Question 1

The two "goods" used when economists analyze labor supply are

Accepted Answer

A)  work and leisure.
B)  work and consumption.
C)  saving and consumption.
D)  leisure and consumption.E) B) and C)
F) A) and D)

Question 2

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. 
-Refer to Figure 21-24. At his optimum, Steve is willing to give up about

Accepted Answer

A)  0.75 pounds of pears for 1 pound of apples.
B)  0.75 pounds of apples for 1 pound of pears.
C)  1.20 pounds of pears for 1 pound of apples.
D)  1.20 pounds of apples for 1 pound of pears.E) B) and D)
F) A) and D)

Question 3

Which of the following best describes why indifference curves cannot cross?​

Accepted Answer

A)  ​If indifference curves cross, there are situations where individuals are indifferent between bundles where one bundle contains strictly more of both goods than the other bundle.
B)  ​If indifference curves cross, individuals are not necessarily consuming along their budget line.
C)  ​If indifference curves cross, the marginal rate of substitution can be both increasing and decreasing at a specific point.
D)  ​If indifference curves cross, the goods can be both substitutes and complements.E) All of the above
F) C) and D)

Question 4

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?

Accepted Answer

The slope of the bud...

Question 5

Figure 21-5
(a) 
(b)  Y/PX) ? A) 1/3 B) 1 C) 3 D) 10" class="answers-bank-image d-inline" rel="preload" > Y/PX) ? A) 1/3 B) 1 C) 3 D) 10" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-5. In graph (b) , what is the price of good Y relative to the price of good X (i.e., PY/PX) ?

Accepted Answer

A)  1/3
B)  1
C)  3
D)  10E) None of the above
F) All of the above

Question 6

Figure 21-30 The graph shows two budget constraints for a consumer. 
-Refer to Figure 21-30. Suppose the price of a hamburger is $10 and Budget Constraint A applies. What is the consumer's income? What is the price of a light bulb?

Accepted Answer

The consumer's incom...

Question 7

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. Consider the budget constraint between "spending today" on the horizontal axis and "spending a year from today" on the vertical axis. What is the slope of this budget constraint?

Accepted Answer

A)  -0.75
B)  -1.00
C)  -1.25
D)  -2.25E) A) and B)
F) All of the above

Question 8

Figure 21-13 
-Refer to Figure 21-13. As the consumer moves from A to B to C, the consumer's total utility

Accepted Answer

A)  increases.
B)  decreases.
C)  remains constant.
D)  first increases, then decreases.E) A) and B)
F) A) and C)

Question 9

Which of the following statements is not correct?

Accepted Answer

A)  If Fiona gets a higher wage and works more, the substitution effect is greater than the income effect for her.
B)  If Miguel 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 D)
F) A) and C)

Question 10

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. Of the four labeled points, which is (are) affordable to Hannah?

Accepted Answer

Points B a...

Question 11

For a typical consumer, most indifference curves are downward sloping.

Accepted Answer

A) True 
 B)False

Question 12

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

Question 13

Which of the following is a property of a typical indifference curve?

Accepted Answer

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

Question 14

Figure 21-22 
-Refer to Figure 21-22. 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 D)
F) B) and C)

Question 15

Suppose a consumer consumes two goods, X and Y. The relative price of the two goods equals the

Accepted Answer

A)  marginal rate of substitution.
B)  rate at which the consumer will give up X to gain Y while maintaining the same level of utility.
C)  slope of the budget constraint.
D)  All of the above are correct.E) A) and D)
F) A) and C)

Question 16

The rate at which a consumer is willing to trade one good for another to maintain the same level of satisfaction is affected by the

Accepted Answer

A)  prices of the products.
B)  amount of each good the consumer is currently consuming.
C)  consumer's income.
D)  marginal value product.E) B) and C)
F) None of the above

Question 17

When the indifference curve is tangent to the budget constraint,

Accepted Answer

A)  a consumer cannot be made better off without an increase in her income or a price decrease in one of the goods she consumes.
B)  the consumer is likely to be at a sub-optimal level of consumption.
C)  income is at its optimum for a consumer.
D)  indifference curves are likely to intersect.E) B) and D)
F) A) and B)

Question 18

When the price of a good increases, all else equal, the higher price

Accepted Answer

A)  reduces the consumer's set of buying opportunities.
B)  leads to a parallel shift of the budget constraint.
C)  will necessarily lead to an increase in the consumption of goods whose price did not change.
D)  generally discourages the consumption of inferior goods.E) C) and D)
F) A) and D)

Question 19

If an indifference curve is bowed out away from the origin, the marginal rate of substitution is

Accepted Answer

A)  not likely to reflect the relative value of goods.
B)  likely to be constant for all bundles along the indifference curve.
C)  likely to be identical to the price ratio for each bundle along the indifference curve.
D)  different for each bundle along the indifference curve.E) All of the above
F) B) and C)

Question 20

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?

Accepted Answer

A)  3
B)  4
C)  5
D)  6E) A) and D)
F) B) and C)

Exam 21: The Theory of Consumer Choice

When the price of a good increases, all else equal, the higher price

Correct Answer
verified

Figure 21-22 -Refer to Figure 21-22. 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
verified

Figure 21-30 The graph shows two budget constraints for a consumer. -Refer to Figure 21-30. Suppose the price of a hamburger is $10 and Budget Constraint A applies. What is the consumer's income? What is the price of a light bulb?

Correct Answer
verified
The consumer's incom...
View Answer

Which of the following is a property of a typical indifference curve?

Correct Answer
verified

The two "goods" used when economists analyze labor supply are

Correct Answer
verified

Which of the following best describes why indifference curves cannot cross?

Correct Answer
verified

Correct Answer
verified

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. At his optimum, Steve is willing to give up about

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. Of the four labeled points, which is (are) affordable to Hannah?

Correct Answer
verified
Points B a...
View Answer

When the indifference curve is tangent to the budget constraint,

Correct Answer
verified

Correct Answer
verified
The slope of the bud...
View Answer

For a typical consumer, most indifference curves are downward sloping.

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

The rate at which a consumer is willing to trade one good for another to maintain the same level of satisfaction is affected by the

Correct Answer
verified

If an indifference curve is bowed out away from the origin, the marginal rate of substitution is

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Figure 21-13 -Refer to Figure 21-13. As the consumer moves from A to B to C, the consumer's total utility

Correct Answer
verified

Suppose a consumer consumes two goods, X and Y. The relative price of the two goods equals the

Correct Answer
verified

Which of the following statements is not correct?

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

When the price of a good increases, all else equal, the higher price

Correct AnswerverifiedShow Answer

Figure 21-22 -Refer to Figure 21-22. 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 AnswerverifiedShow Answer

Figure 21-30 The graph shows two budget constraints for a consumer. -Refer to Figure 21-30. Suppose the price of a hamburger is $10 and Budget Constraint A applies. What is the consumer's income? What is the price of a light bulb?

Correct AnswerverifiedThe consumer's incom...View AnswerShow Answer

Which of the following is a property of a typical indifference curve?

Correct AnswerverifiedShow Answer

The two "goods" used when economists analyze labor supply are

Correct AnswerverifiedShow Answer

Which of the following best describes why indifference curves cannot cross?​

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. At his optimum, Steve is willing to give up about

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. Of the four labeled points, which is (are) affordable to Hannah?

Correct AnswerverifiedPoints B a...View AnswerShow Answer

When the indifference curve is tangent to the budget constraint,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe slope of the bud...View AnswerShow Answer

For a typical consumer, most indifference curves are downward sloping.

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

The rate at which a consumer is willing to trade one good for another to maintain the same level of satisfaction is affected by the

Correct AnswerverifiedShow Answer

If an indifference curve is bowed out away from the origin, the marginal rate of substitution is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 21-13 -Refer to Figure 21-13. As the consumer moves from A to B to C, the consumer's total utility

Correct AnswerverifiedShow Answer

Suppose a consumer consumes two goods, X and Y. The relative price of the two goods equals the

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The consumer's incom...
View Answer

Correct Answer
verified

Correct Answer
verified

Which of the following best describes why indifference curves cannot cross?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Points B a...
View Answer

Correct Answer
verified

Correct Answer
verified
The slope of the bud...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified