Question 1

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 2

When two goods are perfect complements,the indifference curve is

Accepted Answer

A)   a horizontal straight line.
B)   bowed outward.
C)   a downward-sloping straight line.
D)   a right angle.E) C) and D)
F) A) and D)

Question 3

Figure 21-12 
-Refer to Figure 21-12.If the consumer moves from bundle W to bundle Z,the

Accepted Answer

A)   marginal rate of substitution remains constant.
B)   total utility remains constant.
C)   total utility decreases.
D)   Both a and b are correct.E) A) and B)
F) None of the above

Question 4

The consumer's optimum is where

Accepted Answer

A)   MUx/MUy = Py/Px.
B)   MUx/Py = MUy/Px.
C)   MUx/MUy = Px/Py.
D)   None of the above is correct.E) B) and C)
F) B) and D)

Question 5

Karen,Tara,and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days.Ice cream costs $5 per gallon,and paperback novels cost $8 each.Karen has a budget of $80,Tara has a budget of $60,and Chelsea has a budget of $40 to spend on ice cream and paperback novels.Which of the following statements is correct?

Accepted Answer

A)   Each woman faces the same budget constraint.
B)   The slope of the budget constraint is the same for each woman.
C)   The area underneath the budget constraint is larger for Chelsea than for Karen.
D)   All of the above are correct.E) A) and B)
F) C) and D)

Question 6

An increase in a consumer's income

Accepted Answer

A)   increases the slope of the consumer's budget constraint.
B)   has no effect on the slope of the consumer's budget constraint.
C)   decreases the slope of the consumer's budget constraint.
D)   has no effect on the consumer's budget constraint.E) A) and C)
F) B) and C)

Question 7

The substitution effect of a price change is depicted by a

Accepted Answer

A)   movement along the budget constraint holding satisfaction constant.
B)   shift in the budget constraint at the old prices.
C)   movement along the consumer's new indifference curve at the new prices.
D)   movement along the original indifference curve to the point where the marginal rate of substitution equals the price ratio for the new set of prices.E) None of the above
F) B) and C)

Question 8

The theory of consumer choice describes the

Accepted Answer

A)   literal process by which people make decisions.
B)   irrational decisions made by consumers on a daily basis.
C)   implicit,psychological process by which people make explicit,economic decisions.
D)   Both a and b are correct.E) A) and B)
F) A) and C)

Question 9

Suppose a consumer spends her income on two goods: music CDs and DVDs.The consumer has $200 to allocate to these two goods,the price of a CD is $10,and the price of a DVD is $20.What is the maximum number of CDs the consumer can purchase?

Accepted Answer

A)   10
B)   20
C)   40
D)   50E) A) and C)
F) B) and D)

Question 10

Figure 21-7 
-Refer to Figure 21-7.Suppose a consumer has $200 in income,the price of a book is $5,and the price of a DVD is $10.What is the value of A?

Accepted Answer

A)   40
B)   20
C)   10
D)   2E) B) and D)
F) All of the above

Question 11

The income effect of a price change is depicted by

Accepted Answer

A)   a parallel shift of the budget constraint at the old set of prices.
B)   a parallel shift of the budget constraint at the new set of prices.
C)   a movement along the budget constraint holding the level of satisfaction constant.
D)   not observable and is therefore neither a shift nor a change in the slope of the budget constraint.E) A) and B)
F) C) and D)

Question 12

Katie wins $3 million in her state's lottery.If Katie drastically reduces the number of hours she works after she wins the money,we can infer that the income effect is larger than the substitution effect for her.

Accepted Answer

A) True 
 B)False

Question 13

What are the two effects of a change in a price that a consumer experiences?

Accepted Answer

A)   the income effect and the budget effect
B)   the complement effect and the substitute effect
C)   the price effect and the preference effect
D)   the income effect and the substitution effectE) A) and B)
F) A) and C)

Question 14

A consumer consumes two normal goods,sandwiches and milk.When the price of milk is $0.50 per glass,the consumer purchases 40 glasses.When the price rises to $0.65 per glass,the consumer purchases 30 glasses.We can use the information provided by the consumer's optimum choices to derive the

Accepted Answer

A)   demand curve for milk.
B)   demand curve for sandwiches.
C)   supply curve for milk.
D)   labor-leisure tradeoff.E) C) and D)
F) B) and C)

Question 15

The slope of an indifference curve is

Accepted Answer

A)   the rate of change of consumer's preferences.
B)   the marginal rate of preference.
C)   the marginal rate of substitution.
D)   always equal to the slope of the budget constraint.E) None of the above
F) B) and D)

Question 16

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) None of the above
F) A) and C)

Question 17

When Matt has an income of $2,000,he consumes 30 units of good A and 50 units of good B.After Matt's income increases to $3,000,he consumes 25 units of good A and 95 units of good B.Which of the following statements is correct?

Accepted Answer

A)   Both goods A and B are normal goods.
B)   Both goods A and B are inferior goods.
C)   Good A is a normal good,and good B is an inferior good.
D)   Good A is an inferior good,and good B is a normal good.E) A) and B)
F) None of the above

Question 18

Graphically demonstrate the conditions associated with a consumer optimum.Carefully label all curves and axes.

Accepted Answer

The answer of Graphically demonstrate the conditions associated with a...

Question 19

Suppose a consumer has preferences over two goods,X and Y,which are perfect substitutes.In particular,two units of X is equivalent to one unit of Y.If the price of X is $1,the price of Y is $3,and the consumer has $30 of income to allocate to these two goods,how much of each good should the consumer purchase to maximize satisfaction?

Accepted Answer

A)   30 units of X and 0 units of Y
B)   0 units of X and 10 units of Y
C)   15 units of X and 5 units of Y
D)   15 units of X and 0 units of YE) None of the above
F) A) and D)

Question 20

A consumer's preferences for right shoes and left shoes 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) A) and C)

Exam 21: The Theory of Consumer Choice

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
verified

Graphically demonstrate the conditions associated with a consumer optimum.Carefully label all curves and axes.

Correct Answer
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A consumer's preferences for right shoes and left shoes can be represented by indifference curves that are

Correct Answer
verified

Figure 21-12 -Refer to Figure 21-12.If the consumer moves from bundle W to bundle Z,the

Correct Answer
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Figure 21-7 -Refer to Figure 21-7.Suppose a consumer has $200 in income,the price of a book is $5,and the price of a DVD is $10.What is the value of A?

Correct Answer
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Suppose a consumer spends her income on two goods: music CDs and DVDs.The consumer has $200 to allocate to these two goods,the price of a CD is $10,and the price of a DVD is $20.What is the maximum number of CDs the consumer can purchase?

Correct Answer
verified

The slope of an indifference curve is

Correct Answer
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What are the two effects of a change in a price that a consumer experiences?

Correct Answer
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The theory of consumer choice describes the

Correct Answer
verified

Katie wins $3 million in her state's lottery.If Katie drastically reduces the number of hours she works after she wins the money,we can infer that the income effect is larger than the substitution effect for her.

Correct Answer
verified

Correct Answer
verified

A consumer consumes two normal goods,sandwiches and milk.When the price of milk is $0.50 per glass,the consumer purchases 40 glasses.When the price rises to $0.65 per glass,the consumer purchases 30 glasses.We can use the information provided by the consumer's optimum choices to derive the

Correct Answer
verified

An increase in a consumer's income

Correct Answer
verified

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 Answer
verified

Correct Answer
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The income effect of a price change is depicted by

Correct Answer
verified

When Matt has an income of $2,000,he consumes 30 units of good A and 50 units of good B.After Matt's income increases to $3,000,he consumes 25 units of good A and 95 units of good B.Which of the following statements is correct?

Correct Answer
verified

The consumer's optimum is where

Correct Answer
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The substitution effect of a price change is depicted by a

Correct Answer
verified

When two goods are perfect complements,the indifference curve is

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

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

Graphically demonstrate the conditions associated with a consumer optimum.Carefully label all curves and axes.

Correct AnswerverifiedShow Answer

A consumer's preferences for right shoes and left shoes can be represented by indifference curves that are

Correct AnswerverifiedShow Answer

Figure 21-12 -Refer to Figure 21-12.If the consumer moves from bundle W to bundle Z,the

Correct AnswerverifiedShow Answer

Figure 21-7 -Refer to Figure 21-7.Suppose a consumer has $200 in income,the price of a book is $5,and the price of a DVD is $10.What is the value of A?

Correct AnswerverifiedShow Answer

Suppose a consumer spends her income on two goods: music CDs and DVDs.The consumer has $200 to allocate to these two goods,the price of a CD is $10,and the price of a DVD is $20.What is the maximum number of CDs the consumer can purchase?

Correct AnswerverifiedShow Answer

The slope of an indifference curve is

Correct AnswerverifiedShow Answer

What are the two effects of a change in a price that a consumer experiences?

Correct AnswerverifiedShow Answer

The theory of consumer choice describes the

Correct AnswerverifiedShow Answer

Katie wins $3 million in her state's lottery.If Katie drastically reduces the number of hours she works after she wins the money,we can infer that the income effect is larger than the substitution effect for her.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A consumer consumes two normal goods,sandwiches and milk.When the price of milk is $0.50 per glass,the consumer purchases 40 glasses.When the price rises to $0.65 per glass,the consumer purchases 30 glasses.We can use the information provided by the consumer's optimum choices to derive the

Correct AnswerverifiedShow Answer

An increase in a consumer's income

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

Correct AnswerverifiedShow Answer

The income effect of a price change is depicted by

Correct AnswerverifiedShow Answer

When Matt has an income of $2,000,he consumes 30 units of good A and 50 units of good B.After Matt's income increases to $3,000,he consumes 25 units of good A and 95 units of good B.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The consumer's optimum is where

Correct AnswerverifiedShow Answer

The substitution effect of a price change is depicted by a

Correct AnswerverifiedShow Answer

When two goods are perfect complements,the indifference curve is

Correct AnswerverifiedShow Answer

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