Question 1

If the relative price of a concert ticket is 3 times the price of a meal at a good restaurant,then the opportunity cost of a concert ticket can be measured by the

Accepted Answer

A)  slope of the budget constraint.
B)  slope of an indifference curve.
C)  marginal rate of substitution.
D)  income effect.E) B) and C)
F) A) and D)

Question 2

The opportunity cost of current household consumption is the

Accepted Answer

A)  wage rate.
B)  market interest rate.
C)  price of the goods consumed.
D)  explicit cost of consumption.E) A) and C)
F) B) and C)

Question 3

Figure 21-4
 
-Refer to Figure 21-4.Which of the following statements is true?

Accepted Answer

A)  If a consumer moves from point C to point A, her loss of Ho-Ho's cannot be compensated for by an increase in Twinkies.
B)  Point E is preferred to all other points identified in the figure.
C)  Since more is preferred to less, point C may be preferred to point E in some circumstances for this consumer.
D)  Even though point E has more of both goods than point B, we could draw a different set of indifference curves in which point B is preferred to point E.E) A) and B)
F) A) and D)

Question 4

To derive the demand curve for a good the

Accepted Answer

A)  income effect must be greater than the substitution effect.
B)  substitution effect must be greater than the income effect.
C)  substitution effect must be in the same direction as the income effect.
D)  income effect and the substitution effect may work in the same or in opposite directions.E) A) and D)
F) A) and C)

Question 5

When two goods are easily substitutable,such as right and left shoes,the indifference curves are right angles.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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) B) and D)

Question 7

Jonathan is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires.When the substitution effect dominates the income effect,an increase in the interest rate on savings is likely to

Accepted Answer

A)  increase saving.
B)  decrease saving.
C)  have no effect on saving.
D)  All of the above are possible.E) C) and D)
F) A) and C)

Question 8

"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 B)
F) A) and C)

Question 9

Economists use the term Giffen good to describe a good that violates the law of demand.

Accepted Answer

A) True 
 B)False

Question 10

Violations of the law of demand are assumed to occur

Accepted Answer

A)  regularly.
B)  only when goods are Giffen goods.
C)  only when the substitution effect dominates the income effect.
D)  All of the above are correct.E) None of the above
F) All of the above

Question 11

A consumer that doesn't spend all of her income

Accepted Answer

A)  would be at a point outside of her budget constraint.
B)  would be at a point inside her budget constraint.
C)  must not be consuming positive quantities of all goods.
D)  must be consuming at a point where her budget constraint touches one of the axes.E) C) and D)
F) A) and C)

Question 12

Evaluate the following statement: "Giffen goods violate the 'law of demand,' therefore,the 'law of demand' can't really be considered a 'law.'"

Accepted Answer

Giffen goods are extremely rar...

Question 13

The consumer's optimum is where

Accepted Answer

A)  MUₓ/MUᵧ = Pᵧ/Pₓ
B)  MUₓ/Pᵧ = MUᵧ/Pₓ
C)  Pₓ/MUₓ = Pᵧ/MUᵧ
D)  MUₓ/MUᵧ = Pₓ/PᵧE) C) and D)
F) All of the above

Question 14

The rate at which a consumer is willing to trade one good for another to maintain the same level of satisfaction is affected by

Accepted Answer

A)  the prices of the products.
B)  the amount of each good the consumer is currently consuming.
C)  the consumer's income.
D)  the marginal value product.E) None of the above
F) All of the above

Question 15

The marginal rate of substitution is the slope of the budget constraint.

Accepted Answer

A) True 
 B)False

Question 16

Suppose Rich always uses two packets of sugar with his coffee.Rich's indifference curves for sugar and coffee are

Accepted Answer

A)  bowed inward.
B)  bowed outward.
C)  straight lines.
D)  L shaped.E) A) and C)
F) A) and B)

Question 17

If a consumer wants more of a good when his income rises,economists call it an inferior good.

Accepted Answer

A) True 
 B)False

Question 18

Figure 21-3
 
-Refer to Figure 21-3.In graph (a) ,what is the price of good y relative to good x (i.e.,Pᵧ/Pₓ) ?

Accepted Answer

A)  1/3
B)  1/4
C)  3
D)  4E) None of the above
F) A) and B)

Question 19

The following diagram shows a budget constraint for a particular consumer. 
If the price of x is $10,what is the price of y?

Accepted Answer

A)  $15
B)  $25
C)  $35
D)  $70E) None of the above
F) A) and B)

Question 20

The goal of the consumer is to

Accepted Answer

A)  maximize utility.
B)  be on the highest indifference curve.
C)  maximize satisfaction.
D)  All of the above are the goals of the consumer.E) C) and D)
F) A) and B)

Exam 21: The Theory of Consumer Choice

If the relative price of a concert ticket is 3 times the price of a meal at a good restaurant,then the opportunity cost of a concert ticket can be measured by the

Correct AnswerverifiedShow Answer

Suppose Rich always uses two packets of sugar with his coffee.Rich's indifference curves for sugar and coffee are

Correct AnswerverifiedShow Answer

The rate at which a consumer is willing to trade one good for another to maintain the same level of satisfaction is affected by

Correct AnswerverifiedShow Answer

If a consumer wants more of a good when his income rises,economists call it an inferior good.

Correct AnswerverifiedShow Answer

Evaluate the following statement: "Giffen goods violate the 'law of demand,' therefore,the 'law of demand' can't really be considered a 'law.'"

Correct AnswerverifiedGiffen goods are extremely rar...View AnswerShow Answer

A consumer that doesn't spend all of her income

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Economists use the term Giffen good to describe a good that violates the law of demand.

Correct AnswerverifiedShow Answer

Jonathan is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires.When the substitution effect dominates the income effect,an increase in the interest rate on savings is likely to

Correct AnswerverifiedShow Answer

The marginal rate of substitution is the slope of the budget constraint.

Correct AnswerverifiedShow Answer

The opportunity cost of current household consumption is the

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To derive the demand curve for a good the

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

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The consumer's optimum is where

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Figure 21-3 -Refer to Figure 21-3.In graph (a) ,what is the price of good y relative to good x (i.e.,Pᵧ/Pₓ) ?

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Violations of the law of demand are assumed to occur

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Figure 21-4 -Refer to Figure 21-4.Which of the following statements is true?

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When two goods are easily substitutable,such as right and left shoes,the indifference curves are right angles.

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The goal of the consumer is to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The following diagram shows a budget constraint for a particular consumer. If the price of x is $10,what is the price of y?

Correct AnswerverifiedShow Answer

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Giffen goods are extremely rar...
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