Question 1

Figure 21-12
  
-Refer to Figure 21-12.If the consumer moves from bundle V to bundle X,the

Accepted Answer

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

Question 2

Bundle J contains 10 units of good X and 5 units of good Y.Bundle K contains 5 units of good X and 10 units of good Y.Bundle L contains 10 units of good X and 10 units of good Y.Assume that the consumer's preferences satisfy the four properties of indifference curves.The price of X is $1,the price of Y is $2,and the consumer has an income of $20.Which bundle will the consumer choose?

Accepted Answer

A)  bundle J 
B)  bundle K 
C)  bundle L 
D)  either bundle J or bundle K 
A)  bundle J 
B)  bundle K 
C)  bundle L 
D)  either bundle J or bundle K

Question 3

Consider the indifference curve map for nickels and quarters.Assume nickels are on the vertical axis and quarters are on the horizontal axis.The indifference curves for nickels and quarters are

Accepted Answer

A)  straight lines with slope of -1/5 
B)  straight lines with a slope of -1. 
C)  straight lines with a slope of -5. 
D)  L shaped. 
A)  straight lines with slope of -1/5 
B)  straight lines with a slope of -1. 
C)  straight lines with a slope of -5. 
D)  L shaped.

Question 4

Suppose that you have $100 today and expect to receive $100 one year from today.Your money market account pays an annual interest rate of 25%,and you may borrow money at that interest rate.If you save all your money,how much money will you have one year from today?

Accepted Answer

A)  $100 
B)  $125 
C)  $200 
D)  $225 
A)  $100 
B)  $125 
C)  $200 
D)  $225

Question 5

The theory of consumer choice illustrates the

Accepted Answer

A)  importance of property rights in creating efficient markets. 
B)  ability of a single economic actor to have a substantial influence on market prices. 
C)  the trade-offs that people face in their role as purchasers. 
D)  All of the above are correct. 
A)  importance of property rights in creating efficient markets. 
B)  ability of a single economic actor to have a substantial influence on market prices. 
C)  the trade-offs that people face in their role as purchasers. 
D)  All of the above are correct.

Question 6

Figure 21-8
  
-Refer to Figure 21-8.If the price of good X is $5,and your budget constraint is DE,what is the price of good Y?

Accepted Answer

A)  $10 
B)  $5 
C)  $2.50 
D)  $1.67 
A)  $10 
B)  $5 
C)  $2.50 
D)  $1.67

Question 7

Each of the following are characteristics of a typical indifference curve map except

Accepted Answer

A)  moving northeast to a new indifference curve will increase utility. 
B)  points on the same indifference curve yield equal utility. 
C)  the axes represent levels of utility for each of the goods. 
D)  indifference curves cannot cross. 
A)  moving northeast to a new indifference curve will increase utility. 
B)  points on the same indifference curve yield equal utility. 
C)  the axes represent levels of utility for each of the goods. 
D)  indifference curves cannot cross.

Question 8

The indifference curves for perfect substitutes are straight lines.

Accepted Answer

A) True 
 B)False

Question 9

If a consumer purchases more of good X and good Y after her income increases,then neither good X nor good Y is an inferior good for her.

Accepted Answer

A) True 
 B)False

Question 10

When two goods are perfect complements,the indifference curves will

Accepted Answer

A)  have a positive slope. 
B)  be right angles. 
C)  have a constant marginal rate of substitution. 
D)  Both b and c are correct. 
A)  have a positive slope. 
B)  be right angles. 
C)  have a constant marginal rate of substitution. 
D)  Both b and c are correct.

Question 11

A rational consumer maximizes her

Accepted Answer

A)  preferences. 
B)  marginal rate of substitution. 
C)  utility. 
D)  budget constraint. 
A)  preferences. 
B)  marginal rate of substitution. 
C)  utility. 
D)  budget constraint.

Question 12

Figure 21-17
  
-Refer to Figure 21-17.Bundle B represents a point where

Accepted Answer

A)  MRSxy > Py/Px. 
B)  MRSxy = Px/Py. 
C)  MRSxy  Px/Py. 
A)  MRSxy > Py/Px. 
B)  MRSxy = Px/Py. 
C)  MRSxy  Px/Py.

Question 13

If a consumer purchases more of good B when his income rises,good B is an inferior good.

Accepted Answer

A) True 
 B)False

Question 14

Figure 21-22
  
-Refer to Figure 21-22.When the price of X is $80,the price of Y is $20,and the consumer's income is $160,the consumer's optimal choice is D.Then the price of X decreases to $20.The income effect can be illustrated as the movement from

Accepted Answer

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

Question 15

The substitution effect of a price change is depicted by a

Accepted Answer

A)  movement along the budget constraint holding satisfaction constant. 
B)  shift in the budget constraint at the old prices. 
C)  movement along the consumer's new indifference curve at the new prices. 
D)  movement along the original indifference curve to the point where the marginal rate of substitution equals the price ratio for the new set of prices. 
A)  movement along the budget constraint holding satisfaction constant. 
B)  shift in the budget constraint at the old prices. 
C)  movement along the consumer's new indifference curve at the new prices. 
D)  movement along the original indifference curve to the point where the marginal rate of substitution equals the price ratio for the new set of prices.

Question 16

A consumer consumes two normal goods,sandwiches and milk.When the price of milk is $0.50 per glass,the consumer purchases 40 glasses.When the price rises to $0.65 per glass,the consumer purchases 30 glasses.We can use the information provided by the consumer's optimum choices to derive the

Accepted Answer

A)  demand curve for milk. 
B)  demand curve for sandwiches. 
C)  supply curve for milk. 
D)  labor-leisure tradeoff. 
A)  demand curve for milk. 
B)  demand curve for sandwiches. 
C)  supply curve for milk. 
D)  labor-leisure tradeoff.

Question 17

Suppose a consumer spends her income on two goods: iTunes music downloads and books.The consumer has $100 to allocate to these two goods,the price of a downloaded song is $1,and the price of a book is $20.What is the maximum number of books the consumer can purchase?

Accepted Answer

A)  100 
B)  20 
C)  10 
D)  5 
A)  100 
B)  20 
C)  10 
D)  5

Question 18

The theory of consumer choice provides a(n)

Accepted Answer

A)  literal account of how people make decisions. 
B)  unrealistic picture of how people make decisions. 
C)  model that is consistent with how people make decisions. 
D)  in-depth model that is based more in psychology than in economics. 
A)  literal account of how people make decisions. 
B)  unrealistic picture of how people make decisions. 
C)  model that is consistent with how people make decisions. 
D)  in-depth model that is based more in psychology than in economics.

Question 19

Figure 21-22
  
-Refer to Figure 21-22.When the price of X is $80,the price of Y is $20,and the consumer's income is $160,the consumer's optimal choice is D.Then the price of X decreases to $20.The substitution effect can be illustrated as the movement from

Accepted Answer

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

Question 20

When the price of a normal good decreases,

Accepted Answer

A)  both the income and substitution effects encourage the consumer to purchase more of the good. 
B)  both the income and substitution effects encourage the consumer to purchase less of the good. 
C)  the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good. 
D)  the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good. 
A)  both the income and substitution effects encourage the consumer to purchase more of the good. 
B)  both the income and substitution effects encourage the consumer to purchase less of the good. 
C)  the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good. 
D)  the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good.

Exam 21: The Theory of Consumer Choice.

Figure 21-12 -Refer to Figure 21-12.If the consumer moves from bundle V to bundle X,the

Consider the indifference curve map for nickels and quarters.Assume nickels are on the vertical axis and quarters are on the horizontal axis.The indifference curves for nickels and quarters are

Suppose that you have $100 today and expect to receive $100 one year from today.Your money market account pays an annual interest rate of 25%,and you may borrow money at that interest rate.If you save all your money,how much money will you have one year from today?

The theory of consumer choice illustrates the

Figure 21-8 -Refer to Figure 21-8.If the price of good X is $5,and your budget constraint is DE,what is the price of good Y?

Each of the following are characteristics of a typical indifference curve map except

The indifference curves for perfect substitutes are straight lines.

If a consumer purchases more of good X and good Y after her income increases,then neither good X nor good Y is an inferior good for her.

When two goods are perfect complements,the indifference curves will

A rational consumer maximizes her

Figure 21-17 -Refer to Figure 21-17.Bundle B represents a point where

If a consumer purchases more of good B when his income rises,good B is an inferior good.

Figure 21-22 -Refer to Figure 21-22.When the price of X is $80,the price of Y is $20,and the consumer's income is $160,the consumer's optimal choice is D.Then the price of X decreases to $20.The income effect can be illustrated as the movement from

The substitution effect of a price change is depicted by a

A consumer consumes two normal goods,sandwiches and milk.When the price of milk is $0.50 per glass,the consumer purchases 40 glasses.When the price rises to $0.65 per glass,the consumer purchases 30 glasses.We can use the information provided by the consumer's optimum choices to derive the

Suppose a consumer spends her income on two goods: iTunes music downloads and books.The consumer has $100 to allocate to these two goods,the price of a downloaded song is $1,and the price of a book is $20.What is the maximum number of books the consumer can purchase?

The theory of consumer choice provides a(n)

Figure 21-22 -Refer to Figure 21-22.When the price of X is $80,the price of Y is $20,and the consumer's income is $160,the consumer's optimal choice is D.Then the price of X decreases to $20.The substitution effect can be illustrated as the movement from

When the price of a normal good decreases,

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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