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Exam 21: The Theory of Consumer Choice

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Question 91

Multiple Choice

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Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (a) , what is the price of good Y relative to the price of good X (i.e., Py/Px) ?

A) 1/3
B) 1/4
C) 3
D) 4

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

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Question 92

Multiple Choice

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Figure 21-17 -Refer to Figure 21-17. When the price of X is $6, the price of Y is $24, and income is $48, Paul's optimal choice is point C. Then the price of Y decreases to $6. Paul's new optimal choice is point

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

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

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Question 93

Multiple Choice

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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?

Scenario 21-4 Frank spends all of his income of $240 per month on shirts and hats. The price of a shirt is $40 and the price of a hat is $30. -Refer to Scenario 21-4. What is the slope of Frank's budget constraint if it is drawn with the quantity of shirts on the horizontal axis and the quantity of hats on the vertical axis?

A consumer is currently spending all of her available income on two goods: music CDs and DVDs. At her current consumption bundle, she is spending twice as much on CDs as she is on DVDs. If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs, what is the price of a DVD?

Frannie spends her income on rice and beans. At her optimum, Frannie's

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. If point A is Kevin's optimum, then at that optimum, what is his opportunity cost of a shirt in terms of sweaters?

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

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

For a typical consumer, indifference curves can intersect if they satisfy the property of transitivity.

Two economists found empirical evidence that when the price of rice decreased in the Hunan province of China, local residents consumed less rice than before the price decrease. The study provides a real-world example of a(n)

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. If Steve's income is $12.60, then the price of a pound of apples is

If goods X and Y are both normal goods for Brenda, then an increase in Brenda's income will lead her to__________.

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. Which of the following pairs of prices matches the appearance of the budget constraint?

Shelley wins $1 million in her state's lottery. If Shelley keeps working after she wins the money, we can infer that the substitution effect must exactly offset the income effect for her.

Figure 21-32 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 21-32. 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?

Goods x and y are available to Jeff. At Jeff's optimum, the marginal utility per dollar spent on good x equals__________________.

Figure 21-8 -Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?

Traci consumes two goods, lemonade and pretzels. Lemonade costs $1 per glass, and she consumes it to the point where the marginal utility she receives from her last glass of lemonade is 3. Pretzels cost $2 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 his utility, how many bags of pretzels does he buy each month?