-1.All of the points identified in the figure represent affordable consumption options with the exception of

Correct AnswerverifiedShow Answer

When two goods are perfect substitutes,the indifference curve is

Correct AnswerverifiedShow Answer

A consumer consumes two normal goods,pretzels and Mt.Dew.The price of pretzels rises.The income effect,by itself,suggests that the consumer will consume

Correct AnswerverifiedShow Answer

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Everyone faces scarcity of res...
View Answer

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