Question 1

A consumer's preferences for right shoes and left shoes can be represented by indifference curves that are

Accepted Answer

A) bowed out from the origin 
B) bowed in toward the origin 
C) straight lines 
D) right angles 
A) bowed out from the origin 
B) bowed in toward the origin 
C) straight lines 
D) right angles

Question 2

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 $8, the price of good Y is $10, and the consumer's income is $360. Then the consumer's optimal choice is to buy

Accepted Answer

A) 15 units of good X and 24 units of good Y. 
B) 20 units of good X and 20 units of good Y. 
C) 30 units of good X and 12 units of good Y. 
D) 40 units of good X and 4 units of good Y. 
A) 15 units of good X and 24 units of good Y. 
B) 20 units of good X and 20 units of good Y. 
C) 30 units of good X and 12 units of good Y. 
D) 40 units of good X and 4 units of good Y.

Question 3

Figure 21-5
(a)
(b)    
-Refer to Figure 21-5. Assume that a consumer faces the budget constraint shown in graph (a) in January and the budget constraint shown in graph (b) in February. If the consumer's income has remained constant, then what has happened to prices between January and February?

Accepted Answer

A) The price of X has fallen, but there could not have been a change in the price of Y. 
B) The price of Y has fallen, but there could not have been a change in the price of X. 
C) The price of X has fallen, and the price of Y has risen. 
D) The price of Y has fallen, and the price of X has risen. 
A) The price of X has fallen, but there could not have been a change in the price of Y. 
B) The price of Y has fallen, but there could not have been a change in the price of X. 
C) The price of X has fallen, and the price of Y has risen. 
D) The price of Y has fallen, and the price of X has risen.

Question 4

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 A?

Accepted Answer

A) 200 
B) 100 
C) 50 
D) 25 
A) 200 
B) 100 
C) 50 
D) 25

Question 5

If the relative price of a concert ticket is three times the price of a meal at a good restaurant, then the opportunity cost of a concert ticket can be measured by the

Accepted Answer

A) slope of the budget constraint. 
B) slope of an indifference curve. 
C) marginal rate of substitution. 
D) income effect. 
A) slope of the budget constraint. 
B) slope of an indifference curve. 
C) marginal rate of substitution. 
D) income effect.

Question 6

A consumer likes two goods: books and movies. The two bundles shown in the table below lie on the same indifference curve for the consumer.
 
Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four properties of indifference curves?

Accepted Answer

A) 1 movie and 5 books 
B) 3 movies and 3 books 
C) 5 movies and 1 book 
D) 1 movie and 7 books 
A) 1 movie and 5 books 
B) 3 movies and 3 books 
C) 5 movies and 1 book 
D) 1 movie and 7 books

Question 7

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 the maximum affordable quantity of good X. 
B) he consumes the 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. 
A) he consumes the maximum affordable quantity of good X. 
B) he consumes the 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.

Question 8

The slope of the budget constraint is determined by the

Accepted Answer

A) relative price of the goods measured on the axes. 
B) relative price of the goods measured on the axes and the consumer's income. 
C) endowment of productive resources. 
D) preferences of the consumer. 
A) relative price of the goods measured on the axes. 
B) relative price of the goods measured on the axes and the consumer's income. 
C) endowment of productive resources. 
D) preferences of the consumer.

Question 9

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 10

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 increases to 40%. 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 11

An increase in the interest rate today leading to a decrease in consumption today violates the law of demand.​

Accepted Answer

A) True 
 B)False

Question 12

When two goods are perfect complements, the indifference curve is

Accepted Answer

A) a horizontal straight line. 
B) bowed outward. 
C) a downward-sloping straight line. 
D) a right angle. 
A) a horizontal straight line. 
B) bowed outward. 
C) a downward-sloping straight line. 
D) a right angle.

Question 13

The marginal rate of substitution

Accepted Answer

A) varies along an indifference curve if the curve is bowed inward. 
B) is constant along an indifference curve if the curve is a straight line. 
C) is greater when a consumer has more of two goods rather than less of two goods. 
D) Both a and b are correct. 
A) varies along an indifference curve if the curve is bowed inward. 
B) is constant along an indifference curve if the curve is a straight line. 
C) is greater when a consumer has more of two goods rather than less of two goods. 
D) Both a and b are correct.

Question 14

A decrease in a consumer's income

Accepted Answer

A) increases the slope of the consumer's budget constraint. 
B) has no effect on the consumer's budget constraint. 
C) decreases the slope of the consumer's budget constraint. 
D) has no effect on the slope of the consumer's budget constraint. 
A) increases the slope of the consumer's budget constraint. 
B) has no effect on the consumer's budget constraint. 
C) decreases the slope of the consumer's budget constraint. 
D) has no effect on the slope of the consumer's budget constraint.

Question 15

Figure 21-18  
-Refer to Figure 21-18. Given the budget constraint depicted in the graph, the consumer's optimal choice will be point

Accepted Answer

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

Question 16

Figure 21-23  
-Refer to Figure 21-23. 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 income effect 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. 
A) D to E. 
B) D to C. 
C) C to E. 
D) E to D.

Question 17

At a consumer's optimal choice, the consumer chooses the combination of goods such that the ratio of the marginal utilities equals the ratio of the prices.

Accepted Answer

A) True 
 B)False

Question 18

Jack and Diane each buy pizza and paperback novels. Pizza costs $3 per slice, and paperback novels cost $5 each. Jack has a budget of $30, and Diane has a budget of $15 to spend on pizza and paperback novels. Which consumer(s) can afford to purchase 5 slices of pizza and 3 paperback novels?

Accepted Answer

A) Jack only 
B) Diane only 
C) both Jack and Diane 
D) neither Jack nor Diane 
A) Jack only 
B) Diane only 
C) both Jack and Diane 
D) neither Jack nor Diane

Question 19

Which effect of a price change moves the consumer along the same indifference curve to a point with a new marginal rate of substitution?

Accepted Answer

A) the budget effect 
B) the preference effect 
C) the substitution effect 
D) the income effect 
A) the budget effect 
B) the preference effect 
C) the substitution effect 
D) the income effect

Question 20

When a consumer is purchasing the best combination of two goods, X and Y, subject to a budget constraint, we say that the consumer is at an optimal choice point. A graph of an optimal choice point shows that it occurs

Accepted Answer

A) along the highest indifference curve. 
B) along the lowest budget constraint. 
C) where the indifference curve is tangent to the budget constraint. 
D) All of the above are correct. 
A) along the highest indifference curve. 
B) along the lowest budget constraint. 
C) where the indifference curve is tangent to the budget constraint. 
D) All of the above are correct.

Exam 21: The Theory of Consumer Choice

A consumer's preferences for right shoes and left shoes can be represented by indifference curves that are

Figure 21-5 (a) (b) -Refer to Figure 21-5. Assume that a consumer faces the budget constraint shown in graph (a) in January and the budget constraint shown in graph (b) in February. If the consumer's income has remained constant, then what has happened to prices between January and February?

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 A?

If the relative price of a concert ticket is three times the price of a meal at a good restaurant, then the opportunity cost of a concert ticket can be measured by the

A consumer likes two goods: books and movies. The two bundles shown in the table below lie on the same indifference curve for the consumer. Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four properties of indifference curves?

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

The slope of the budget constraint is determined by the

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?

An increase in the interest rate today leading to a decrease in consumption today violates the law of demand.​

When two goods are perfect complements, the indifference curve is

The marginal rate of substitution

A decrease in a consumer's income

Figure 21-18 -Refer to Figure 21-18. Given the budget constraint depicted in the graph, the consumer's optimal choice will be point

Figure 21-23 -Refer to Figure 21-23. 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 income effect can be illustrated as the movement from

At a consumer's optimal choice, the consumer chooses the combination of goods such that the ratio of the marginal utilities equals the ratio of the prices.

Jack and Diane each buy pizza and paperback novels. Pizza costs $3 per slice, and paperback novels cost $5 each. Jack has a budget of $30, and Diane has a budget of $15 to spend on pizza and paperback novels. Which consumer(s) can afford to purchase 5 slices of pizza and 3 paperback novels?

Which effect of a price change moves the consumer along the same indifference curve to a point with a new marginal rate of substitution?

When a consumer is purchasing the best combination of two goods, X and Y, subject to a budget constraint, we say that the consumer is at an optimal choice point. A graph of an optimal choice point shows that it occurs

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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

An increase in the interest rate today leading to a decrease in consumption today violates the law of demand.