FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 21: The Theory of Consumer Choice

Show Answer

Share

---

All types

Filters

Study Flashcards

Question 121

Multiple Choice

Review LaterAdd Note

Review Later

The income effect of a price change is depicted by

A) a parallel shift of the budget constraint at the old set of prices.
B) a parallel shift of the budget constraint at the new set of prices.
C) a movement along the budget constraint holding the level of satisfaction constant.
D) not observable and is therefore neither a shift nor a change in the slope of the budget constraint.

E) A) and B)
F) C) and D)

Correct Answer

verified

Show Answer

Question 122

Multiple Choice

Review LaterAdd Note

Review Later

A decrease in income will cause a consumer's budget constraint to

A) shift outward, parallel to its initial position.
B) shift inward, parallel to its initial position.
C) pivot along the horizontal axis.
D) pivot along the vertical axis.

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

Correct Answer

verified

Show Answer

Question 123

Multiple Choice

Review LaterAdd Note

Figure 21-26 -Refer to Figure 21-26. Rhonda experiences an increase in her hourly wage. Her optimal choice point moves from A to B. For Rhonda,

All points on a demand curve are optimal consumption points.

Abby, Bobbi, and Deborah each buy ice cream and paperback novels to enjoy on hot summer days. Ice cream costs $5 per gallon, and paperback novels cost $8 each. Abby has a budget of $80, Bobbi has a budget of $60, and Deborah has a budget of $40 to spend on ice cream and paperback novels. Who can afford to purchase 4 gallons of ice cream and 5 paperback novels?

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

The theory of consumer choice illustrates that people face tradeoffs, which is one of the Ten Principles of Economics.

Assume that a college student spends her income on mac-n-cheese and CDs. The price of one box of mac-n- cheese is $1, and the price of one CD is $12. If she has $200 of income, she could choose to consume

Irrespective of whether she is at her optimum, Jenna's valuation of coffee relative to orange juice can be measured by

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 buying

If a good is a Giffen good, then

Andi uses all of her income to purchase books and games. At any two points A and B on Andi's budget constraint,

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

Traci consumes two goods, lemonade and pretzels. Lemonade costs $2 per glass, and she consumes it to the point where the marginal utility she receives from her last glass of lemonade is 4. Pretzels cost $3 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 her utility, how many bags of pretzels does she buy each month?

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. If Frank uses all of his income to buy hats during a certain month, then how many hats does he buy?

The income effect of a price change is the change in consumption that results from the movement to a new indifference curve.

The marginal rate of substitution between two goods always equals the

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. How much income does Hannah earn when she is young?

The slope of a consumer's budget constraint is unaffected by a change in income.

Figure 21-18 -Refer to Figure 21-18. Given the budget constraint depicted in the graph, the consumer's optimal choice will be point