Question 1

If the price of a good increases, all else equal, consumers perceive

Accepted Answer

A) an increase in purchasing power if the good is an inferior good. 
B) an increase in income if the price increase occurs for a normal good. 
C) a decrease in purchasing power. 
D) a net gain in purchasing power if they decrease consumption of some goods. 
A) an increase in purchasing power if the good is an inferior good. 
B) an increase in income if the price increase occurs for a normal good. 
C) a decrease in purchasing power. 
D) a net gain in purchasing power if they decrease consumption of some goods.

Question 2

If we observe that a consumer's budget constraint has shifted inward, we can assume that the consumer will buy

Accepted Answer

A) fewer normal goods and more inferior goods. 
B) more normal goods and fewer inferior goods. 
C) more normal goods and more inferior goods. 
D) fewer normal goods and fewer inferior goods. 
A) fewer normal goods and more inferior goods. 
B) more normal goods and fewer inferior goods. 
C) more normal goods and more inferior goods. 
D) fewer normal goods and fewer inferior goods.

Question 3

Figure 21-16  
-Refer to Figure 21-16. The price of X is $25, the price of Y is $25, and the consumer's income is $100. Which point represents the consumer's optimal choice?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 4

We can use the theory of consumer choice to analyze

Accepted Answer

A) why most demand curves slope downward. 
B) the tradeoff between work and leisure 
C) how interest rates affect household saving. 
D) All of the above are correct. 
A) why most demand curves slope downward. 
B) the tradeoff between work and leisure 
C) how interest rates affect household saving. 
D) All of the above are correct.

Question 5

Suppose a consumer spends his income on CDs and DVDs. If his income decreases, the budget constraint for CDs and DVDs will

Accepted Answer

A) shift outward, parallel to the original budget constraint. 
B) shift inward, parallel to the original budget constraint. 
C) rotate outward along the CD axis because he can afford more CDs. 
D) rotate outward along the DVD axis because he can afford more DVDs. 
A) shift outward, parallel to the original budget constraint. 
B) shift inward, parallel to the original budget constraint. 
C) rotate outward along the CD axis because he can afford more CDs. 
D) rotate outward along the DVD axis because he can afford more DVDs.

Question 6

The substitution 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 upward.

Accepted Answer

A) True 
 B)False

Question 7

The substitution effect of a wage decrease in the work-leisure model results in the worker choosing to

Accepted Answer

A) work less than before. 
B) work more than before. 
C) possibly work more or less than before. 
D) work more with a higher level of consumption. 
A) work less than before. 
B) work more than before. 
C) possibly work more or less than before. 
D) work more with a higher level of consumption.

Question 8

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. The four curves that are drawn on the figure are

Accepted Answer

A) indifference curves. 
B) budget constraints. 
C) demand curves. 
D) income curves. 
A) indifference curves. 
B) budget constraints. 
C) demand curves. 
D) income curves.

Question 9

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

Accepted Answer

A) the consumer to feel richer, so the consumer buys more granola bars. 
B) the consumer to feel richer, so the consumer buys fewer granola bars. 
C) granola bars to be relatively more expensive, so the consumer buys more granola bars. 
D) granola bars to be relatively less expensive, so the consumer buys fewer granola bars. 
A) the consumer to feel richer, so the consumer buys more granola bars. 
B) the consumer to feel richer, so the consumer buys fewer granola bars. 
C) granola bars to be relatively more expensive, so the consumer buys more granola bars. 
D) granola bars to be relatively less expensive, so the consumer buys fewer granola bars.

Question 10

A consumer spends all of her income on goods x and y. At her optimum,

Accepted Answer

A) her valuation of the two goods exceeds the market's valuation of the two goods. 
B) her marginal rate of substitution between good x and good y exceeds the ratio of the price of good x to the price of good y. 
C) the slope of her budget constraint is equal to the slope of the highest indifference curve that she can reach while remaining within her budget. 
D) her expenditure on good x is equal to her expenditure on good y. 
A) her valuation of the two goods exceeds the market's valuation of the two goods. 
B) her marginal rate of substitution between good x and good y exceeds the ratio of the price of good x to the price of good y. 
C) the slope of her budget constraint is equal to the slope of the highest indifference curve that she can reach while remaining within her budget. 
D) her expenditure on good x is equal to her expenditure on good y.

Question 11

At the consumer's optimum the

Accepted Answer

A) budget constraint will have a slope of MUx/Px. 
B) slope of the indifference curve is equal to the slope of the budget constraint. 
C) indifference curve will intersect the budget constraint at the midpoint of the budget constraint. 
D) Both b and c are correct. 
A) budget constraint will have a slope of MUx/Px. 
B) slope of the indifference curve is equal to the slope of the budget constraint. 
C) indifference curve will intersect the budget constraint at the midpoint of the budget constraint. 
D) Both b and c are correct.

Question 12

Figure 21-19  
-Refer to Figure 21-19. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, which of the following would cause the consumer to move to point A?

Accepted Answer

A) a decrease in the price of Skittles 
B) a decrease in the price of M&M's 
C) an increase in the price of Skittles 
D) an increase in the price of M&M's 
A) a decrease in the price of Skittles 
B) a decrease in the price of M&M's 
C) an increase in the price of Skittles 
D) an increase in the price of M&M's

Question 13

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin.  
-Refer to Figure 21-31. If the price of a shirt is $20 and point B is Kevin's optimum, then what is Kevin's income?

Accepted Answer

Kevin's in

Question 14

Which of the following is not correct?

Accepted Answer

A) Indifference curves are downward sloping. 
B) Indifference curves that are closer to the origin are preferred to indifference curves that are further from the origin. 
C) Indifference curves are bowed in toward the origin. 
D) Indifference curves do not cross. 
A) Indifference curves are downward sloping. 
B) Indifference curves that are closer to the origin are preferred to indifference curves that are further from the origin. 
C) Indifference curves are bowed in toward the origin. 
D) Indifference curves do not cross.

Question 15

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 represented by a point on which curve?

Accepted Answer

A) I1 
B) I2 
C) I3 
D) I4 
A) I1 
B) I2 
C) I3 
D) I4

Question 16

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 17

Figure 21-5
(a)
(b)    
-Refer to Figure 21-5. In graph (b), if income is equal to $420, then the price of good Y is

Accepted Answer

A) $1. 
B) $3. 
C) $10. 
D) $30. 
A) $1. 
B) $3. 
C) $10. 
D) $30.

Question 18

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

Accepted Answer

A) True 
 B)False

Question 19

Consider the budget constraint between "spending today" on the horizontal axis and "spending a year from today" on the vertical axis. Suppose that you have $100 today and expect to receive $100 one year from today. Your money market account pays an annual interest rate of 25%, and you may borrow money at that interest rate. Suppose now that the interest rate decreases to 10%. What happens to the slope of your budget constraint relative to when the interest rate was 25%? The slope

Accepted Answer

A) becomes steeper. 
B) becomes flatter. 
C) doesn't change because the budget constraint shifts in parallel to the original budget constraint. 
D) doesn't change because the budget constraint shifts out parallel to the original budget constraint. 
A) becomes steeper. 
B) becomes flatter. 
C) doesn't change because the budget constraint shifts in parallel to the original budget constraint. 
D) doesn't change because the budget constraint shifts out parallel to the original budget constraint.

Question 20

Figure 21-1 The downward-sloping line on the figure represents a consumer's budget
constraint.  
-Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Accepted Answer

A) A. 
B) E. 
C) A and E. 
D) None of the above are correct. All of the points identified on the figure are affordable. 
A) A. 
B) E. 
C) A and E. 
D) None of the above are correct. All of the points identified on the figure are affordable.

If the price of a good increases, all else equal, consumers perceive

If we observe that a consumer's budget constraint has shifted inward, we can assume that the consumer will buy

Figure 21-16 -Refer to Figure 21-16. The price of X is $25, the price of Y is $25, and the consumer's income is $100. Which point represents the consumer's optimal choice?

We can use the theory of consumer choice to analyze

Suppose a consumer spends his income on CDs and DVDs. If his income decreases, the budget constraint for CDs and DVDs will

The substitution 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 upward.

The substitution effect of a wage decrease in the work-leisure model results in the worker choosing to

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. The four curves that are drawn on the figure are

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

A consumer spends all of her income on goods x and y. At her optimum,

At the consumer's optimum the

Figure 21-19 -Refer to Figure 21-19. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, which of the following would cause the consumer to move to point A?

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. If the price of a shirt is $20 and point B is Kevin's optimum, then what is Kevin's income?

Which of the following is not correct?

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

Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (b), if income is equal to $420, then the price of good Y is

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

Figure 21-1 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

Frontiers in Microeconomics

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Exam 21: The Theory of Consumer Choice

If the price of a good increases, all else equal, consumers perceive

If we observe that a consumer's budget constraint has shifted inward, we can assume that the consumer will buy

Figure 21-16 -Refer to Figure 21-16. The price of X is $25, the price of Y is $25, and the consumer's income is $100. Which point represents the consumer's optimal choice?

We can use the theory of consumer choice to analyze

Suppose a consumer spends his income on CDs and DVDs. If his income decreases, the budget constraint for CDs and DVDs will

The substitution 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 upward.

The substitution effect of a wage decrease in the work-leisure model results in the worker choosing to

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. The four curves that are drawn on the figure are

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

A consumer spends all of her income on goods x and y. At her optimum,

At the consumer's optimum the

Figure 21-19 -Refer to Figure 21-19. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, which of the following would cause the consumer to move to point A?

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. If the price of a shirt is $20 and point B is Kevin's optimum, then what is Kevin's income?

Which of the following is not correct?

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

Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (b), if income is equal to $420, then the price of good Y is

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

Figure 21-1 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

Frontiers in Microeconomics

Filters