Question 1

Which of the following descriptions best depicts the substitution effect?

Accepted Answer

A)  the change in consumption resulting from a change in the consumer's income, holding the prices of the goods constant 
B)  the change in consumption resulting from a change in the consumer's income, holding the consumer's level of satisfaction constant 
C)  the change in consumption resulting from a change in the price of one good, holding the consumer's level of satisfaction constant 
D)  the change in consumption resulting from a change in the price of one good, allowing the consumer's level of satisfaction to change 
A)  the change in consumption resulting from a change in the consumer's income, holding the prices of the goods constant 
B)  the change in consumption resulting from a change in the consumer's income, holding the consumer's level of satisfaction constant 
C)  the change in consumption resulting from a change in the price of one good, holding the consumer's level of satisfaction constant 
D)  the change in consumption resulting from a change in the price of one good, allowing the consumer's level of satisfaction to change

Question 2

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 5 slices of pizza and 5 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 3

The relationship between the marginal utility that David gets from eating ice cream sundaes and the number of ice cream cones he eats per week is as follows:  
David receives 3 units of utility from the last dollar spent on each of the other goods he consumes.If ice cream sundaes cost $4 each,how many ice cream sundaes will he consume per month if he maximizes utility?

Accepted Answer

A)  2 
B)  3 
C)  4 
D)  5 
A)  2 
B)  3 
C)  4 
D)  5

Question 4

The income effect of a price change is unaffected by whether the good is a normal or inferior good.

Accepted Answer

A) True 
 B)False

Question 5

Figure 21-17
  
-Refer to Figure 21-17.It would be possible for the consumer to reach I₂ if

Accepted Answer

A)  the price of Y decreases. 
B)  the price of X decreases. 
C)  income increases. 
D)  All of the above would be correct. 
A)  the price of Y decreases. 
B)  the price of X decreases. 
C)  income increases. 
D)  All of the above would be correct.

Question 6

A consumer chooses an optimal consumption point where the

Accepted Answer

A)  marginal rate of substitution is maximized. 
B)  slope of the indifference curve exceeds the slope of the budget constraint by the greatest amount. 
C)  ratio of the marginal utilities equals the ratio of the prices. 
D)  All of the above are correct. 
A)  marginal rate of substitution is maximized. 
B)  slope of the indifference curve exceeds the slope of the budget constraint by the greatest amount. 
C)  ratio of the marginal utilities equals the ratio of the prices. 
D)  All of the above are correct.

Question 7

Scenario 21-1
Suppose the price of hot wings is $10, the price of beer is $1, and the consumer's income is $50. In addition, suppose the consumer's budget constraint illustrates hot wings on the horizontal axis and beer on the vertical axis.
-Refer to Scenario 21-1.If the price of beer doubles to $2,then the

Accepted Answer

A)  budget constraint intersects the vertical axis at 25 beers. 
B)  slope of the budget constraint rises to -2. 
C)  slope of the budget constraint falls to -4. 
D)  budget constraint shifts inward in a parallel fashion. 
A)  budget constraint intersects the vertical axis at 25 beers. 
B)  slope of the budget constraint rises to -2. 
C)  slope of the budget constraint falls to -4. 
D)  budget constraint shifts inward in a parallel fashion.

Question 8

"Left" gloves and "right" gloves provide a good example of

Accepted Answer

A)  perfect substitutes. 
B)  perfect complements. 
C)  negatively sloped indifference curves. 
D)  positively sloped indifference curves. 
A)  perfect substitutes. 
B)  perfect complements. 
C)  negatively sloped indifference curves. 
D)  positively sloped indifference curves.

Question 9

Mark spends his weekly income on gin and cocktail olives.The price of gin has risen from $7 to $9 per bottle,the price of cocktail olives has fallen from $6 to $5 per jar,and Mark's income has stayed fixed at $46 per week.Since the price changes,Mark has been buying 4 bottles of gin and 2 jars of cocktail olives per week.At the original prices,4 bottles of gin and 2 jars of cocktail olives would have

Accepted Answer

A)  exactly exhausted his income. 
B)  cost more than his income. 
C)  cost less than his income. 
D)  could have maximized his satisfaction given his budget constraint. 
A)  exactly exhausted his income. 
B)  cost more than his income. 
C)  cost less than his income. 
D)  could have maximized his satisfaction given his budget constraint.

Question 10

The substitution effect in the work-leisure model induces a person to work less in response to higher wages,which tends to make the labor-supply curve slope upward.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following represents a consumer's optimum?

Accepted Answer

A)  MUx/MUy = Py/Px 
B)  MUx/Py = MUy/Px 
C)  MUx/Px = MUy/Py 
D)  MUy/MUx = Px/Py 
A)  MUx/MUy = Py/Px 
B)  MUx/Py = MUy/Px 
C)  MUx/Px = MUy/Py 
D)  MUy/MUx = Px/Py

Question 12

Calvin is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires.When the substitution effect dominates the income effect,an increase in the interest rate on savings will cause him to

Accepted Answer

A)  increase his savings rate. 
B)  decrease his savings rate. 
C)  continue saving at the same rate. 
D)  Any of the above are possible. 
A)  increase his savings rate. 
B)  decrease his savings rate. 
C)  continue saving at the same rate. 
D)  Any of the above are possible.

Question 13

Assume that a college student spends her income on mac-n-cheese and CDs.The price of one box of mac-n-cheese is $1,and the price of one CD is $12.If she has $100 of income,she could choose to consume

Accepted Answer

A)  15 boxes of mac-n-cheese and 6 CDs. 
B)  20 boxes of mac-n-cheese and 7 CDs. 
C)  10 boxes of mac-n-cheese and 8 CDs. 
D)  30 boxes of mac-n-cheese and 6 CDs. 
A)  15 boxes of mac-n-cheese and 6 CDs. 
B)  20 boxes of mac-n-cheese and 7 CDs. 
C)  10 boxes of mac-n-cheese and 8 CDs. 
D)  30 boxes of mac-n-cheese and 6 CDs.

Question 14

Figure 21-6
  
-Refer to Figure 21-6.Suppose a consumer has $100 in income,the price of Mt.Dew is $2,and the value of A is 200.What is the price of popcorn?

Accepted Answer

A)  $0.50 
B)  $1 
C)  $2 
D)  $4 
A)  $0.50 
B)  $1 
C)  $2 
D)  $4

Question 15

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 $8.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 16

Traci consumes two goods,lemonade and pretzels.Lemonade costs $2 per glass,and she consumes it to the point where the marginal utility she receives from her last glass of lemonade is 4.Pretzels cost $3 per bag.The relationship between the marginal utility Traci gets from eating a bag of pretzels and the number of bags she eats per month is as follows:  
If Traci is maximizing her utility,how many bags of potato chips does she buy each month?

Accepted Answer

A)  3 
B)  4 
C)  5 
D)  6 
A)  3 
B)  4 
C)  5 
D)  6

Question 17

Figure 21-6
  
-Refer to Figure 21-6.Suppose a consumer has $100 in income,the price of popcorn is $2,and the value of B is 100.What is the price of Mt.Dew?

Accepted Answer

A)  $1 
B)  $2 
C)  $5 
D)  $100 
A)  $1 
B)  $2 
C)  $5 
D)  $100

Question 18

At a consumer's optimal choice,the consumer chooses the combination of goods such that the ratio of the marginal utilities equals the ratio of the prices.

Accepted Answer

A) True 
 B)False

Question 19

The consumer's optimum is where

Accepted Answer

A)  MUx/MUy = Py/Px. 
B)  MUx/Py = MUy/Px. 
C)  MUx/MUy = Px/Py. 
D)  None of the above is correct. 
A)  MUx/MUy = Py/Px. 
B)  MUx/Py = MUy/Px. 
C)  MUx/MUy = Px/Py. 
D)  None of the above is correct.

Question 20

Figure 21-9
  
-Refer to Figure 21-9.If the consumer has $600 in income,what is the price of good X?

Accepted Answer

A)  $20 
B)  $6 
C)  $3 
D)  $0.33 
A)  $20 
B)  $6 
C)  $3 
D)  $0.33

Which of the following descriptions best depicts the substitution effect?

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 5 slices of pizza and 5 paperback novels?

The income effect of a price change is unaffected by whether the good is a normal or inferior good.

Figure 21-17 -Refer to Figure 21-17.It would be possible for the consumer to reach I₂ if

A consumer chooses an optimal consumption point where the

"Left" gloves and "right" gloves provide a good example of

The substitution effect in the work-leisure model induces a person to work less in response to higher wages,which tends to make the labor-supply curve slope upward.

Which of the following represents a consumer's optimum?

Calvin is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires.When the substitution effect dominates the income effect,an increase in the interest rate on savings will cause him to

Assume that a college student spends her income on mac-n-cheese and CDs.The price of one box of mac-n-cheese is $1,and the price of one CD is $12.If she has $100 of income,she could choose to consume

Figure 21-6 -Refer to Figure 21-6.Suppose a consumer has $100 in income,the price of Mt.Dew is $2,and the value of A is 200.What is the price of popcorn?

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 $8.Steve's new optimal choice is point

Figure 21-6 -Refer to Figure 21-6.Suppose a consumer has $100 in income,the price of popcorn is $2,and the value of B is 100.What is the price of Mt.Dew?

At a consumer's optimal choice,the consumer chooses the combination of goods such that the ratio of the marginal utilities equals the ratio of the prices.

The consumer's optimum is where

Figure 21-9 -Refer to Figure 21-9.If the consumer has $600 in income,what is the price of good X?

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

Exam 21: The Theory of Consumer Choice.

Which of the following descriptions best depicts the substitution effect?

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 5 slices of pizza and 5 paperback novels?

The income effect of a price change is unaffected by whether the good is a normal or inferior good.

Figure 21-17 -Refer to Figure 21-17.It would be possible for the consumer to reach I₂ if

A consumer chooses an optimal consumption point where the

"Left" gloves and "right" gloves provide a good example of

The substitution effect in the work-leisure model induces a person to work less in response to higher wages,which tends to make the labor-supply curve slope upward.

Which of the following represents a consumer's optimum?

Calvin is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires.When the substitution effect dominates the income effect,an increase in the interest rate on savings will cause him to

Assume that a college student spends her income on mac-n-cheese and CDs.The price of one box of mac-n-cheese is $1,and the price of one CD is $12.If she has $100 of income,she could choose to consume

Figure 21-6 -Refer to Figure 21-6.Suppose a consumer has $100 in income,the price of Mt.Dew is $2,and the value of A is 200.What is the price of popcorn?

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 $8.Steve's new optimal choice is point

Figure 21-6 -Refer to Figure 21-6.Suppose a consumer has $100 in income,the price of popcorn is $2,and the value of B is 100.What is the price of Mt.Dew?

At a consumer's optimal choice,the consumer chooses the combination of goods such that the ratio of the marginal utilities equals the ratio of the prices.

The consumer's optimum is where

Figure 21-9 -Refer to Figure 21-9.If the consumer has $600 in income,what is the price of good X?

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