Question 1

An indifference curve illustrates the

Accepted Answer

A)  prices facing a consumer as she chooses how much of good X and good Y to consume.
B)  income facing a consumer as she chooses how much of good X and good Y to consume.
C)  trade-offs facing a consumer as she chooses how much of good X and good Y to consume.
D)  All of the above are correct.E) B) and C)
F) C) and D)

Question 2

Figure 21-13 
-Refer to Figure 21-13. As the consumer moves from A to B to C, the consumer's total utility

Accepted Answer

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

Question 3

When indifference curves are bowed inward, the marginal rate of substitution varies at each point on the indifference curve.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is correct?

Accepted Answer

A)  The theory of consumer choice provides a more complete understanding of supply, just as the theory of the competitive firm provides a more complete understanding of demand.
B)  The theory of consumer choice provides a more complete understanding of demand, just as the theory of the competitive firm provides a more complete understanding of supply.
C)  Monetary theory provides a more complete understanding of demand, just as the theory of the competitive firm provides a more complete understanding of supply.
D)  The theory of public choice provides a more complete understanding of supply, just as the theory of the competitive firm provides a more complete understanding of demand.E) C) and D)
F) B) and C)

Question 5

Economists represent a consumer's preferences using

Accepted Answer

A)  demand curves.
B)  budget constraints.
C)  indifference curves.
D)  supply curves.E) All of the above
F) A) and B)

Question 6

A decrease in the price of DVD players leads consumers to buy more DVD players. From this information we can conclude that DVD players

Accepted Answer

A)  are normal goods.
B)  are inferior goods.
C)  are luxury goods.
D)  could be any of the above.E) None of the above
F) A) and B)

Question 7

What does the slope of a consumer's indifference curve represent?

Accepted Answer

The slope of a consumer's indi...

Question 8

Figure 21-8 
-Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?

Accepted Answer

A)  $3.33
B)  $5
C)  $15
D)  $30E) C) and D)
F) B) and C)

Question 9

For a typical consumer, most indifference curves are bowed inward.

Accepted Answer

A) True 
 B)False

Question 10

Because people are more willing to trade away goods that they have in abundance and less willing to trade away goods of which they have little, indifference curves are ___________.

Accepted Answer

bowed inwa...

Question 11

Suppose a consumer consumes two goods, X and Y. The relative price of the two goods equals the

Accepted Answer

A)  marginal rate of substitution.
B)  rate at which the consumer will give up X to gain Y while maintaining the same level of utility.
C)  slope of the budget constraint.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 12

A consumer chooses an optimal consumption point where the

Accepted Answer

A)  marginal rate of substitution is maximized.
B)  rate at which the consumer is willing to trade one good for another equals the price ratio.
C)  price ratio is minimized.
D)  All of the above are correct.E) A) and D)
F) None of the above

Question 13

A consumer has preferences over two goods, X and Y. Suppose we graph this consumer's preferences (which satisfy the usual properties of indifference curves)  and budget constraint on a diagram with X on the horizontal axis and Y on the vertical axis. At the consumer's current consumption bundle, the consumer is spending all available income, and the marginal rate of substitution is less than the slope of the budget constraint. We can conclude that the consumer

Accepted Answer

A)  is currently maximizing satisfaction subject to the budget constraint.
B)  could increase satisfaction by consuming more X and less Y.
C)  could increase satisfaction by consuming less X and more Y.
D)  could purchase more X and more Y and increase total satisfaction.E) All of the above
F) A) and B)

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 directly on 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)  80 beers and 0 bratwurstsE) A) and B)
F) B) and C)

Question 15

​Suppose an individual knows that the marginal utility he receives from the next apple is 5 and that the price of an apple is $2. He also knows that the marginal utility he receives from the next orange is 3 and the price of an orange is $1. If the individual is choosing optimally, the next good he will buy is

Accepted Answer

A)  ​an orange because the marginal utility per dollar spent on an orange is greater.
B)  ​an orange because the marginal utility of the orange is greater.
C)  ​an apple because the marginal utility per dollar spent on an apple is greater.
D)  ​an apple because the marginal utility of the apple is greater.E) A) and C)
F) B) and D)

Question 16

A decrease in income will cause a consumer's budget constraint to

Accepted Answer

A)  shift outward, parallel to its initial position.
B)  shift inward, parallel to its initial position.
C)  pivot along the horizontal axis.
D)  pivot along the vertical axis.E) A) and C)
F) A) and B)

Question 17

Shelley wins $1 million in her state's lottery. If Shelley keeps working after she wins the money, we can infer that the substitution effect must exactly offset the income effect for her.

Accepted Answer

A) True 
 B)False

Question 18

If a consumer purchases more of good X and good Y after her income increases, then neither good X nor good Y is an inferior good for her.

Accepted Answer

A) True 
 B)False

Question 19

Frannie spends her income on rice and beans. At her optimum, Frannie's

Accepted Answer

A)  utility from consuming rice is equal to her utility from consuming beams.
B)  marginal utility of rice is equal to her marginal utility of beans.
C)  marginal utility per dollar spent on rice equals her marginal utility per dollar spent on beans.
D)  marginal rate of substitution is equal to 1.E) A) and B)
F) A) and C)

Question 20

Bill consumes two goods: iced tea and spaghetti. The price of iced tea is $2 per bottle, and the price of spaghetti is $8 per serving. His income is $1,000 per month. He spends all of his income each month. He purchases 200 bottles of iced tea. How many servings of spaghetti does he purchase?

Accepted Answer

A)  125
B)  75
C)  50
D)  10E) C) and D)
F) B) and D)

Exam 21: The Theory of Consumer Choice

Economists represent a consumer's preferences using

Correct Answer
verified

A decrease in income will cause a consumer's budget constraint to

Correct Answer
verified

Shelley wins $1 million in her state's lottery. If Shelley keeps working after she wins the money, we can infer that the substitution effect must exactly offset the income effect for her.

Correct Answer
verified

Correct Answer
verified

Suppose a consumer consumes two goods, X and Y. The relative price of the two goods equals the

Correct Answer
verified

A decrease in the price of DVD players leads consumers to buy more DVD players. From this information we can conclude that DVD players

Correct Answer
verified

Because people are more willing to trade away goods that they have in abundance and less willing to trade away goods of which they have little, indifference curves are ___________.

Correct Answer
verified
bowed inwa...
View Answer

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
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Figure 21-13 -Refer to Figure 21-13. As the consumer moves from A to B to C, the consumer's total utility

Correct Answer
verified

What does the slope of a consumer's indifference curve represent?

Correct Answer
verified
The slope of a consumer's indi...
View Answer

If a consumer purchases more of good X and good Y after her income increases, then neither good X nor good Y is an inferior good for her.

Correct Answer
verified

An indifference curve illustrates the

Correct Answer
verified

Bill consumes two goods: iced tea and spaghetti. The price of iced tea is $2 per bottle, and the price of spaghetti is $8 per serving. His income is $1,000 per month. He spends all of his income each month. He purchases 200 bottles of iced tea. How many servings of spaghetti does he purchase?

Correct Answer
verified

Figure 21-8 -Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?

Correct Answer
verified

Correct Answer
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When indifference curves are bowed inward, the marginal rate of substitution varies at each point on the indifference curve.

Correct Answer
verified

A consumer chooses an optimal consumption point where the

Correct Answer
verified

For a typical consumer, most indifference curves are bowed inward.

Correct Answer
verified

Frannie spends her income on rice and beans. At her optimum, Frannie's

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

Economists represent a consumer's preferences using

Correct AnswerverifiedShow Answer

A decrease in income will cause a consumer's budget constraint to

Correct AnswerverifiedShow Answer

Shelley wins $1 million in her state's lottery. If Shelley keeps working after she wins the money, we can infer that the substitution effect must exactly offset the income effect for her.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose a consumer consumes two goods, X and Y. The relative price of the two goods equals the

Correct AnswerverifiedShow Answer

A decrease in the price of DVD players leads consumers to buy more DVD players. From this information we can conclude that DVD players

Correct AnswerverifiedShow Answer

Because people are more willing to trade away goods that they have in abundance and less willing to trade away goods of which they have little, indifference curves are ___________.

Correct Answerverifiedbowed inwa...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Figure 21-13 -Refer to Figure 21-13. As the consumer moves from A to B to C, the consumer's total utility

Correct AnswerverifiedShow Answer

What does the slope of a consumer's indifference curve represent?

Correct AnswerverifiedThe slope of a consumer's indi...View AnswerShow Answer

If a consumer purchases more of good X and good Y after her income increases, then neither good X nor good Y is an inferior good for her.

Correct AnswerverifiedShow Answer

An indifference curve illustrates the

Correct AnswerverifiedShow Answer

Bill consumes two goods: iced tea and spaghetti. The price of iced tea is $2 per bottle, and the price of spaghetti is $8 per serving. His income is $1,000 per month. He spends all of his income each month. He purchases 200 bottles of iced tea. How many servings of spaghetti does he purchase?

Correct AnswerverifiedShow Answer

Figure 21-8 -Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When indifference curves are bowed inward, the marginal rate of substitution varies at each point on the indifference curve.

Correct AnswerverifiedShow Answer

A consumer chooses an optimal consumption point where the

Correct AnswerverifiedShow Answer

For a typical consumer, most indifference curves are bowed inward.

Correct AnswerverifiedShow Answer

Frannie spends her income on rice and beans. At her optimum, Frannie's

Correct AnswerverifiedShow Answer

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bowed inwa...
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The slope of a consumer's indi...
View Answer

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