Question 1

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 2

Figure 21-7
The following graph shows three possible indifference curves (I)  for a consumer.  ​
-Refer to Figure 21-7. A person who chooses to consume bundle D is likely to

Accepted Answer

A)  receive higher total satisfaction at bundle D than at bundle A.
B)  spend more on bundle D than bundle A.
C)  receive higher marginal utility from pudding than from scones.
D)  receive higher marginal utility from scones than from pudding.E) A) and D)
F) C) and D)

Question 3

A family on a trip budgets $800 for meals and gasoline. If the price of a meal for the family is $50, how many meals can the family buy if they do not buy any gasoline?

Accepted Answer

A)  8
B)  16
C)  24
D)  32E) C) and D)
F) None of the above

Question 4

When indifference curves are downward sloping, the marginal rate of substitution is usually constant.

Accepted Answer

A) True 
 B)False

Question 5

Joseph is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires. When the substitution effect dominates the income effect, an increase in the interest rate on savings will cause him to

Accepted Answer

A)  increase his savings rate.
B)  decrease his savings rate.
C)  continue saving at the current rate.
D)  change his savings rate but in an unknown way.E) A) and B)
F) B) and D)

Question 6

Figure 21-1 
-Refer to Figure 21-1. A consumer who chooses to spend all of her income could be at which point(s)  on the figure?

Accepted Answer

A)  B only
B)  A only
C)  E, D, or C only
D)  B, E, D, or C onlyE) B) and C)
F) None of the above

Question 7

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

Question 8

Figure 21-16
The following figure illustrates the preferences of a representative consumer, Nathaniel. 
-Refer to Figure 21-16. 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 9

Consumers face tradeoffs except at the point where the indifference curve is tangent to the budget line.

Accepted Answer

A) True 
 B)False

Exam 21: The Theory of Consumer Choice

Correct Answer
verified

When indifference curves are downward sloping, the marginal rate of substitution is usually constant.

Correct Answer
verified

Figure 21-7 The following graph shows three possible indifference curves (I) for a consumer. -Refer to Figure 21-7. A person who chooses to consume bundle D is likely to

Correct Answer
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Figure 21-1 -Refer to Figure 21-1. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

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

Correct Answer
verified

A family on a trip budgets $800 for meals and gasoline. If the price of a meal for the family is $50, how many meals can the family buy if they do not buy any gasoline?

Correct Answer
verified

Consumers face tradeoffs except at the point where the indifference curve is tangent to the budget line.

Correct Answer
verified

Figure 21-16 The following figure illustrates the preferences of a representative consumer, Nathaniel. -Refer to Figure 21-16. Interest rates increase by 4 percent. Nathaniel's optimal choice point moves from A to B. Nathaniel consumes

Correct Answer
verified

Joseph is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires. When the substitution effect dominates the income effect, an increase in the interest rate on savings will cause him to

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

Correct AnswerverifiedShow Answer

When indifference curves are downward sloping, the marginal rate of substitution is usually constant.

Correct AnswerverifiedShow Answer

Figure 21-7 The following graph shows three possible indifference curves (I) for a consumer. ​ -Refer to Figure 21-7. A person who chooses to consume bundle D is likely to

Correct AnswerverifiedShow Answer

Figure 21-1 -Refer to Figure 21-1. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A family on a trip budgets $800 for meals and gasoline. If the price of a meal for the family is $50, how many meals can the family buy if they do not buy any gasoline?

Correct AnswerverifiedShow Answer

Consumers face tradeoffs except at the point where the indifference curve is tangent to the budget line.

Correct AnswerverifiedShow Answer

Figure 21-16 The following figure illustrates the preferences of a representative consumer, Nathaniel. -Refer to Figure 21-16. Interest rates increase by 4 percent. Nathaniel's optimal choice point moves from A to B. Nathaniel consumes

Correct AnswerverifiedShow Answer

Joseph is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires. When the substitution effect dominates the income effect, an increase in the interest rate on savings will cause him to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Figure 21-7 The following graph shows three possible indifference curves (I) for a consumer. -Refer to Figure 21-7. A person who chooses to consume bundle D is likely to

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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