Question 1

An optimizing consumer will select the consumption bundle in which the

Accepted Answer

A)  ratio of total utilities is equal to the relative price ratio.
B)  ratio of income to price equals the marginal rate of substitution.
C)  marginal rate of substitution is equal to the relative price ratio of the goods.
D)  marginal rate of substitution is equal to marginal utility.E) A) and B)
F) A) and D)

Question 2

Figure 21-28
The figure below illustrates the preferences for a representative consumer, Christopher. 
-Refer to Figure 21-28. Interest rates increase by 3 percent. Christopher's optimal choice point moves from A to B. Christopher consumes

Accepted Answer

A)  less while he is younger and saves more than he did before interest rates increased.
B)  more while he is younger and saves more than he did before interest rates increased.
C)  less while he is younger and saves less than he did before interest rates increased.
D)  more while he is younger and saves less than he did before interest rates increased.E) None of the above
F) C) and D)

Question 3

Consider the indifference curve map and budget constraint for two goods, beef and potatoes. Suppose the good measured on the horizontal axis, potatoes, is a Giffen good. Beef is measured on the vertical axis and is a normal good. When the price of potatoes increases, the substitution effect causes

Accepted Answer

A)  an increase in the consumption of potatoes, and the income effect causes a decrease in the consumption of potatoes. The substitution effect is less than the income effect.
B)  a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes. The substitution effect is greater than the income effect.
C)  an increase in the consumption of potatoes, and the income effect causes a decrease in the consumption of potatoes. The substitution effect is greater than the income effect.
D)  a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes. The substitution effect is less than the income effect.E) A) and B)
F) A) and C)

Question 4

A consumer's budget constraint is drawn on a graph with the number of sandwiches measured along the horizontal axis and the number of bowls of soup measured along the vertical axis. Hold the consumer's income and the price of a sandwich fixed, and increase the price of a bowl of soup. Describe the effect on the budget constraint.

Accepted Answer

The horizontal intercept is un...

Question 5

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. Which of the four labeled points is Hannah's optimum?

Accepted Answer

Point B is...

Question 6

If the relative price of a concert ticket is three times the price of a meal at a good restaurant, then the opportunity cost of a concert ticket can be measured by the

Accepted Answer

A)  slope of the budget constraint.
B)  slope of an indifference curve.
C)  marginal rate of substitution.
D)  income effect.E) All of the above
F) A) and D)

Question 7

A consumer has preferences over consumption and leisure, both of which are normal goods. When the wage decreases, the consumer chooses to consume less leisure. For this consumer the labor supply curve will

Accepted Answer

A)  slope upward.
B)  slope backward.
C)  be horizontal.
D)  be vertical.E) A) and D)
F) A) and C)

Question 8

Hannah and Chris each like jewelry and music by the Rolling Stones. If we were to graph an indifference curve with jewelry on the horizontal axis and CDs by the Rolling Stones on the vertical axis, then

Accepted Answer

A)  Hannah and Chris would have identical indifference curves.
B)  Hannah's indifference curve would be higher than Chris's indifference curve.
C)  Chris's indifference curve would be higher than Hannah's indifference curve.
D)  Because we do not know the intensity of each woman's preferences, we do not have enough information to compare their indifference curves.E) A) and B)
F) A) and C)

Question 9

The slope of the budget constraint reveals the relative price of good X compared to good Y.

Accepted Answer

A) True 
 B)False

Question 10

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. 
-Refer to Figure 21-24. About what percentage of his income is Steve spending on apples when he is at his optimum?

Accepted Answer

A)  33.3 percent
B)  38.2 percent
C)  44.4 percent
D)  56.7 percentE) None of the above
F) A) and C)

Question 11

Suppose Caroline will only drink a cup of coffee if she can add two packets of sugar to it. Which graph would illustrate a representative indifference curve?

Accepted Answer

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

Question 12

Evaluate the following statement, "Warren Buffet is the second richest person in the world. He doesn't face any constraint on his ability to purchase commodities he wants."

Accepted Answer

All people face scarcity of re...

Question 13

Suppose good X is on the horizontal axis, good Y is on the vertical axis, and the slope of an individual's budget line is -2. Which of the following is true?​

Accepted Answer

A)  ​Good Y is twice as expensive as good X.
B)  ​The consumer gives up two units of good Y for each unit of good X she purchases.
C)  ​The opportunity cost of good X is one half of a unit of good Y.
D)  ​All of the above are correct.E) All of the above
F) A) and D)

Question 14

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 15

Figure 21-15 On the graph, Qx represents the quantity of good x and Qy represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves. x represents the quantity of good x and Qy represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves.   -Refer to Figure 21-15. Barbara is happier at A) point B than at point A. B) point B than at point C. C) point C than at point D. D) All of the above are correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-15. Barbara is happier at

Accepted Answer

A)  point B than at point A.
B)  point B than at point C.
C)  point C than at point D.
D)  All of the above are correct.E) None of the above
F) B) and D)

Question 16

Scenario 21-2
Lawrence has recently graduated from college with a degree in journalism and economics. He has decided to pursue a career as a freelance journalist writing for business newspapers and magazines. Lawrence is typically awake for 112 hours each week (he sleeps an average of 8 hours each day) . For each hour Lawrence spends writing, he can earn $75. Lawrence is such a good writer that he can get paid for as many hours of writing as he chooses to work.
-Refer to Scenario 21-2. If Lawrence's wage increases to $90 per hour of writing, which of the following points would fall on his budget constraint?

Accepted Answer

A)  75 hours of leisure, $2,775 of consumption
B)  80 hours of leisure, $2,400 of consumption
C)  85 hours of leisure, $2,430 of consumption
D)  90 hours of leisure, $1,650 of consumptionE) B) and C)
F) None of the above

Question 17

A good is an inferior good if the consumer buys less of it when

Accepted Answer

A)  his income rises.
B)  the price of the good rises.
C)  the price of a substitute good falls.
D)  his income falls.E) None of the above
F) B) and C)

Question 18

Clark enjoys fishing and hunting. He divides his leisure hours between the two outdoor activities. Suppose we were to draw Clark's indifference curves for the two activities, placing fishing on the horizontal axis and hunting on the vertical axis. If Clark's indifference curves are bowed inward, then

Accepted Answer

A)  the rate at which he is willing to give up an hour of hunting for an hour of fishing changes depending on how many hours of each activity he has done. For example, if Clark has already fished a lot in one week, he will be more willing to give up an hour of fishing for an hour of hunting than if he has only fished a little that week.
B)  the rate at which he is willing to give up an hour of hunting for an hour of fishing is constant because he must derive the same enjoyment out of each activity.
C)  the rate at which he is willing to give up an hour of hunting for an hour of fishing changes depending on how many hours of each activity he has done. For example, if Clark has already fished a lot in one week, he will be less willing to give up an hour of fishing for an hour of hunting than if he has only fished a little that week.
D)  Clark's indifference curves will not cross. When indifference curves are bowed outward, the indifference curves must cross.E) C) and D)
F) A) and B)

Question 19

Andi uses all of her income to purchase books and games. At any two points A and B on Andi's budget constraint,

Accepted Answer

A)  Andi is spending all of her income on books and games.
B)  Andi is spending one half of her income on books and the other half of her income on games.
C)  the price of books relative to the price of games is different.
D)  All of the above are correct.E) A) and B)
F) C) and D)

Question 20

Figure 21-19 
-Refer to Figure 21-19. 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 $2. The consumer's optimal choice is point

Accepted Answer

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

Exam 21: The Theory of Consumer Choice

Figure 21-15 On the graph, Q_x represents the quantity of good x and Q_y represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves. -Refer to Figure 21-15. Barbara is happier at

Correct Answer
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Correct Answer
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Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. About what percentage of his income is Steve spending on apples when he is at his optimum?

Correct Answer
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Consider the indifference curve map and budget constraint for two goods, beef and potatoes. Suppose the good measured on the horizontal axis, potatoes, is a Giffen good. Beef is measured on the vertical axis and is a normal good. When the price of potatoes increases, the substitution effect causes

Correct Answer
verified

Hannah and Chris each like jewelry and music by the Rolling Stones. If we were to graph an indifference curve with jewelry on the horizontal axis and CDs by the Rolling Stones on the vertical axis, then

Correct Answer
verified

The slope of the budget constraint reveals the relative price of good X compared to good Y.

Correct Answer
verified

A consumer has preferences over consumption and leisure, both of which are normal goods. When the wage decreases, the consumer chooses to consume less leisure. For this consumer the labor supply curve will

Correct Answer
verified

Figure 21-19 -Refer to Figure 21-19. 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 $2. The consumer's optimal choice is point

Correct Answer
verified

A good is an inferior good if the consumer buys less of it when

Correct Answer
verified

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

Correct Answer
verified

Andi uses all of her income to purchase books and games. At any two points A and B on Andi's budget constraint,

Correct Answer
verified

Figure 21-28 The figure below illustrates the preferences for a representative consumer, Christopher. -Refer to Figure 21-28. Interest rates increase by 3 percent. Christopher's optimal choice point moves from A to B. Christopher consumes

Correct Answer
verified

Correct Answer
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The horizontal intercept is un...
View Answer

If the relative price of a concert ticket is three times the price of a meal at a good restaurant, then the opportunity cost of a concert ticket can be measured by the

Correct Answer
verified

Suppose good X is on the horizontal axis, good Y is on the vertical axis, and the slope of an individual's budget line is -2. Which of the following is true?

Correct Answer
verified

Suppose Caroline will only drink a cup of coffee if she can add two packets of sugar to it. Which graph would illustrate a representative indifference curve?

Correct Answer
verified

An optimizing consumer will select the consumption bundle in which the

Correct Answer
verified

Correct Answer
verified

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. Which of the four labeled points is Hannah's optimum?

Correct Answer
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Point B is...
View Answer

Evaluate the following statement, "Warren Buffet is the second richest person in the world. He doesn't face any constraint on his ability to purchase commodities he wants."

Correct Answer
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All people face scarcity of re...
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Exam 21: The Theory of Consumer Choice

Figure 21-15 On the graph, Qx represents the quantity of good x and Qy represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves. -Refer to Figure 21-15. Barbara is happier at

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. About what percentage of his income is Steve spending on apples when he is at his optimum?

Correct AnswerverifiedShow Answer

Consider the indifference curve map and budget constraint for two goods, beef and potatoes. Suppose the good measured on the horizontal axis, potatoes, is a Giffen good. Beef is measured on the vertical axis and is a normal good. When the price of potatoes increases, the substitution effect causes

Correct AnswerverifiedShow Answer

Hannah and Chris each like jewelry and music by the Rolling Stones. If we were to graph an indifference curve with jewelry on the horizontal axis and CDs by the Rolling Stones on the vertical axis, then

Correct AnswerverifiedShow Answer

The slope of the budget constraint reveals the relative price of good X compared to good Y.

Correct AnswerverifiedShow Answer

A consumer has preferences over consumption and leisure, both of which are normal goods. When the wage decreases, the consumer chooses to consume less leisure. For this consumer the labor supply curve will

Correct AnswerverifiedShow Answer

Figure 21-19 -Refer to Figure 21-19. 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 $2. The consumer's optimal choice is point

Correct AnswerverifiedShow Answer

A good is an inferior good if the consumer buys less of it when

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

Andi uses all of her income to purchase books and games. At any two points A and B on Andi's budget constraint,

Correct AnswerverifiedShow Answer

Figure 21-28 The figure below illustrates the preferences for a representative consumer, Christopher. -Refer to Figure 21-28. Interest rates increase by 3 percent. Christopher's optimal choice point moves from A to B. Christopher consumes

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe horizontal intercept is un...View AnswerShow Answer

If the relative price of a concert ticket is three times the price of a meal at a good restaurant, then the opportunity cost of a concert ticket can be measured by the

Correct AnswerverifiedShow Answer

Suppose good X is on the horizontal axis, good Y is on the vertical axis, and the slope of an individual's budget line is -2. Which of the following is true?​

Correct AnswerverifiedShow Answer

Suppose Caroline will only drink a cup of coffee if she can add two packets of sugar to it. Which graph would illustrate a representative indifference curve?

Correct AnswerverifiedShow Answer

An optimizing consumer will select the consumption bundle in which the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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. Which of the four labeled points is Hannah's optimum?

Correct AnswerverifiedPoint B is...View AnswerShow Answer

Evaluate the following statement, "Warren Buffet is the second richest person in the world. He doesn't face any constraint on his ability to purchase commodities he wants."

Correct AnswerverifiedAll people face scarcity of re...View AnswerShow Answer

Figure 21-15 On the graph, Q_x represents the quantity of good x and Q_y represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves. -Refer to Figure 21-15. Barbara is happier at

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The horizontal intercept is un...
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Correct Answer
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Suppose good X is on the horizontal axis, good Y is on the vertical axis, and the slope of an individual's budget line is -2. Which of the following is true?

Correct Answer
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Correct Answer
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Point B is...
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All people face scarcity of re...
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