Exam 21: The Theory of Consumer Choice

Figure 21-16 -Refer to Figure 21-16. The price of X is $5, the price of Y is $20, and the consumer's income is $40. Which point represents the consumer's optimal choice?

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.

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?

Figure 21-8 -Refer to Figure 21-8. You have $300 to spend on good X and good Y. If good X costs $30 and good Y costs $50, your budget constraint is

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. Which of the following pairs of prices matches the appearance of the budget constraint?

Gerald spends his weekly income on gin and cocktail olives. The price of gin has risen from $7 to $9 per bottle, the price of cocktail olives has fallen from $6 to $5 per jar, and Gerald's income has stayed fixed at $46 per week. Since the price changes, Gerald has been buying 4 bottles of gin and 2 jars of cocktail olives per week. At the original prices, 4 bottles of gin and 2 jars of cocktail olives would have

Preston goes to the movies every Sunday afternoon. The movie theater offers 4 combinations of popcorn and beverages: the "mini-combo" costs $5 and includes a small popcorn and a small drink, the "medium-combo" costs $7 and includes a medium popcorn and a medium drink, the "value-combo" also costs $7 and includes a small popcorn and a large drink, and the "large-combo" costs $9 and includes a large popcorn and a large drink. Preston always purchases the "value-combo." We can conclude that

When the price of an inferior good decreases,

The theory of consumer choice examines

Clark enjoys fishing and hunting. He divides his leisure hours between the two outdoor activities. Suppose we were to draw Clark's indifference curves for the two activities, placing fishing on the horizontal axis and hunting on the vertical axis. If Clark's indifference curves are bowed inward, then

When a consumer experiences a price decrease for an inferior good, if the income effect is

Which of the following represents a consumer's optimum?

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 income effect associated with a decrease in the price of a textbook will result in

Indifference curves tend to be bowed inward because of diminishing

Goods x and y are available to Jeff. At Jeff's optimum, the marginal utility per dollar spent on good x equals __________________.

A budget constraint illustrates the

When indifference curves are downward sloping, the marginal rate of substitution is usually constant.

Suppose good X is on the horizontal axis, good Y is on the vertical axis, and the slope of an individual's budget line is -2. Which of the following is true?​

The indifference curves for perfect substitutes are right angles.

An optimizing consumer will select the consumption bundle in which the