Question 1

Suppose a consumer spends her income on two goods: music CDs and DVDs.The consumer has $200 to allocate to these two goods,the price of a CD is $10,and the price of a DVD is $20.What is the maximum number of CDs the consumer can purchase?

Accepted Answer

A)   10
B)   20
C)   40
D)   50E) C) and D)
F) A) and D) B

Question 2

Figure 21-10 
-Refer to Figure 21-10.Assume that the consumer depicted in the figure has an income of $50.The price of Skittles is $5 and the price of M&M's is $5.This consumer will choose a consumption bundle where the marginal rate of substitution is

Accepted Answer

A)   10
B)   5
C)   1
D)   1/5.E) A) and D)
F) A) and C)

Question 3

When a consumer experiences a price decrease for an inferior good,it is possible that the income effect is

Accepted Answer

A)   less than the substitution effect,and the demand curve will be downward sloping.
B)   greater than the substitution effect,and the demand curve will be upward sloping.
C)   less than the substitution effect,and the demand curve will be upward sloping.
D)   both a and b are correct.E) A) and D)
F) All of the above

Question 4

"Left" gloves and "right" gloves provide a good example of

Accepted Answer

A)   perfect substitutes.
B)   perfect complements.
C)   negatively sloped indifference curves.
D)   positively sloped indifference curves.E) A) and D)
F) C) and D)

Question 5

A rise in the interest rate will generally result in people consuming more when they are old if the substitution effect outweighs the income effect.

Accepted Answer

A) True 
 B)False  True

Question 6

When leisure is a normal good,the income effect from a decrease in wages is evident in

Accepted Answer

A)   a desire to consume more leisure.
B)   a desire to consume less leisure.
C)   an upward-sloping labor supply curve.
D)   a shift in labor demand.E) B) and C)
F) A) and D)

Question 7

Figure 21-5 
-Refer to Figure 21-5.Suppose a consumer has $200 in income,the price of popcorn is $1,and the price of Mt.Dew is $2.What is the value of A?

Accepted Answer

A)   200
B)   100
C)   50
D)   25E) B) and C)
F) C) and D)

Question 8

Suppose a consumer spends his income on CDs and DVDs.If his 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 he can afford more CDs.
D)   rotate outward along the DVD axis because he can afford more DVDs.E) All of the above
F) A) and B)

Question 9

Economists represent a consumer's preferences using

Accepted Answer

A)   demand curves.
B)   budget constraints.
C)   indifference curves.
D)   supply curves.E) A) and B)
F) All of the above

Question 10

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) A) and B)
F) B) and C)

Question 11

A Giffen good is a good for which

Accepted Answer

A)   a decrease in the price decreases the quantity demanded.
B)   the substitution effect outweighs the income effect.
C)   an increase in the price decreases the quantity demanded.
D)   Both a) and b) are correct.E) None of the above
F) All of the above

Question 12

At the consumer's optimum

Accepted Answer

A)   the budget constraint will have a slope of MUx/Px.
B)   the slope of the indifference curve is equal to the slope of the budget constraint.
C)   the indifference curve will intersect the budget constraint at the midpoint of the budget constraint.
D)   Both b and c are correct.E) B) and C)
F) A) and D)

Question 13

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

Question 14

Figure 21-4 
-Refer to Figure 21-4.Assume that a consumer faces both budget constraints in graph (a) and graph (b) on two different occasions.If her income has remained constant,what has happened to prices?

Accepted Answer

A)   The price of X in graph (a) is higher than the price of X in graph (b) .
B)   The price of Y in graph (a) is higher than the price of Y in graph (b) .
C)   The prices of both X and Y are lower in graph (a) .
D)   None of the above is true.E) None of the above
F) A) and D) A

Question 15

Figure 21-9 2 if A)  the price of Y decreases. B)  the price of X decreases. C)  income increases. D)  All of the above would be correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-9.It would be possible for the consumer to reach I2 if

Accepted Answer

A)   the price of Y decreases.
B)   the price of X decreases.
C)   income increases.
D)   All of the above would be correct.E) A) and B)
F) A) and C)

Question 16

For a typical consumer,indifference curves can intersect if they satisfy the property of transitivity.

Accepted Answer

A) True 
 B)False

Question 17

When two goods are perfect complements,the indifference curves are right angles.

Accepted Answer

A) True 
 B)False

Question 18

Scenario 21-2
Fred 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.Fred is typically awake for 112 hours each week (he sleeps an average of 8 hours each day) .For each hour Fred spends writing,he can earn $75.Fred 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 Fred'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) A) and B)

Question 19

Figure 21-6 
-Refer to Figure 21-6.Suppose a consumer has $500 in income,the price of a book is $10,and the value of B is 50.What is the price of a DVD?

Accepted Answer

A)   $5
B)   $10
C)   $50
D)   $100E) A) and C)
F) All of the above

Question 20

Figure 21-4 y/Px) ? A)  1/3 B)  1/4 C)  3 D)  4" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-4.In graph (a) ,what is the price of good Y relative to good X (i.e. ,Py/Px) ?

Accepted Answer

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

Exam 21: The Theory of Consumer Choice

Suppose a consumer spends her income on two goods: music CDs and DVDs.The consumer has $200 to allocate to these two goods,the price of a CD is $10,and the price of a DVD is $20.What is the maximum number of CDs the consumer can purchase?

Correct Answer
verified
B

Figure 21-10 -Refer to Figure 21-10.Assume that the consumer depicted in the figure has an income of $50.The price of Skittles is $5 and the price of M&M's is $5.This consumer will choose a consumption bundle where the marginal rate of substitution is

Correct Answer
verified

When a consumer experiences a price decrease for an inferior good,it is possible that the income effect is

Correct Answer
verified

"Left" gloves and "right" gloves provide a good example of

Correct Answer
verified

A rise in the interest rate will generally result in people consuming more when they are old if the substitution effect outweighs the income effect.

Correct Answer
verified
True

When leisure is a normal good,the income effect from a decrease in wages is evident in

Correct Answer
verified

Figure 21-5 -Refer to Figure 21-5.Suppose a consumer has $200 in income,the price of popcorn is $1,and the price of Mt.Dew is $2.What is the value of A?

Correct Answer
verified

Suppose a consumer spends his income on CDs and DVDs.If his income decreases,the budget constraint for CDs and DVDs will

Correct Answer
verified

Economists represent a consumer's preferences using

Correct Answer
verified

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

Correct Answer
verified

A Giffen good is a good for which

Correct Answer
verified

At the consumer's optimum

Correct Answer
verified

Correct Answer
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Figure 21-4 -Refer to Figure 21-4.Assume that a consumer faces both budget constraints in graph (a) and graph (b) on two different occasions.If her income has remained constant,what has happened to prices?

Correct Answer
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A

Figure 21-9 -Refer to Figure 21-9.It would be possible for the consumer to reach I₂ if

Correct Answer
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For a typical consumer,indifference curves can intersect if they satisfy the property of transitivity.

Correct Answer
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When two goods are perfect complements,the indifference curves are right angles.

Correct Answer
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Correct Answer
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Figure 21-6 -Refer to Figure 21-6.Suppose a consumer has $500 in income,the price of a book is $10,and the value of B is 50.What is the price of a DVD?

Correct Answer
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Figure 21-4 -Refer to Figure 21-4.In graph (a) ,what is the price of good Y relative to good X (i.e. ,P_y/P_x) ?

Correct Answer
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Exam 21: The Theory of Consumer Choice

Suppose a consumer spends her income on two goods: music CDs and DVDs.The consumer has $200 to allocate to these two goods,the price of a CD is $10,and the price of a DVD is $20.What is the maximum number of CDs the consumer can purchase?

Correct AnswerverifiedB

Figure 21-10 -Refer to Figure 21-10.Assume that the consumer depicted in the figure has an income of $50.The price of Skittles is $5 and the price of M&M's is $5.This consumer will choose a consumption bundle where the marginal rate of substitution is

Correct AnswerverifiedShow Answer

When a consumer experiences a price decrease for an inferior good,it is possible that the income effect is

Correct AnswerverifiedShow Answer

"Left" gloves and "right" gloves provide a good example of

Correct AnswerverifiedShow Answer

A rise in the interest rate will generally result in people consuming more when they are old if the substitution effect outweighs the income effect.

Correct AnswerverifiedTrue

When leisure is a normal good,the income effect from a decrease in wages is evident in

Correct AnswerverifiedShow Answer

Figure 21-5 -Refer to Figure 21-5.Suppose a consumer has $200 in income,the price of popcorn is $1,and the price of Mt.Dew is $2.What is the value of A?

Correct AnswerverifiedShow Answer

Suppose a consumer spends his income on CDs and DVDs.If his income decreases,the budget constraint for CDs and DVDs will

Correct AnswerverifiedShow Answer

Economists represent a consumer's preferences using

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A Giffen good is a good for which

Correct AnswerverifiedShow Answer

At the consumer's optimum

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 21-4 -Refer to Figure 21-4.Assume that a consumer faces both budget constraints in graph (a) and graph (b) on two different occasions.If her income has remained constant,what has happened to prices?

Correct AnswerverifiedA

Figure 21-9 -Refer to Figure 21-9.It would be possible for the consumer to reach I2 if

Correct AnswerverifiedShow Answer

For a typical consumer,indifference curves can intersect if they satisfy the property of transitivity.

Correct AnswerverifiedShow Answer

When two goods are perfect complements,the indifference curves are right angles.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 21-6 -Refer to Figure 21-6.Suppose a consumer has $500 in income,the price of a book is $10,and the value of B is 50.What is the price of a DVD?

Correct AnswerverifiedShow Answer

Figure 21-4 -Refer to Figure 21-4.In graph (a) ,what is the price of good Y relative to good X (i.e. ,Py/Px) ?

Correct AnswerverifiedShow Answer

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B

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True

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A

Figure 21-9 -Refer to Figure 21-9.It would be possible for the consumer to reach I₂ if

Correct Answer
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Figure 21-4 -Refer to Figure 21-4.In graph (a) ,what is the price of good Y relative to good X (i.e. ,P_y/P_x) ?

Correct Answer
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