Question 1

A consumer's preferences provide a ranking of

Accepted Answer

A)  all possible consumption bundles.
B)  only the consumption bundles that fall on the same indifference curve.
C)  consumption bundles based their prices.
D)  consumption bundles based on the consumer's income.E) A) and B)
F) A) and D)

Question 2

If Chad's labor-supply curve is upward-sloping, then, for Chad,

Accepted Answer

A)  an increase in the wage creates an income effect that is greater than the substitution effect.
B)  an increase in the wage creates a substitution effect that is greater than the income effect.
C)  leisure and consumption are perfect substitutes.
D)  leisure and consumption are perfect complements.E) C) and D)
F) B) and D)

Question 3

A rational consumer maximizes her

Accepted Answer

A)  preferences.
B)  marginal rate of substitution.
C)  utility.
D)  budget constraint.E) C) and D)
F) A) and C)

Question 4

A consumer consumes two normal goods, coffee and chocolate. The price of coffee rises. The income effect, by itself, suggests that the consumer will consume

Accepted Answer

A)  more coffee and more chocolate.
B)  less coffee and less chocolate.
C)  more coffee and less chocolate.
D)  less coffee and more chocolate.E) None of the above
F) A) and C)

Question 5

Janet prefers cashews to almonds. She prefers macadamia nuts to peanuts, but she is indifferent between almonds and peanuts. Which of the following statements can we say for sure?

Accepted Answer

A)  Janet prefers cashews to macadamia nuts.
B)  Janet prefers peanuts to cashews.
C)  Janet prefers macadamia nuts to almonds.
D)  Janet prefers almonds to macadamia nuts.E) None of the above
F) B) and C)

Question 6

When two goods are perfect complements, the indifference curves are right angles.

Accepted Answer

A) True 
 B)False

Question 7

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

Accepted Answer

A)  is equal to the price of the least-expensive good.
B)  exceeds the marginal utility of each good by the greatest amount.
C)  is less than the slope of the budget constraint.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 8

Figure 21-10 
-Refer to Figure 21-10. Which of the following statements is correct?

Accepted Answer

A)  Bundle A provides the same utility as bundle E.
B)  Bundle A provides the same utility as bundle C.
C)  Bundle B contains more cake than bundle C.
D)  The bundles along indifference curve Indifference Curve 2 are preferred to those along indifference curve Indifference Curve 3.E) A) and C)
F) A) and B)

Question 9

Assume that a person consumes two goods, Coke and Snickers. Use a graph to demonstrate how the consumer adjusts his/her optimal consumption bundle when the price of Coke decreases. Carefully label all curves and axes. What will happen to consumption if Coke is a normal good? What will happen to consumption if Coke is an inferior good? (Remember to explain the possible change when the income effect dominates and when the substitution effect dominates.)

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> If Coke is a normal good, the consumpti...

Question 10

A typical consumer consumes both coffee and donuts. After the consumer's income decreases, the consumer consumes more coffee but fewer donuts than before. For this consumer, coffee is a normal good, but donuts are an inferior good.

Accepted Answer

A) True 
 B)False

Question 11

When the price of a good increases, all else equal, the higher price

Accepted Answer

A)  reduces the consumer's set of buying opportunities.
B)  leads to a parallel shift of the budget constraint.
C)  will necessarily lead to an increase in the consumption of goods whose price did not change.
D)  generally discourages the consumption of inferior goods.E) B) and D)
F) All of the above

Question 12

Abby, Bobbi, and Deborah 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. Abby has a budget of $80, Bobbi has a budget of $60, and Deborah 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 Deborah than for Abby.
D)  All of the above are correct.E) A) and D)
F) A) and B)

Question 13

Indifference curves illustrate

Accepted Answer

A)  a firm's profits.
B)  a consumer's budget.
C)  a consumer's preferences.
D)  the prices of two goods.E) C) and D)
F) None of the above

Question 14

Which of the following represents a consumer's optimum?

Accepted Answer

A)  MUx/MUy = Py/Px
B)  MUx/Py = MUy/Px
C)  MUx/Px = MUy/Py
D)  MUy/MUx = Px/PyE) B) and C)
F) A) and D)

Question 15

Using our model of consumer choice, is it possible for a consumer to buy less of a particular good when his income rises? Briefly explain.

Accepted Answer

Yes, an increase in ...

Question 16

Figure 21-8 
-Refer to Figure 21-8. You have $600 to spend on good X and good Y. If good X costs $100 and good Y costs $100, your budget constraint is

Accepted Answer

A)  AB.
B)  BC.
C)  CD.
D)  DE.E) B) and C)
F) A) and C)

Question 17

Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the substitution effect associated with a decrease in the price of a textbook, by itself, will result in

Accepted Answer

A)  a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles.
B)  a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles.
C)  an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles.
D)  an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles.E) B) and C)
F) A) and D)

Question 18

The following diagram shows two budget lines: A and B.  Which of the following could explain the change in the budget line from A to B?

Accepted Answer

A)  a decrease in the price of X
B)  an increase in the price of Y
C)  a decrease in the price of Y
D)  More than one of the above could explain this change.E) A) and B)
F) None of the above

Question 19

A consumer who doesn't spend all of her income

Accepted Answer

A)  would be at a point outside of her budget constraint.
B)  would be at a point inside her budget constraint.
C)  must not be consuming positive quantities of all goods.
D)  must be consuming at a point where her budget constraint touches one of the axes.E) A) and B)
F) B) and C)

Question 20

All Giffen goods are

Accepted Answer

A)  inferior goods, and all inferior goods are Giffen goods.
B)  inferior goods, but not all inferior goods are Giffen goods.
C)  normal goods, but not all normal goods are Giffen goods.
D)  normal goods, and all normal goods are Giffen goods.E) A) and B)
F) B) and D)

Exam 21: The Theory of Consumer Choice

Figure 21-10 -Refer to Figure 21-10. Which of the following statements is correct?

Correct Answer
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If Chad's labor-supply curve is upward-sloping, then, for Chad,

Correct Answer
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All Giffen goods are

Correct Answer
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An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

Correct Answer
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Figure 21-8 -Refer to Figure 21-8. You have $600 to spend on good X and good Y. If good X costs $100 and good Y costs $100, your budget constraint is

Correct Answer
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Correct Answer
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Correct Answer
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If Coke is a normal good, the consumpti...
View Answer

A typical consumer consumes both coffee and donuts. After the consumer's income decreases, the consumer consumes more coffee but fewer donuts than before. For this consumer, coffee is a normal good, but donuts are an inferior good.

Correct Answer
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Janet prefers cashews to almonds. She prefers macadamia nuts to peanuts, but she is indifferent between almonds and peanuts. Which of the following statements can we say for sure?

Correct Answer
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Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the substitution effect associated with a decrease in the price of a textbook, by itself, will result in

Correct Answer
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Which of the following represents a consumer's optimum?

Correct Answer
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A consumer's preferences provide a ranking of

Correct Answer
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When the price of a good increases, all else equal, the higher price

Correct Answer
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A rational consumer maximizes her

Correct Answer
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Using our model of consumer choice, is it possible for a consumer to buy less of a particular good when his income rises? Briefly explain.

Correct Answer
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Yes, an increase in ...
View Answer

A consumer who doesn't spend all of her income

Correct Answer
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The following diagram shows two budget lines: A and B. Which of the following could explain the change in the budget line from A to B?

Correct Answer
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Indifference curves illustrate

Correct Answer
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A consumer consumes two normal goods, coffee and chocolate. The price of coffee rises. The income effect, by itself, suggests that the consumer will consume

Correct Answer
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When two goods are perfect complements, the indifference curves are right angles.

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

Figure 21-10 -Refer to Figure 21-10. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If Chad's labor-supply curve is upward-sloping, then, for Chad,

Correct AnswerverifiedShow Answer

All Giffen goods are

Correct AnswerverifiedShow Answer

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

Correct AnswerverifiedShow Answer

Figure 21-8 -Refer to Figure 21-8. You have $600 to spend on good X and good Y. If good X costs $100 and good Y costs $100, your budget constraint is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answerverified If Coke is a normal good, the consumpti...View AnswerShow Answer

A typical consumer consumes both coffee and donuts. After the consumer's income decreases, the consumer consumes more coffee but fewer donuts than before. For this consumer, coffee is a normal good, but donuts are an inferior good.

Correct AnswerverifiedShow Answer

Janet prefers cashews to almonds. She prefers macadamia nuts to peanuts, but she is indifferent between almonds and peanuts. Which of the following statements can we say for sure?

Correct AnswerverifiedShow Answer

Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the substitution effect associated with a decrease in the price of a textbook, by itself, will result in

Correct AnswerverifiedShow Answer

Which of the following represents a consumer's optimum?

Correct AnswerverifiedShow Answer

A consumer's preferences provide a ranking of

Correct AnswerverifiedShow Answer

When the price of a good increases, all else equal, the higher price

Correct AnswerverifiedShow Answer

A rational consumer maximizes her

Correct AnswerverifiedShow Answer

Using our model of consumer choice, is it possible for a consumer to buy less of a particular good when his income rises? Briefly explain.

Correct AnswerverifiedYes, an increase in ...View AnswerShow Answer

A consumer who doesn't spend all of her income

Correct AnswerverifiedShow Answer

The following diagram shows two budget lines: A and B. Which of the following could explain the change in the budget line from A to B?

Correct AnswerverifiedShow Answer

Indifference curves illustrate

Correct AnswerverifiedShow Answer

A consumer consumes two normal goods, coffee and chocolate. The price of coffee rises. The income effect, by itself, suggests that the consumer will consume

Correct AnswerverifiedShow Answer

When two goods are perfect complements, the indifference curves are right angles.

Correct AnswerverifiedShow Answer

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If Coke is a normal good, the consumpti...
View Answer

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Yes, an increase in ...
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