Exam 21: The Theory of Consumer Choice.

Consider the budget constraint between "spending today" on the horizontal axis and "spending a year from today" on the vertical axis.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.Suppose now that the interest rate increases to 40%.What happens to the slope of your budget constraint relative to when the interest rate was 25%? The slope

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

Figure 21-14 -Refer to Figure 21-14.Which of the following statements is correct?

The opportunity cost of current household consumption is the

If income increases and prices are unchanged,the consumer's budget constraint

Jordan 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 income effect dominates the substitution effect,an increase in the interest rate on savings will cause him to

Suppose that Elmer's hourly wage increases,and he decides to work fewer hours.For Elmer,the substitution effect of the wage change is

A family on a trip budgets $800 for meals and hotel accommodations.Suppose the price of a meal is $40.In addition,suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals.How many meals could the family afford if they gave up two nights in the hotel?

Bundle A contains 10 units of good X and 5 units of good Y.Bundle B contains 5 units of good X and 10 units of good Y.Bundle C contains 10 units of good X and 10 units of good Y.The consumer is indifferent between bundle A and bundle B.Assume that the consumer's preferences satisfy the four properties of indifference curves.Which of the following statements is correct?

The theory of consumer choice examines

All Giffen goods are

Figure 21-10 -Refer to Figure 21-10.Which of the following statements is not correct?

Figure 21-7 -Refer to Figure 21-7.Suppose the price of a book is $15,the price of a DVD is $10,the value of A is 5,and the value of B is 7.5.How much income does the consumer have?

Figure 21-21 -Refer to Figure 21-21.The shift from point B to point C in the figure is due to the

Figure 21-13 -Refer to Figure 21-13.As the consumer moves from A to B to C,the consumer's total utility

Assume that a consumer's indifference curve is bowed outward but satisfies the other three properties of indifference curves.As the consumer moves from left to right along the horizontal axis,the consumer's marginal rate of substitution

Economic theory predicts that an increase in wages

If we observe that a consumer's budget constraint has shifted outward,we can assume that the consumer will buy

The marginal rate of substitution is the slope of the budget constraint.

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 decides to spend 80 hours a week playing volleyball on the beach and the rest of his time writing,how much income will he have available to spend on consumption goods?