Question 1

Goods X and Y are perfect complements.If the price of good Y falls,what will the substitution effect acting by itself do

Accepted Answer

A)  It will cause consumers to buy more of good Y and less of good X.
B)  It will cause consumers to buy more of good X and less of good Y.
C)  It will not affect the amount of goods X and Y that consumers buy.
D)  It will affect the amount of goods X and Y that consumers buy, but in an unpredictable way.E) B) and D)
F) All of the above

Question 2

If the price of a good increases,what do consumers perceive,all else being equal

Accepted Answer

A)  an increase in purchasing power if the good is an inferior good
B)  an increase in income if the price increase occurs for a normal good
C)  a decrease in purchasing power
D)  a net gain in income if they increase consumption of some goodsE) A) and C)
F) B) and C)

Question 3

Jaelle is planning ahead for retirement and must decide how much to spend and how much to save while she is working in order to have money to spend when she retires.When the income effect dominates the substitution effect,how is an increase in the interest rate likely to influence saving

Accepted Answer

A)  It is likely to decrease saving.
B)  It is likely to increase saving.
C)  It is likely to increase saving now and decrease saving later.
D)  It is likely to decrease saving now and increase saving later.E) None of the above
F) A) and C)

Question 4

Assume that a college student spends all of her income on macaroni and hamburger.During exam week,the price of a box of macaroni is $1.50 and a pound of hamburger costs $4.00.If she has $41 of income,what could she choose to consume

Accepted Answer

A)  5 boxes of macaroni and 4 pounds of hamburger
B)  7 boxes of macaroni and 9 pounds of hamburger
C)  11 boxes of macaroni and 6 pounds of hamburger
D)  15 boxes of macaroni and 5pounds of hamburgerE) None of the above
F) C) and D)

Question 5

Assume that a college student purchases only coffee and almonds.If coffee is an inferior good and almonds are a normal good,what will the income effect associated with an increase in the price of almonds result in

Accepted Answer

A)  a decrease in the consumption of both almonds and coffee
B)  a decrease in the consumption of almonds and an increase in the consumption of coffee
C)  an increase in the consumption of both almonds and coffee
D)  an increase in the consumption of almonds and a decrease in the consumption of coffeeE) None of the above
F) A) and B)

Question 6

When the budget constraint is tangent to the indifference curve,what is likely to be the case

Accepted Answer

A)  The consumer cannot be made better off without increasing her income.
B)  The consumer is likely to be at a suboptimal level of consumption.
C)  Income is at its optimum for a consumer.
D)  Indifference curves are likely to intersect.E) All of the above
F) A) and D)

Question 7

Which statement best explains the relationship between indifference curves and consumer preferences

Accepted Answer

A)  A consumer is equally satisfied with any indifference curve.
B)  A consumer prefers indifference curves with positive slopes.
C)  A consumer prefers higher indifference curves to lower indifference curves.
D)  A consumer is generally unable to place all consumption bundles on an indifference curve.E) All of the above
F) None of the above

Question 8

What is a rational consumer likely to have maximized

Accepted Answer

A)  preferences
B)  marginal rate of substitution
C)  utility
D)  budget constraintE) None of the above
F) A) and B)

Question 9

Which property characterizes the consumption bundle selected by an optimizing consumer

Accepted Answer

A)  The ratio of total utilities is equal to the relative price.
B)  The ratio of income to price equals the marginal rate of substitution.
C)  The marginal rate of substitution is equal to the relative price.
D)  The marginal rate of substitution is equal to income.E) B) and D)
F) A) and B)

Question 10

Refer to Scenario 21-1 in your textbook.If Fred decides to spend 78 hours a week playing volleyball on the beach,and the rest of his time writing,how much income will he have available to spend on consumption goods each week

Accepted Answer

A)  $900
B)  $1560
C)  $2890
D)  $3540E) A) and B)
F) A) and C)

Question 11

Which of the following is most likely an inferior good

Accepted Answer

A)  an antique car
B)  gasoline
C)  a bus ticket
D)  an airline ticketE) A) and C)
F) B) and C)

Question 12

Assume that your mother purchased two pairs of identical gloves for your birthday.What,in this case,do "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 curvesE) C) and D)
F) A) and B)

Question 13

When two goods are strong complements,such as nickels and dimes,the indifference curves are horizontal lines.

Accepted Answer

A) True 
 B)False

Question 14

Assume that a consumer faces the following budget constraints:
a.Assuming that income is the same on both occasions,describe the difference in relative prices between panel (a) and panel (b).
b.If income in panel (b) is $154,what is the price of good X
c.If income in panel (a) is $98,what is the price of good Y
d.Assuming that the price of good X is the same on both occasions,describe the difference in income and price of good Y between panel (a) and panel (b).

Accepted Answer

a. The price of good Y is relatively hig...

Question 15

Which characterization applies to a normal good

Accepted Answer

A)  The average consumer chooses to consume the good at a normal level.
B)  The average consumer chooses to consume a normal good over a substitute good.
C)  An increase in income increases consumption of the good.
D)  An increase in income decreases consumption of the good.E) A) and B)
F) All of the above

Question 16

Consider two goods: pizza and cola.What is the slope of the consumer's budget constraint measured by

Accepted Answer

A)  the consumer's income divided by the price of cola
B)  the relative price of pizza and cola
C)  the relative income that the consumer spends on pizza and cola
D)  the consumer's spending on pizza divided by the consumer's incomeE) A) and B)
F) A) and D)

Question 17

Figure 21-3
 
-Refer to Figure 21-3.In graph (b) ,if income is equal to $210,what is the price of good X

Accepted Answer

A)  $8
B)  $10
C)  $12
D)  $14E) All of the above
F) B) and C)

Question 18

Figure 21-4
This figure shows a consumer's choice between popcorn and juice.
 
-Refer to Figure 21-4.Comparing all the points on the figure,which one is the best choice

Accepted Answer

A)  If a consumer moves from point C to point A, her loss of popcorn cannot be compensated by an increase of juice.
B)  Point E is preferred to all other points identified in the figure.
C)  Because more is preferred to less, point C may be preferred to point E in some circumstances.
D)  Because point E and point B have basically equal units of juice and popcorn, a consumer would be indifferent between these two points.E) A) and D)
F) A) and C)

Question 19

The consumer chooses consumption of the two goods so that the marginal rate of substitution equals the relative price ratio.

Accepted Answer

A) True 
 B)False

Question 20

If an indifference curve is bowed inward toward the origin,what do we know about the marginal rate of substitution

Accepted Answer

A)  It is not likely to reflect the relative value of goods.
B)  It is likely to be constant for all bundles along the indifference curve.
C)  It is likely to be identical to the price ratio for each bundle along the indifference curve.
D)  It is different for each bundle along the indifference curve.E) B) and D)
F) None of the above

Exam 21: The Theory of Consumer Choice

Which of the following is most likely an inferior good

Correct Answer
verified

Figure 21-4 This figure shows a consumer's choice between popcorn and juice. -Refer to Figure 21-4.Comparing all the points on the figure,which one is the best choice

Correct Answer
verified

Correct Answer
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a. The price of good Y is relatively hig...
View Answer

Assume that your mother purchased two pairs of identical gloves for your birthday.What,in this case,do "left" gloves and "right" gloves provide a good example of

Correct Answer
verified

Which statement best explains the relationship between indifference curves and consumer preferences

Correct Answer
verified

When the budget constraint is tangent to the indifference curve,what is likely to be the case

Correct Answer
verified

Goods X and Y are perfect complements.If the price of good Y falls,what will the substitution effect acting by itself do

Correct Answer
verified

Which characterization applies to a normal good

Correct Answer
verified

The consumer chooses consumption of the two goods so that the marginal rate of substitution equals the relative price ratio.

Correct Answer
verified

What is a rational consumer likely to have maximized

Correct Answer
verified

Consider two goods: pizza and cola.What is the slope of the consumer's budget constraint measured by

Correct Answer
verified

If an indifference curve is bowed inward toward the origin,what do we know about the marginal rate of substitution

Correct Answer
verified

If the price of a good increases,what do consumers perceive,all else being equal

Correct Answer
verified

Refer to Scenario 21-1 in your textbook.If Fred decides to spend 78 hours a week playing volleyball on the beach,and the rest of his time writing,how much income will he have available to spend on consumption goods each week

Correct Answer
verified

Assume that a college student spends all of her income on macaroni and hamburger.During exam week,the price of a box of macaroni is $1.50 and a pound of hamburger costs $4.00.If she has $41 of income,what could she choose to consume

Correct Answer
verified

Which property characterizes the consumption bundle selected by an optimizing consumer

Correct Answer
verified

Jaelle is planning ahead for retirement and must decide how much to spend and how much to save while she is working in order to have money to spend when she retires.When the income effect dominates the substitution effect,how is an increase in the interest rate likely to influence saving

Correct Answer
verified

Figure 21-3 -Refer to Figure 21-3.In graph (b) ,if income is equal to $210,what is the price of good X

Correct Answer
verified

When two goods are strong complements,such as nickels and dimes,the indifference curves are horizontal lines.

Correct Answer
verified

Assume that a college student purchases only coffee and almonds.If coffee is an inferior good and almonds are a normal good,what will the income effect associated with an increase in the price of almonds result in

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

Which of the following is most likely an inferior good

Correct AnswerverifiedShow Answer

Figure 21-4 This figure shows a consumer's choice between popcorn and juice. -Refer to Figure 21-4.Comparing all the points on the figure,which one is the best choice

Correct AnswerverifiedShow Answer

Correct Answerverifieda. The price of good Y is relatively hig...View AnswerShow Answer

Assume that your mother purchased two pairs of identical gloves for your birthday.What,in this case,do "left" gloves and "right" gloves provide a good example of

Correct AnswerverifiedShow Answer

Which statement best explains the relationship between indifference curves and consumer preferences

Correct AnswerverifiedShow Answer

When the budget constraint is tangent to the indifference curve,what is likely to be the case

Correct AnswerverifiedShow Answer

Goods X and Y are perfect complements.If the price of good Y falls,what will the substitution effect acting by itself do

Correct AnswerverifiedShow Answer

Which characterization applies to a normal good

Correct AnswerverifiedShow Answer

The consumer chooses consumption of the two goods so that the marginal rate of substitution equals the relative price ratio.

Correct AnswerverifiedShow Answer

What is a rational consumer likely to have maximized

Correct AnswerverifiedShow Answer

Consider two goods: pizza and cola.What is the slope of the consumer's budget constraint measured by

Correct AnswerverifiedShow Answer

If an indifference curve is bowed inward toward the origin,what do we know about the marginal rate of substitution

Correct AnswerverifiedShow Answer

If the price of a good increases,what do consumers perceive,all else being equal

Correct AnswerverifiedShow Answer

Refer to Scenario 21-1 in your textbook.If Fred decides to spend 78 hours a week playing volleyball on the beach,and the rest of his time writing,how much income will he have available to spend on consumption goods each week

Correct AnswerverifiedShow Answer

Assume that a college student spends all of her income on macaroni and hamburger.During exam week,the price of a box of macaroni is $1.50 and a pound of hamburger costs $4.00.If she has $41 of income,what could she choose to consume

Correct AnswerverifiedShow Answer

Which property characterizes the consumption bundle selected by an optimizing consumer

Correct AnswerverifiedShow Answer

Jaelle is planning ahead for retirement and must decide how much to spend and how much to save while she is working in order to have money to spend when she retires.When the income effect dominates the substitution effect,how is an increase in the interest rate likely to influence saving

Correct AnswerverifiedShow Answer

Figure 21-3 -Refer to Figure 21-3.In graph (b) ,if income is equal to $210,what is the price of good X

Correct AnswerverifiedShow Answer

When two goods are strong complements,such as nickels and dimes,the indifference curves are horizontal lines.

Correct AnswerverifiedShow Answer

Assume that a college student purchases only coffee and almonds.If coffee is an inferior good and almonds are a normal good,what will the income effect associated with an increase in the price of almonds result in

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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a. The price of good Y is relatively hig...
View Answer

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