Question 1

Beer and pretzels are normal goods.When the price of beer falls,the substitution effect causes

Accepted Answer

A)   the consumer to feel richer,so the consumer buys more pretzels.
B)   the consumer to feel richer,so the consumer buys less pretzels.
C)   pretzels to be relatively more expensive,so the consumer buys less pretzels.
D)   pretzels to be relatively less expensive,so the consumer buys more pretzels.E) None of the above
F) A) and B)

Question 2

Suppose Caroline is indifferent between tea and coffee as long as she consumes an equivalent amount of caffeine.Suppose that coffee has twice as much caffeine as tea.Which graph would illustrate a representative indifference curve?
A)
B)
C)
D)

Accepted Answer

The answer of Suppose Caroline is indifferent between tea and...

Question 3

The bowed shape of the indifference curve reflects the consumer's

Accepted Answer

A)   unwillingness to give up a good that he already has in large quantity.
B)   unwillingness to purchase a good that he already has in large quantity.
C)   greater willingness to give up a good that he already has in large quantity.
D)   greater willingness to purchase a good that he already has in large quantity.E) A) and B)
F) All of the above

Question 4

List and briefly explain each of the four properties of indifference curves.

Accepted Answer

1: Higher indifference curves are prefer...

Question 5

A consumer's preferences for $1 bills and $20 bills can be represented by indifference curves that are

Accepted Answer

A)   bowed out from the origin
B)   bowed in toward the origin
C)   straight lines
D)   right anglesE) A) and B)
F) B) and D)

Question 6

Figure 21-12 
-Refer to Figure 21-12.If the consumer was initially at point A in the figure,a movement from point B to point C 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) B) and D)
F) A) and B)

Question 7

Assume that a consumer's indifference curve is bowed inward and satisfies the other three properties of indifference curves.As the consumer moves from left to right along the horizontal axis,the consumer's marginal rate of substitution

Accepted Answer

A)   increases.
B)   decreases.
C)   remains constant.
D)   increases,then decreases.E) B) and C)
F) A) and D)

Question 8

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 $126,what is the price of good X?
c.
If income in Panel A is $84,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 9

A rational person can have a negatively-sloped labor supply curve.

Accepted Answer

A) True 
 B)False

Question 10

If the income effect counteracts the substitution effect,we know that the good in question is a(n)

Accepted Answer

A)   complementary good.
B)   inferior good.
C)   luxury good.
D)   normal good.E) A) and B)
F) None of the above

Question 11

Figure 21-2 
-Refer to Figure 21-2.Which of the following statements is correct?

Accepted Answer

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

Question 12

Answer the following questions based on the table.A consumer is able to consume the following bundles of rice and beans when the price of rice is $2 and the price of beans is $3.
  
a.
How much is this consumer's income?
b.
Draw a budget constraint given this information.Label it B.
c.
Construct a new budget constraint showing the change if the price of rice falls $1.Label this C.
d.
Given the original prices for rice ($2)and beans ($3),construct a new budget constraint if this consumer's income increased to $48.Label this D.

Accepted Answer

The answer of Answer the following questions based on the...

Question 13

A family on a trip budgets $800 for meals and hotel accommodations.Suppose the price of a meal is $40.In addition,suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals.How many meals could the family afford if they gave up two nights in the hotel?

Accepted Answer

A)   1
B)   2
C)   5
D)   8E) None of the above
F) B) and D)

Question 14

Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst.The price of a pint of beer is $5,and the price of a bratwurst is $4.Which of the following combinations of beers and bratwursts represents a point that would lie to the exterior of the consumer's budget constraint?

Accepted Answer

A)   160 beers and 200 bratwursts
B)   40 beers and 50 bratwursts
C)   80 beers and 100 bratwursts
D)   160 beers and 0 bratwurstsE) None of the above
F) All of the above

Question 15

If an indifference curve is bowed in toward the origin,the marginal rate of substitution is

Accepted Answer

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

Question 16

Figure 21-8   
-Refer to Figure 21-8.Which of the following statements is correct?

Accepted Answer

A)   The indifference curves represented in graph a are perfect complements.
B)   The indifference curves represented in graph b are perfect substitutes.
C)   The indifference curves represented in graph c are neither perfect substitutes not perfect complements.
D)   All of the above are correct.E) C) and D)
F) B) and D)

Question 17

A consumer is currently spending all of her available income on two goods: music CDs and DVDs.At her current consumption bundle she is spending twice as much on CDs as she is on DVDs.If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs,what is the price of a CD?

Accepted Answer

A)   $4
B)   $8
C)   $12
D)   $20E) B) and D)
F) C) and D)

Question 18

Alicia is a vegetarian,so she does not eat beef.That is,beef provides no additional utility to Alicia.She loves potatoes,however.If we illustrate Alicia's indifference curves by drawing beef on the horizontal axis and potatoes on the vertical axis,her indifference curves will

Accepted Answer

A)   slope downward.
B)   be vertical straight lines.
C)   slope upward.
D)   be horizontal straight lines.E) B) and C)
F) C) and D)

Question 19

Just as the theory of the competitive firm provides a more complete understanding of supply,the theory of consumer choice provides a more complete understanding of

Accepted Answer

A)   demand.
B)   profits.
C)   production possibility frontiers.
D)   wages.E) C) and D)
F) A) and D)

Question 20

When economists describe preferences,they often use the concept of

Accepted Answer

A)   markets.
B)   income.
C)   utility.
D)   prices.E) B) and C)
F) A) and B)

Exam 21: The Theory of Consumer Choice

Figure 21-12 -Refer to Figure 21-12.If the consumer was initially at point A in the figure,a movement from point B to point C as a result of a decrease in the price of potato chips represents the

Correct Answer
verified

A consumer is currently spending all of her available income on two goods: music CDs and DVDs.At her current consumption bundle she is spending twice as much on CDs as she is on DVDs.If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs,what is the price of a CD?

Correct Answer
verified

If an indifference curve is bowed in toward the origin,the marginal rate of substitution is

Correct Answer
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When economists describe preferences,they often use the concept of

Correct Answer
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A consumer's preferences for $1 bills and $20 bills can be represented by indifference curves that are

Correct Answer
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Figure 21-8 -Refer to Figure 21-8.Which of the following statements is correct?

Correct Answer
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Suppose Caroline is indifferent between tea and coffee as long as she consumes an equivalent amount of caffeine.Suppose that coffee has twice as much caffeine as tea.Which graph would illustrate a representative indifference curve? A) B) C) D)

Correct Answer
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Correct Answer
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Correct Answer
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A rational person can have a negatively-sloped labor supply curve.

Correct Answer
verified

Beer and pretzels are normal goods.When the price of beer falls,the substitution effect causes

Correct Answer
verified

Just as the theory of the competitive firm provides a more complete understanding of supply,the theory of consumer choice provides a more complete understanding of

Correct Answer
verified

Figure 21-2 -Refer to Figure 21-2.Which of the following statements is correct?

Correct Answer
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The bowed shape of the indifference curve reflects the consumer's

Correct Answer
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Assume that a consumer's indifference curve is bowed inward and satisfies the other three properties of indifference curves.As the consumer moves from left to right along the horizontal axis,the consumer's marginal rate of substitution

Correct Answer
verified

List and briefly explain each of the four properties of indifference curves.

Correct Answer
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1: Higher indifference curves are prefer...
View Answer

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

If the income effect counteracts the substitution effect,we know that the good in question is a(n)

Correct Answer
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Alicia is a vegetarian,so she does not eat beef.That is,beef provides no additional utility to Alicia.She loves potatoes,however.If we illustrate Alicia's indifference curves by drawing beef on the horizontal axis and potatoes on the vertical axis,her indifference curves will

Correct Answer
verified

A family on a trip budgets $800 for meals and hotel accommodations.Suppose the price of a meal is $40.In addition,suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals.How many meals could the family afford if they gave up two nights in the hotel?

Correct Answer
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Exam 21: The Theory of Consumer Choice

Figure 21-12 -Refer to Figure 21-12.If the consumer was initially at point A in the figure,a movement from point B to point C as a result of a decrease in the price of potato chips represents the

Correct AnswerverifiedShow Answer

A consumer is currently spending all of her available income on two goods: music CDs and DVDs.At her current consumption bundle she is spending twice as much on CDs as she is on DVDs.If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs,what is the price of a CD?

Correct AnswerverifiedShow Answer

If an indifference curve is bowed in toward the origin,the marginal rate of substitution is

Correct AnswerverifiedShow Answer

When economists describe preferences,they often use the concept of

Correct AnswerverifiedShow Answer

A consumer's preferences for $1 bills and $20 bills can be represented by indifference curves that are

Correct AnswerverifiedShow Answer

Figure 21-8 -Refer to Figure 21-8.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Suppose Caroline is indifferent between tea and coffee as long as she consumes an equivalent amount of caffeine.Suppose that coffee has twice as much caffeine as tea.Which graph would illustrate a representative indifference curve? A) B) C) D)

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A rational person can have a negatively-sloped labor supply curve.

Correct AnswerverifiedShow Answer

Beer and pretzels are normal goods.When the price of beer falls,the substitution effect causes

Correct AnswerverifiedShow Answer

Just as the theory of the competitive firm provides a more complete understanding of supply,the theory of consumer choice provides a more complete understanding of

Correct AnswerverifiedShow Answer

Figure 21-2 -Refer to Figure 21-2.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The bowed shape of the indifference curve reflects the consumer's

Correct AnswerverifiedShow Answer

Assume that a consumer's indifference curve is bowed inward and satisfies the other three properties of indifference curves.As the consumer moves from left to right along the horizontal axis,the consumer's marginal rate of substitution

Correct AnswerverifiedShow Answer

List and briefly explain each of the four properties of indifference curves.

Correct Answerverified1: Higher indifference curves are prefer...View AnswerShow Answer

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

If the income effect counteracts the substitution effect,we know that the good in question is a(n)

Correct AnswerverifiedShow Answer

Alicia is a vegetarian,so she does not eat beef.That is,beef provides no additional utility to Alicia.She loves potatoes,however.If we illustrate Alicia's indifference curves by drawing beef on the horizontal axis and potatoes on the vertical axis,her indifference curves will

Correct AnswerverifiedShow Answer

A family on a trip budgets $800 for meals and hotel accommodations.Suppose the price of a meal is $40.In addition,suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals.How many meals could the family afford if they gave up two nights in the hotel?

Correct AnswerverifiedShow Answer

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1: Higher indifference curves are prefer...
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a.
The price of good Y is relatively hig...
View Answer

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