Question 1

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) None of the above
F) All of the above

Question 2

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) A) and B)
F) C) and D)

Question 3

When a consumer is purchasing the best combination of two goods,X and Y,subject to a budget constraint,we say that the consumer is at an optimal choice point.A graph of an optimal choice point shows that it occurs

Accepted Answer

A)   along the highest indifference curve.
B)   along the lowest budget constraint.
C)   where the indifference curve is tangent to the budget constraint.
D)   All of the above are correct.E) B) and D)
F) All of the above

Question 4

If a consumer consumes two goods,X and Y,and has indifference curves that are bowed inward,the consumer's optional choice occurs when

Accepted Answer

A)   he consumes that maximum affordable quantity of good X.
B)   he consumes that maximum affordable quantity of good Y.
C)   his indifference curve is tangent to his budget constraint.
D)   his indifference curve lies entirely above his budget constraint.E) A) and D)
F) None of the above

Question 5

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)   15 units of X and 0 units of YE) A) and D)
F) A) and C)

Question 6

Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst.The price of a pint of beer is $5,and the price of a bratwurst is $4.Which of the following combinations of beers and bratwursts represents a point that would lie to the exterior of the consumer's budget constraint?

Accepted Answer

A)   160 beers and 200 bratwursts
B)   40 beers and 50 bratwursts
C)   80 beers and 100 bratwursts
D)   160 beers and 0 bratwurstsE) B) and C)
F) A) and D)

Question 7

Figure 21-14

-Refer to Figure 21-14.Which of the graphs shown represent indifference curves for perfect complements?

Accepted Answer

A)   graph a
B)   graph b
C)   graph c
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 8

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

Accepted Answer

A) True 
 B)False

Question 9

If we observe that William's budget constraint has moved inward,then we know for certain that

Accepted Answer

A)   his income must have decreased.
B)   he will be indifferent between goods X and Y.
C)   the price of one or both of the goods must have increased.
D)   his utility will decrease.E) A) and D)
F) B) and C)

Question 10

When considering household savings,the relative price between consuming when young and consuming when old is the

Accepted Answer

A)   consumption rate.
B)   interest rate that individuals can earn on their private savings.
C)   prime rate.
D)   federal funds rate.E) C) and D)
F) None of the above

Question 11

The indifference curves for nickels and dimes are straight lines.

Accepted Answer

A) True 
 B)False

Question 12

List and briefly explain each of the four properties of indifference curves.

Accepted Answer

1: Higher indifference curves are prefer...

Question 13

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 D)

Question 14

A consumer's preferences provide a ranking of

Accepted Answer

A)   all possible consumption bundles.
B)   only the consumption bundles that fall on the same indifference curve.
C)   consumption bundles based their prices.
D)   consumption bundles based on the consumer's income.E) A) and B)
F) A) and D)

Question 15

A consumer likes two goods: pizza and beer.The four bundles shown in the table below lie on the same indifference curve for the consumer. 
Which of the following statements regarding these bundles is correct?

Accepted Answer

A)   The goods are perfect substitutes for this consumer.
B)   The goods are perfect complements for this consumer.
C)   These bundles illustrate the property that indifference curves are bowed inward.
D)   These bundles violate the property that indifference curves do not cross.E) B) and C)
F) All of the above

Question 16

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

Accepted Answer

A)   is equal to the relative price ratio of the goods.
B)   exceeds the marginal utility of each good by the greatest amount.
C)   is less than the slope of the budget constraint.
D)   All of the above are correct.E) A) and D)
F) A) and C)

Question 17

A decrease in a consumer's income

Accepted Answer

A)   increases the slope of the consumer's budget constraint.
B)   has no effect on the consumer's budget constraint.
C)   decreases the slope of the consumer's budget constraint.
D)   has no effect on the slope of the consumer's budget constraint.E) B) and D)
F) A) and D)

Question 18

Casey consumes two goods,hamburgers and ice cream sandwiches.He has maximized his utility given his income.Ice cream sandwiches costs $2,and he consumes them to the point where the marginal utility he receives is 6.Hamburgers cost $4,and the relationship between the marginal utility that Casey gets from eating hamburgers and the number he eats per month is as follows: 
How many hamburgers does Casey buy each month?

Accepted Answer

A)   1
B)   2
C)   3
D)   4E) C) and D)
F) A) and C)

Question 19

Figure 21-16
 
-Refer to Figure 21-16.When the price of X is $6,the price of Y is $24,and income is $48,Steve's optimal choice is point C.Then the price of Y decreases to $6.Steve's new optimal choice is point

Accepted Answer

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

Question 20

Figure 21-8
 
-Refer to Figure 21-8.You have $300 to spend on good X and good Y.If good X costs $30 and good Y costs $50,your budget constraint is

Accepted Answer

A)   AB.
B)   BC.
C)   CD.
D)   DE.E) A) and C)
F) A) and D)

Exam 21: The Theory of Consumer Choice.

A Giffen good is a good for which

Correct Answer
verified

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

Correct Answer
verified

If a consumer consumes two goods,X and Y,and has indifference curves that are bowed inward,the consumer's optional choice occurs when

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The indifference curves for nickels and dimes are straight lines.

Correct Answer
verified

A consumer likes two goods: pizza and beer.The four bundles shown in the table below lie on the same indifference curve for the consumer. Which of the following statements regarding these bundles is correct?

Correct Answer
verified

List and briefly explain each of the four properties of indifference curves.

Correct Answer
verified
1: Higher indifference curves are prefer...
View Answer

Figure 21-8 -Refer to Figure 21-8.You have $300 to spend on good X and good Y.If good X costs $30 and good Y costs $50,your budget constraint is

Correct Answer
verified

When a consumer is purchasing the best combination of two goods,X and Y,subject to a budget constraint,we say that the consumer is at an optimal choice point.A graph of an optimal choice point shows that it occurs

Correct Answer
verified

When considering household savings,the relative price between consuming when young and consuming when old is the

Correct Answer
verified

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

Correct Answer
verified

A consumer's preferences provide a ranking of

Correct Answer
verified

The theory of consumer choice examines how

Correct Answer
verified

If we observe that William's budget constraint has moved inward,then we know for certain that

Correct Answer
verified

A decrease in a consumer's income

Correct Answer
verified

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

Correct Answer
verified

Figure 21-14 -Refer to Figure 21-14.Which of the graphs shown represent indifference curves for perfect complements?

Correct Answer
verified

Figure 21-16 -Refer to Figure 21-16.When the price of X is $6,the price of Y is $24,and income is $48,Steve's optimal choice is point C.Then the price of Y decreases to $6.Steve's new optimal choice is point

Correct Answer
verified

Exam 21: The Theory of Consumer Choice.

A Giffen good is a good for which

Correct AnswerverifiedShow Answer

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

Correct AnswerverifiedShow Answer

If a consumer consumes two goods,X and Y,and has indifference curves that are bowed inward,the consumer's optional choice occurs when

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The indifference curves for nickels and dimes are straight lines.

Correct AnswerverifiedShow Answer

A consumer likes two goods: pizza and beer.The four bundles shown in the table below lie on the same indifference curve for the consumer. Which of the following statements regarding these bundles is correct?

Correct AnswerverifiedShow Answer

List and briefly explain each of the four properties of indifference curves.

Correct Answerverified1: Higher indifference curves are prefer...View AnswerShow Answer

Figure 21-8 -Refer to Figure 21-8.You have $300 to spend on good X and good Y.If good X costs $30 and good Y costs $50,your budget constraint is

Correct AnswerverifiedShow Answer

When a consumer is purchasing the best combination of two goods,X and Y,subject to a budget constraint,we say that the consumer is at an optimal choice point.A graph of an optimal choice point shows that it occurs

Correct AnswerverifiedShow Answer

When considering household savings,the relative price between consuming when young and consuming when old is 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

A consumer's preferences provide a ranking of

Correct AnswerverifiedShow Answer

The theory of consumer choice examines how

Correct AnswerverifiedShow Answer

If we observe that William's budget constraint has moved inward,then we know for certain that

Correct AnswerverifiedShow Answer

A decrease in a consumer's income

Correct AnswerverifiedShow Answer

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

Correct AnswerverifiedShow Answer

Figure 21-14 -Refer to Figure 21-14.Which of the graphs shown represent indifference curves for perfect complements?

Correct AnswerverifiedShow Answer

Figure 21-16 -Refer to Figure 21-16.When the price of X is $6,the price of Y is $24,and income is $48,Steve's optimal choice is point C.Then the price of Y decreases to $6.Steve's new optimal choice is point

Correct AnswerverifiedShow Answer

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1: Higher indifference curves are prefer...
View Answer

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