Question 1

A normal good is one

Accepted Answer

A)  the average consumer chooses to consume at a normal level. 
B)  the average consumer chooses to consume over other similar goods. 
C)  for which an increase in income increases consumption of the good. 
D)  for which an increase in income decreases consumption of the good. 
A)  the average consumer chooses to consume at a normal level. 
B)  the average consumer chooses to consume over other similar goods. 
C)  for which an increase in income increases consumption of the good. 
D)  for which an increase in income decreases consumption of the good.

Question 2

Ryan experiences an increase in his wages.The hours of labor that he supplies to the market would increase if

Accepted Answer

A)  the income effect is larger than the substitution effect. 
B)  the substitution effect is larger than the income effect. 
C)  neither the income effect nor the substitution effect apply to Tom's labor-leisure tradeoff. 
D)  Ryan views both labor and leisure as inferior goods. 
A)  the income effect is larger than the substitution effect. 
B)  the substitution effect is larger than the income effect. 
C)  neither the income effect nor the substitution effect apply to Tom's labor-leisure tradeoff. 
D)  Ryan views both labor and leisure as inferior goods.

Question 3

Figure 21-3
In each case, the budget constraint moves from BC-1 to BC-2.

-Refer to Figure 21-3.Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods?
(i)graph a
(ii)graph b
(iii)graph c
(iv)graph d

Accepted Answer

A)  (i) only 
B)  (iv) only 
C)  (ii) or (iii) only 
D)  None of the above is correct. 
A)  (i) only 
B)  (iv) only 
C)  (ii) or (iii) only 
D)  None of the above is correct.

Question 4

Figure 21-14

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

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 5

A budget constraint illustrates bundles that a consumer prefers equally,while an indifference curve illustrates bundles that are equally affordable to a consumer.

Accepted Answer

A) True 
 B)False

Question 6

When two goods are perfect substitutes,the

Accepted Answer

A)  indifference curve is a horizontal straight line. 
B)  marginal rate of substitution is constant. 
C)  indifference curve is a vertical straight line. 
D)  Both a and b are correct. 
A)  indifference curve is a horizontal straight line. 
B)  marginal rate of substitution is constant. 
C)  indifference curve is a vertical straight line. 
D)  Both a and b are correct.

Question 7

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.Which of the following statements is correct?

Accepted Answer

A)  Each woman faces the same budget constraint. 
B)  The slope of the budget constraint is the same for each woman. 
C)  The area underneath the budget constraint is larger for Chelsea than for Karen. 
D)  All of the above are correct. 
A)  Each woman faces the same budget constraint. 
B)  The slope of the budget constraint is the same for each woman. 
C)  The area underneath the budget constraint is larger for Chelsea than for Karen. 
D)  All of the above are correct.

Question 8

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 $4.The consumer will choose a consumption bundle where the marginal rate of substitution is

Accepted Answer

A)  2. 
B)  2/3. 
C)  1/2. 
D)  1/3. 
A)  2. 
B)  2/3. 
C)  1/2. 
D)  1/3.

Question 9

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 4 gallons of ice cream and 5 paperback novels?

Accepted Answer

A)  Karen, Tara, and Chelsea 
B)  Karen only 
C)  Karen and Tara but not Chelsea 
D)  none of the women 
A)  Karen, Tara, and Chelsea 
B)  Karen only 
C)  Karen and Tara but not Chelsea 
D)  none of the women

Question 10

In the upward-sloping portion of the individual labor-supply curve,the substitution effect is

Accepted Answer

A)  greater than the income effect. 
B)  less than the income effect. 
C)  equal to the income effect. 
D)  exactly offset by the income effect. 
A)  greater than the income effect. 
B)  less than the income effect. 
C)  equal to the income effect. 
D)  exactly offset by the income effect.

Question 11

Scenario 21-2
Fred has recently graduated from college with a degree in journalism and economics. He has decided to pursue a career as a freelance journalist writing for business newspapers and magazines. Fred is typically awake for 112 hours each week (he sleeps an average of 8 hours each day). For each hour Fred spends writing, he can earn $75. Fred is such a good writer that he can get paid for as many hours of writing as he chooses to work.
-Refer to Scenario 21-2.If Fred's wage increases to $90 per hour of writing,which of the following points would fall on his budget constraint?

Accepted Answer

A)  75 hours of leisure, $2,775 of consumption 
B)  80 hours of leisure, $2,400 of consumption 
C)  85 hours of leisure, $2,430 of consumption 
D)  90 hours of leisure, $1,650 of consumption 
A)  75 hours of leisure, $2,775 of consumption 
B)  80 hours of leisure, $2,400 of consumption 
C)  85 hours of leisure, $2,430 of consumption 
D)  90 hours of leisure, $1,650 of consumption

Question 12

Irene is a vegetarian,so she does not eat pork.That is,pork provides no additional utility to Irene.She loves broccoli,however.If we illustrate Irene's indifference curves by drawing broccoli on the horizontal axis and pork on the vertical axis,her indifference curves will

Accepted Answer

A)  slope downward. 
B)  be vertical straight lines. 
C)  slope upward. 
D)  be horizontal straight lines. 
A)  slope downward. 
B)  be vertical straight lines. 
C)  slope upward. 
D)  be horizontal straight lines.

Question 13

Which of the following is not correct?

Accepted Answer

A)  Indifference curves are downward sloping. 
B)  Indifference curves that are closer to the origin are preferred to indifference curves that are further from the origin. 
C)  Indifference curves are bowed in toward the origin. 
D)  Indifference curves do not cross. 
A)  Indifference curves are downward sloping. 
B)  Indifference curves that are closer to the origin are preferred to indifference curves that are further from the origin. 
C)  Indifference curves are bowed in toward the origin. 
D)  Indifference curves do not cross.

Question 14

Figure 21-11
  
-Refer to Figure 21-11.What is the consumer's marginal rate of substitution?

Accepted Answer

A)  12 
B)  4 
C)  1 
D)  We do not have enough information to answer the question because the MRS varies along the graph. 
A)  12 
B)  4 
C)  1 
D)  We do not have enough information to answer the question because the MRS varies along the graph.

Question 15

Using the graph shown,construct a demand curve for M&M's given an income of $10.

Accepted Answer

The answer of Using the graph shown,construct a demand curve...

Question 16

Figure 21-7
  
-Refer to Figure 21-7.Suppose a consumer has $500 in income,the price of a book is $10,and the value of B is 50.What is the price of a DVD?

Accepted Answer

A)  $5 
B)  $10 
C)  $50 
D)  $100 
A)  $5 
B)  $10 
C)  $50 
D)  $100

Question 17

When the price of a normal good increases,

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.

Question 18

Assume that a consumer's indifference curve is a downward-sloping straight line.As the consumer moves from left to right along the horizontal axis,the consumer's marginal rate of substitution

Accepted Answer

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

Question 19

Consider the indifference curve map and budget constraint for two goods,beef and potatoes.Suppose the good measured on the horizontal axis,potatoes,is a Giffen good.Beef is measured on the vertical axis and is a normal good.When the price of potatoes increases,the substitution effect causes

Accepted Answer

A)  an increase in the consumption of potatoes, and the income effect causes a decrease in the consumption of potatoes. The substitution effect is less than the income effect. 
B)  a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes. The substitution effect is greater than the income effect. 
C)  an increase in the consumption of potatoes, and the income effect causes a decrease in the consumption of potatoes. The substitution effect is greater than the income effect. 
D)  a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes. The substitution effect is less than the income effect. 
A)  an increase in the consumption of potatoes, and the income effect causes a decrease in the consumption of potatoes. The substitution effect is less than the income effect. 
B)  a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes. The substitution effect is greater than the income effect. 
C)  an increase in the consumption of potatoes, and the income effect causes a decrease in the consumption of potatoes. The substitution effect is greater than the income effect. 
D)  a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes. The substitution effect is less than the income effect.

Question 20

Both Diana and Sarah like jazz music and music by the Beatles.Diana likes music by the Beatles much better than jazz music,whereas Sarah prefers jazz music to music by the Beatles.If we were to graph an indifference curve with cds by the Beatles on the horizontal axis and jazz cds on the vertical axis,then

Accepted Answer

A)  Diana and Sarah would have identical indifference curves. 
B)  Diana's indifference curve would be steeper than Sarah's indifference curve. 
C)  Sarah's indifference curve would be steeper than Diana's indifference curve. 
D)  We do not have enough information to compare their indifference curves. 
A)  Diana and Sarah would have identical indifference curves. 
B)  Diana's indifference curve would be steeper than Sarah's indifference curve. 
C)  Sarah's indifference curve would be steeper than Diana's indifference curve. 
D)  We do not have enough information to compare their indifference curves.

A normal good is one

Ryan experiences an increase in his wages.The hours of labor that he supplies to the market would increase if

Figure 21-3 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3.Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods? (i)graph a (ii)graph b (iii)graph c (iv)graph d

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

A budget constraint illustrates bundles that a consumer prefers equally,while an indifference curve illustrates bundles that are equally affordable to a consumer.

When two goods are perfect substitutes,the

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 $4.The consumer will choose a consumption bundle where the marginal rate of substitution is

In the upward-sloping portion of the individual labor-supply curve,the substitution effect is

Irene is a vegetarian,so she does not eat pork.That is,pork provides no additional utility to Irene.She loves broccoli,however.If we illustrate Irene's indifference curves by drawing broccoli on the horizontal axis and pork on the vertical axis,her indifference curves will

Which of the following is not correct?

Figure 21-11 -Refer to Figure 21-11.What is the consumer's marginal rate of substitution?

Using the graph shown,construct a demand curve for M&M's given an income of $10.

Figure 21-7 -Refer to Figure 21-7.Suppose a consumer has $500 in income,the price of a book is $10,and the value of B is 50.What is the price of a DVD?

When the price of a normal good increases,

Assume that a consumer's indifference curve is a downward-sloping straight line.As the consumer moves from left to right along the horizontal axis,the consumer's marginal rate of substitution

Consider the indifference curve map and budget constraint for two goods,beef and potatoes.Suppose the good measured on the horizontal axis,potatoes,is a Giffen good.Beef is measured on the vertical axis and is a normal good.When the price of potatoes increases,the substitution effect causes

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.

A normal good is one

Ryan experiences an increase in his wages.The hours of labor that he supplies to the market would increase if

Figure 21-3 In each case, the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3.Which of the graphs in the figure could reflect a simultaneous decrease in the prices of both goods? (i)graph a (ii)graph b (iii)graph c (iv)graph d

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

A budget constraint illustrates bundles that a consumer prefers equally,while an indifference curve illustrates bundles that are equally affordable to a consumer.

When two goods are perfect substitutes,the

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 $4.The consumer will choose a consumption bundle where the marginal rate of substitution is

In the upward-sloping portion of the individual labor-supply curve,the substitution effect is

Irene is a vegetarian,so she does not eat pork.That is,pork provides no additional utility to Irene.She loves broccoli,however.If we illustrate Irene's indifference curves by drawing broccoli on the horizontal axis and pork on the vertical axis,her indifference curves will

Which of the following is not correct?

Figure 21-11 -Refer to Figure 21-11.What is the consumer's marginal rate of substitution?

Using the graph shown,construct a demand curve for M&M's given an income of $10.

Figure 21-7 -Refer to Figure 21-7.Suppose a consumer has $500 in income,the price of a book is $10,and the value of B is 50.What is the price of a DVD?

When the price of a normal good increases,

Assume that a consumer's indifference curve is a downward-sloping straight line.As the consumer moves from left to right along the horizontal axis,the consumer's marginal rate of substitution

Consider the indifference curve map and budget constraint for two goods,beef and potatoes.Suppose the good measured on the horizontal axis,potatoes,is a Giffen good.Beef is measured on the vertical axis and is a normal good.When the price of potatoes increases,the substitution effect causes

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