Question 1

If the price of bread is zero,the budget constraint between bread (on the vertical axis)and cheese (on the horizontal axis)would

Accepted Answer

A)  be vertical. 
B)  coincide with the vertical axis. 
C)  coincide with the horizontal axis. 
D)  be horizontal. 
A)  be vertical. 
B)  coincide with the vertical axis. 
C)  coincide with the horizontal axis. 
D)  be horizontal. A

Question 2

A consumer chooses an optimal consumption point where the

Accepted Answer

A)  marginal rate of substitution equals the relative price ratio. 
B)  slope of the indifference curve equals the slope of the budget constraint. 
C)  ratio of the marginal utilities equals the ratio of the prices. 
D)  All of the above are correct. 
A)  marginal rate of substitution equals the relative price ratio. 
B)  slope of the indifference curve equals the slope of the budget constraint. 
C)  ratio of the marginal utilities equals the ratio of the prices. 
D)  All of the above are correct. D

Question 3

Which of the following is a property of typical indifference curves?

Accepted Answer

A)  Indifference curves usually intersect. 
B)  Indifference curves have positive slopes. 
C)  Indifference curves are downward sloping and always linear. 
D)  Indifference curves are usually bowed in toward the origin. 
A)  Indifference curves usually intersect. 
B)  Indifference curves have positive slopes. 
C)  Indifference curves are downward sloping and always linear. 
D)  Indifference curves are usually bowed in toward the origin. D

Question 4

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

Accepted Answer

A)  greater than the substitution effect, the demand curve will be downward sloping. 
B)  greater than the substitution effect, the demand curve will be upward sloping. 
C)  less than the substitution effect, the demand curve will be upward sloping. 
D)  less than the substitution effect but the substitution effect is positive, the demand curve will be upward sloping. 
A)  greater than the substitution effect, the demand curve will be downward sloping. 
B)  greater than the substitution effect, the demand curve will be upward sloping. 
C)  less than the substitution effect, the demand curve will be upward sloping. 
D)  less than the substitution effect but the substitution effect is positive, the demand curve will be upward sloping.

Question 5

Figure 21-2
  
-Refer to Figure 21-2.Which of the following statements is correct?

Accepted Answer

A)  Points W, X, and Y all cost the consumer the same amount of money. 
B)  Point V is unaffordable for the consumer given his budget constraint. 
C)  Point Z costs less than point V. 
D)  Points W, X, and Y give the consumer the same level of satisfaction. 
A)  Points W, X, and Y all cost the consumer the same amount of money. 
B)  Point V is unaffordable for the consumer given his budget constraint. 
C)  Point Z costs less than point V. 
D)  Points W, X, and Y give the consumer the same level of satisfaction.

Question 6

Figure 21-10
  
-Refer to Figure 21-10.Which of the following statements is correct?

Accepted Answer

A)  Bundle A provides the same utility as bundle E. 
B)  Bundle A provides the same utility as bundle C. 
C)  Bundle B contains more cake than bundle C. 
D)  The bundles along indifference curve Indifference Curve 2 are preferred to those along indifference curve Indifference Curve 3. 
A)  Bundle A provides the same utility as bundle E. 
B)  Bundle A provides the same utility as bundle C. 
C)  Bundle B contains more cake than bundle C. 
D)  The bundles along indifference curve Indifference Curve 2 are preferred to those along indifference curve Indifference Curve 3.

Question 7

If income decreases and prices are unchanged,the consumer's budget constraint

Accepted Answer

A)  remains the same. 
B)  shifts outward. 
C)  shifts inward. 
D)  rotates outward along the horizontal axis. 
A)  remains the same. 
B)  shifts outward. 
C)  shifts inward. 
D)  rotates outward along the horizontal axis.

Question 8

Which of the following is most likely an inferior good?

Accepted Answer

A)  an antique car 
B)  gasoline 
C)  a bus ticket 
D)  an airline ticket 
A)  an antique car 
B)  gasoline 
C)  a bus ticket 
D)  an airline ticket

Question 9

The slope of an indifference curve is

Accepted Answer

A)  the rate of change of consumer's preferences. 
B)  the marginal rate of preference. 
C)  the marginal rate of substitution. 
D)  always equal to the slope of the budget constraint. 
A)  the rate of change of consumer's preferences. 
B)  the marginal rate of preference. 
C)  the marginal rate of substitution. 
D)  always equal to the slope of the budget constraint.

Question 10

A consumer chooses an optimal consumption point where the

Accepted Answer

A)  marginal rate of substitution is maximized. 
B)  rate at which the consumer is willing to trade one good for another equals the price ratio. 
C)  price ratio is minimized. 
D)  All of the above are correct. 
A)  marginal rate of substitution is maximized. 
B)  rate at which the consumer is willing to trade one good for another equals the price ratio. 
C)  price ratio is minimized. 
D)  All of the above are correct.

Question 11

Figure 21-12
  
-Refer to Figure 21-12.If the consumer moves from bundle W to bundle Z,the

Accepted Answer

A)  marginal rate of substitution remains constant. 
B)  total utility remains constant. 
C)  total utility decreases. 
D)  Both a) and b) are correct. 
A)  marginal rate of substitution remains constant. 
B)  total utility remains constant. 
C)  total utility decreases. 
D)  Both a) and b) are correct.

Question 12

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 13

Energy drinks and granola bars are normal goods.When the price of energy drinks decreases,the income effect causes

Accepted Answer

A)  the consumer to feel richer, so the consumer buys more granola bars. 
B)  the consumer to feel richer, so the consumer buys fewer granola bars. 
C)  granola bars to be relatively more expensive, so the consumer buys more granola bars. 
D)  granola bars to be relatively less expensive, so the consumer buys fewer granola bars. 
A)  the consumer to feel richer, so the consumer buys more granola bars. 
B)  the consumer to feel richer, so the consumer buys fewer granola bars. 
C)  granola bars to be relatively more expensive, so the consumer buys more granola bars. 
D)  granola bars to be relatively less expensive, so the consumer buys fewer granola bars.

Question 14

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

Accepted Answer

A)  the rate at which he is willing to give up an hour of hunting for an hour of fishing changes depending on how many hours of each activity he has done. For example, if Bob has already fished a lot in one week, he will be more willing to give up an hour of fishing for an hour of hunting than if he has only fished a little that week. 
B)  the rate at which he is willing to give up an hour of hunting for an hour of fishing is constant because he must derive the same enjoyment out of each activity. 
C)  the rate at which he is willing to give up an hour of hunting for an hour of fishing changes depending on how many hours of each activity he has done. For example, if Bob has already fished a lot in one week, he will be less willing to give up an hour of fishing for an hour of hunting than if he has only fished a little that week. 
D)  Bob's indifference curves will not cross. When indifference curves are bowed outward, the indifference curves must cross. 
A)  the rate at which he is willing to give up an hour of hunting for an hour of fishing changes depending on how many hours of each activity he has done. For example, if Bob has already fished a lot in one week, he will be more willing to give up an hour of fishing for an hour of hunting than if he has only fished a little that week. 
B)  the rate at which he is willing to give up an hour of hunting for an hour of fishing is constant because he must derive the same enjoyment out of each activity. 
C)  the rate at which he is willing to give up an hour of hunting for an hour of fishing changes depending on how many hours of each activity he has done. For example, if Bob has already fished a lot in one week, he will be less willing to give up an hour of fishing for an hour of hunting than if he has only fished a little that week. 
D)  Bob's indifference curves will not cross. When indifference curves are bowed outward, the indifference curves must cross.

Question 15

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 16

The income effect of a price change is depicted by

Accepted Answer

A)  a parallel shift of the budget constraint at the old set of prices. 
B)  a parallel shift of the budget constraint at the new set of prices. 
C)  a movement along the budget constraint holding the level of satisfaction constant. 
D)  not observable and is therefore neither a shift nor a change in the slope of the budget constraint. 
A)  a parallel shift of the budget constraint at the old set of prices. 
B)  a parallel shift of the budget constraint at the new set of prices. 
C)  a movement along the budget constraint holding the level of satisfaction constant. 
D)  not observable and is therefore neither a shift nor a change in the slope of the budget constraint.

Question 17

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 the price of X 
B)  an increase in the price of Y 
C)  a decrease in the price of Y 
D)  More than one of the above could explain this change. 
A)  a decrease in the price of X 
B)  an increase in the price of Y 
C)  a decrease in the price of Y 
D)  More than one of the above could explain this change.

Question 18

When a consumer spends less time enjoying leisure and more time working,she has

Accepted Answer

A)  lower income and therefore cannot afford more consumption. 
B)  lower income and therefore can afford more consumption. 
C)  higher income and therefore cannot afford more consumption. 
D)  higher income and therefore can afford more consumption. 
A)  lower income and therefore cannot afford more consumption. 
B)  lower income and therefore can afford more consumption. 
C)  higher income and therefore cannot afford more consumption. 
D)  higher income and therefore can afford more consumption.

Question 19

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 an increase in the price of a textbook will result in

Accepted Answer

A)  a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles. 
B)  a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles. 
C)  an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles. 
D)  an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles. 
A)  a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles. 
B)  a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles. 
C)  an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles. 
D)  an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles.

Question 20

A consumer chooses an optimal consumption point where the

Accepted Answer

A)  marginal rate of substitution exceeds the relative price ratio. 
B)  slope of the indifference curve equals the slope of the budget constraint. 
C)  ratio of the prices equals one. 
D)  All of the above are correct. 
A)  marginal rate of substitution exceeds the relative price ratio. 
B)  slope of the indifference curve equals the slope of the budget constraint. 
C)  ratio of the prices equals one. 
D)  All of the above are correct.

Exam 21: The Theory of Consumer Choice.

If the price of bread is zero,the budget constraint between bread (on the vertical axis)and cheese (on the horizontal axis)would

A consumer chooses an optimal consumption point where the

Which of the following is a property of typical indifference curves?

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

Figure 21-2 -Refer to Figure 21-2.Which of the following statements is correct?

Figure 21-10 -Refer to Figure 21-10.Which of the following statements is correct?

If income decreases and prices are unchanged,the consumer's budget constraint

Which of the following is most likely an inferior good?

The slope of an indifference curve is

A consumer chooses an optimal consumption point where the

Figure 21-12 -Refer to Figure 21-12.If the consumer moves from bundle W to bundle Z,the

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

Energy drinks and granola bars are normal goods.When the price of energy drinks decreases,the income effect causes

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

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

The income effect of a price change is depicted by

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 a consumer spends less time enjoying leisure and more time working,she has

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 an increase in the price of a textbook will result in

A consumer chooses an optimal consumption point where the

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.

Application: 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 Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

Frontiers in Microeconomics.

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