Question 1

Graph 22-9 
-Refer to Graph 22-9.Assume that the consumer depicted in the graph has an income of $20.Using the information above, which of the following price-quantity combinations would be on her demand curve for marshmallows if the price of chocolate chips is $2?

Accepted Answer

A)  $1, eight
B)  $1, 14
C)  $2, seven
D)  $2, threeE) All of the above
F) C) and D)

Question 2

The indifference curves of perfect substitutes are:

Accepted Answer

A)  straight lines
B)  at right angles
C)  bowed inwards
D)  bowed outwardsE) A) and C)
F) All of the above

Question 3

Graph 22-9 
-Refer to Graph 22-9.Assume that the consumer depicted in the graph has an income of $50, and the price of marshmallows is $2.50, and the price of chocolate chips is $5.The optimising consumer will choose to purchase which bundle of marshmallows and chocolate chips?

Accepted Answer

A)  bundle A
B)  bundle B
C)  bundle C
D)  bundle DE) C) and D)
F) None of the above

Question 4

Refer to the information provided.If Amy decides to spend 80 hours a week playing tennis, and the rest of her time photographing, how much income will she have available to spend on consumption goods?

Accepted Answer

A)  $600
B)  $1600
C)  $6000
D)  $16 000E) B) and C)
F) A) and B)

Question 5

Which of the following is a property of indifference curves?

Accepted Answer

A)  indifference curves have positive slopes
B)  indifference curves that cross are helpful in explaining differences in consumption choices
C)  indifference curves are bowed in toward the origin
D)  indifference curves are always linear and downward-slopingE) B) and C)
F) All of the above

Question 6

Refer to the information provided.If the interest rate on Diane's savings increases, it is possible that:

Accepted Answer

A)  she will increase her savings in the work period
B)  she will decrease her savings in the work period
C)  she will not change her consumption in the work period
D)  all of the above are possibleE) None of the above
F) B) and C)

Question 7

Second-hand clothing is an example of a normal good.

Accepted Answer

A) True 
 B)False

Question 8

Graph 22-8 
-Refer to Graph 22-8.If the consumer is currently at point B on the graph shown, a change to point C as a result of a decrease in the price of potato chips would show the:

Accepted Answer

A)  price effect
B)  budget effect
C)  substitution effect
D)  income effectE) C) and D)
F) All of the above

Question 9

Graph 22-3 
-Refer to Graph 22-3.Using the figure in panel (a) , what is ratio of the price of X to the price of Y (i.e.PX/PY) ?

Accepted Answer

A)  50/1
B)  5/1
C)  1/5
D)  1/50E) C) and D)
F) A) and C)

Question 10

The income effect is the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve.

Accepted Answer

A) True 
 B)False

Question 11

If the marginal rate of substitution of pepsi for pizza is six litres of pepsi for one pizza slice, and the price of pepsi is $1 per litre and the price of pizza is $3 per slice, then this consumer should:

Accepted Answer

A)  trade pepsi for pizza and end up on a higher indifference curve
B)  trade pizza for pepsi and end up on a higher indifference curve
C)  do nothing as they are already maximizing utility
D)  we cannot say without more informationE) A) and C)
F) C) and D)

Question 12

A budget constraint:

Accepted Answer

A)  represents the bundles of consumption that makes a consumer equally happy
B)  shows the consumption bundles that a consumer can afford
C)  reflects the desire by consumers to increase their income
D)  shows the prices that a consumer chooses to pay for products he consumesE) C) and D)
F) A) and B)

Question 13

Graph 22-5 
-Refer to Graph 22-5.Which of the graphs shown represent(s)  indifference curves for perfect complements?

Accepted Answer

A)  panel a
B)  panel b
C)  panel c
D)  all of the aboveE) A) and D)
F) C) and D)

Question 14

It is plausible for the labour supply curve to slope either upwards or downwards.

Accepted Answer

A) True 
 B)False

Question 15

The substitution effect from an increase in wages is manifest in a:

Accepted Answer

A)  decrease in labour demand
B)  desire to consume less leisure
C)  desire to consume more leisure
D)  backward-bending labour supply curveE) A) and C)
F) A) and B)

Question 16

If a good is a perfect substitute, then the MRS will be constant no matter how much of any one good the consumer possesses.

Accepted Answer

A) True 
 B)False

Question 17

Indifference curves can:

Accepted Answer

A)  cross, but only if one good is a Giffen good
B)  cross, but only if one good is an inferior good
C)  cross, but only if both goods are inferior goods
D)  can never crossE) B) and D)
F) All of the above

Question 18

Graph 22-4 
-Refer to Graph 22-4.Based on this graph, which of the following statements is correct?

Accepted Answer

A)  point A is valued more than point B
B)  point B is valued the same as point E
C)  the bundle associated with point D contains more croissants than that associated with point
D)  the bundles along indifference curve I1 are preferred to those along indifference curve I2E) B) and C)
F) C) and D)

Question 19

Which of the following statements is correct? A consumer will be maximising utility when:
(i)  the indifference curve is tangent to the budget constraint
(ii)  the marginal rate of substitution equals the ratio of the prices
(iii)  the marginal utility per dollar spent on good x is equal to the marginal utility per dollar spent on good Y

Accepted Answer

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

Question 20

Giffen goods are characterised by upward sloping indifference curves.

Accepted Answer

A) True 
 B)False

Exam 22: The Theory of Consumer Choice

Correct Answer
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It is plausible for the labour supply curve to slope either upwards or downwards.

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Graph 22-3 -Refer to Graph 22-3.Using the figure in panel (a) , what is ratio of the price of X to the price of Y (i.e.PX/PY) ?

Correct Answer
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A budget constraint:

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Giffen goods are characterised by upward sloping indifference curves.

Correct Answer
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Graph 22-8 -Refer to Graph 22-8.If the consumer is currently at point B on the graph shown, a change to point C as a result of a decrease in the price of potato chips would show the:

Correct Answer
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The income effect is the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve.

Correct Answer
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The substitution effect from an increase in wages is manifest in a:

Correct Answer
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The indifference curves of perfect substitutes are:

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Refer to the information provided.If Amy decides to spend 80 hours a week playing tennis, and the rest of her time photographing, how much income will she have available to spend on consumption goods?

Correct Answer
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Graph 22-4 -Refer to Graph 22-4.Based on this graph, which of the following statements is correct?

Correct Answer
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Graph 22-9 -Refer to Graph 22-9.Assume that the consumer depicted in the graph has an income of $50, and the price of marshmallows is $2.50, and the price of chocolate chips is $5.The optimising consumer will choose to purchase which bundle of marshmallows and chocolate chips?

Correct Answer
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Graph 22-5 -Refer to Graph 22-5.Which of the graphs shown represent(s) indifference curves for perfect complements?

Correct Answer
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Indifference curves can:

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Graph 22-9 -Refer to Graph 22-9.Assume that the consumer depicted in the graph has an income of $20.Using the information above, which of the following price-quantity combinations would be on her demand curve for marshmallows if the price of chocolate chips is $2?

Correct Answer
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Which of the following is a property of indifference curves?

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Refer to the information provided.If the interest rate on Diane's savings increases, it is possible that:

Correct Answer
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If the marginal rate of substitution of pepsi for pizza is six litres of pepsi for one pizza slice, and the price of pepsi is $1 per litre and the price of pizza is $3 per slice, then this consumer should:

Correct Answer
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Second-hand clothing is an example of a normal good.

Correct Answer
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If a good is a perfect substitute, then the MRS will be constant no matter how much of any one good the consumer possesses.

Correct Answer
verified

Exam 22: The Theory of Consumer Choice

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It is plausible for the labour supply curve to slope either upwards or downwards.

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Graph 22-3 -Refer to Graph 22-3.Using the figure in panel (a) , what is ratio of the price of X to the price of Y (i.e.PX/PY) ?

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A budget constraint:

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Giffen goods are characterised by upward sloping indifference curves.

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Graph 22-8 -Refer to Graph 22-8.If the consumer is currently at point B on the graph shown, a change to point C as a result of a decrease in the price of potato chips would show the:

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The income effect is the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve.

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The substitution effect from an increase in wages is manifest in a:

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The indifference curves of perfect substitutes are:

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Refer to the information provided.If Amy decides to spend 80 hours a week playing tennis, and the rest of her time photographing, how much income will she have available to spend on consumption goods?

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Graph 22-4 -Refer to Graph 22-4.Based on this graph, which of the following statements is correct?

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Graph 22-9 -Refer to Graph 22-9.Assume that the consumer depicted in the graph has an income of $50, and the price of marshmallows is $2.50, and the price of chocolate chips is $5.The optimising consumer will choose to purchase which bundle of marshmallows and chocolate chips?

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Graph 22-5 -Refer to Graph 22-5.Which of the graphs shown represent(s) indifference curves for perfect complements?

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Indifference curves can:

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Graph 22-9 -Refer to Graph 22-9.Assume that the consumer depicted in the graph has an income of $20.Using the information above, which of the following price-quantity combinations would be on her demand curve for marshmallows if the price of chocolate chips is $2?

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Which of the following is a property of indifference curves?

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Refer to the information provided.If the interest rate on Diane's savings increases, it is possible that:

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If the marginal rate of substitution of pepsi for pizza is six litres of pepsi for one pizza slice, and the price of pepsi is $1 per litre and the price of pizza is $3 per slice, then this consumer should:

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Second-hand clothing is an example of a normal good.

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If a good is a perfect substitute, then the MRS will be constant no matter how much of any one good the consumer possesses.

Correct AnswerverifiedShow Answer

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