Question 1

Figure 21-10
 
-Refer to Figure 21-10.When comparing bundle A to bundle E,the consumer

Accepted Answer

A)   prefers bundle A because it contains more donuts.
B)   prefers bundle E because it lies on a higher indifference curve.
C)   prefers bundle E because it contains more donuts.
D)   is indifferent between the two bundles.E) None of the above
F) B) and C)

Question 2

Figure 21-22
 
-Refer to Figure 21-22.When the price of X is $80,the price of Y is $20,and the consumer's income is $160,the consumer's optimal choice is D.Then the price of X decreases to $20.The demand curve can be illustrated as the movement from

Accepted Answer

A)   D to E.
B)   D to C.
C)   C to E.
D)   E to D.E) B) and C)
F) None of the above

Question 3

Which of the following is not a property of a typical indifference curve?

Accepted Answer

A)   downward sloping
B)   bowed away from the origin
C)   does not intersect another indifference curve
D)   a higher one is preferred to a lower oneE) B) and C)
F) A) and C)

Question 4

Figure 21-10
 
-Refer to Figure 21-10.When comparing bundle B to bundle C,the consumer

Accepted Answer

A)   prefers bundle B because it contains more donuts.
B)   is indifferent between the two bundles.
C)   prefers bundle C because it contains more cake.
D)   In order to compare bundle B to bundle C, we must know the prices of cake and donuts.E) B) and C)
F) All of the above

Question 5

If a consumer experiences a decrease in income,the new budget constraint will have the same slope as the old budget constraint.

Accepted Answer

A) True 
 B)False

Question 6

Energy drinks and granola bars are normal goods.When the price of energy drinks decreases,the income effect causes a

Accepted Answer

A)   shift to a lower indifference curve, and the consumer buys fewer granola bars.
B)   shift to a higher indifference curve, and the consumer buys more granola bars.
C)   movement along the indifference curve, and the consumer buys fewer granola bars.
D)   movement along the indifference curve, and the consumer buys more granola bars.E) All of the above
F) B) and C)

Question 7

At the consumer's optimum the

Accepted Answer

A)   budget constraint will have a slope of MUx/Px.
B)   slope of the indifference curve is equal to the slope of the budget constraint.
C)   indifference curve will intersect the budget constraint at the midpoint of the budget constraint.
D)   Both b and c are correct.E) B) and C)
F) C) and D)

Question 8

Figure 21-12
 
-Refer to Figure 21-12.The marginal rate of substitution between bundles V and Z is

Accepted Answer

A)   greater than the marginal rate of substitution between bundles Z and T.
B)   less than the marginal rate of substitution between bundles Z and T.
C)   equal to the marginal rate of substitution between bundles Z and T.
D)   We are unable to compare the marginal rates of substitution.E) C) and D)
F) A) and D)

Question 9

The theory of consumer choice is representative of how consumers make decisions but is not intended to be a literal account of the process.

Accepted Answer

A) True 
 B)False

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

Question 11

Giffen goods have positively-sloped demand curves because they are

Accepted Answer

A)   normal goods for which the income effect outweighs the substitution effect.
B)   normal goods for which the substitution effect outweighs the income effect.
C)   inferior goods for which the income effect outweighs the substitution effect.
D)   inferior goods for which the substitution effect outweighs the income effect.E) A) and C)
F) None of the above

Question 12

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 3 slices of pizza and 4 paperback novels?

Accepted Answer

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

Question 13

Which of the following statements is not correct?

Accepted Answer

A)   Reducing taxes on interest income might encourage people to save more.
B)   Reducing taxes on interest income might reduce saving.
C)   A price increase will create income and substitution effects that will both always work to reduce consumption of the good.
D)   Utility is maximized when the marginal rate of substitution between any two goods equals the relative prices of the two goods.E) A) and D)
F) A) and C)

Question 14

Figure 21-18
 
-Refer to Figure 21-18.Assume that the consumer depicted in the figure has an income of $20.The price of Skittles is $2 and the price of M&M's is $4.The consumer's optimal choice is point

Accepted Answer

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

Question 15

Figure 21-14

-Refer to Figure 21-14.Which of the following statements is correct?

Accepted Answer

A)   The indifference curves represented in graph a are perfect substitutes.
B)   The indifference curves represented in graph b are perfect complements.
C)   The indifference curves represented in graph c are neither perfect substitutes not perfect complements.
D)   All of the above are correct.E) None of the above
F) A) and C)

Question 16

Figure 21-10
 
-Refer to Figure 21-10.Which of the following statements is not true for a consumer who moves from bundle B to bundle C?

Accepted Answer

A)   At bundle C the consumer would be willing to give up a larger amount of cake in exchange for a donut than at bundle B.
B)   The marginal rate of substitution at bundles B and C are the same since the points lie on the same indifference curve.
C)   The consumer is willing to sacrifice donuts to obtain cake.
D)   The consumer receives the same level of satisfaction at bundles B and C.E) All of the above
F) B) and C)

Question 17

Suppose the price of good X falls and the consumption of good X increases.From this we can infer that X is a(n) 
(i) normal good.
(ii) inferior good.
(iii) Giffen good.

Accepted Answer

A)   (i)  only
B)   (i)  or (ii)  only
C)   (iii)  only
D)   (ii)  or (iii)  onlyE) A) and B)
F) A) and C)

Question 18

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

Question 19

The goal of the consumer is to

Accepted Answer

A)   maximize utility.
B)   be on the highest indifference curve.
C)   maximize satisfaction.
D)   All of the above are the goals of the consumer.E) A) and C)
F) B) and D)

Question 20

Assume that consumption when young and consumption when old are both normal goods.The income effect of an increase in the interest rate will result in

Accepted Answer

A)   an increase in saving when young.
B)   an increase in saving when old.
C)   a decrease in saving when young.
D)   a decrease in saving when old.E) C) and D)
F) A) and D)

Exam 21: The Theory of Consumer Choice.

Which of the following is not a property of a typical indifference curve?

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Suppose the price of good X falls and the consumption of good X increases.From this we can infer that X is a(n) (i) normal good. (ii) inferior good. (iii) Giffen good.

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Which of the following statements is not correct?

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Giffen goods have positively-sloped demand curves because they are

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Figure 21-10 -Refer to Figure 21-10.When comparing bundle B to bundle C,the consumer

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Assume that consumption when young and consumption when old are both normal goods.The income effect of an increase in the interest rate will result in

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At the consumer's optimum the

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Figure 21-22 -Refer to Figure 21-22.When the price of X is $80,the price of Y is $20,and the consumer's income is $160,the consumer's optimal choice is D.Then the price of X decreases to $20.The demand curve can be illustrated as the movement from

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Figure 21-14 -Refer to Figure 21-14.Which of the following statements is correct?

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

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If a consumer experiences a decrease in income,the new budget constraint will have the same slope as the old budget constraint.

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Figure 21-12 -Refer to Figure 21-12.The marginal rate of substitution between bundles V and Z is

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The theory of consumer choice is representative of how consumers make decisions but is not intended to be a literal account of the process.

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Energy drinks and granola bars are normal goods.When the price of energy drinks decreases,the income effect causes a

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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 3 slices of pizza and 4 paperback novels?

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Figure 21-10 -Refer to Figure 21-10.When comparing bundle A to bundle E,the consumer

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The goal of the consumer is to

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Which of the following statements is not correct?

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Figure 21-10 -Refer to Figure 21-10.Which of the following statements is not true for a consumer who moves from bundle B to bundle C?

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Figure 21-18 -Refer to Figure 21-18.Assume that the consumer depicted in the figure has an income of $20.The price of Skittles is $2 and the price of M&M's is $4.The consumer's optimal choice is point

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