FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 21: The Theory of Consumer Choice

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 91

Multiple Choice

Review LaterAdd Note

Review Later

Figure 21-10 -Refer to Figure 21-10. Given the budget constraint depicted in the graph, the consumer's optimal choice will be point

A) A.
B) B.
C) C.
D) D.

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

Correct Answer

verified

Show Answer

Question 92

Multiple Choice

Review LaterAdd Note

Review Later

Suppose a consumer spends her income on two goods: music CDs and DVDs. The price of a CD is $8, and the price of a DVD is $20. If we graph the budget constraint by measuring the quantity of CDs purchased on the vertical axis and the quantity of DVDs on the horizontal axis, what is the slope of the budget constraint?

A) −5.0
B) −2.5
C) −0.4
D) The slope of the budget constraint cannot be determined without knowing the income the consumer has available to spend on the two goods.

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

Correct Answer

verified

Show Answer

Question 93

Multiple Choice

Review LaterAdd Note

Figure 21-4 -Refer to Figure 21-4. Suppose a consumer has $104 in income, the price of lemonade is $3, and the value of A is 52. What is the price of pretzels?

Suppose Reta is planning for retirement in a two-period world. In the first period, Reta is young and earns $1 million and in the second period, Reta is old and retired and earns nothing. The interest rate is initially 10 percent, but then it falls to 7 percent. After the interest rate falls, the

If a consumer experiences a decrease in income, the new budget constraint will have the same slope as the old budget constraint.

For Molly, the substitution effect of a wage increase is stronger than the income effect. In response to a wage increase, will Sally work more hours or will she work fewer hours?

The theory of consumer choice illustrates that people face tradeoffs, which is one of the Ten Principles of Economics.

When indifference curves are bowed inward, the marginal rate of substitution varies at each point on the indifference curve.

Scenario 21-3 Scott knows that he will ultimately face retirement. Assume that Scott will experience two periods in his life, one in which he works and earns income, and one in which he is retired and earns no income. Scott can earn $250,000 during his working period and nothing in his retirement period. He must both save and consume in his work period with an interest rate of 10 percent on savings. -Refer to Scenario 21-3. If the interest rate on savings increases,

Figure 21-18 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. ​ -Refer to Figure 21-18. For Kevin, are sweaters and shirts substitutes, complements, or neither?

Figure 21-13 -Refer to Figure 21-13. When the price of X is $40, the price of Y is $10, and the consumer's income is $80, the consumer's optimal choice is C. Then the price of X decreases to $10. We can derive the demand curve by determining the change in the quantity demanded illustrated by the movement from

Figure 21-18 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. ​ -Refer to Figure 21-18. If point B is Kevin's optimum, then at that optimum, what is his opportunity cost of a sweater in terms of shirts?

Table 21-3 ​ Ethan consumes two goods, milk and pretzels. Milk costs $2 per glass, and he consumes it to the point where the marginal utility he receives from his last glass of milk is 6. Pretzels cost $4 per bag. The relationship between the marginal utility Ethan gets from eating a bag of pretzels and the number of bags he eats per month is as follows: ​ $\begin{array} { | c | c | } \hline \text { Bags of Pretzels } & \text { Marginal Utility } \\\hline 1 & 30 \\\hline 2 & 20 \\\hline 3 & 12 \\\hline 4 & 6 \\\hline 5 & 2 \\\hline 6 & 0 \\\hline\end{array}$ ​ ​ -Samantha is maximizing total utility while consuming food and clothing. Her marginal utility from food is 50, and her marginal utility from clothing is 25. If clothing is priced at $10 per unit, the price of food per unit must be

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."

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.

Figure 21-8 ​ ​ -Refer to Figure 21-8. What is the consumer's marginal rate of substitution as she moves from A to B?

Figure 21-13 -Refer to Figure 21-13. When the price of X is $40, the price of Y is $10, and the consumer's income is $80, the consumer's optimal choice is C. Then the price of X decreases to $10. The substitution effect can be illustrated as the movement from

What does the slope of a budget constraint represent?

Figure 21-19 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. ​ -Refer to Figure 21-19. From the figure we can determine how much income Hannah earns when young and we can determine the interest rate. Could the interest rate rise to a level at which Hannah could afford to be at point A?

Because people are more willing to trade away goods that they have in abundance and less willing to trade away goods of which they have little, indifference curves are ___________.