Question 1

A budget constraint shows

Accepted Answer

A)  the maximum utility that a consumer can achieve for a given level of income. 
B)  a series of bundles that cost the consumer the same amount of money. 
C)  a series of bundles that give the consumer the same level of utility. 
D)  All of the above are correct. 
A)  the maximum utility that a consumer can achieve for a given level of income. 
B)  a series of bundles that cost the consumer the same amount of money. 
C)  a series of bundles that give the consumer the same level of utility. 
D)  All of the above are correct.

Question 2

Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst. The price of a pint of beer is $5, and the price of a bratwurst is $4. Which of the following combinations of beers and bratwursts represents a point that would lie directly on the consumer's budget constraint?

Accepted Answer

A)  160 beers and 200 bratwursts 
B)  40 beers and 50 bratwursts 
C)  80 beers and 100 bratwursts 
D)  80 beers and 0 bratwursts 
A)  160 beers and 200 bratwursts 
B)  40 beers and 50 bratwursts 
C)  80 beers and 100 bratwursts 
D)  80 beers and 0 bratwursts

Question 3

Suppose a consumer consumes two goods, X and Y. The slope of the budget constraint equals the

Accepted Answer

A)  marginal rate of substitution. 
B)  rate at which the consumer will give up X to gain Y while maintaining the same level of utility. 
C)  relative price of the two goods. 
D)  All of the above are correct. 
A)  marginal rate of substitution. 
B)  rate at which the consumer will give up X to gain Y while maintaining the same level of utility. 
C)  relative price of the two goods. 
D)  All of the above are correct.

Question 4

Figure 21-30
The graph shows two budget constraints for a consumer.  
-Refer to Figure 21-30. What particular change would result in a rotation of the budget constraint from Budget Constraint A to Budget Constraint B?

Accepted Answer

A decrease in the pr

Question 5

When the indifference curve is tangent to the budget constraint,

Accepted Answer

A)  a consumer cannot be made better off without an increase in her income or a price decrease in one of the goods she consumes. 
B)  the consumer is likely to be at a sub-optimal level of consumption. 
C)  income is at its optimum for a consumer. 
D)  indifference curves are likely to intersect. 
A)  a consumer cannot be made better off without an increase in her income or a price decrease in one of the goods she consumes. 
B)  the consumer is likely to be at a sub-optimal level of consumption. 
C)  income is at its optimum for a consumer. 
D)  indifference curves are likely to intersect.

Question 6

Figure 21-5
(a) (b)
    
-Refer to Figure 21-5. In graph (a), if income is equal to $200, then the price of good Y is

Accepted Answer

A)  $3. 
B)  $5. 
C)  $7. 
D)  $10. 
A)  $3. 
B)  $5. 
C)  $7. 
D)  $10.

Question 7

Suppose the price of good X falls. As a result, the quantity demanded for good X increases for a particular consumer. For this consumer, the substitution effect induced the consumer to purchase more X while the income effect induced the consumer to purchase less X. We can infer that X is a(n)

Accepted Answer

A)  normal good. 
B)  inferior good. 
C)  Giffen good. 
D)  luxury good. 
A)  normal good. 
B)  inferior good. 
C)  Giffen good. 
D)  luxury good.

Question 8

An optimizing consumer will select a consumption bundle in which

Accepted Answer

A)  income is maximized, and prices are minimized. 
B)  utility is maximized, and prices are minimized. 
C)  utility is maximized, subject to budget constraints. 
D)  utility is maximized, and indifference curves are linear. 
A)  income is maximized, and prices are minimized. 
B)  utility is maximized, and prices are minimized. 
C)  utility is maximized, subject to budget constraints. 
D)  utility is maximized, and indifference curves are linear.

Question 9

Fiona uses all of her income to purchase popcorn and butter. At any two points A and B on Fiona's budget constraint,

Accepted Answer

A)  Fiona is equally happy. 
B)  Fiona is spending more money on popcorn than she is spending on butter. 
C)  Fiona's income is different. 
D)  the price of popcorn relative to the price of butter is the same. 
A)  Fiona is equally happy. 
B)  Fiona is spending more money on popcorn than she is spending on butter. 
C)  Fiona's income is different. 
D)  the price of popcorn relative to the price of butter is the same.

Question 10

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. Consider the budget constraint between "spending today" on the horizontal axis and "spending a year from today" on the vertical axis. What is the slope of this budget constraint?

Accepted Answer

A)  -0.75 
B)  -1.00 
C)  -1.25 
D)  -2.25 
A)  -0.75 
B)  -1.00 
C)  -1.25 
D)  -2.25

Question 11

Figure 21-20
The following graph illustrates a representative consumer's preferences for marshmallows and chocolate chip cookies:  
-Refer to Figure 21-20. Assume that the consumer has an income of $80. If the price of chocolate chips is $4 and the price of marshmallows is $4, the optimizing consumer would choose to purchase

Accepted Answer

A)  9 marshmallows and 6 chocolate chips. 
B)  10 marshmallows and 10 chocolate chips. 
C)  5 marshmallows and 5 chocolate chips. 
D)  3 marshmallows and 9 chocolate chips. 
A)  9 marshmallows and 6 chocolate chips. 
B)  10 marshmallows and 10 chocolate chips. 
C)  5 marshmallows and 5 chocolate chips. 
D)  3 marshmallows and 9 chocolate chips.

Question 12

When Matt has an income of $2,000, he consumes 30 units of good A and 50 units of good B. After Matt's income increases to $3,000, he consumes 25 units of good A and 95 units of good B. Which of the following statements is correct?

Accepted Answer

A)  Both goods A and B are normal goods. 
B)  Both goods A and B are inferior goods. 
C)  Good A is a normal good, and good B is an inferior good. 
D)  Good A is an inferior good, and good B is a normal good. 
A)  Both goods A and B are normal goods. 
B)  Both goods A and B are inferior goods. 
C)  Good A is a normal good, and good B is an inferior good. 
D)  Good A is an inferior good, and good B is a normal good.

Question 13

A consumer's indifference curves are straight lines when, for the consumer, the goods in question are__________________________.

Accepted Answer

The answer of A consumer's indifference curves are straight lines...

Question 14

The relationship between the marginal utility that Casey gets from eating ice cream sundaes and the number of ice cream cones he eats per week is as follows:   Casey receives 3 units of utility from the last dollar spent on each of the other goods he consumes. If ice cream sundaes cost $4 each, how many ice cream sundaes will he consume per month if he maximizes utility?

Accepted Answer

A)  2 
B)  3 
C)  4 
D)  5 
A)  2 
B)  3 
C)  4 
D)  5

Question 15

Figure 21-2
The downward­sloping line on the figure represents a consumer's budget constraint.  
-Refer to Figure 21-2. If the consumer's income is $100, then what is the price of an apple?

Accepted Answer

A)  $0.50 
B)  $0.75 
C)  $1.00 
D)  $1.25 
A)  $0.50 
B)  $0.75 
C)  $1.00 
D)  $1.25

Question 16

If the interest rate rises, an individual could choose to

Accepted Answer

A)  increase consumption when young. 
B)  increase consumption when old. 
C)  decrease consumption when young. 
D)  Any of the above could be correct. 
A)  increase consumption when young. 
B)  increase consumption when old. 
C)  decrease consumption when young. 
D)  Any of the above could be correct.

Question 17

Figure 21-22  
-Refer to Figure 21-22. If the consumer is currently at point A in the figure, a movement to point B as a result of a decrease in the price of potato chips represents the

Accepted Answer

A)  substitution effect. 
B)  income effect. 
C)  budget effect. 
D)  price effect. 
A)  substitution effect. 
B)  income effect. 
C)  budget effect. 
D)  price effect.

Question 18

Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will

Accepted Answer

A)  cause the consumer to buy more of good Y and less of good X. 
B)  cause the consumer to buy more of good X and less of good Y. 
C)  not affect the amount of goods X and Y that the consumer buys. 
D)  result in an upward-sloping demand for good Y if the substitution effect is positive. 
A)  cause the consumer to buy more of good Y and less of good X. 
B)  cause the consumer to buy more of good X and less of good Y. 
C)  not affect the amount of goods X and Y that the consumer buys. 
D)  result in an upward-sloping demand for good Y if the substitution effect is positive.

Question 19

Figure 21-25
The figure pertains to a particular consumer. On the axes, X represents the quantity of good X and Y represents the quantity of good Y.  
-Refer to Figure 21-25. Suppose the price of good X is $10, the price of good Y is $5, and the consumer's income is $210. Then the consumer's optimal choice is to buy

Accepted Answer

A)  8 units of good X and 26 units of good Y. 
B)  11 units of good X and 20 units of good Y. 
C)  14 units of good X and 14 units of good Y. 
D)  18 units of good X and 6 units of good Y. 
A)  8 units of good X and 26 units of good Y. 
B)  11 units of good X and 20 units of good Y. 
C)  14 units of good X and 14 units of good Y. 
D)  18 units of good X and 6 units of good Y.

Question 20

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?

Accepted Answer

A)  100 
B)  200 
C)  50 
D)  25 
A)  100 
B)  200 
C)  50 
D)  25

A budget constraint shows

Suppose a consumer consumes two goods, X and Y. The slope of the budget constraint equals the

Figure 21-30 The graph shows two budget constraints for a consumer. -Refer to Figure 21-30. What particular change would result in a rotation of the budget constraint from Budget Constraint A to Budget Constraint B?

When the indifference curve is tangent to the budget constraint,

Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (a), if income is equal to $200, then the price of good Y is

Suppose the price of good X falls. As a result, the quantity demanded for good X increases for a particular consumer. For this consumer, the substitution effect induced the consumer to purchase more X while the income effect induced the consumer to purchase less X. We can infer that X is a(n)

An optimizing consumer will select a consumption bundle in which

Fiona uses all of her income to purchase popcorn and butter. At any two points A and B on Fiona's budget constraint,

When Matt has an income of $2,000, he consumes 30 units of good A and 50 units of good B. After Matt's income increases to $3,000, he consumes 25 units of good A and 95 units of good B. Which of the following statements is correct?

A consumer's indifference curves are straight lines when, for the consumer, the goods in question are__________________________.

Figure 21-2 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. If the consumer's income is $100, then what is the price of an apple?

If the interest rate rises, an individual could choose to

Figure 21-22 -Refer to Figure 21-22. If the consumer is currently at point A in the figure, a movement to point B as a result of a decrease in the price of potato chips represents the

Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will

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?

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

Filters

Exam 21: The Theory of Consumer Choice

A budget constraint shows

Suppose a consumer consumes two goods, X and Y. The slope of the budget constraint equals the

Figure 21-30 The graph shows two budget constraints for a consumer. -Refer to Figure 21-30. What particular change would result in a rotation of the budget constraint from Budget Constraint A to Budget Constraint B?

When the indifference curve is tangent to the budget constraint,

Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (a), if income is equal to $200, then the price of good Y is

Suppose the price of good X falls. As a result, the quantity demanded for good X increases for a particular consumer. For this consumer, the substitution effect induced the consumer to purchase more X while the income effect induced the consumer to purchase less X. We can infer that X is a(n)

An optimizing consumer will select a consumption bundle in which

Fiona uses all of her income to purchase popcorn and butter. At any two points A and B on Fiona's budget constraint,

When Matt has an income of $2,000, he consumes 30 units of good A and 50 units of good B. After Matt's income increases to $3,000, he consumes 25 units of good A and 95 units of good B. Which of the following statements is correct?

A consumer's indifference curves are straight lines when, for the consumer, the goods in question are__________________________.

Figure 21-2 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. If the consumer's income is $100, then what is the price of an apple?

If the interest rate rises, an individual could choose to

Figure 21-22 -Refer to Figure 21-22. If the consumer is currently at point A in the figure, a movement to point B as a result of a decrease in the price of potato chips represents the

Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will

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?

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

Filters

Figure 21-2 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. If the consumer's income is $100, then what is the price of an apple?