Question 1

If two bundles of goods give a consumer the same satisfaction,the consumer must be

Accepted Answer

A)  on her budget constraint.
B)  in a position of equilibrium.
C)  indifferent between the bundles.
D)  Both a and c are correct.E) C) and D)
F) B) and C)

Question 2

In the work-leisure model,suppose consumption and leisure are both normal goods.The income effect of a wage increase 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 than before with a higher level of consumption.E) A) and B)
F) A) and C)

Question 3

Figure 21-7
 
-Refer to Figure 21-7.Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B.According to the graph,what change forces 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) None of the above
F) A) and D)

Question 4

Utility measures

Accepted Answer

A)  the income a consumer receives from consuming a bundle of goods.
B)  the satisfaction a consumer receives from consuming a bundle of goods.
C)  the satisfaction a consumer places on their budget constraint.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 5

A family on a trip budgets $800 for meals and hotel accommodations.Suppose the price of a meal is $40.In addition,suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals.How many meals could the family afford if they gave up two nights in the hotel?

Accepted Answer

A)  1
B)  2
C)  5
D)  8E) A) and D)
F) B) and C)

Question 6

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 7

Suppose the only two goods that Brett consumes are wine and cheese.When wine sells for $10 a bottle and cheese sell for $10 a pound,he buys 6 bottles of wine and 4 pounds of cheese - spending his entire income of $100.One day the price of wine falls to $5 a bottle and the price of cheese increases to $20 a pound,while his income does not change.The bundle of wine and cheese that he purchased at the old prices,now costs,at the new prices,

Accepted Answer

A)  the same amount.
B)  less than Brett's income.
C)  more than Brett's income.
D)  not enough information to answer the question.E) All of the above
F) A) and D)

Question 8

Economic theory predicts that an increase in wages

Accepted Answer

A)  will cause a wage earner to work more.
B)  will cause a wage earner to work less.
C)  will cause a wage earner to be more productive.
D)  might cause a wage earner to work more or work less.E) None of the above
F) A) and B)

Question 9

Figure 21-4
 
-Refer to Figure 21-4.Which of the following statements is true for a consumer who moves from point A to point D?

Accepted Answer

A)  It is difficult to compare the level of consumer satisfaction between points D and a.
B)  The consumer is indifferent between point A and point D.
C)  The consumer is definitely worse off.
D)  The consumer is likely to place a higher relative value on Twinkies at point A than at point D.E) B) and D)
F) B) and C)

Question 10

All of the following are properties of indifference curves except

Accepted Answer

A)  higher indifference curves are preferred to lower ones.
B)  indifference curves are downward sloping.
C)  indifference curves do not cross.
D)  indifference curves are bowed outward.E) B) and C)
F) A) and C)

Question 11

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 increases to 40%.What happens to the slope of your budget constraint relative to when the interest rate was $25%?

Accepted Answer

A)  it becomes steeper
B)  it becomes flatter
C)  it doesn't change because the budget constraint shifts in parallel to the original budget constraint
D)  it doesn't change because the budget constraint shifts out parallel to the original budget constraintE) All of the above
F) A) and C)

Question 12

The slope of the budget constraint is all of the following except

Accepted Answer

A)  the relative price of two goods.
B)  the rate at which a consumer can trade one good for another.
C)  the marginal rate of substitution.
D)  constant.E) C) and D)
F) A) and D)

Question 13

The bowed shape of the indifference curve reflects the consumer's

Accepted Answer

A)  unwillingness to give up a good that he already has in large quantity.
B)  unwillingness to purchase a good that he already has in large quantity.
C)  greater willingness to give up a good that he already has in large quantity.
D)  greater willingness to purchase a good that he already has in large quantity.E) A) and C)
F) B) and C)

Question 14

Budget constraints exist for consumers because

Accepted Answer

A)  their utility from consuming goods eventually reaches a maximum level.
B)  even with unlimited incomes they have to pay for each good they consume.
C)  they have to pay for goods and they have limited incomes.
D)  prices and incomes are inversely related.E) A) and B)
F) None of the above

Question 15

If a consumer's 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 we can afford more CDs.
D)  rotate outward along the DVD axis because we can afford more DVDs.E) All of the above
F) A) and C)

Question 16

Which of the following statements best describes the substitution effect?

Accepted Answer

A)  The change in consumption resulting from a change in the consumer's income holding the prices of the goods constant.
B)  The change in consumption resulting from a change in the consumer's income holding the consumer's level of satisfaction constant.
C)  The change in consumption resulting from a change in the price of one good holding the consumer's level of satisfaction constant.
D)  The change in consumption resulting from a change in the price of one good allowing the consumer's level of satisfaction to change.E) A) and C)
F) A) and D)

Question 17

A consumer has preferences over two goods,books and movies.The consumer is currently spending all available income on these two goods and maximizes satisfaction by purchasing ten books and five movies.The price of a movie falls and the consumer optimally chooses to consume eleven books and four movies.From this information we can infer that

Accepted Answer

A)  movies are a normal good for this consumer.
B)  movies are an inferior good for this consumer.
C)  movies are a Giffen good for this consumer.
D)  movies are either an inferior good or a Giffen good for this consumer; we would need information on prices and income to be certain.E) A) and D)
F) A) and C)

Question 18

List and briefly explain each of the four properties of indifference curves.

Accepted Answer

1: Higher indifference curves are prefer...

Question 19

Consider the indifference curve map and budget constraint for two goods (B and K) .Suppose the good on the horizontal axis (K) is inferior,but not Giffen.When the price of the inferior good on the horizontal axis (K) decreases

Accepted Answer

A)  the substitution effect and income effect both cause an increase in the consumption of K.
B)  the substitution effect causes a decrease in the consumption of K and the income effect causes an increase in the consumption of K.However, the substitution effect is greater than the income effect.
C)  the substitution effect causes an increase in the consumption of K and the income effect causes a decrease in the consumption of K.However, the substitution effect is greater than the income effect.
D)  the substitution effect and income effect both cause a decrease in the consumption of K.E) C) and D)
F) A) and D)

Question 20

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) All of the above
F) B) and C)

Exam 21: The Theory of Consumer Choice

Figure 21-7 -Refer to Figure 21-7.Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B.According to the graph,what change forces the consumer to move to point A?

Correct Answer
verified

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

Correct Answer
verified

If two bundles of goods give a consumer the same satisfaction,the consumer must be

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

All of the following are properties of indifference curves except

Correct Answer
verified

Consider the indifference curve map and budget constraint for two goods (B and K) .Suppose the good on the horizontal axis (K) is inferior,but not Giffen.When the price of the inferior good on the horizontal axis (K) decreases

Correct Answer
verified

The bowed shape of the indifference curve reflects the consumer's

Correct Answer
verified

Budget constraints exist for consumers because

Correct Answer
verified

List and briefly explain each of the four properties of indifference curves.

Correct Answer
verified
1: Higher indifference curves are prefer...
View Answer

Utility measures

Correct Answer
verified

In the work-leisure model,suppose consumption and leisure are both normal goods.The income effect of a wage increase results in the worker choosing to

Correct Answer
verified

Which of the following statements best describes the substitution effect?

Correct Answer
verified

Correct Answer
verified

The slope of the budget constraint is all of the following except

Correct Answer
verified

Figure 21-4 -Refer to Figure 21-4.Which of the following statements is true for a consumer who moves from point A to point D?

Correct Answer
verified

A family on a trip budgets $800 for meals and hotel accommodations.Suppose the price of a meal is $40.In addition,suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals.How many meals could the family afford if they gave up two nights in the hotel?

Correct Answer
verified

If a consumer's income decreases,the budget constraint for CDs and DVDs will

Correct Answer
verified

Economic theory predicts that an increase in wages

Correct Answer
verified

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

Figure 21-7 -Refer to Figure 21-7.Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B.According to the graph,what change forces 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

If two bundles of goods give a consumer the same satisfaction,the consumer must be

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

All of the following are properties of indifference curves except

Correct AnswerverifiedShow Answer

Consider the indifference curve map and budget constraint for two goods (B and K) .Suppose the good on the horizontal axis (K) is inferior,but not Giffen.When the price of the inferior good on the horizontal axis (K) decreases

Correct AnswerverifiedShow Answer

The bowed shape of the indifference curve reflects the consumer's

Correct AnswerverifiedShow Answer

Budget constraints exist for consumers because

Correct AnswerverifiedShow Answer

List and briefly explain each of the four properties of indifference curves.

Correct Answerverified1: Higher indifference curves are prefer...View AnswerShow Answer

Utility measures

Correct AnswerverifiedShow Answer

In the work-leisure model,suppose consumption and leisure are both normal goods.The income effect of a wage increase results in the worker choosing to

Correct AnswerverifiedShow Answer

Which of the following statements best describes the substitution effect?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The slope of the budget constraint is all of the following except

Correct AnswerverifiedShow Answer

Figure 21-4 -Refer to Figure 21-4.Which of the following statements is true for a consumer who moves from point A to point D?

Correct AnswerverifiedShow Answer

A family on a trip budgets $800 for meals and hotel accommodations.Suppose the price of a meal is $40.In addition,suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals.How many meals could the family afford if they gave up two nights in the hotel?

Correct AnswerverifiedShow Answer

If a consumer's income decreases,the budget constraint for CDs and DVDs will

Correct AnswerverifiedShow Answer

Economic theory predicts that an increase in wages

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
1: Higher indifference curves are prefer...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified