Exam 21: The Theory of Consumer Choice.

Traci consumes two goods,lemonade and pretzels.Lemonade costs $1 per glass,and she consumes it to the point where the marginal utility she receives from her last glass of lemonade is 3.Pretzels cost $2 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 his utility,how many bags of potato chips does he buy each month?

Figure 21-18 -Refer to Figure 21-18.Assume that the consumer depicted in the figure has an income of $50.The price of Skittles is $5 and the price of M&M's is $5.This consumer will choose a consumption bundle where the marginal rate of substitution is

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

Karen,Tara,and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days.Ice cream costs $5 per gallon,and paperback novels cost $8 each.Karen has a budget of $80,Tara has a budget of $60,and Chelsea has a budget of $40 to spend on ice cream and paperback novels.Who can afford to purchase 8 gallons of ice cream and 5 paperback novels?

Michael faces tradeoffs between consuming in the current period when he is young and consuming in a future period when he is old.Michael experiences a decrease in the current interest rate he earns on his savings.Michael will save

John is planning ahead for retirement in a two-period world.When John is young he will earn $1 million,and when John is old and retired he will be given $50,000 from Social Security.If the interest rate between the two time periods is 7 percent,what is the slope of John's budget constraint when considering the consumption possibilities between the two periods if consumption when young is graphed on the horizontal axis and consumption when old is graphed on the vertical axis?

A consumer's budget constraint for goods X and Y is determined by how much the consumer likes good X relative to good Y.

Billie spends all of her income on soccer balls and jeans,and the price of a pair of jeans is three times the price of soccer balls.In order to maximize total utility,Billie should

The following diagram shows a budget constraint for a particular consumer. If the price of X is $5,what is the consumer's income?

The income 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 backward.

An increase in a consumer's income

Figure 21-18 -Refer to Figure 21-18.Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B.According to the graph,which of the following would cause the consumer to move to point A?

A consumer consumes two normal goods,popcorn and Pepsi.The price of Pepsi rises.The substitution effect,by itself,suggests that the consumer will consume

Figure 21-6 -Refer to Figure 21-6.Suppose a consumer has $200 in income,the price of popcorn is $1,and the price of Mt.Dew is $2.What is the value of B?

Suppose that for Emily,DVDs and trips to the movie theater are perfect substitutes.Currently,Emily is spending all of her income on trips to the movie theater.If the price of DVDs doubles,the substitution effect will

Higher indifference curves are preferred to lower ones as long as the

Suppose Caroline is indifferent between tea and coffee as long as she consumes an equivalent amount of caffeine.Suppose that coffee has twice as much caffeine as tea.Which graph would illustrate a representative indifference curve?

The indifference curves for left shoes and right shoes are right angles.

Diana and Sarah each like jewelry and music by the Rolling Stones.If we were to graph an indifference curve with jewelry on the horizontal axis and cds by the Rolling Stones on the vertical axis,then

Figure 21-23 -Refer to Figure 21-23.Fiona experiences an increase in her hourly wage.Her optimal choice point moves from A to B.For Fiona,