Exam 21: The Theory of Consumer Choice

Scenario 21-3 Scott knows that he will ultimately face retirement. Assume that Scott will experience two periods in his life, one in which he works and earns income, and one in which he is retired and earns no income. Scott can earn $250,000 during his working period and nothing in his retirement period. He must both save and consume in his work period with an interest rate of 10 percent on savings. -Refer to Scenario 21-3. If the interest rate on savings increases, it is possible that

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

An optimizing consumer will select a consumption bundle in which

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?

John is planning ahead for retirement in a two-period world. When John is young he will earn $1 million, and when John is old and retired he will be given $50,000 from Social Security. If the interest rate between the two time periods is 7 percent, what is the slope of John's budget constraint when considering the consumption possibilities between the two periods if consumption when young is graphed on the horizontal axis and consumption when old is graphed on the vertical axis?

Given a consumer's indifference map, the demand curve for a good can

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 21-8 -Refer to Figure 21-8. If the price of good X is $5, and your budget constraint is DE, what is the price of good Y?

Figure 21-14 -Refer to Figure 21-14. Which of the graphs shown may represent indifference curves?

A consumer's budget constraint is drawn with the quantity of pizza measured along the horizontal axis and the price of Pepsi measured along the vertical axis. If the market is offering the consumer the trade-off of 3 pints of Pepsi for 1 pizza, then what is the slope of the consumer's budget constraint?

Figure 21-14 -Refer to Figure 21-14. Which of the graphs shown represent indifference curves for perfect substitutes?

Assume that a consumer faces the following budget constraints. a.Assuming that income is the same on both occasions, describe the difference in relative prices between Panel A and Panel B. b.If income in Panel B is $126, what is the price of good X? c.If income in Panel A is $84, what is the price of good Y? d.Assuming that the price of good X is the same on both occasions, describe the difference in income and price of good Y between Panel A and Panel B.

Figure 21-20 The following graph illustrates a representative consumer's preferences for marshmallows and chocolate chip cookies: -Refer to Figure 21-20. 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

Scenario 21-1 Suppose the price of hot wings is $10, the price of beer is $1, and the consumer's income is $50. In addition, suppose the consumer's budget constraint illustrates hot wings on the horizontal axis and beer on the vertical axis. -Refer to Scenario 21-1. If the price of beer doubles to $2, then the

The slope of a consumer's budget constraint is unaffected by a change in income.

Suppose a consumer knows that at her current bundle, MUx/Px > MUy/Py. Is this individual choosing a bundle that maximizes utility? ​

Figure 21-6 -Refer to Figure 21-6. Suppose a consumer has $200 in income, the price of popcorn is $1, and the price of Mt. Dew is $2. What is the value of B?

A consumer has preferences over two goods, X and Y. Suppose we graph this consumer's preferences (which satisfy the usual properties of indifference curves) and budget constraint on a diagram with X on the horizontal axis and Y on the vertical axis. At the consumer's current consumption bundle, the consumer is spending all available income, and the marginal rate of substitution is less than the slope of the budget constraint. We can conclude that the consumer

If John's marginal utility derived from the consumption of another candy bar is 1 and the price of the candy bar is $1.50, then

Figure 21-30 The graph shows two budget constraints for a consumer. -Refer to Figure 21-30. What particular change would result in a rotation of the budget constraint from Budget Constraint A to Budget Constraint B?