Question 1

List and briefly explain each of the four properties of indifference curves.

Accepted Answer

1: Higher indifference curves are prefer

Question 2

Figure 21-14

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

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

Figure 21-16
  
-Refer to Figure 21-16.When the price of X is $6,the price of Y is $24,and income is $48,Steve's optimal choice is point C.Then the price of Y decreases to $6.Steve's new optimal choice is point

Accepted Answer

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

Question 4

A Giffen good is a good for which

Accepted Answer

A)  a decrease in the price decreases the quantity demanded. 
B)  the income effect outweighs the substitution effect. 
C)  an increase in the price decreases the quantity demanded. 
D)  Both a) and b) are correct. 
A)  a decrease in the price decreases the quantity demanded. 
B)  the income effect outweighs the substitution effect. 
C)  an increase in the price decreases the quantity demanded. 
D)  Both a) and b) are correct.

Question 5

Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst.The price of a pint of beer is $5,and the price of a bratwurst is $4.Which of the following combinations of beers and bratwursts represents a point that would lie to the exterior of the consumer's budget constraint?

Accepted Answer

A)  160 beers and 200 bratwursts 
B)  40 beers and 50 bratwursts 
C)  80 beers and 100 bratwursts 
D)  160 beers and 0 bratwursts 
A)  160 beers and 200 bratwursts 
B)  40 beers and 50 bratwursts 
C)  80 beers and 100 bratwursts 
D)  160 beers and 0 bratwursts

Question 6

When considering household savings,the relative price between consuming when young and consuming when old is the

Accepted Answer

A)  consumption rate. 
B)  interest rate that individuals can earn on their private savings. 
C)  prime rate. 
D)  federal funds rate. 
A)  consumption rate. 
B)  interest rate that individuals can earn on their private savings. 
C)  prime rate. 
D)  federal funds rate.

Question 7

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.

Question 8

Suppose a consumer has preferences over two goods,X and Y,which are perfect substitutes.In particular,two units of X is equivalent to one unit of Y.If the price of X is $1,the price of Y is $3,and the consumer has $30 of income to allocate to these two goods,how much of each good should the consumer purchase to maximize satisfaction?

Accepted Answer

A)  30 units of X and 0 units of Y 
B)  0 units of X and 10 units of Y 
C)  15 units of X and 5 units of Y 
D)  15 units of X and 0 units of Y 
A)  30 units of X and 0 units of Y 
B)  0 units of X and 10 units of Y 
C)  15 units of X and 5 units of Y 
D)  15 units of X and 0 units of Y

Question 9

A consumer likes two goods: pizza and beer.The four 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)  These bundles illustrate the property that indifference curves are bowed inward. 
D)  These bundles violate the property that indifference curves do not cross. 
A)  The goods are perfect substitutes for this consumer. 
B)  The goods are perfect complements for this consumer. 
C)  These bundles illustrate the property that indifference curves are bowed inward. 
D)  These bundles violate the property that indifference curves do not cross.

Question 10

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

Accepted Answer

A)  is equal to the relative price ratio of the goods. 
B)  exceeds the marginal utility of each good by the greatest amount. 
C)  is less than the slope of the budget constraint. 
D)  All of the above are correct. 
A)  is equal to the relative price ratio of the goods. 
B)  exceeds the marginal utility of each good by the greatest amount. 
C)  is less than the slope of the budget constraint. 
D)  All of the above are correct.

Question 11

The indifference curves for nickels and dimes are straight lines.

Accepted Answer

A) True 
 B)False

Question 12

A consumer's preferences provide a ranking of

Accepted Answer

A)  all possible consumption bundles. 
B)  only the consumption bundles that fall on the same indifference curve. 
C)  consumption bundles based their prices. 
D)  consumption bundles based on the consumer's income. 
A)  all possible consumption bundles. 
B)  only the consumption bundles that fall on the same indifference curve. 
C)  consumption bundles based their prices. 
D)  consumption bundles based on the consumer's income.

Question 13

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 14

Figure 21-8
  
-Refer to Figure 21-8.You have $300 to spend on good X and good Y.If good X costs $30 and good Y costs $50,your budget constraint is

Accepted Answer

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

Question 15

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 16

Casey consumes two goods,hamburgers and ice cream sandwiches.He has maximized his utility given his income.Ice cream sandwiches costs $2,and he consumes them to the point where the marginal utility he receives is 6.Hamburgers cost $4,and the relationship between the marginal utility that Casey gets from eating hamburgers and the number he eats per month is as follows:  
How many hamburgers does Casey buy each month?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 17

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

Accepted Answer

A) True 
 B)False

Question 18

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 19

If we observe that William's budget constraint has moved inward,then we know for certain that

Accepted Answer

A)  his income must have decreased. 
B)  he will be indifferent between goods X and Y. 
C)  the price of one or both of the goods must have increased. 
D)  his utility will decrease. 
A)  his income must have decreased. 
B)  he will be indifferent between goods X and Y. 
C)  the price of one or both of the goods must have increased. 
D)  his utility will decrease.

Question 20

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 that maximum affordable quantity of good X. 
B)  he consumes that 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 that maximum affordable quantity of good X. 
B)  he consumes that 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.

List and briefly explain each of the four properties of indifference curves.

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

Figure 21-16 -Refer to Figure 21-16.When the price of X is $6,the price of Y is $24,and income is $48,Steve's optimal choice is point C.Then the price of Y decreases to $6.Steve's new optimal choice is point

A Giffen good is a good for which

When considering household savings,the relative price between consuming when young and consuming when old is the

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

A consumer likes two goods: pizza and beer.The four 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?

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

The indifference curves for nickels and dimes are straight lines.

A consumer's preferences provide a ranking of

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

Figure 21-8 -Refer to Figure 21-8.You have $300 to spend on good X and good Y.If good X costs $30 and good Y costs $50,your budget constraint is

The theory of consumer choice examines how

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

A decrease in a consumer's income

If we observe that William's budget constraint has moved inward,then we know for certain that

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

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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Exam 21: The Theory of Consumer Choice.

List and briefly explain each of the four properties of indifference curves.

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

Figure 21-16 -Refer to Figure 21-16.When the price of X is $6,the price of Y is $24,and income is $48,Steve's optimal choice is point C.Then the price of Y decreases to $6.Steve's new optimal choice is point

A Giffen good is a good for which

When considering household savings,the relative price between consuming when young and consuming when old is the

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

A consumer likes two goods: pizza and beer.The four 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?

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

The indifference curves for nickels and dimes are straight lines.

A consumer's preferences provide a ranking of

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

Figure 21-8 -Refer to Figure 21-8.You have $300 to spend on good X and good Y.If good X costs $30 and good Y costs $50,your budget constraint is

The theory of consumer choice examines how

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

A decrease in a consumer's income

If we observe that William's budget constraint has moved inward,then we know for certain that

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

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.

Filters