Question 1

Figure 21-21
 
-Refer to Figure 21-21.If the consumer were initially at point A in the figure,a movement from point B to point C as a result of a decrease in the price of potato chips represents the

Accepted Answer

A)   substitution effect.
B)   income effect.
C)   budget effect.
D)   price effect.E) B) and C)
F) B) and D)

Question 2

The marginal rate of substitution between two goods always equals the

Accepted Answer

A)   marginal utility of one divided by the marginal utility of the other.
B)   marginal utility of one times the marginal utility of the other.
C)   price of one good divided by the price of the other.
D)   Both a and c are correct.E) A) and D)
F) A) and C)

Question 3

As more units of an item are purchased,everything else equal,marginal satisfaction from consuming additional units will tend to

Accepted Answer

A)   decrease at the same rate for all consumers.
B)   decrease but at different rates for different people.
C)   increase at the same rate for all consumers.
D)   increase but at a decreasing rate for all consumers.E) B) and D)
F) B) and C)

Question 4

Scenario 21-3
Zach knows that he will ultimately face retirement. Assume that Zach will experience two periods in his life, one in which he works and earns income, and one in which he is retired and earns no income. Zach can earn $250,000 during his working period and nothing in his retirement period. He must both save and consume in his work period with an interest rate of 10 percent on savings.
-Refer to Scenario 21-3.Assume that Zach decides to consume $100,000 in the work period.How much money will he have available for consumption in his retirement period?

Accepted Answer

A)   $100,000
B)   $110,000
C)   $150,000
D)   $165,000E) B) and C)
F) A) and D)

Question 5

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) B) and D)

Question 6

If we observe that Jamie's budget constraint has moved outward,then we know for certain that

Accepted Answer

A)   her income must have increased.
B)   she will be indifferent between goods X and Y.
C)   the price of one or both of the goods must have decreased.
D)   she can reach a higher indifference curve.E) B) and C)
F) All of the above

Question 7

Figure 21-12
 
-Refer to Figure 21-12.Which of the following statements is not correct?

Accepted Answer

A)   The consumer prefers bundle Y to bundle Z.
B)   The consumer is indifference between bundle W and bundle X.
C)   The consumer is indifference between bundle X and bundle V.
D)   The consumer prefers bundle X to bundle Z.E) B) and D)
F) C) and D)

Question 8

Assume that a consumer faces the following budget constraints.
  
a.Assuming that income is the same on both occasions,describe the difference in relative prices between Panel A and Panel B.
b.If income in Panel B is $126,what is the price of good X?
c.If income in Panel A is $84,what is the price of good Y?
d.Assuming that the price of good X is the same on both occasions,describe the difference in income and price of good Y between Panel A and Panel B.

Accepted Answer

a.The price of good Y is relatively high...

Question 9

A worker with a backward-bending labor supply curve responds to an increase in wages by working more hours.

Accepted Answer

A) True 
 B)False

Question 10

Figure 21-9
 
-Refer to Figure 21-9.If the price of good X is $15,what is the price of good Y?

Accepted Answer

A)   $1,500
B)   $50
C)   $5
D)   $0.50E) None of the above
F) A) and D)

Question 11

Which of the following does not represent a tradeoff facing a consumer?

Accepted Answer

A)   choosing to purchase more of all goods
B)   choosing to spend more time on leisure and less time on work
C)   choosing to spend more now and consume less in the future
D)   choosing to purchase less of one good in order to purchase more of another goodE) A) and B)
F) B) and D)

Question 12

Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst.The price of a pint of beer is $5,and the price of a bratwurst is $4.Which of the following combinations of beers and bratwursts represents a point that would lie to the interior of the consumer's budget constraint?

Accepted Answer

A)   160 beers and 200 bratwursts
B)   40 beers and 50 bratwursts
C)   80 beers and 100 bratwursts
D)   160 beers and 0 bratwurstsE) A) and B)
F) C) and D)

Question 13

A consumer's preferences for right shoes and left shoes can be represented by indifference curves that are

Accepted Answer

A)   bowed out from the origin
B)   bowed in toward the origin
C)   straight lines
D)   right anglesE) None of the above
F) A) and C)

Question 14

Figure 21-17
  Py/Px. B)  MRSxy = Px/Py. C)  MRSxy 
-Refer to Figure 21-17.Bundle D represents a point where

Accepted Answer

A)   MRSxy > Py/Px.
B)   MRSxy = Px/Py.
C)   MRSxy 
D)   MRSxy < Py/Px.E) All of the above
F) B) and C)

Question 15

Bill consumes two goods,iced tea and spaghetti.The price of iced tea is $4 per bottle,and the price of spaghetti is $6 per serving.His income is $1,000 per month.He spends all his income each month.He purchases 100 bottles of iced tea.How many servings of spaghetti can he purchase?

Accepted Answer

A)   250
B)   166.67
C)   100
D)   10E) B) and C)
F) A) and D)

Question 16

Figure 21-3
In each case, the budget constraint moves from BC-1 to BC-2.

-Refer to Figure 21-3.Which of the graphs in the figure reflects an increase in the price of good X only?

Accepted Answer

A)   graph a
B)   graph b
C)   graph c
D)   graph dE) B) and D)
F) C) and D)

Question 17

Economists have found evidence of a Giffen good when studying the consumption of rice in the Chinese province of Hunan.

Accepted Answer

A) True 
 B)False

Question 18

Figure 21-5

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

Accepted Answer

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

Question 19

Angie is maximizing total utility while consuming food and clothing.Her marginal utility from food is 50,and her marginal utility from clothing is 25.If clothing is priced at $10 per unit,the price of food per unit must be

Accepted Answer

A)   $2.
B)   $2.50.
C)   $5.
D)   $20.E) All of the above
F) A) and C)

Question 20

Figure 21-2
 
-Refer to Figure 21-2.A consumer who chooses to spend all of her income could be at which point(s) on the budget constraint?

Accepted Answer

A)   V only
B)   Z only
C)   V, W, X, or Y only
D)   W, X, or Y onlyE) A) and B)
F) All of the above

Exam 21: The Theory of Consumer Choice.

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

Correct Answer
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Figure 21-2 -Refer to Figure 21-2.A consumer who chooses to spend all of her income could be at which point(s) on the budget constraint?

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Figure 21-3 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3.Which of the graphs in the figure reflects an increase in the price of good X only?

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Figure 21-12 -Refer to Figure 21-12.Which of the following statements is not correct?

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As more units of an item are purchased,everything else equal,marginal satisfaction from consuming additional units will tend to

Correct Answer
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Figure 21-21 -Refer to Figure 21-21.If the consumer were initially at point A in the figure,a movement from point B to point C as a result of a decrease in the price of potato chips represents the

Correct Answer
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Which of the following does not represent a tradeoff facing a consumer?

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

Correct Answer
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A worker with a backward-bending labor supply curve responds to an increase in wages by working more hours.

Correct Answer
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Bill consumes two goods,iced tea and spaghetti.The price of iced tea is $4 per bottle,and the price of spaghetti is $6 per serving.His income is $1,000 per month.He spends all his income each month.He purchases 100 bottles of iced tea.How many servings of spaghetti can he purchase?

Correct Answer
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Figure 21-9 -Refer to Figure 21-9.If the price of good X is $15,what is the price of good Y?

Correct Answer
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Figure 21-17 -Refer to Figure 21-17.Bundle D represents a point where

Correct Answer
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The marginal rate of substitution between two goods always equals the

Correct Answer
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Angie is maximizing total utility while consuming food and clothing.Her marginal utility from food is 50,and her marginal utility from clothing is 25.If clothing is priced at $10 per unit,the price of food per unit must be

Correct Answer
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a.The price of good Y is relatively high...
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If we observe that Jamie's budget constraint has moved outward,then we know for certain that

Correct Answer
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A consumer's preferences for right shoes and left shoes can be represented by indifference curves that are

Correct Answer
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Economists have found evidence of a Giffen good when studying the consumption of rice in the Chinese province of Hunan.

Correct Answer
verified

Exam 21: The Theory of Consumer Choice.

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

Correct AnswerverifiedShow Answer

Figure 21-2 -Refer to Figure 21-2.A consumer who chooses to spend all of her income could be at which point(s) on the budget constraint?

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Figure 21-3 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3.Which of the graphs in the figure reflects an increase in the price of good X only?

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Figure 21-12 -Refer to Figure 21-12.Which of the following statements is not correct?

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As more units of an item are purchased,everything else equal,marginal satisfaction from consuming additional units will tend to

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Figure 21-21 -Refer to Figure 21-21.If the consumer were initially at point A in the figure,a movement from point B to point C as a result of a decrease in the price of potato chips represents the

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Which of the following does not represent a tradeoff facing a consumer?

Correct AnswerverifiedShow Answer

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

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A worker with a backward-bending labor supply curve responds to an increase in wages by working more hours.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Bill consumes two goods,iced tea and spaghetti.The price of iced tea is $4 per bottle,and the price of spaghetti is $6 per serving.His income is $1,000 per month.He spends all his income each month.He purchases 100 bottles of iced tea.How many servings of spaghetti can he purchase?

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Figure 21-9 -Refer to Figure 21-9.If the price of good X is $15,what is the price of good Y?

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Figure 21-17 -Refer to Figure 21-17.Bundle D represents a point where

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The marginal rate of substitution between two goods always equals the

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Angie is maximizing total utility while consuming food and clothing.Her marginal utility from food is 50,and her marginal utility from clothing is 25.If clothing is priced at $10 per unit,the price of food per unit must be

Correct AnswerverifiedShow Answer

Correct Answerverifieda.The price of good Y is relatively high...View AnswerShow Answer

If we observe that Jamie's budget constraint has moved outward,then we know for certain that

Correct AnswerverifiedShow Answer

A consumer's preferences for right shoes and left shoes can be represented by indifference curves that are

Correct AnswerverifiedShow Answer

Economists have found evidence of a Giffen good when studying the consumption of rice in the Chinese province of Hunan.

Correct AnswerverifiedShow Answer

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a.The price of good Y is relatively high...
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