Question 1

Figure 21-19 
-Refer to Figure 21-19. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, which of the following would cause the consumer to move to point A?

Accepted Answer

A)  a decrease in the price of Skittles
B)  a decrease in the price of M&M's
C)  an increase in the price of Skittles
D)  an increase in the price of M&M'sE) A) and D)
F) A) and C)

Question 2

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

Question 3

Figure 21-1 The downward-sloping line on the figure represents a consumer's budget
constraint. 
-Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Accepted Answer

A)  A.
B)  E.
C)  A and E.
D)  None of the above are correct. All of the points identified on the figure are affordable.E) B) and C)
F) A) and D)

Question 4

Consider the budget constraint between "spending today" on the horizontal axis and "spending a year from today" on the vertical axis. Suppose that you have $100 today and expect to receive $100 one year from today. Your money market account pays an annual interest rate of 25%, and you may borrow money at that interest rate. Suppose now that the interest rate decreases to 10%. What happens to the slope of your budget constraint relative to when the interest rate was 25%? The slope

Accepted Answer

A)  becomes steeper.
B)  becomes flatter.
C)  doesn't change because the budget constraint shifts in parallel to the original budget constraint.
D)  doesn't change because the budget constraint shifts out parallel to the original budget constraint.E) A) and B)
F) A) and D)

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

Suppose a consumer spends his income on CDs and DVDs. If his income decreases, the budget constraint for CDs and DVDs will

Accepted Answer

A)  shift outward, parallel to the original budget constraint.
B)  shift inward, parallel to the original budget constraint.
C)  rotate outward along the CD axis because he can afford more CDs.
D)  rotate outward along the DVD axis because he can afford more DVDs.E) A) and D)
F) C) and D)

Question 7

The substitution effect of a wage decrease in the work-leisure model results in the worker choosing to

Accepted Answer

A)  work less than before.
B)  work more than before.
C)  possibly work more or less than before.
D)  work more with a higher level of consumption.E) B) and C)
F) A) and B)

Question 8

We can use the theory of consumer choice to analyze

Accepted Answer

A)  why most demand curves slope downward.
B)  the tradeoff between work and leisure
C)  how interest rates affect household saving.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 9

If we observe that a consumer's budget constraint has shifted inward, 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) All of the above
F) None of the above

Question 10

A consumer spends all of her income on goods x and y. At her optimum,

Accepted Answer

A)  her valuation of the two goods exceeds the market's valuation of the two goods.
B)  her marginal rate of substitution between good x and good y exceeds the ratio of the price of good x to the price of good y.
C)  the slope of her budget constraint is equal to the slope of the highest indifference curve that she can reach while remaining within her budget.
D)  her expenditure on good x is equal to her expenditure on good y.E) A) and C)
F) A) and D)

Question 11

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. 
-Refer to Figure 21-31. If the price of a shirt is $20 and point B is Kevin's optimum, then what is Kevin's income?

Accepted Answer

Kevin's in...

Question 12

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  the consumer to feel richer, so the consumer buys more granola bars.
B)  the consumer to feel richer, so the consumer buys fewer granola bars.
C)  granola bars to be relatively more expensive, so the consumer buys more granola bars.
D)  granola bars to be relatively less expensive, so the consumer buys fewer granola bars.E) A) and B)
F) A) and C)

Question 14

If the price of a good increases, all else equal, consumers perceive

Accepted Answer

A)  an increase in purchasing power if the good is an inferior good.
B)  an increase in income if the price increase occurs for a normal good.
C)  a decrease in purchasing power.
D)  a net gain in purchasing power if they decrease consumption of some goods.E) A) and D)
F) A) and B)

Question 15

Figure 21-25 The figure pertains to a particular consumer. On the axes, X represents the quantity of good X and Y represents the quantity of good Y. 
-Refer to Figure 21-25. The four curves that are drawn on the figure are

Accepted Answer

A)  indifference curves.
B)  budget constraints.
C)  demand curves.
D)  income curves.E) None of the above
F) A) and D)

Question 16

Graphically demonstrate the conditions associated with a consumer optimum. Carefully label all curves and axes.

Accepted Answer

The answer of Graphically demonstrate the conditions associated with a...

Question 17

Which of the following is not correct?

Accepted Answer

A)  Indifference curves are downward sloping.
B)  Indifference curves that are closer to the origin are preferred to indifference curves that are further from the origin.
C)  Indifference curves are bowed in toward the origin.
D)  Indifference curves do not cross.E) All of the above
F) A) and D)

Question 18

Figure 21-25 The figure pertains to a particular consumer. On the axes, X represents the quantity of good X and Y represents the quantity of good Y. 1 B) I2 C) I3 D) I4" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-25. Suppose the price of good X is $15, the price of good Y is $10, and the consumer's income is $450. Then the consumer's optimal choice is represented by a point on which curve?

Accepted Answer

A)  I1
B)  I2
C)  I3
D)  I4E) A) and D)
F) A) and C)

Question 19

Figure 21-16 
-Refer to Figure 21-16. The price of X is $25, the price of Y is $25, and the consumer's income is $100. Which point represents the consumer's optimal choice?

Accepted Answer

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

Question 20

Figure 21-5
(a) 
(b)   
-Refer to Figure 21-5. In graph (b) , if income is equal to $420, then the price of good Y is

Accepted Answer

A)  $1.
B)  $3.
C)  $10.
D)  $30.E) All of the above
F) B) and C)

Exam 21: The Theory of Consumer Choice

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

Correct Answer
verified

If the price of a good increases, all else equal, consumers perceive

Correct Answer
verified

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

Correct Answer
verified

Figure 21-1 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Correct Answer
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Figure 21-19 -Refer to Figure 21-19. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, which of the following would cause the consumer to move to point A?

Correct Answer
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Graphically demonstrate the conditions associated with a consumer optimum. Carefully label all curves and axes.

Correct Answer
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Figure 21-25 The figure pertains to a particular consumer. On the axes, X represents the quantity of good X and Y represents the quantity of good Y. -Refer to Figure 21-25. The four curves that are drawn on the figure are

Correct Answer
verified

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

Correct Answer
verified

Figure 21-16 -Refer to Figure 21-16. The price of X is $25, the price of Y is $25, and the consumer's income is $100. Which point represents the consumer's optimal choice?

Correct Answer
verified

The substitution effect of a wage decrease in the work-leisure model results in the worker choosing to

Correct Answer
verified

Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (b) , if income is equal to $420, then the price of good Y is

Correct Answer
verified

At the consumer's optimum the

Correct Answer
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A consumer spends all of her income on goods x and y. At her optimum,

Correct Answer
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Correct Answer
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Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. If the price of a shirt is $20 and point B is Kevin's optimum, then what is Kevin's income?

Correct Answer
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Kevin's in...
View Answer

Which of the following is not correct?

Correct Answer
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We can use the theory of consumer choice to analyze

Correct Answer
verified

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.

Correct Answer
verified

Correct Answer
verified

Suppose a consumer spends his income on CDs and DVDs. If his income decreases, the budget constraint for CDs and DVDs will

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

Correct AnswerverifiedShow Answer

If the price of a good increases, all else equal, consumers perceive

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 21-1 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Correct AnswerverifiedShow Answer

Figure 21-19 -Refer to Figure 21-19. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, which of the following would cause the consumer to move to point A?

Correct AnswerverifiedShow Answer

Graphically demonstrate the conditions associated with a consumer optimum. Carefully label all curves and axes.

Correct AnswerverifiedShow Answer

Figure 21-25 The figure pertains to a particular consumer. On the axes, X represents the quantity of good X and Y represents the quantity of good Y. -Refer to Figure 21-25. The four curves that are drawn on the figure are

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 21-16 -Refer to Figure 21-16. The price of X is $25, the price of Y is $25, and the consumer's income is $100. Which point represents the consumer's optimal choice?

Correct AnswerverifiedShow Answer

The substitution effect of a wage decrease in the work-leisure model results in the worker choosing to

Correct AnswerverifiedShow Answer

Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (b) , if income is equal to $420, then the price of good Y is

Correct AnswerverifiedShow Answer

At the consumer's optimum the

Correct AnswerverifiedShow Answer

A consumer spends all of her income on goods x and y. At her optimum,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. If the price of a shirt is $20 and point B is Kevin's optimum, then what is Kevin's income?

Correct AnswerverifiedKevin's in...View AnswerShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

We can use the theory of consumer choice to analyze

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose a consumer spends his income on CDs and DVDs. If his income decreases, the budget constraint for CDs and DVDs will

Correct AnswerverifiedShow Answer

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Kevin's in...
View Answer

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