Question 1

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 income and a decrease in the price of X 
B) a decrease in income and an increase in the price of X 
C) an increase in income and a decrease in the price of X 
D) an increase in income and an increase in the price of X 
A) a decrease in income and a decrease in the price of X 
B) a decrease in income and an increase in the price of X 
C) an increase in income and a decrease in the price of X 
D) an increase in income and an increase in the price of X

Question 2

When considering her budget, the highest indifference curve that a consumer can reach is the

Accepted Answer

A) one that is tangent to the budget constraint. 
B) indifference curve farthest from the origin 
C) indifference curve that intersects the budget constraint in at least two places. 
D) None of the above is correct. 
A) one that is tangent to the budget constraint. 
B) indifference curve farthest from the origin 
C) indifference curve that intersects the budget constraint in at least two places. 
D) None of the above is correct.

Question 3

Scenario 21-4 Frank spends all of his income of $240 per month on shirts and hats. The price of a shirt is $40 and the price of a hat is $30.
-Refer to Scenario 21-4. If Frank uses all of his income to buy hats during a certain month, then how many hats does he buy?

Accepted Answer

Frank buys

Question 4

The change in consumption that results when a price change moves the consumer along a given indifference curve to a point illustrating the new marginal rate of substitution is called the

Accepted Answer

A) income effect. 
B) substitution effect. 
C) Giffen good effect. 
D) inferior good effect. 
A) income effect. 
B) substitution effect. 
C) Giffen good effect. 
D) inferior good effect.

Question 5

Figure 21-8  
-Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?

Accepted Answer

A) $3.33 
B) $5 
C) $15 
D) $30 
A) $3.33 
B) $5 
C) $15 
D) $30

Question 6

Figure 21-1 The downward-sloping line on the figure represents a consumer's budget
constraint.  
-Refer to Figure 21-1. If the price of a CD is $12, then the consumer's income amounts to

Accepted Answer

A) $140. 
B) $180. 
C) $210. 
D) $240. 
A) $140. 
B) $180. 
C) $210. 
D) $240.

Question 7

Pepsi and pizza are normal goods. When the price of pizza rises, the substitution effect causes Pepsi to be relatively

Accepted Answer

A) more expensive, so the consumer buys more Pepsi. 
B) more expensive, so the consumer buys less Pepsi. 
C) less expensive, so the consumer buys more Pepsi. 
D) less expensive, so the consumer buys less Pepsi. 
A) more expensive, so the consumer buys more Pepsi. 
B) more expensive, so the consumer buys less Pepsi. 
C) less expensive, so the consumer buys more Pepsi. 
D) less expensive, so the consumer buys less Pepsi.

Question 8

If Priscilla regards cheese and crackers as perfect complements, then

Accepted Answer

A) her indifference curves slope upward. 
B) her indifference curves are straight lines. 
C) Priscilla prefers lower indifference curves to higher ones. 
D) for Priscilla a bundle of 5 crackers and 5 ounces of cheese is just as good as a bundle of 5 crackers and 8 ounces of cheese. 
A) her indifference curves slope upward. 
B) her indifference curves are straight lines. 
C) Priscilla prefers lower indifference curves to higher ones. 
D) for Priscilla a bundle of 5 crackers and 5 ounces of cheese is just as good as a bundle of 5 crackers and 8 ounces of cheese.

Question 9

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve.  
-Refer to Figure 21-24. Suppose the price of pears, the price of apples, and Steve's income remain constant, and Steve moves from point B to point C. In doing so, Steve

Accepted Answer

A) becomes better off. 
B) moves from a point that is not optimal to a point that is optimal. 
C) gives up some apples to get some pears. 
D) All of the above are correct. 
A) becomes better off. 
B) moves from a point that is not optimal to a point that is optimal. 
C) gives up some apples to get some pears. 
D) All of the above are correct.

Question 10

Scenario 21-2
Lawrence has recently graduated from college with a degree in journalism and economics. He has decided to pursue a career as a freelance journalist writing for business newspapers and magazines. Lawrence is typically awake for 112 hours each week (he sleeps an average of 8 hours each day). For each hour Lawrence spends writing, he can earn $75. Lawrence is such a good writer that he can get paid for as many hours of writing as he chooses to work.
-Refer to Scenario 21-2. If Lawrence decides to spend 80 hours a week playing volleyball on the beach and the rest of his time writing, how much income will he have available to spend on consumption goods?

Accepted Answer

A) $900 
B) $1,500 
C) $2,400 
D) $3,000 
A) $900 
B) $1,500 
C) $2,400 
D) $3,000

Question 11

The indifference curves for perfect substitutes are straight lines.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Thomas faces prices of $6 for a unit of good X and $30 for a unit of good Y. At his optimum, Thomas is willing to give up 1 unit of good Y for __________ units of good X.

Accepted Answer

The answer of Thomas faces prices of $6 for a...

Question 14

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin.  
-Refer to Figure 21-31. Suppose Kevin is optimally purchasing 21 shirts and 28 sweaters, and he is spending $1,680 on sweaters. What is the price of a shirt?

Accepted Answer

Given that Kevin is optimally purchasing

Question 15

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 16

When two goods are perfect substitutes, the marginal rate of substitution

Accepted Answer

A) is constant along the indifference curve. 
B) decreases as the scarcity of one good increases. 
C) increases as the scarcity of one good increases. 
D) changes to reflect the consumer's changing preferences for the goods. 
A) is constant along the indifference curve. 
B) decreases as the scarcity of one good increases. 
C) increases as the scarcity of one good increases. 
D) changes to reflect the consumer's changing preferences for the goods.

Question 17

The theory of consumer choice examines how

Accepted Answer

A) firms make profit-maximizing decisions. 
B) consumers make utility-maximizing decisions. 
C) wages are determined in competitive labor markets. 
D) prices are determined in competitive goods markets. 
A) firms make profit-maximizing decisions. 
B) consumers make utility-maximizing decisions. 
C) wages are determined in competitive labor markets. 
D) prices are determined in competitive goods markets.

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 3 slices of pizza and 4 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

When Jamar has an income of $2,000, he consumes 30 units of good A and 50 units of good B. After Jamar's income decreases to $1,500, he consumes 33 units of good A and 45 units of good B. Which of the following statements is correct?

Accepted Answer

A) Both goods A and B are normal goods. 
B) Both goods A and B are inferior goods. 
C) Good A is a normal good, and good B is an inferior good. 
D) Good A is an inferior good, and good B is a normal good. 
A) Both goods A and B are normal goods. 
B) Both goods A and B are inferior goods. 
C) Good A is a normal good, and good B is an inferior good. 
D) Good A is an inferior good, and good B is a normal good.

Question 20

When indifference curves are bowed in toward the origin,

Accepted Answer

A) consumers are less inclined to trade away goods they are lacking. 
B) consumers' willingness to trade away goods they have in abundance diminishes. 
C) an increase in income will shift the indifference curve away from the origin. 
D) a decrease in income will shift the indifference curve toward the origin. 
A) consumers are less inclined to trade away goods they are lacking. 
B) consumers' willingness to trade away goods they have in abundance diminishes. 
C) an increase in income will shift the indifference curve away from the origin. 
D) a decrease in income will shift the indifference curve toward the origin.

Exam 21: The Theory of Consumer Choice

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?

When considering her budget, the highest indifference curve that a consumer can reach is the

Scenario 21-4 Frank spends all of his income of $240 per month on shirts and hats. The price of a shirt is $40 and the price of a hat is $30. -Refer to Scenario 21-4. If Frank uses all of his income to buy hats during a certain month, then how many hats does he buy?

The change in consumption that results when a price change moves the consumer along a given indifference curve to a point illustrating the new marginal rate of substitution is called the

Figure 21-8 -Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?

Figure 21-1 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the price of a CD is $12, then the consumer's income amounts to

Pepsi and pizza are normal goods. When the price of pizza rises, the substitution effect causes Pepsi to be relatively

If Priscilla regards cheese and crackers as perfect complements, then

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. Suppose the price of pears, the price of apples, and Steve's income remain constant, and Steve moves from point B to point C. In doing so, Steve

The indifference curves for perfect substitutes are straight lines.

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.

Thomas faces prices of $6 for a unit of good X and $30 for a unit of good Y. At his optimum, Thomas is willing to give up 1 unit of good Y for __________ units of good X.

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. Suppose Kevin is optimally purchasing 21 shirts and 28 sweaters, and he is spending $1,680 on sweaters. What is the price of a shirt?

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

When two goods are perfect substitutes, the marginal rate of substitution

The theory of consumer choice examines how

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 3 slices of pizza and 4 paperback novels?

When Jamar has an income of $2,000, he consumes 30 units of good A and 50 units of good B. After Jamar's income decreases to $1,500, he consumes 33 units of good A and 45 units of good B. Which of the following statements is correct?

When indifference curves are bowed in toward the origin,

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

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