Question 1

Figure 21-2
The downward­sloping line on the figure represents a consumer's budget constraint. 
-Refer to Figure 21-2. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

Accepted Answer

A)  V only 
B)  Z only 
C)  V, W, X, or Y only 
D)  W, X, or Y only

Question 2

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 represented by a point on which curve?

Accepted Answer

A)  I1 
B)  I2 
C)  I3 
D)  I4

Question 3

Figure 21-1
The downward­sloping line on the figure represents a consumer's budget constraint. 
-Refer to Figure 21-1. If the price of a CD is $12, then the consumer's income amounts to

Accepted Answer

A)  $140. 
B)  $180. 
C)  $210. 
D)  $240.

Question 4

A rational person can have a negatively-sloped labor supply curve.

Accepted Answer

A) True 
 B)False

Question 5

Which effect of a price change moves the consumer along the same indifference curve to a point with a new marginal rate of substitution?

Accepted Answer

A)  the budget effect 
B)  the preference effect 
C)  the substitution effect 
D)  the income effect

Question 6

Figure 21-32
The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. 
-Refer to Figure 21-32. Of the four labeled points, which is (are) affordable to Hannah?

Accepted Answer

The answer of Figure 21-32
The figure shows three indifference curves...

Question 7

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 to the interior of 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)  160 beers and 0 bratwursts

Question 8

The labor supply curve may have a backward-bending portion if, at higher wages, the income effect is

Accepted Answer

A)  smaller than the substitution effect. 
B)  larger than the substitution effect. 
C)  negative. 
D)  Any of the above could result in a backward-bending supply curve.

Question 9

The indifference curves for perfect substitutes are straight lines.

Accepted Answer

A) True 
 B)False

Question 10

Figure 21-9 
-Refer to Figure 21-9. If the price of good X is $15, what is the price of good Y?

Accepted Answer

A)  $1,500 
B)  $50 
C)  $5 
D)  $0.50

Question 11

Figure 21-24
The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. 
-Refer to Figure 21-24. If Steve's income is $12.60, then the price of a pound of apples is

Accepted Answer

A)  $4.50. 
B)  $3.85. 
C)  $3.00. 
D)  $2.80.

Question 12

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 $8, the price of good Y is $10, and the consumer's income is $360. Then the consumer's optimal choice is represented by a point on which curve?

Accepted Answer

A)  I1 
B)  I2 
C)  I3 
D)  I4

Question 13

Consider the indifference curve map and budget constraint for two goods, X and Y. Suppose the good on the horizontal axis, X, is normal. When the price of X increases, the substitution effect

Accepted Answer

A)  and income effect both cause an increase in the consumption of X. 
B)  causes a decrease in the consumption of X, and the income effect causes an increase in the consumption of 
C)  causes an increase in the consumption of X, and the income effect causes a decrease in the consumption of 
D)  and income effect both cause a decrease in the consumption of X.

Question 14

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

Accepted Answer

A)  be two times the income effect. 
B)  be half the income effect. 
C)  be zero. 
D)  always increase the number of trips to the movie theater Emily makes.

Question 15

If a consumer experiences a decrease in income, the new budget constraint will have the same slope as the old budget constraint.

Accepted Answer

A) True 
 B)False

Question 16

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.

Question 17

Figure 21-32
The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. 
-Refer to Figure 21-32. How much income does Hannah earn when she is young?

Accepted Answer

The answer of Figure 21-32
The figure shows three indifference curves...

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Figure 21-32
The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. 
-Refer to Figure 21-32. Which of the four labeled points is Hannah's optimum?

Accepted Answer

The answer of Figure 21-32
The figure shows three indifference curves...

Question 20

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 labor­leisure tradeoff. 
D)  Ryan views both labor and leisure as inferior goods.

Exam 21: The Theory of Consumer Choice

Figure 21-2 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the price of a CD is $12, then the consumer's income amounts to

A rational person can have a negatively-sloped labor supply curve.

Which effect of a price change moves the consumer along the same indifference curve to a point with a new marginal rate of substitution?

Figure 21-32 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. -Refer to Figure 21-32. Of the four labeled points, which is (are) affordable to Hannah?

The labor supply curve may have a backward-bending portion if, at higher wages, the income effect is

The indifference curves for perfect substitutes are straight lines.

Figure 21-9 -Refer to Figure 21-9. If the price of good X is $15, what is the price of good Y?

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. If Steve's income is $12.60, then the price of a pound of apples is

Consider the indifference curve map and budget constraint for two goods, X and Y. Suppose the good on the horizontal axis, X, is normal. When the price of X increases, the substitution effect

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

If a consumer experiences a decrease in income, the new budget constraint will have the same slope as the old budget constraint.

When the indifference curve is tangent to the budget constraint,

Figure 21-32 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. -Refer to Figure 21-32. How much income does Hannah earn when she is young?

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

Figure 21-32 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. -Refer to Figure 21-32. Which of the four labeled points is Hannah's optimum?

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

Exam 21: The Theory of Consumer Choice

Figure 21-2 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

Figure 21-1 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the price of a CD is $12, then the consumer's income amounts to

A rational person can have a negatively-sloped labor supply curve.

Which effect of a price change moves the consumer along the same indifference curve to a point with a new marginal rate of substitution?

Figure 21-32 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. -Refer to Figure 21-32. Of the four labeled points, which is (are) affordable to Hannah?

The labor supply curve may have a backward-bending portion if, at higher wages, the income effect is

The indifference curves for perfect substitutes are straight lines.

Figure 21-9 -Refer to Figure 21-9. If the price of good X is $15, what is the price of good Y?

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. If Steve's income is $12.60, then the price of a pound of apples is

Consider the indifference curve map and budget constraint for two goods, X and Y. Suppose the good on the horizontal axis, X, is normal. When the price of X increases, the substitution effect

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

If a consumer experiences a decrease in income, the new budget constraint will have the same slope as the old budget constraint.

When the indifference curve is tangent to the budget constraint,

Figure 21-32 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. -Refer to Figure 21-32. How much income does Hannah earn when she is young?

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

Figure 21-32 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. -Refer to Figure 21-32. Which of the four labeled points is Hannah's optimum?

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

Figure 21-2 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the price of a CD is $12, then the consumer's income amounts to