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The income effect of a price change is unaffected by whether the good is a normal or inferior good.

A) True
B) False

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Mark spends his weekly income on gin and cocktail olives.The price of gin has risen from $7 to $9 per bottle,the price of cocktail olives has fallen from $6 to $5 per jar,and Mark's income has stayed fixed at $46 per week.Since the price changes,Mark has been buying 4 bottles of gin and 2 jars of cocktail olives per week.At the original prices,4 bottles of gin and 2 jars of cocktail olives would have


A) exactly exhausted his income.
B) cost more than his income.
C) cost less than his income.
D) could have maximized his satisfaction given his budget constraint.

E) A) and B)
F) A) and C)

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Scenario 21-1 Suppose the price of hot wings is $10, the price of beer is $1, and the consumer's income is $50. In addition, suppose the consumer's budget constraint illustrates hot wings on the horizontal axis and beer on the vertical axis. -Refer to Scenario 21-1.If the price of beer doubles to $2,then the


A) budget constraint intersects the vertical axis at 25 beers.
B) slope of the budget constraint rises to -2.
C) slope of the budget constraint falls to -4.
D) budget constraint shifts inward in a parallel fashion.

E) All of the above
F) B) and C)

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The relationship between the marginal utility that David gets from eating ice cream sundaes and the number of ice cream cones he eats per week is as follows: The relationship between the marginal utility that David gets from eating ice cream sundaes and the number of ice cream cones he eats per week is as follows: David 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? A) 2 B) 3 C) 4 D) 5 David 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?


A) 2
B) 3
C) 4
D) 5

E) B) and C)
F) All of the above

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The substitution effect in the work-leisure model induces a person to work less in response to higher wages,which tends to make the labor-supply curve slope upward.

A) True
B) False

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Which of the following represents a consumer's optimum?


A) MUx/MUy = Py/Px
B) MUx/Py = MUy/Px
C) MUx/Px = MUy/Py
D) MUy/MUx = Px/Py

E) B) and C)
F) All of the above

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Figure 21-17 Figure 21-17 -Refer to Figure 21-17.It would be possible for the consumer to reach Iā‚‚ if A) the price of Y decreases. B) the price of X decreases. C) income increases. D) All of the above would be correct. -Refer to Figure 21-17.It would be possible for the consumer to reach Iā‚‚ if


A) the price of Y decreases.
B) the price of X decreases.
C) income increases.
D) All of the above would be correct.

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

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"Left" gloves and "right" gloves provide a good example of


A) perfect substitutes.
B) perfect complements.
C) negatively sloped indifference curves.
D) positively sloped indifference curves.

E) All of the above
F) A) and D)

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Figure 21-9 Figure 21-9 -Refer to Figure 21-9.If the consumer has $600 in income,what is the price of good X? A) $20 B) $6 C) $3 D) $0.33 -Refer to Figure 21-9.If the consumer has $600 in income,what is the price of good X?


A) $20
B) $6
C) $3
D) $0.33

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

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Figure 21-16 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 $8.Steve's new optimal choice is point A) A. B) B. C) D. D) E. -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 $8.Steve's new optimal choice is point


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

E) A) and C)
F) A) and B)

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Figure 21-6 Figure 21-6 -Refer to Figure 21-6.Suppose a consumer has $100 in income,the price of popcorn is $2,and the value of B is 100.What is the price of Mt.Dew? A) $1 B) $2 C) $5 D) $100 -Refer to Figure 21-6.Suppose a consumer has $100 in income,the price of popcorn is $2,and the value of B is 100.What is the price of Mt.Dew?


A) $1
B) $2
C) $5
D) $100

E) A) and B)
F) A) and C)

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Assume that a college student spends her income on mac-n-cheese and CDs.The price of one box of mac-n-cheese is $1,and the price of one CD is $12.If she has $100 of income,she could choose to consume


A) 15 boxes of mac-n-cheese and 6 CDs.
B) 20 boxes of mac-n-cheese and 7 CDs.
C) 10 boxes of mac-n-cheese and 8 CDs.
D) 30 boxes of mac-n-cheese and 6 CDs.

E) A) and D)
F) B) and D)

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Jack and Diane each buy pizza and paperback novels.Pizza costs $3 per slice,and paperback novels cost $5 each.Jack has a budget of $30,and Diane has a budget of $15 to spend on pizza and paperback novels.Which consumer(s) can afford to purchase 5 slices of pizza and 5 paperback novels?


A) Jack only
B) Diane only
C) both Jack and Diane
D) neither Jack nor Diane

E) A) and C)
F) B) and C)

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Traci consumes two goods,lemonade and pretzels.Lemonade costs $2 per glass,and she consumes it to the point where the marginal utility she receives from her last glass of lemonade is 4.Pretzels cost $3 per bag.The relationship between the marginal utility Traci gets from eating a bag of pretzels and the number of bags she eats per month is as follows: Traci consumes two goods,lemonade and pretzels.Lemonade costs $2 per glass,and she consumes it to the point where the marginal utility she receives from her last glass of lemonade is 4.Pretzels cost $3 per bag.The relationship between the marginal utility Traci gets from eating a bag of pretzels and the number of bags she eats per month is as follows: If Traci is maximizing her utility,how many bags of potato chips does she buy each month? A) 3 B) 4 C) 5 D) 6 If Traci is maximizing her utility,how many bags of potato chips does she buy each month?


A) 3
B) 4
C) 5
D) 6

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

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A consumer chooses an optimal consumption point where the


A) marginal rate of substitution is maximized.
B) slope of the indifference curve exceeds the slope of the budget constraint by the greatest amount.
C) ratio of the marginal utilities equals the ratio of the prices.
D) All of the above are correct.

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

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Which of the following descriptions best depicts the substitution effect?


A) the change in consumption resulting from a change in the consumer's income, holding the prices of the goods constant
B) the change in consumption resulting from a change in the consumer's income, holding the consumer's level of satisfaction constant
C) the change in consumption resulting from a change in the price of one good, holding the consumer's level of satisfaction constant
D) the change in consumption resulting from a change in the price of one good, allowing the consumer's level of satisfaction to change

E) A) and B)
F) A) and C)

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At a consumer's optimal choice,the consumer chooses the combination of goods such that the ratio of the marginal utilities equals the ratio of the prices.

A) True
B) False

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Calvin 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


A) increase his savings rate.
B) decrease his savings rate.
C) continue saving at the same rate.
D) Any of the above are possible.

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

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Figure 21-6 Figure 21-6 -Refer to Figure 21-6.Suppose a consumer has $100 in income,the price of Mt.Dew is $2,and the value of A is 200.What is the price of popcorn? A) $0.50 B) $1 C) $2 D) $4 -Refer to Figure 21-6.Suppose a consumer has $100 in income,the price of Mt.Dew is $2,and the value of A is 200.What is the price of popcorn?


A) $0.50
B) $1
C) $2
D) $4

E) All of the above
F) A) and D)

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The consumer's optimum is where


A) MUx/MUy = Py/Px.
B) MUx/Py = MUy/Px.
C) MUx/MUy = Px/Py.
D) None of the above is correct.

E) B) and C)
F) B) and D)

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