Question 1

The income effect in the work-leisure model induces a person to work less in response to higher wages,which tends to make the labor-supply curve slope backward.

Accepted Answer

A) True 
 B)False

Question 2

All points on a demand curve are optimal consumption points.

Accepted Answer

A) True 
 B)False

Question 3

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) C) and D)
F) B) and C)

Question 4

Figure 21-19
The following graph illustrates a representative consumer's preferences for marshmallows and chocolate chip cookies: 
-Refer to Figure 21-19.Assume that the consumer has an income of $80.If the price of chocolate chips is $4 and the price of marshmallows is $4,the optimizing consumer would choose to purchase

Accepted Answer

A)   9 marshmallows and 6 chocolate chips.
B)   10 marshmallows and 10 chocolate chips.
C)   5 marshmallows and 5 chocolate chips.
D)   3 marshmallows and 9 chocolate chips.E) None of the above
F) B) and C)

Question 5

Figure 21-22 
-Refer to Figure 21-22.When the price of X is $80,the price of Y is $20,and the consumer's income is $160,the consumer's optimal choice is D.Then the price of X decreases to $20.The demand curve can be illustrated as the movement from

Accepted Answer

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

Question 6

Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack. 
-Refer to Figure 21-1.Jack

Accepted Answer

A)   gains 1.1 pounds of pears and becomes better off by moving from point A to point B.
B)   gains 1.1 pounds of pears and becomes better off by moving from point A to point C.
C)   gains 1.1 pounds of pears and becomes better off by moving from point B to point C.
D)   gives up 1.1 pounds of pears and becomes better off by moving from point C to point B.E) All of the above
F) B) and C)

Question 7

Angie is maximizing total utility while consuming food and clothing.Her marginal utility from food is 50,and her marginal utility from clothing is 25.If clothing is priced at $10 per unit,the price of food per unit must be

Accepted Answer

A)   $2.
B)   $2.50.
C)   $5.
D)   $20.E) A) and B)
F) None of the above

Question 8

Figure 21-2.The graph shows two budget constraints for a consumer. 
-Refer to Figure 21-2.Suppose the price of a hamburger is $10 and Budget Constraint A applies.What is the consumer's income? What is the price of a light bulb?

Accepted Answer

The consumer's incom...

Question 9

If the consumer's income and all prices simultaneously decrease by one-half,then the optimum consumption will

Accepted Answer

A)   shift outward relative to the original optimum.
B)   move leftward along the original budget constraint.
C)   shift inward relative to the original optimum.
D)   not change.E) None of the above
F) All of the above

Question 10

Figure 21-10 
-Refer to Figure 21-10.A person that chooses to consume bundle C is likely to

Accepted Answer

A)   receive higher total satisfaction at bundle C than at bundle A.
B)   spend more on bundle C than bundle A.
C)   receive higher marginal utility from cake than from donuts.
D)   receive higher marginal utility from donuts than from cake.E) A) and D)
F) B) and C)

Question 11

Laura consumes only beer and chips.Her indifference curves are all bowed inward.Consider the bundles (2,6) , (4,4) ,and (6,2) .If Laura is indifferent between (2,6) and (6,2) ,then Laura must

Accepted Answer

A)   prefer (4,4) to (6,2) .
B)   be indifferent between (4,4) and (6,2) .
C)   prefer (6,2) to (4,4) .
D)   prefer (2,6) to (4,4) .E) C) and D)
F) B) and D)

Question 12

Thomas faces prices of $6 for a unit of good X and $30 for a unit of good Y.At his optimum,Thomas is willing to give up 1 unit of good Y for __________ units of good X.

Accepted Answer

The answer of Thomas faces prices of $6 for a...

Question 13

Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack. 
-Refer to Figure 21-1.In moving from point A to point C,Jack gives up

Accepted Answer

A)   4.9 pounds of apples,gains 2.0 pounds of pears,and becomes worse off.
B)   4.9 pounds of apples,gains 2.0 pounds of pears,and becomes better off.
C)   5.5 pounds of apples,gains 4.1 pounds of pears,and becomes worse off.
D)   5.5 pounds of apples,gains 4.1 pounds of pears,and becomes better off.E) All of the above
F) A) and D)

Question 14

Which of the following is an example of a Giffen good?

Accepted Answer

A)   fish in Japan
B)   rice in the Chinese province of Hunan
C)   pork in India
D)   Both a and b are correct.E) A) and B)
F) None of the above

Question 15

Figure 21-19
The following graph illustrates a representative consumer's preferences for marshmallows and chocolate chip cookies: 
-Refer to Figure 21-19.Assume that the consumer has an income of $40.If the price of chocolate chips is $4 and the price of marshmallows is $4,the optimizing consumer would choose to purchase

Accepted Answer

A)   9 marshmallows and 6 chocolate chips.
B)   10 marshmallows and 10 chocolate chips.
C)   5 marshmallows and 5 chocolate chips.
D)   3 marshmallows and 9 chocolate chips.E) A) and B)
F) A) and D)

Question 16

Figure 21-9 
-Refer to Figure 21-9.If the consumer has $600 in income,what is the price of good X?

Accepted Answer

A)   $20
B)   $6
C)   $3
D)   $0.33E) B) and D)
F) A) and D)

Question 17

If a consumer consumes two goods,X and Y,and has indifference curves that are bowed inward,the consumer's optional choice occurs when

Accepted Answer

A)   he consumes that maximum affordable quantity of good X.
B)   he consumes that maximum affordable quantity of good Y.
C)   his indifference curve is tangent to his budget constraint.
D)   his indifference curve lies entirely above his budget constraint.E) A) and D)
F) None of the above

Question 18

Energy drinks and granola bars are normal goods.When the price of energy drinks decreases,the income effect causes a

Accepted Answer

A)   shift to a lower indifference curve,and the consumer buys fewer granola bars.
B)   shift to a higher indifference curve,and the consumer buys more granola bars.
C)   movement along the indifference curve,and the consumer buys fewer granola bars.
D)   movement along the indifference curve,and the consumer buys more granola bars.E) A) and C)
F) A) and D)

Question 19

Figure 21-21 
-Refer to Figure 21-21.If the consumer is currently at point A in the figure,a movement to point B 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 C)
F) None of the above

Question 20

Figure 21-12 
-Refer to Figure 21-12.The marginal rate of substitution between bundles V and Z is

Accepted Answer

A)   greater than the marginal rate of substitution between bundles Z and T.
B)   less than the marginal rate of substitution between bundles Z and T.
C)   equal to the marginal rate of substitution between bundles Z and T.
D)   We are unable to compare the marginal rates of substitution.E) None of the above
F) B) and C)

Exam 21: The Theory of Consumer Choice

Energy drinks and granola bars are normal goods.When the price of energy drinks decreases,the income effect causes a

Correct Answer
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Figure 21-21 -Refer to Figure 21-21.If the consumer is currently at point A in the figure,a movement to point B as a result of a decrease in the price of potato chips represents the

Correct Answer
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Figure 21-22 -Refer to Figure 21-22.When the price of X is $80,the price of Y is $20,and the consumer's income is $160,the consumer's optimal choice is D.Then the price of X decreases to $20.The demand curve can be illustrated as the movement from

Correct Answer
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All points on a demand curve are optimal consumption points.

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

Correct Answer
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Correct Answer
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Correct Answer
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The income effect in the work-leisure model induces a person to work less in response to higher wages,which tends to make the labor-supply curve slope backward.

Correct Answer
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Figure 21-12 -Refer to Figure 21-12.The marginal rate of substitution between bundles V and Z is

Correct Answer
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If the consumer's income and all prices simultaneously decrease by one-half,then the optimum consumption will

Correct Answer
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If a consumer consumes two goods,X and Y,and has indifference curves that are bowed inward,the consumer's optional choice occurs when

Correct Answer
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Laura consumes only beer and chips.Her indifference curves are all bowed inward.Consider the bundles (2,6) , (4,4) ,and (6,2) .If Laura is indifferent between (2,6) and (6,2) ,then Laura must

Correct Answer
verified

Thomas faces prices of $6 for a unit of good X and $30 for a unit of good Y.At his optimum,Thomas is willing to give up 1 unit of good Y for __________ units of good X.

Correct Answer
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Angie is maximizing total utility while consuming food and clothing.Her marginal utility from food is 50,and her marginal utility from clothing is 25.If clothing is priced at $10 per unit,the price of food per unit must be

Correct Answer
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Figure 21-2.The graph shows two budget constraints for a consumer. -Refer to Figure 21-2.Suppose the price of a hamburger is $10 and Budget Constraint A applies.What is the consumer's income? What is the price of a light bulb?

Correct Answer
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The consumer's incom...
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Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack. -Refer to Figure 21-1.In moving from point A to point C,Jack gives up

Correct Answer
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Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack. -Refer to Figure 21-1.Jack

Correct Answer
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Which of the following is an example of a Giffen good?

Correct Answer
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Figure 21-9 -Refer to Figure 21-9.If the consumer has $600 in income,what is the price of good X?

Correct Answer
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Figure 21-10 -Refer to Figure 21-10.A person that chooses to consume bundle C is likely to

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

Energy drinks and granola bars are normal goods.When the price of energy drinks decreases,the income effect causes a

Correct AnswerverifiedShow Answer

Figure 21-21 -Refer to Figure 21-21.If the consumer is currently at point A in the figure,a movement to point B as a result of a decrease in the price of potato chips represents the

Correct AnswerverifiedShow Answer

Figure 21-22 -Refer to Figure 21-22.When the price of X is $80,the price of Y is $20,and the consumer's income is $160,the consumer's optimal choice is D.Then the price of X decreases to $20.The demand curve can be illustrated as the movement from

Correct AnswerverifiedShow Answer

All points on a demand curve are optimal consumption points.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The income effect in the work-leisure model induces a person to work less in response to higher wages,which tends to make the labor-supply curve slope backward.

Correct AnswerverifiedShow Answer

Figure 21-12 -Refer to Figure 21-12.The marginal rate of substitution between bundles V and Z is

Correct AnswerverifiedShow Answer

If the consumer's income and all prices simultaneously decrease by one-half,then the optimum consumption will

Correct AnswerverifiedShow Answer

If a consumer consumes two goods,X and Y,and has indifference curves that are bowed inward,the consumer's optional choice occurs when

Correct AnswerverifiedShow Answer

Laura consumes only beer and chips.Her indifference curves are all bowed inward.Consider the bundles (2,6) , (4,4) ,and (6,2) .If Laura is indifferent between (2,6) and (6,2) ,then Laura must

Correct AnswerverifiedShow Answer

Thomas faces prices of $6 for a unit of good X and $30 for a unit of good Y.At his optimum,Thomas is willing to give up 1 unit of good Y for __________ units of good X.

Correct AnswerverifiedShow Answer

Angie is maximizing total utility while consuming food and clothing.Her marginal utility from food is 50,and her marginal utility from clothing is 25.If clothing is priced at $10 per unit,the price of food per unit must be

Correct AnswerverifiedShow Answer

Figure 21-2.The graph shows two budget constraints for a consumer. -Refer to Figure 21-2.Suppose the price of a hamburger is $10 and Budget Constraint A applies.What is the consumer's income? What is the price of a light bulb?

Correct AnswerverifiedThe consumer's incom...View AnswerShow Answer

Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack. -Refer to Figure 21-1.In moving from point A to point C,Jack gives up

Correct AnswerverifiedShow Answer

Figure 21-1.The figure shows three indifference curves and a budget constraint for a certain consumer named Jack. -Refer to Figure 21-1.Jack

Correct AnswerverifiedShow Answer

Which of the following is an example of a Giffen good?

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Figure 21-9 -Refer to Figure 21-9.If the consumer has $600 in income,what is the price of good X?

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Figure 21-10 -Refer to Figure 21-10.A person that chooses to consume bundle C is likely to

Correct AnswerverifiedShow Answer

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The consumer's incom...
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