Exam 22: The Theory of Consumer Choice

Which of the following statements about welfare assistance packages is true? An individual who receives food stamps: (i) may be indifferent between food stamps and a cash transfer of equal dollar value (ii) will always be better off with a cash transfer of equal dollar value (iii) would always choose to spend less money on food with a cash transfer of equal dollar value

The marginal rate of substitution is:

The backward bending portion of an individual labour supply curve is indicative of:

An optimising consumer will select a consumption bundle in which utility is maximised:

Graph 22-1 -Refer to Graph 22-1.Which of the points on the graph shown reflects the choice of a consumer who chooses not to spend her entire income?

When income increases, a budget constraint will:

Graph 22-3 -Refer to Graph 22-3.Suppose that these budget lines exist for the same consumer who faced the same budget constraint in both panels.What can we infer about the prices of the two goods?

A budget constraint shows the bundles of consumption that make the consumer happy.

When the price of a good decreases, ceteris paribus, the lower price:

Refer to the information provided.What is the implicit price that Amy pays for the satisfaction derived from playing an hour of tennis?

Consumers are able to select the prices that they pay for commodities.In this sense, a consumer has some control over the budget constraint he/she faces.

To reach a higher indifference curve a consumer must either obtain an income increase or be offered the goods at lower prices.

An optimising consumer will select a consumption bundle in which the:

Which of the following statements are true? i. higher indifference curves are preferred to lower ones ii. indifference curves are always downwards sloping iii. indifference curves are always bowed inwards (convex)

Refer to the information provided.Assume that Diane decides to consume $300 000 in the work period.How much will she consume in her retirement period?

A utility-maximising individual will consume a bundle of goods that is:

Select the true statements that follow.When the indifference curve is tangent to the budget constraint, a consumer: (i) cannot be made better off without increasing his or her income (ii) is consuming the best combination of two goods that are attainable (iii) must be on a linear indifference curve

Explain the relationship between the budget constraint and an indifference curve at consumer optimum.

The slope of an indifference curve reflects the consumer's willingness to exchange one commodity for another.

Which of the following statements is correct? If the indifference curves are at right angles to each other, then the consumer will: (i) be indifferent to trading one good for the other (ii) always consume the good in constant proportions (iii) will always consume a bundle on the "point" of the indifference curve (where the indifference curves meet at 90-degrees)