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Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. 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 willing to give up about A) 0.75 pounds of pears for 1 pound of apples. B) 0.75 pounds of apples for 1 pound of pears. C) 1.20 pounds of pears for 1 pound of apples. D) 1.20 pounds of apples for 1 pound of pears. -Refer to Figure 21-24. At his optimum, Steve is willing to give up about


A) 0.75 pounds of pears for 1 pound of apples.
B) 0.75 pounds of apples for 1 pound of pears.
C) 1.20 pounds of pears for 1 pound of apples.
D) 1.20 pounds of apples for 1 pound of pears.

E) None of the above
F) A) and B)

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Figure 21-17 Figure 21-17 -Refer to Figure 21-17. When the price of X is $6, the price of Y is $24, and income is $48, Paul's optimal choice is point C. Then the price of Y decreases to $6. Paul's new optimal choice is point A) A. B) B. C) D. D) E. -Refer to Figure 21-17. When the price of X is $6, the price of Y is $24, and income is $48, Paul's optimal choice is point C. Then the price of Y decreases to $6. Paul's new optimal choice is point


A) A.
B) B.
C) D.
D) E.

E) A) and B)
F) None of the above

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For Antonio, the income effect of an interest-rate increase is stronger than the substitution effect. In response to a higher interest rate, will Antonio save more or will he save less?

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In response to a hig...

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Gerald spends his weekly income on gin and cocktail olives. The price of gin has risen from $7 to $9 per bottle, the price of cocktail olives has fallen from $6 to $5 per jar, and Gerald's income has stayed fixed at $46 per week. Since the price changes, Gerald has been buying 4 bottles of gin and 2 jars of cocktail olives per week. At the original prices, 4 bottles of gin and 2 jars of cocktail olives would have


A) exactly exhausted his income.
B) cost more than his income.
C) cost less than his income.
D) could have maximized his satisfaction given his budget constraint.

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

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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: 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? A) 3 B) 4 C) 5 D) 6 If Traci is maximizing her utility, how many bags of pretzels does she buy each month?


A) 3
B) 4
C) 5
D) 6

E) None of the above
F) All of the above

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B

If a good is a Giffen good, then


A) the supply curve is downward sloping.
B) the demand curve is upward sloping.
C) the demand curve is horizontal.
D) there is no optimal level of consumption for the consumer.

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

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Figure 21-4 In each case, the budget constraint moves from BC-1 to BC-2. Figure 21-4 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-4. Which of the graphs in the figure could reflect a decrease in income? A) graph a B) graph b C) graph d D) None of the above is correct. Figure 21-4 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-4. Which of the graphs in the figure could reflect a decrease in income? A) graph a B) graph b C) graph d D) None of the above is correct. Figure 21-4 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-4. Which of the graphs in the figure could reflect a decrease in income? A) graph a B) graph b C) graph d D) None of the above is correct. Figure 21-4 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-4. Which of the graphs in the figure could reflect a decrease in income? A) graph a B) graph b C) graph d D) None of the above is correct. -Refer to Figure 21-4. Which of the graphs in the figure could reflect a decrease in income?


A) graph a
B) graph b
C) graph d
D) None of the above is correct.

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

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Which of the following is a property of a typical indifference curve?


A) upward sloping
B) bowed away from the origin
C) does not intersect another indifference curve
D) a lower one is preferred to a higher one

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

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Figure 21-6 Figure 21-6 -Refer to Figure 21-6. 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? A) 200 B) 100 C) 50 D) 25 -Refer to Figure 21-6. 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?


A) 200
B) 100
C) 50
D) 25

E) A) and B)
F) None of the above

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If the price of bread is zero and the price of cheese is positive, then the budget constraint between bread (on the horizontal axis) and cheese (on the vertical axis) would


A) be vertical.
B) coincide with the vertical axis.
C) coincide with the horizontal axis.
D) be horizontal.

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

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D

The income effect of a price change is unaffected by whether the good is a normal or inferior good.

A) True
B) False

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Figure 21-10 Figure 21-10 -Refer to Figure 21-10. Which of the following statements is not correct? A) Bundles on Indifference Curve 3 are preferred to bundles on Indifference Curve 1. B) The consumer is indifferent between bundles A and E because they contain the same number of donuts. C) The consumer is indifference between bundles B and C. D) The consumer prefers bundle C to bundle D. -Refer to Figure 21-10. Which of the following statements is not correct?


A) Bundles on Indifference Curve 3 are preferred to bundles on Indifference Curve 1.
B) The consumer is indifferent between bundles A and E because they contain the same number of donuts.
C) The consumer is indifference between bundles B and C.
D) The consumer prefers bundle C to bundle D.

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

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Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will


A) cause the consumer to buy more of good Y and less of good X.
B) cause the consumer to buy more of good X and less of good Y.
C) not affect the amount of goods X and Y that the consumer buys.
D) result in an upward-sloping demand for good Y if the substitution effect is positive.

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

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Figure 21-2 The downward-sloping line on the figure represents a consumer's budget constraint. Figure 21-2 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. Which of the following statements is not necessarily correct? A) Points W, X, and Y all cost the consumer the same amount of money. B) Point Z is unaffordable for the consumer given his budget constraint. C) Point V costs less than point Z. D) Points W, X, and Y give the consumer the same level of satisfaction. -Refer to Figure 21-2. Which of the following statements is not necessarily correct?


A) Points W, X, and Y all cost the consumer the same amount of money.
B) Point Z is unaffordable for the consumer given his budget constraint.
C) Point V costs less than point Z.
D) Points W, X, and Y give the consumer the same level of satisfaction.

E) A) and C)
F) None of the above

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Indifference curves tend to be bowed inward because of diminishing


A) marginal rates of substitution.
B) demand for the good as prices rise.
C) income.
D) Both a and b are correct.

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

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Figure 21-9 Figure 21-9 -Refer to Figure 21-9. If the consumer has $600 in income, what is the price of good Y? A) $20 B) $6 C) $3 D) $0.33 -Refer to Figure 21-9. If the consumer has $600 in income, what is the price of good Y?


A) $20
B) $6
C) $3
D) $0.33

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

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A

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 that you borrow $60 and spend $160 today. After you repay your loan one year from today, how much money will you have available for consumption one year from today?


A) $0
B) $25
C) $50
D) $75

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

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The theory of consumer choice provides the foundation for understanding the


A) structure of a firm.
B) profitability of a firm.
C) demand for a firm's product.
D) supply of a firm's product.

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

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Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. In moving from point A to point C, Steve gives up A) 4.9 pounds of apples, gains 2.0 pounds of pears, and becomes worse off. B) 4.9 pounds of apples, gains 2.0 pounds of pears, and becomes better off. C) 5.5 pounds of apples, gains 4.1 pounds of pears, and becomes worse off. D) 5.5 pounds of apples, gains 4.1 pounds of pears, and becomes better off. -Refer to Figure 21-24. In moving from point A to point C, Steve gives up


A) 4.9 pounds of apples, gains 2.0 pounds of pears, and becomes worse off.
B) 4.9 pounds of apples, gains 2.0 pounds of pears, and becomes better off.
C) 5.5 pounds of apples, gains 4.1 pounds of pears, and becomes worse off.
D) 5.5 pounds of apples, gains 4.1 pounds of pears, and becomes better off.

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

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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


A) 30 boxes of mac-n-cheese and 12 CDs.
B) 40 boxes of mac-n-cheese and 14 CDs.
C) 20 boxes of mac-n-cheese and 16 CDs.
D) 60 boxes of mac-n-cheese and 12 CDs.

E) A) and C)
F) None of the above

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