Question 1

The theory of consumer choice provides a(n)

Accepted Answer

A)   literal account of how people make decisions.
B)   unrealistic picture of how people make decisions.
C)   model that is consistent with how people make decisions.
D)   in-depth model that is based more in psychology than in economics.E) A) and B)
F) A) and C)

Question 2

Figure 21-11 
-Refer to Figure 21-11.Assume that the consumer depicted the figure has an income of $50.Based on the information available in the graph,which of the following price-quantity combinations would be on her demand curve for marshmallows if the price of chocolate chips is $2.50?

Accepted Answer

A)   P=$2.50,Q=6
B)   P=$2.50,Q=10
C)   P=$5.00,Q=3
D)   P=$5.00,Q=5E) All of the above
F) A) and C)

Question 3

Assume that a consumer's indifference curve is bowed outward but satisfies the other three properties of indifference curves.As the consumer moves from left to right along the horizontal axis,the consumer's marginal rate of substitution

Accepted Answer

A)   increases.
B)   decreases.
C)   remains constant.
D)   increases,then decreases.E) A) and C)
F) A) and D)

Question 4

An increase in income will cause a consumer's budget constraint to

Accepted Answer

A)   shift outward,parallel to its initial position.
B)   shift inward,parallel to its initial position.
C)   pivot around the horizontal axis.
D)   pivot around the vertical axis.E) A) and D)
F) B) and C)

Question 5

A Giffen good is a good for which an increase in the price

Accepted Answer

A)   decreases the quantity supplied.
B)   increases the quantity supplied.
C)   decreases the quantity demanded.
D)   increases the quantity demanded.E) B) and D)
F) B) and C)

Question 6

Jeffrey spends all of his income on warm-up suits and running shoes,and the price of a pair of shoes is four times the price of a warm-up suit.In order to maximize total utility,Jeffrey should

Accepted Answer

A)   buy four times as many warm-up suits as pairs of running shoes.
B)   buy four times as many pairs of running shoes as warm-up suits.
C)   buy both items until the marginal utility of a pair of running shoes is four times the marginal utility of a warm-up suit.
D)   buy both items until the marginal utility of a warm-up suit is four times the marginal utility of a pair of running shoes.E) B) and C)
F) C) and D)

Question 7

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) All of the above
F) None of the above

Question 8

Suppose that for Emily,DVDs and trips to the movie theater are perfect substitutes.Currently,Emily is spending all of her income on trips to the movie theater.If the price of DVDs doubles,the substitution effect will

Accepted Answer

A)   be two times the income effect.
B)   be half the income effect.
C)   be zero.
D)   always increase the number of trips to the movie theater Emily makes.E) A) and B)
F) None of the above

Question 9

When the price of an inferior good decreases,

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

Question 10

Which of the following statements is not correct?

Accepted Answer

A)   If Jane gets a higher wage and works more,the substitution effect is greater than the income effect for her.
B)   If Spencer experiences a wage decrease and works less,the income effect is greater than the substitution effect for him.
C)   If the substitution effect is greater than the income effect,the labor-supply curve is upward sloping.
D)   If the income effect is greater than the substitution effect,the labor-supply curve is downward sloping.E) None of the above
F) All of the above

Question 11

At a consumer's optimal choice,the consumer chooses the combination of goods that equates the marginal rate of substitution and the price ratio.

Accepted Answer

A) True 
 B)False

Question 12

A consumer has preferences over 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 violate the property that indifference curves are bowed inward.
D)   These bundles violate the property that indifference curves do not cross.E) A) and B)
F) None of the above

Question 13

Which of the following is a property of a typical indifference curve?

Accepted Answer

A)   upward sloping
B)   bowed away from the origin
C)   do not intersect
D)   lower ones are preferred to higher onesE) B) and D)
F) C) and D)

Question 14

When the price of a shirt falls,the

Accepted Answer

A)   quantity of shirts demanded falls.
B)   quantity of shirts demanded rises.
C)   quantity of shirts supplied rises.
D)   demand for shirts falls.E) A) and D)
F) B) and D)

Question 15

Figure 21-9 xy > Py/Px. B)  MRSxy = Px/Py. C)  MRSxy x/Py. D)  MRSxy > Px/Py." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-9.Bundle C represents a point where

Accepted Answer

A)   MRSxy > Py/Px.
B)   MRSxy = Px/Py.
C)   MRSxy x/Py.
D)   MRSxy > Px/Py.E) A) and B)
F) A) and D)

Question 16

If the price of hamburgers increases,the substitution effect works to

Accepted Answer

A)   decrease the quantity of hamburgers supplied.
B)   increase the number of hamburger buns demanded.
C)   decrease the quantity of hamburgers demanded.
D)   increase the number of hamburger buns supplied.E) A) and C)
F) B) and D)

Question 17

The following diagram shows a budget constraint for a particular consumer. 
If the price of X is $5,what is the consumer's income?

Accepted Answer

A)   $2
B)   $10
C)   $30
D)   $300E) C) and D)
F) A) and D)

Question 18

Jaime is currently consuming some of good X and some of good Y.If good Y is a normal good for this consumer,a rise in her income will definitely cause her to

Accepted Answer

A)   increase her consumption of X.
B)   increase her consumption of Y.
C)   decrease her consumption of X.
D)   decrease her consumption of Y.E) A) and B)
F) C) and D)

Question 19

Given a consumer's indifference map,the demand curve for a good can

Accepted Answer

A)   be derived by moving a consumer's budget constraint as her income falls.
B)   be derived by moving a consumer's budget constraint as her income rises.
C)   be derived by moving a consumer's budget constraint as the market price of one good changes.
D)   not be derived from consumer theory.E) None of the above
F) A) and B)

Question 20

If we observe that a consumer's budget constraint has shifted outward,we can assume that the consumer will buy

Accepted Answer

A)   fewer normal goods and more inferior goods.
B)   more normal goods and fewer inferior goods.
C)   more normal goods and more inferior goods.
D)   fewer normal goods and fewer inferior goods.E) C) and D)
F) A) and B)

Exam 21: The Theory of Consumer Choice

Given a consumer's indifference map,the demand curve for a good can

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Jaime is currently consuming some of good X and some of good Y.If good Y is a normal good for this consumer,a rise in her income will definitely cause her to

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Which of the following statements is not correct?

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An increase in income will cause a consumer's budget constraint to

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Suppose that for Emily,DVDs and trips to the movie theater are perfect substitutes.Currently,Emily is spending all of her income on trips to the movie theater.If the price of DVDs doubles,the substitution effect will

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Figure 21-9 -Refer to Figure 21-9.Bundle C represents a point where

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The following diagram shows a budget constraint for a particular consumer. If the price of X is $5,what is the consumer's income?

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If we observe that a consumer's budget constraint has shifted outward,we can assume that the consumer will buy

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If the price of hamburgers increases,the substitution effect works to

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Which of the following is a property of a typical indifference curve?

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When the price of a shirt falls,the

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Assume that a consumer's indifference curve is bowed outward but satisfies the other three properties of indifference curves.As the consumer moves from left to right along the horizontal axis,the consumer's marginal rate of substitution

Correct AnswerverifiedShow Answer

The theory of consumer choice provides a(n)

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

Jeffrey spends all of his income on warm-up suits and running shoes,and the price of a pair of shoes is four times the price of a warm-up suit.In order to maximize total utility,Jeffrey should

Correct AnswerverifiedShow Answer

A Giffen good is a good for which an increase in the price

Correct AnswerverifiedShow Answer

Figure 21-11 -Refer to Figure 21-11.Assume that the consumer depicted the figure has an income of $50.Based on the information available in the graph,which of the following price-quantity combinations would be on her demand curve for marshmallows if the price of chocolate chips is $2.50?

Correct AnswerverifiedShow Answer

When the price of an inferior good decreases,

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A consumer has preferences over 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?

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At a consumer's optimal choice,the consumer chooses the combination of goods that equates the marginal rate of substitution and the price ratio.

Correct AnswerverifiedShow Answer

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