Question 1

For a typical consumer,most indifference curves are downward sloping.

Accepted Answer

A) True 
 B)False

Question 2

Graphically demonstrate the conditions associated with a consumer optimum.Carefully label all curves and axes.

Accepted Answer

The answer of Graphically demonstrate the conditions associated with a...

Question 3

Which of the following equations corresponds to an optimal choice point?

Accepted Answer

A)  (i)only 
B)  (i),(ii),and (iii)only 
C)  (ii)and (iv)only 
D)  (i),(ii),(iii),and (iv) 
A)  (i)only 
B)  (i),(ii),and (iii)only 
C)  (ii)and (iv)only 
D)  (i),(ii),(iii),and (iv)

Question 4

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 5

Figure 21-11  
-Refer to Figure 21-11.Assume that the consumer depicted in the figure has an income of $100 and currently optimizes at bundle A.When the price of marshmallows decreases to $5,which bundle will the optimizing consumer choose?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 6

The marginal rate of substitution is the slope of the indifference curve.

Accepted Answer

A) True 
 B)False

Question 7

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 8

The marginal rate of substitution

Accepted Answer

A)  varies along an indifference curve if the curve is bowed inward. 
B)  is constant along an indifference curve if the curve is a straight line. 
C)  is greater when a consumer has more of two goods rather than less of two goods. 
D)  Both a and b are correct. 
A)  varies along an indifference curve if the curve is bowed inward. 
B)  is constant along an indifference curve if the curve is a straight line. 
C)  is greater when a consumer has more of two goods rather than less of two goods. 
D)  Both a and b are correct.

Question 9

A consumer chooses an optimal consumption point where the

Accepted Answer

A)  marginal rate of substitution is maximized. 
B)  rate at which the consumer is willing to trade one good for another equals the price ratio. 
C)  price ratio is minimized. 
D)  All of the above are correct. 
A)  marginal rate of substitution is maximized. 
B)  rate at which the consumer is willing to trade one good for another equals the price ratio. 
C)  price ratio is minimized. 
D)  All of the above are correct.

Question 10

The theory of consumer choice explains how people choose between

Accepted Answer

A)  textbooks and energy drinks. 
B)  labor and leisure. 
C)  spending now and spending in the future. 
D)  All of the above are correct. 
A)  textbooks and energy drinks. 
B)  labor and leisure. 
C)  spending now and spending in the future. 
D)  All of the above are correct.

Question 11

When two goods are perfect substitutes,the marginal rate of substitution

Accepted Answer

A)  is constant along the indifference curve. 
B)  decreases as the scarcity of one good increases. 
C)  increases as the scarcity of one good increases. 
D)  changes to reflect the consumer's changing preferences for the goods. 
A)  is constant along the indifference curve. 
B)  decreases as the scarcity of one good increases. 
C)  increases as the scarcity of one good increases. 
D)  changes to reflect the consumer's changing preferences for the goods.

Question 12

When two goods are perfect substitutes,the indifference curves are right angles.

Accepted Answer

A) True 
 B)False

Question 13

The marginal rate of substitution between two goods always equals the

Accepted Answer

A)  marginal utility of one divided by the marginal utility of the other. 
B)  marginal utility of one times the marginal utility of the other. 
C)  price of one good divided by the price of the other. 
D)  Both a and c are correct. 
A)  marginal utility of one divided by the marginal utility of the other. 
B)  marginal utility of one times the marginal utility of the other. 
C)  price of one good divided by the price of the other. 
D)  Both a and c are correct.

Question 14

Which of the following statements is correct?

Accepted Answer

A)  The theory of consumer choice provides a more complete understanding of supply,just as the theory of the competitive firm provides a more complete understanding of demand. 
B)  The theory of consumer choice provides a more complete understanding of demand,just as the theory of the competitive firm provides a more complete understanding of supply. 
C)  Monetary theory provides a more complete understanding of demand,just as the theory of the competitive firm provides a more complete understanding of supply. 
D)  The theory of public choice provides a more complete understanding of supply,just as the theory of the competitive firm provides a more complete understanding of demand. 
A)  The theory of consumer choice provides a more complete understanding of supply,just as the theory of the competitive firm provides a more complete understanding of demand. 
B)  The theory of consumer choice provides a more complete understanding of demand,just as the theory of the competitive firm provides a more complete understanding of supply. 
C)  Monetary theory provides a more complete understanding of demand,just as the theory of the competitive firm provides a more complete understanding of supply. 
D)  The theory of public choice provides a more complete understanding of supply,just as the theory of the competitive firm provides a more complete understanding of demand.

Question 15

Figure 21-4  
-Refer to Figure 21-4.In graph (b),what is the price of good X relative to good Y (i.e. ,Px/Py)?

Accepted Answer

A)  2/7 
B)  3/6 
C)  7/2 
D)  7 
A)  2/7 
B)  3/6 
C)  7/2 
D)  7

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

One of the primary research results in tax policy analysis over the last 20 years is that

Accepted Answer

A)  an increase in interest rates will increase saving. 
B)  an increase in interest rates will decrease saving. 
C)  lowering taxes on interest income will increase saving. 
D)  None of the above is correct. 
A)  an increase in interest rates will increase saving. 
B)  an increase in interest rates will decrease saving. 
C)  lowering taxes on interest income will increase saving. 
D)  None of the above is correct.

Question 18

Which of the following is a property of a typical indifference curve?

Accepted Answer

A)  upward sloping 
B)  bowed away from the origin 
C)  they often intersect 
D)  higher ones are preferred to lower ones 
A)  upward sloping 
B)  bowed away from the origin 
C)  they often intersect 
D)  higher ones are preferred to lower ones

Question 19

When two goods are perfect substitutes,the

Accepted Answer

A)  indifference curve is a downward-sloping 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 downward-sloping 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 20

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.

Accepted Answer

A) True 
 B)False

Exam 21: The Theory of Consumer Choice

For a typical consumer,most indifference curves are downward sloping.

Graphically demonstrate the conditions associated with a consumer optimum.Carefully label all curves and axes.

Which of the following equations corresponds to an optimal choice point?

A consumer chooses an optimal consumption point where the

Figure 21-11 -Refer to Figure 21-11.Assume that the consumer depicted in the figure has an income of $100 and currently optimizes at bundle A.When the price of marshmallows decreases to $5,which bundle will the optimizing consumer choose?

The marginal rate of substitution is the slope of the indifference curve.

The marginal rate of substitution

A consumer chooses an optimal consumption point where the

The theory of consumer choice explains how people choose between

When two goods are perfect substitutes,the marginal rate of substitution

When two goods are perfect substitutes,the indifference curves are right angles.

The marginal rate of substitution between two goods always equals the

Which of the following statements is correct?

Figure 21-4 -Refer to Figure 21-4.In graph (b),what is the price of good X relative to good Y (i.e. ,Px/Py)?

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

One of the primary research results in tax policy analysis over the last 20 years is that

Which of the following is a property of a typical indifference curve?

When two goods are perfect substitutes,the

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.

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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters

Figure 21-4 -Refer to Figure 21-4.In graph (b),what is the price of good X relative to good Y (i.e. ,P_x/P_y)?