Question 1

Figure 21-11 
-Refer to Figure 21-11. What is the consumer's marginal rate of substitution as she moves from B to C?

Accepted Answer

A)  12
B)  6
C)  4
D)  1E) All of the above
F) A) and B)

Question 2

Suppose Reta is planning for retirement in a two-period world. In the first period Reta is young and earns $1 million, and in the second period Reta is old and retired and earns nothing. The interest rate is initially 10 percent, but then it falls to 7 percent. After the interest rate falls, the

Accepted Answer

A)  substitution effect will induce Reta to consume more when she is young.
B)  substitution effect will induce Reta to consume less when she is young.
C)  income effect will induce Reta to consume more when she is young.
D)  change in interest rates affects the substitution effect but not the income effect.E) C) and D)
F) A) and B)

Question 3

​Suppose the price of good X increases and consumers purchase more of good Y. Which of the following statements is necessarily true about good Y?

Accepted Answer

A)  ​Good Y is a normal good.
B)  ​Good Y is an inferior good, but not a Giffen good.
C)  ​Good Y is an inferior good and a Giffen good.
D)  ​Good Y could be a normal or inferior good.E) All of the above
F) A) and B)

Question 4

Figure 21-5
(a) 
(b)  X/PY) ? A) 1/4 B) 1/3 C) 3 D) 4" class="answers-bank-image d-inline" rel="preload" > X/PY) ? A) 1/4 B) 1/3 C) 3 D) 4" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-5. In graph (a) , what is the price of good X relative to the price of good Y (i.e., PX/PY) ?

Accepted Answer

A)  1/4
B)  1/3
C)  3
D)  4E) A) and B)
F) A) and C)

Question 5

Ryan experiences an increase in his wages. The hours of labor that he supplies to the market would increase if

Accepted Answer

A)  the income effect is larger than the substitution effect.
B)  the substitution effect is larger than the income effect.
C)  neither the income effect nor the substitution effect apply to Tom's labor-leisure tradeoff.
D)  Ryan views both labor and leisure as inferior goods.E) A) and D)
F) B) and C)

Question 6

A consumer's optimal choice is affected by income, prices of goods, and preferences.

Accepted Answer

A) True 
 B)False

Question 7

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 D)
F) A) and B)

Question 8

An individual's demand curve for a good is derived by varying the

Accepted Answer

A)  income level and observing the resulting total utility derived from both goods.
B)  price of one good and observing the resulting quantities of the other good.
C)  budget line to the left and calculating the loss in total utility.
D)  price of one good and observing the resulting quantities demanded of that good.E) All of the above
F) A) and D)

Question 9

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

Accepted Answer

A)  Indifference curves usually intersect.
B)  Indifference curves have positive slopes.
C)  Indifference curves are downward sloping and always linear.
D)  Indifference curves are usually bowed in toward the origin.E) A) and D)
F) B) and C)

Question 10

Teresa faces prices of $6.00 for a unit of good X and $1.50 for a unit of good Y. At her optimum, Teresa is willing to give up 1 unit of good X for __________ units of good Y.

Accepted Answer

The answer of Teresa faces prices of $6.00 for a...

Question 11

Figure 21-25 The figure pertains to a particular consumer. On the axes, X represents the quantity of good X and Y represents the quantity of good Y. 
-Refer to Figure 21-25. Suppose the price of good X is $15, the price of good Y is $10, and the consumer's income is $450. Then the consumer's optimal choice is to buy

Accepted Answer

A)  6 units of good X and 36 units of good Y.
B)  12 units of good X and 27 units of good Y.
C)  20 units of good X and 15 units of good Y.
D)  26 units of good X and 6 units of good Y.E) None of the above
F) B) and D)

Question 12

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?

Accepted Answer

Hannah ear...

Question 13

Figure 21-18 2 if A) the price of Y decreases. B) the price of X decreases. C) income increases. D) All of the above would be correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-18. It would be possible for the consumer to reach I2 if

Accepted Answer

A)  the price of Y decreases.
B)  the price of X decreases.
C)  income increases.
D)  All of the above would be correct.E) None of the above
F) A) and B)

Question 14

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 $8. Paul's new optimal choice is point

Accepted Answer

A)  A.
B)  B.
C)  D.
D)  E.E) None of the above
F) B) and C)

Question 15

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) All of the above

Question 16

A family on a trip budgets $800 for meals and gasoline. If the price of a meal for the family is $50, how many meals can the family buy if they do not buy any gasoline?

Accepted Answer

A)  8
B)  16
C)  24
D)  32E) None of the above
F) C) and D)

Question 17

Figure 21-19 
-Refer to Figure 21-19. Assume that the consumer depicted in the figure has an income of $20. The price of Skittles is $2 and the price of M&M's is $2. The consumer's optimal choice is point

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D.E) A) and B)
F) All of the above

Question 18

Figure 21-27 
-Refer to Figure 21-27. Anna experiences an increase in her hourly wage. Her optimal choice point moves from A to B. For Anna,

Accepted Answer

A)  her labor supply curve is backward bending.
B)  her labor supply curve is upward sloping.
C)  leisure is an inferior good.
D)  both a and c are correct.E) A) and B)
F) A) and C)

Question 19

Figure 21-30 The graph shows two budget constraints for a consumer. 
-Refer to Figure 21-30. Suppose Budget Constraint B applies. If the consumer's income is $90 and if he is buying 5 light bulbs, then how much money is he spending on hamburgers?

Accepted Answer

If income is $90, then the price of a li...

Question 20

For a typical consumer, indifference curves can intersect if they satisfy the property of transitivity.

Accepted Answer

A) True 
 B)False

Exam 21: The Theory of Consumer Choice

For a typical consumer, indifference curves can intersect if they satisfy the property of transitivity.

Correct Answer
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An individual's demand curve for a good is derived by varying the

Correct Answer
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Suppose the price of good X increases and consumers purchase more of good Y. Which of the following statements is necessarily true about good Y?

Correct Answer
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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 $8. Paul's new optimal choice is point

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

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

Correct Answer
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Teresa faces prices of $6.00 for a unit of good X and $1.50 for a unit of good Y. At her optimum, Teresa is willing to give up 1 unit of good X for __________ units of good Y.

Correct Answer
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Correct Answer
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Figure 21-18 -Refer to Figure 21-18. It would be possible for the consumer to reach I₂ if

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
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A family on a trip budgets $800 for meals and gasoline. If the price of a meal for the family is $50, how many meals can the family buy if they do not buy any gasoline?

Correct Answer
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Figure 21-30 The graph shows two budget constraints for a consumer. -Refer to Figure 21-30. Suppose Budget Constraint B applies. If the consumer's income is $90 and if he is buying 5 light bulbs, then how much money is he spending on hamburgers?

Correct Answer
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If income is $90, then the price of a li...
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Suppose Reta is planning for retirement in a two-period world. In the first period Reta is young and earns $1 million, and in the second period Reta is old and retired and earns nothing. The interest rate is initially 10 percent, but then it falls to 7 percent. After the interest rate falls, the

Correct Answer
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Figure 21-19 -Refer to Figure 21-19. Assume that the consumer depicted in the figure has an income of $20. The price of Skittles is $2 and the price of M&M's is $2. The consumer's optimal choice is point

Correct Answer
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Figure 21-11 -Refer to Figure 21-11. What is the consumer's marginal rate of substitution as she moves from B to C?

Correct Answer
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Which of the following is a property of typical indifference curves?

Correct Answer
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Figure 21-27 -Refer to Figure 21-27. Anna experiences an increase in her hourly wage. Her optimal choice point moves from A to B. For Anna,

Correct Answer
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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?

Correct Answer
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Hannah ear...
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Ryan experiences an increase in his wages. The hours of labor that he supplies to the market would increase if

Correct Answer
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A consumer's optimal choice is affected by income, prices of goods, and preferences.

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

For a typical consumer, indifference curves can intersect if they satisfy the property of transitivity.

Correct AnswerverifiedShow Answer

An individual's demand curve for a good is derived by varying the

Correct AnswerverifiedShow Answer

​Suppose the price of good X increases and consumers purchase more of good Y. Which of the following statements is necessarily true about good Y?

Correct AnswerverifiedShow Answer

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 $8. Paul's new optimal choice is point

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Teresa faces prices of $6.00 for a unit of good X and $1.50 for a unit of good Y. At her optimum, Teresa is willing to give up 1 unit of good X for __________ units of good Y.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 21-18 -Refer to Figure 21-18. It would be possible for the consumer to reach I2 if

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

A family on a trip budgets $800 for meals and gasoline. If the price of a meal for the family is $50, how many meals can the family buy if they do not buy any gasoline?

Correct AnswerverifiedShow Answer

Figure 21-30 The graph shows two budget constraints for a consumer. -Refer to Figure 21-30. Suppose Budget Constraint B applies. If the consumer's income is $90 and if he is buying 5 light bulbs, then how much money is he spending on hamburgers?

Correct AnswerverifiedIf income is $90, then the price of a li...View AnswerShow Answer

Suppose Reta is planning for retirement in a two-period world. In the first period Reta is young and earns $1 million, and in the second period Reta is old and retired and earns nothing. The interest rate is initially 10 percent, but then it falls to 7 percent. After the interest rate falls, the

Correct AnswerverifiedShow Answer

Figure 21-19 -Refer to Figure 21-19. Assume that the consumer depicted in the figure has an income of $20. The price of Skittles is $2 and the price of M&M's is $2. The consumer's optimal choice is point

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Figure 21-11 -Refer to Figure 21-11. What is the consumer's marginal rate of substitution as she moves from B to C?

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

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Figure 21-27 -Refer to Figure 21-27. Anna experiences an increase in her hourly wage. Her optimal choice point moves from A to B. For Anna,

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedHannah ear...View AnswerShow Answer

Ryan experiences an increase in his wages. The hours of labor that he supplies to the market would increase if

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A consumer's optimal choice is affected by income, prices of goods, and preferences.

Correct AnswerverifiedShow Answer

Correct Answer
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Suppose the price of good X increases and consumers purchase more of good Y. Which of the following statements is necessarily true about good Y?

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

Correct Answer
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Figure 21-18 -Refer to Figure 21-18. It would be possible for the consumer to reach I₂ if

Correct Answer
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If income is $90, then the price of a li...
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Hannah ear...
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