Question 1

If the relative price of a concert ticket is three times the price of a meal at a good restaurant, then the opportunity cost of a concert ticket can be measured by the

Accepted Answer

A)   slope of the budget constraint.
B)   slope of an indifference curve.
C)   marginal rate of substitution.
D)   income effect.E) A) and B)
F) A) and C) A

Question 2

Figure 21-18 
-Refer to Figure 21-18. Given the budget constraint depicted in the graph, the consumer's optimal choice will be point

Accepted Answer

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

Question 3

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 4

Pepsi and pizza are normal goods. When the price of pizza falls, the substitution effect by itself will cause a

Accepted Answer

A)   shift to a lower indifference curve so that the consumer buys less Pepsi.
B)   shift to a higher indifference curve so that the consumer buys more Pepsi.
C)   movement along the indifference curve so that the consumer buys more Pepsi.
D)   movement along the indifference curve so that the consumer buys less Pepsi.E) B) and C)
F) A) and C)

Question 5

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 simultaneous decrease in the price of X and the price of Y
B)   an increase in income
C)   a decrease in income and a decrease in the price of Y
D)   Both a and b are correct.E) All of the above
F) B) and D)

Question 6

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

Accepted Answer

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

Question 7

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) None of the above
F) B) and C)

Question 8

Figure 21-1
The downward­sloping line on the figure represents a consumer's budget constraint. 
-Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Accepted Answer

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

Question 9

If Suzette responds to an increase in the interest rate by decreasing her saving, then, for Suzette,

Accepted Answer

A)   the increase in the interest rate creates an income effect that is greater than the substitution effect.
B)   the increase in the interest rate creates a substitution effect that is greater than the income effect.
C)   consumption when young and consumption when old are perfect substitutes.
D)   consumption when young and consumption when old are perfect complements.E) B) and C)
F) A) and D)

Question 10

Suppose a consumer consumes two goods, X and Y. The slope of the budget constraint equals the

Accepted Answer

A)   marginal rate of substitution.
B)   rate at which the consumer will give up X to gain Y while maintaining the same level of utility.
C)   relative price of the two goods.
D)   All of the above are correct.E) A) and B)
F) A) and C) C

Question 11

Energy drinks and granola bars are normal goods. When the price of energy drinks decreases, the income effect causes a

Accepted Answer

A)   shift to a lower indifference curve, and the consumer buys fewer granola bars.
B)   shift to a higher indifference curve, and the consumer buys more granola bars.
C)   movement along the indifference curve, and the consumer buys fewer granola bars.
D)   movement along the indifference curve, and the consumer buys more granola bars.E) B) and C)
F) B) and D)

Question 12

The relationship between the marginal utility that Casey gets from eating ice cream sundaes and the number of ice cream cones he eats per week is as follows:  Casey receives 3 units of utility from the last dollar spent on each of the other goods he consumes. If ice cream sundaes cost $4 each, how many ice cream sundaes will he consume per month if he maximizes utility?

Accepted Answer

A)   2
B)   3
C)   4
D)   5E) A) and C)
F) B) and D)

Question 13

Suppose that you have $100 today and expect to receive $100 one year from today. Your money market account pays an annual interest rate of 25%, and you may borrow money at that interest rate. Suppose that you borrow $60 and spend $160 today. After you repay your loan one year from today, how much money will you have available for consumption one year from today?

Accepted Answer

A)   $0
B)   $25
C)   $50
D)   $75E) All of the above
F) B) and D)

Question 14

A good is an inferior good if the consumer buys less of it when

Accepted Answer

A)   his income rises.
B)   the price of the good rises.
C)   the price of a substitute good falls.
D)   his income falls.E) C) and D)
F) A) and D)

Question 15

You can think of an indifference curve as an

Accepted Answer

A)   equal-cost curve.
B)   equal-marginal-cost curve.
C)   equal-utility curve.
D)   equal-marginal-utility curve.E) A) and B)
F) A) and C)

Question 16

If Chad's labor­supply curve is upward­sloping, then, for Chad,

Accepted Answer

A)   an increase in the wage creates an income effect that is greater than the substitution effect.
B)   an increase in the wage creates a substitution effect that is greater than the income effect.
C)   leisure and consumption are perfect substitutes.
D)   leisure and consumption are perfect complements.E) B) and D)
F) None of the above

Question 17

What is significant about a point on a graph at which an indifference curve is tangent to a budget constraint?

Accepted Answer

A point of tangency between an...

Question 18

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

Question 19

A consumer consumes two normal goods, popcorn and Pepsi. The price of Pepsi rises. The substitution effect, by itself, suggests that the consumer will consume

Accepted Answer

A)   more popcorn and more Pepsi.
B)   less popcorn and less Pepsi.
C)   more popcorn and less Pepsi.
D)   less popcorn and more Pepsi.E) B) and D)
F) B) and C) C

Question 20

A field experiment conducted by economists in the Chinese province of Hunan provided evidence that, for poor households in that province, rice is a good.

Accepted Answer

The answer of A field experiment conducted by economists in...

Exam 21: The Theory of Consumer Choice

If the relative price of a concert ticket is three times the price of a meal at a good restaurant, then the opportunity cost of a concert ticket can be measured by the

Correct Answer
verified
A

Figure 21-18 -Refer to Figure 21-18. Given the budget constraint depicted in the graph, the consumer's optimal choice will be point

Correct Answer
verified

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

Correct Answer
verified

Pepsi and pizza are normal goods. When the price of pizza falls, the substitution effect by itself will cause a

Correct Answer
verified

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
verified

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

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. 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 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Correct Answer
verified

If Suzette responds to an increase in the interest rate by decreasing her saving, then, for Suzette,

Correct Answer
verified

Suppose a consumer consumes two goods, X and Y. The slope of the budget constraint equals the

Correct Answer
verified
C

Energy drinks and granola bars are normal goods. When the price of energy drinks decreases, the income effect causes a

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A good is an inferior good if the consumer buys less of it when

Correct Answer
verified

You can think of an indifference curve as an

Correct Answer
verified

If Chad's laborsupply curve is upwardsloping, then, for Chad,

Correct Answer
verified

What is significant about a point on a graph at which an indifference curve is tangent to a budget constraint?

Correct Answer
verified
A point of tangency between an...
View 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 Answer
verified

A consumer consumes two normal goods, popcorn and Pepsi. The price of Pepsi rises. The substitution effect, by itself, suggests that the consumer will consume

Correct Answer
verified
C

A field experiment conducted by economists in the Chinese province of Hunan provided evidence that, for poor households in that province, rice is a good.

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

If the relative price of a concert ticket is three times the price of a meal at a good restaurant, then the opportunity cost of a concert ticket can be measured by the

Correct AnswerverifiedA

Figure 21-18 -Refer to Figure 21-18. Given the budget constraint depicted in the graph, the consumer's optimal choice will be point

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Pepsi and pizza are normal goods. When the price of pizza falls, the substitution effect by itself will cause a

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

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 21-1 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Correct AnswerverifiedShow Answer

If Suzette responds to an increase in the interest rate by decreasing her saving, then, for Suzette,

Correct AnswerverifiedShow Answer

Suppose a consumer consumes two goods, X and Y. The slope of the budget constraint equals the

Correct AnswerverifiedC

Energy drinks and granola bars are normal goods. When the price of energy drinks decreases, the income effect causes a

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A good is an inferior good if the consumer buys less of it when

Correct AnswerverifiedShow Answer

You can think of an indifference curve as an

Correct AnswerverifiedShow Answer

If Chad's labor­supply curve is upward­sloping, then, for Chad,

Correct AnswerverifiedShow Answer

What is significant about a point on a graph at which an indifference curve is tangent to a budget constraint?

Correct AnswerverifiedA point of tangency between an...View AnswerShow 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

A consumer consumes two normal goods, popcorn and Pepsi. The price of Pepsi rises. The substitution effect, by itself, suggests that the consumer will consume

Correct AnswerverifiedC

A field experiment conducted by economists in the Chinese province of Hunan provided evidence that, for poor households in that province, rice is a good.

Correct AnswerverifiedShow Answer

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If Chad's laborsupply curve is upwardsloping, then, for Chad,

Correct Answer
verified

Correct Answer
verified
A point of tangency between an...
View Answer

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified