Question 1

When the price of an inferior good increases,

Accepted Answer

A)   both the income and substitution effects encourage the consumer to purchase more of the good.
B)   both the income and substitution effects encourage the consumer to purchase less of the good.
C)   the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good.
D)   the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good.E) None of the above
F) A) and D)

Question 2

Figure 21-15
 
-Refer to Figure 21-15.The price of X is $5,the price of Y is $20,and the consumer's income is $40.Which point represents the consumer's optimal choice?

Accepted Answer

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

Question 3

Giffen goods have positively-sloped demand curves because they are

Accepted Answer

A)   inferior goods with no substitution effect.
B)   normal goods with no substitution effect.
C)   inferior goods for which the substitution effect outweighs the income effect.
D)   inferior goods for which the income effect outweighs the substitution effect.E) B) and C)
F) A) and D)

Question 4

Carlos goes to the movies every Sunday afternoon.The movie theater offers 4 combinations of popcorn and beverages: the "mini-combo" costs $5 and includes a small popcorn and a small drink,the "medium-combo" costs $7 and includes a medium popcorn and a medium drink,the "value-combo" also costs $7 and includes a small popcorn and a large drink,and the "large-combo" costs $9 and includes a large popcorn and a large drink.Carlos always purchases the "value-combo." We can conclude that

Accepted Answer

A)   Carlos cannot afford the "large-combo."
B)   Carlos cannot afford the "medium-combo."
C)   Carlos prefers a combo with a larger popcorn-to-beverage ratio.
D)   Carlos prefers a combo with a smaller popcorn-to-beverage ratio.E) A) and B)
F) B) and D)

Question 5

Figure 21-11
 
-Refer to Figure 21-11.What is the consumer's marginal rate of substitution as she moves from B to C?

Accepted Answer

A)   12
B)   6
C)   4
D)   1E) None of the above
F) B) and D)

Question 6

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

Accepted Answer

A)   200
B)   100
C)   50
D)   25E) None of the above
F) All of the above

Question 7

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.If you measure gin on the vertical axis and cocktail olives on the horizontal axis,then the budget constraint

Accepted Answer

A)   is steeper after the price changes.
B)   is flatter after the price changes.
C)   is the same after the price changes.
D)   shifts in a parallel fashion to the old budget constraint after the price changes.E) A) and B)
F) A) and D)

Question 8

An indifference curve illustrates the

Accepted Answer

A)   prices facing a consumer as she chooses how much of good X and good Y to consume.
B)   income facing a consumer as she chooses how much of good X and good Y to consume.
C)   trade-offs facing a consumer as she chooses how much of good X and good Y to consume.
D)   All of the above are correct.E) B) and C)
F) All of the above

Question 9

A consumer has preferences over two goods,X and Y.Suppose we graph this consumer's preferences (which satisfy the usual properties of indifference curves) and budget constraint on a diagram with X on the horizontal axis and Y on the vertical axis.At the consumer's current consumption bundle,the consumer is spending all available income,and the marginal rate of substitution is less than the slope of the budget constraint.We can conclude that the consumer

Accepted Answer

A)   is currently maximizing satisfaction subject to the budget constraint.
B)   could increase satisfaction by consuming more X and less Y.
C)   could increase satisfaction by consuming less X and more Y.
D)   could purchase more X and more Y and increase total satisfaction.E) B) and D)
F) B) and C)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

If the consumer's income and all prices simultaneously double,then the optimum consumption bundle will

Accepted Answer

A)   shift outward relative to the original optimum.
B)   move leftward along the original budget constraint.
C)   not change.
D)   shift inward relative to the original optimum.E) None of the above
F) A) and B)

Question 12

The following diagram shows one indifference curve representing the preferences for goods X and Y for one consumer. 
What is the marginal rate of substitution between points A and B?

Accepted Answer

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

Question 13

Consider the indifference curve map and budget constraint for two goods,X and Y.Suppose the good on the horizontal axis,X,is normal.When the price of X increases,the substitution effect

Accepted Answer

A)   and income effect both cause an increase in the consumption of X.
B)   causes a decrease in the consumption of X, and the income effect causes an increase in the consumption of X. However, the substitution effect is greater than the income effect.
C)   causes an increase in the consumption of X, and the income effect causes a decrease in the consumption of X. However, the substitution effect is greater than the income effect.
D)   and income effect both cause a decrease in the consumption of X.E) None of the above
F) B) and C)

Question 14

A rise in the interest rate will generally result in people consuming more when they are old if the substitution effect outweighs the income effect.

Accepted Answer

A) True 
 B)False

Question 15

Figure 21-13
 
-Refer to Figure 21-13.What is the consumer's marginal rate of substitution as she moves from A to B?

Accepted Answer

A)   4
B)   2
C)   1
D)   0.5E) A) and D)
F) C) and D)

Question 16

Figure 21-14

-Refer to Figure 21-14.Which of the graphs illustrates indifference curves for which the marginal rate of substitution varies?

Accepted Answer

A)   graph a
B)   graph b
C)   graph c
D)   All of the above are correct.E) All of the above
F) A) and C)

Question 17

The theory of consumer choice explains how people choose between

Accepted Answer

A)   textbooks and energy drinks.
B)   labor and leisure.
C)   spending now and spending in the future.
D)   All of the above are correct.E) All of the above
F) A) and C)

Question 18

Figure 21-17
 
-Refer to Figure 21-17.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) B) and C)
F) A) and D)

Question 19

Figure 21-15
 
-Refer to Figure 21-15.The price of X is $20,the price of Y is $5,and the consumer's income is $40.Which point represents the consumer's optimal choice?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) A) and B)
F) None of the above

Question 20

Consider two goods,books and hamburgers.The slope of the consumer's budget constraint is measured by the

Accepted Answer

A)   consumer's income divided by the price of hamburgers.
B)   relative price of books and hamburgers.
C)   consumer's marginal rate of substitution.
D)   number of books purchased divided by the number of hamburgers purchased.E) A) and C)
F) A) and B)

Exam 21: The Theory of Consumer Choice.

If the consumer's income and all prices simultaneously double,then the optimum consumption bundle will

Correct Answer
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Correct Answer
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A rise in the interest rate will generally result in people consuming more when they are old if the substitution effect outweighs the income effect.

Correct Answer
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An indifference curve illustrates the

Correct Answer
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The theory of consumer choice explains how people choose between

Correct Answer
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Figure 21-6 -Refer to Figure 21-6.Suppose a consumer has $200 in income,the price of popcorn is $1,and the price of Mt.Dew is $2.What is the value of A?

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Figure 21-15 -Refer to Figure 21-15.The price of X is $5,the price of Y is $20,and the consumer's income is $40.Which point represents the consumer's optimal choice?

Correct Answer
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Figure 21-14 -Refer to Figure 21-14.Which of the graphs illustrates indifference curves for which the marginal rate of substitution varies?

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

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Figure 21-15 -Refer to Figure 21-15.The price of X is $20,the price of Y is $5,and the consumer's income is $40.Which point represents the consumer's optimal choice?

Correct Answer
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Consider the indifference curve map and budget constraint for two goods,X and Y.Suppose the good on the horizontal axis,X,is normal.When the price of X increases,the substitution effect

Correct Answer
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Consider two goods,books and hamburgers.The slope of the consumer's budget constraint is measured by the

Correct Answer
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Figure 21-13 -Refer to Figure 21-13.What is the consumer's marginal rate of substitution as she moves from A to B?

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Figure 21-17 -Refer to Figure 21-17.Given the budget constraint depicted in the graph,the consumer's optimal choice will be point

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The following diagram shows one indifference curve representing the preferences for goods X and Y for one consumer. What is the marginal rate of substitution between points A and B?

Correct Answer
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When the price of an inferior good increases,

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Figure 21-11 -Refer to Figure 21-11.What is the consumer's marginal rate of substitution as she moves from B to C?

Correct Answer
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Giffen goods have positively-sloped demand curves because they are

Correct Answer
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Exam 21: The Theory of Consumer Choice.

If the consumer's income and all prices simultaneously double,then the optimum consumption bundle will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A rise in the interest rate will generally result in people consuming more when they are old if the substitution effect outweighs the income effect.

Correct AnswerverifiedShow Answer

An indifference curve illustrates the

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The theory of consumer choice explains how people choose between

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

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Figure 21-15 -Refer to Figure 21-15.The price of X is $5,the price of Y is $20,and the consumer's income is $40.Which point represents the consumer's optimal choice?

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Figure 21-14 -Refer to Figure 21-14.Which of the graphs illustrates indifference curves for which the marginal rate of substitution varies?

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

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Figure 21-15 -Refer to Figure 21-15.The price of X is $20,the price of Y is $5,and the consumer's income is $40.Which point represents the consumer's optimal choice?

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Consider the indifference curve map and budget constraint for two goods,X and Y.Suppose the good on the horizontal axis,X,is normal.When the price of X increases,the substitution effect

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Consider two goods,books and hamburgers.The slope of the consumer's budget constraint is measured by the

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Figure 21-13 -Refer to Figure 21-13.What is the consumer's marginal rate of substitution as she moves from A to B?

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Figure 21-17 -Refer to Figure 21-17.Given the budget constraint depicted in the graph,the consumer's optimal choice will be point

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The following diagram shows one indifference curve representing the preferences for goods X and Y for one consumer. What is the marginal rate of substitution between points A and B?

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When the price of an inferior good increases,

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Figure 21-11 -Refer to Figure 21-11.What is the consumer's marginal rate of substitution as she moves from B to C?

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Giffen goods have positively-sloped demand curves because they are

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