Question 1

If two bundles of goods give a consumer the same satisfaction,the consumer must be

Accepted Answer

A)  on her budget constraint. 
B)  in a position of equilibrium. 
C)  indifferent between the bundles. 
D)  Both a and c are correct. 
A)  on her budget constraint. 
B)  in a position of equilibrium. 
C)  indifferent between the bundles. 
D)  Both a and c are correct.

Question 2

Figure 21-14

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

Accepted Answer

A)  graph a 
B)  graph b 
C)  graph c 
D)  All of the above are correct. 
A)  graph a 
B)  graph b 
C)  graph c 
D)  All of the above are correct.

Question 3

When leisure is a normal good,the income effect from a decrease in wages is evident in

Accepted Answer

A)  a desire to consume more leisure. 
B)  a desire to consume less leisure. 
C)  an upward-sloping labor-supply curve. 
D)  a shift in labor demand. 
A)  a desire to consume more leisure. 
B)  a desire to consume less leisure. 
C)  an upward-sloping labor-supply curve. 
D)  a shift in labor demand.

Question 4

Good X is an inferior good but not a Giffen good.When the price of X increases,the consumer will consume

Accepted Answer

A)  more X. 
B)  the same amount of X. 
C)  less X. 
D)  more or less X depending on the size of the income effect relative to the size of the substitution effect. 
A)  more X. 
B)  the same amount of X. 
C)  less X. 
D)  more or less X depending on the size of the income effect relative to the size of the substitution effect.

Question 5

A family on a trip budgets $800 for meals and gasoline.If the price of a meal for the family is $50,how many meals can the family buy if they do not buy any gasoline?

Accepted Answer

A)  8 
B)  16 
C)  24 
D)  32 
A)  8 
B)  16 
C)  24 
D)  32

Question 6

A consumer likes two goods: CDs and novels.The five bundles shown in the table below lie on the same indifference curve for the consumer.  
Which of the following statements regarding these bundles is correct?

Accepted Answer

A)  The goods are perfect substitutes for this consumer. 
B)  The goods are perfect complements for this consumer. 
C)  The bundles violate the property that indifference curves do not cross. 
D)  Both b) and c) are correct. 
A)  The goods are perfect substitutes for this consumer. 
B)  The goods are perfect complements for this consumer. 
C)  The bundles violate the property that indifference curves do not cross. 
D)  Both b) and c) are correct.

Question 7

The rate at which a consumer is willing to exchange one good for another while maintaining a constant level of satisfaction is called the

Accepted Answer

A)  relative expenditure ratio. 
B)  value of marginal product. 
C)  marginal rate of substitution. 
D)  relative price ratio. 
A)  relative expenditure ratio. 
B)  value of marginal product. 
C)  marginal rate of substitution. 
D)  relative price ratio.

Question 8

Susie wins $2 million in her state's lottery.If Susie keeps working after she wins the money,we can infer that the income effect is larger than the substitution effect for her.

Accepted Answer

A) True 
 B)False

Question 9

A consumer has preferences over consumption and leisure,both of which are normal goods.When the wage decreases,the consumer chooses to consume less leisure.For this consumer the labor supply curve will

Accepted Answer

A)  slope upward. 
B)  slope backward. 
C)  be horizontal. 
D)  be vertical. 
A)  slope upward. 
B)  slope backward. 
C)  be horizontal. 
D)  be vertical.

Question 10

Figure 21-11
  
-Refer to Figure 21-11.As the consumer moves from point A to B to C to D,the consumer's marginal rate of substitution

Accepted Answer

A)  remains constant. 
B)  increases. 
C)  decreases. 
D)  first increases, then decreases. 
A)  remains constant. 
B)  increases. 
C)  decreases. 
D)  first increases, then decreases.

Question 11

Figure 21-4
In each case, the budget constraint moves from BC-1 to BC-2.

-Refer to Figure 21-4.Which of the graphs in the figure could reflect a simultaneous increase in the price of good X and decrease in the price of good Y?

Accepted Answer

A)  graph a 
B)  graph b 
C)  graph c 
D)  graph d 
A)  graph a 
B)  graph b 
C)  graph c 
D)  graph d

Question 12

Figure 21-18
  
-Refer to Figure 21-18.Assume that the consumer depicted in the figure has an income of $20.The price of Skittles is $2 and the price of M&M's is $2.The consumer's optimal choice is point

Accepted Answer

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

Question 13

What are the two effects of a change in a price that a consumer experiences?

Accepted Answer

A)  the income effect and the budget effect 
B)  the complement effect and the substitute effect 
C)  the price effect and the preference effect 
D)  the income effect and the substitution effect 
A)  the income effect and the budget effect 
B)  the complement effect and the substitute effect 
C)  the price effect and the preference effect 
D)  the income effect and the substitution effect

Question 14

The theory of consumer choice provides the foundation for understanding the

Accepted Answer

A)  structure of a firm. 
B)  profitability of a firm. 
C)  demand for a firm's product. 
D)  supply of a firm's product. 
A)  structure of a firm. 
B)  profitability of a firm. 
C)  demand for a firm's product. 
D)  supply of a firm's product.

Question 15

The marginal rate of substitution is the slope of the indifference curve.

Accepted Answer

A) True 
 B)False

Question 16

Figure 21-5

-Refer to Figure 21-5.In graph (b),what is the price of good Y relative to good X (i.e.,PY/PX)?

Accepted Answer

A)  1/3 
B)  1 
C)  3 
D)  10 
A)  1/3 
B)  1 
C)  3 
D)  10

Question 17

Explain the difference between inferior and normal goods.As a developing economy experiences increases in income (measured by GDP),what would you predict to happen to demand for inferior goods?

Accepted Answer

Normal goods are those for which consump

Question 18

Economic studies of lottery winners and people who have inherited large amounts of money show that

Accepted Answer

A)  the income effect of winning the lottery or inheriting large amounts of money likely outweighs the substitution effect for most people. 
B)  the substitution effect of winning the lottery or inheriting large amounts of money likely outweighs the income effect for most people. 
C)  most people view leisure as an inferior good. 
D)  most people's labor supply is unaffected by changes in wealth. 
A)  the income effect of winning the lottery or inheriting large amounts of money likely outweighs the substitution effect for most people. 
B)  the substitution effect of winning the lottery or inheriting large amounts of money likely outweighs the income effect for most people. 
C)  most people view leisure as an inferior good. 
D)  most people's labor supply is unaffected by changes in wealth.

Question 19

Figure 21-8
  
-Refer to Figure 21-8.You have $36 to spend on good X and good Y.If good X costs $6 and good Y costs $12,your budget constraint is

Accepted Answer

A)  AB. 
B)  BC. 
C)  CD. 
D)  DE. 
A)  AB. 
B)  BC. 
C)  CD. 
D)  DE.

Question 20

Katie wins $3 million in her state's lottery.If Katie drastically reduces the number of hours she works after she wins the money,we can infer that the income effect is larger than the substitution effect for her.

Accepted Answer

A) True 
 B)False

Exam 21: The Theory of Consumer Choice.

If two bundles of goods give a consumer the same satisfaction,the consumer must be

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

When leisure is a normal good,the income effect from a decrease in wages is evident in

Good X is an inferior good but not a Giffen good.When the price of X increases,the consumer will consume

A family on a trip budgets $800 for meals and gasoline.If the price of a meal for the family is $50,how many meals can the family buy if they do not buy any gasoline?

A consumer likes two goods: CDs and novels.The five bundles shown in the table below lie on the same indifference curve for the consumer. Which of the following statements regarding these bundles is correct?

The rate at which a consumer is willing to exchange one good for another while maintaining a constant level of satisfaction is called the

Susie wins $2 million in her state's lottery.If Susie keeps working after she wins the money,we can infer that the income effect is larger than the substitution effect for her.

A consumer has preferences over consumption and leisure,both of which are normal goods.When the wage decreases,the consumer chooses to consume less leisure.For this consumer the labor supply curve will

Figure 21-11 -Refer to Figure 21-11.As the consumer moves from point A to B to C to D,the consumer's marginal rate of substitution

Figure 21-4 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-4.Which of the graphs in the figure could reflect a simultaneous increase in the price of good X and decrease in the price of good Y?

Figure 21-18 -Refer to Figure 21-18.Assume that the consumer depicted in the figure has an income of $20.The price of Skittles is $2 and the price of M&M's is $2.The consumer's optimal choice is point

What are the two effects of a change in a price that a consumer experiences?

The theory of consumer choice provides the foundation for understanding the

The marginal rate of substitution is the slope of the indifference curve.

Figure 21-5 -Refer to Figure 21-5.In graph (b),what is the price of good Y relative to good X (i.e.,PY/PX)?

Explain the difference between inferior and normal goods.As a developing economy experiences increases in income (measured by GDP),what would you predict to happen to demand for inferior goods?

Economic studies of lottery winners and people who have inherited large amounts of money show that

Figure 21-8 -Refer to Figure 21-8.You have $36 to spend on good X and good Y.If good X costs $6 and good Y costs $12,your budget constraint is

Katie wins $3 million in her state's lottery.If Katie drastically reduces the number of hours she works after she wins the money,we can infer that the income effect is larger than the substitution effect for her.

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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