Question 1

The marginal rate of substitution

Accepted Answer

A)   varies along an indifference curve if the curve is bowed inward.
B)   is constant along an indifference curve if the curve is a straight line.
C)   is greater when a consumer has more of two goods rather than less of two goods.
D)   Both a and b are correct.E) A) and B)
F) A) and C)

Question 2

Indifference curves that cross would suggest that

Accepted Answer

A)   the consumer does not prefer more to less.
B)   the consumer is likely to prefer a redistribution of income from rich to poor.
C)   different individuals have different preferences for the same goods.
D)   the marginal rate of substitution is the same for both indifference curves.E) A) and D)
F) None of the above

Question 3

Which of the following statements is correct?

Accepted Answer

A)   The theory of consumer choice provides a more complete understanding of supply, just as the theory of the competitive firm provides a more complete understanding of demand.
B)   The theory of consumer choice provides a more complete understanding of demand, just as the theory of the competitive firm provides a more complete understanding of supply.
C)   Monetary theory provides a more complete understanding of demand, just as the theory of the competitive firm provides a more complete understanding of supply.
D)   The theory of public choice provides a more complete understanding of supply, just as the theory of the competitive firm provides a more complete understanding of demand.E) B) and C)
F) A) and B)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Assume that a college student spends her income on books and pizza.The price of a pizza is $8,and the price of a book is $15.If she has $100 in income,she could choose to consume

Accepted Answer

A)   8 pizzas and 4 books.
B)   4 pizzas and 5 books.
C)   9 pizzas and 3 books.
D)   4 pizzas and 3 books.E) A) and B)
F) A) and C)

Question 6

Pepsi and pizza are normal goods.When the price of pizza falls,the substitution effect by itself will cause a

Accepted Answer

A)   shift to a lower indifference curve so that the consumer buys less Pepsi.
B)   shift to a higher indifference curve so that the consumer buys more Pepsi.
C)   movement along the indifference curve so that the consumer buys more Pepsi.
D)   movement along the indifference curve so that the consumer buys less Pepsi.E) B) and C)
F) A) and D)

Question 7

Utility measures the

Accepted Answer

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

Question 8

The goal of the consumer is to

Accepted Answer

A)   maximize utility.
B)   minimize expenses.
C)   spend more income in the current time period than in the future.
D)   All of the above are the goals of the consumer.E) C) and D)
F) None of the above

Question 9

Figure 21-25
The figure below illustrates the preferences for a representative consumer, Christopher.
 
-Refer to Figure 21-25.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) All of the above

Question 10

Which effect of a price change moves the consumer along the same indifference curve to a point with a new marginal rate of substitution?

Accepted Answer

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

Question 11

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) None of the above
F) B) and C)

Question 12

Suppose a consumer consumes two goods,X and Y.The slope of the budget constraint 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)   relative price of the two goods.
D)   All of the above are correct.E) All of the above
F) B) and C)

Question 13

Suppose a consumer is currently spending all of her available income on two goods: music CDs and DVDs.If the price of a CD is $9,the price of a DVD is $18,and she is currently consuming 10 CDs and 5 DVDs,what is the consumer's income?

Accepted Answer

A)   $90
B)   $180
C)   $270
D)   $360E) A) and D)
F) None of the above

Question 14

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

Accepted Answer

A)   is equal to the price of the least-expensive good.
B)   exceeds the marginal utility of each good by the greatest amount.
C)   is less than the slope of the budget constraint.
D)   None of the above is correct.E) A) and B)
F) C) and D)

Question 15

An individual's demand curve for a good is derived by varying the

Accepted Answer

A)   income level and observing the resulting total utility derived from both goods.
B)   price of one good and observing the resulting quantities of the other good.
C)   budget line to the left and calculating the loss in total utility.
D)   price of one good and observing the resulting quantities demanded of that good.E) All of the above
F) A) and B)

Question 16

Figure 21-5

-Refer to Figure 21-5.In graph (b) ,if income is equal to $420,the price of good Y is

Accepted Answer

A)   $1.
B)   $3.
C)   $10.
D)   $30.E) A) and B)
F) A) and C)

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Figure 21-21
 
-Refer to Figure 21-21.If the consumer is currently at point A in the figure,a movement to point B 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) All of the above
F) A) and B)

Question 19

As long as a consumer remains on the same indifference curve,

Accepted Answer

A)   she is indifferent to all points that lie on any other indifference curve.
B)   her preferences will not affect the marginal rate of substitution.
C)   she is unable to decide which bundle of goods to choose.
D)   she is indifferent among the points on that curve.E) B) and C)
F) All of the above

Question 20

When indifference curves are bowed in toward the origin,

Accepted Answer

A)   consumers are more inclined to trade away goods they have in abundance.
B)   an increase in income will shift the indifference curve away from the origin.
C)   a decrease in income will shift the indifference curve toward the origin.
D)   Both b)  and c)  are correct.E) B) and D)
F) All of the above

Exam 21: The Theory of Consumer Choice.

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

Correct AnswerverifiedShow Answer

The goal of the consumer is to

Correct AnswerverifiedShow Answer

As long as a consumer remains on the same indifference curve,

Correct AnswerverifiedShow Answer

Suppose a consumer consumes two goods,X and Y.The slope of the budget constraint equals the

Correct AnswerverifiedShow Answer

An individual's demand curve for a good is derived by varying the

Correct AnswerverifiedShow Answer

Figure 21-25 The figure below illustrates the preferences for a representative consumer, Christopher. -Refer to Figure 21-25.Interest rates increase by 3 percent.Christopher's optimal choice point moves from A to B.Christopher consumes

Correct AnswerverifiedShow Answer

Assume that a college student spends her income on books and pizza.The price of a pizza is $8,and the price of a book is $15.If she has $100 in income,she could choose to consume

Correct AnswerverifiedShow Answer

Suppose a consumer is currently spending all of her available income on two goods: music CDs and DVDs.If the price of a CD is $9,the price of a DVD is $18,and she is currently consuming 10 CDs and 5 DVDs,what is the consumer's income?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Indifference curves that cross would suggest that

Correct AnswerverifiedShow Answer

The marginal rate of substitution

Correct AnswerverifiedShow Answer

Pepsi and pizza are normal goods.When the price of pizza falls,the substitution effect by itself will cause a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Utility measures the

Correct AnswerverifiedShow Answer

Figure 21-5 -Refer to Figure 21-5.In graph (b) ,if income is equal to $420,the price of good Y is

Correct AnswerverifiedShow Answer

Figure 21-21 -Refer to Figure 21-21.If the consumer is currently at point A in the figure,a movement to point B as a result of a decrease in the price of potato chips represents the

Correct AnswerverifiedShow Answer

Which effect of a price change moves the consumer along the same indifference curve to a point with a new marginal rate of substitution?

Correct AnswerverifiedShow Answer

When indifference curves are bowed in toward the origin,

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

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