Question 1

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)   200
B)   100
C)   50
D)   25E) A) and B)
F) B) and C)

Question 2

Figure 21-10 
-Refer to Figure 21-10.Which of the following comparisons is correct regarding the marginal rate of substitution (MRS) of donuts for cake?

Accepted Answer

A)   The MRS is greater between bundles A and B than between bundles B and C.
B)   The MRS is greater between bundles B and C than between bundles A and B.
C)   The MRS is the same between bundles A and B and bundles B and C because all three bundles lie on the same indifference curve.
D)   The MRS is greater between bundles E and B than between bundles B and D.E) All of the above
F) C) and D)

Question 3

A Giffen good is a good for which

Accepted Answer

A)   a decrease in the price decreases the quantity demanded.
B)   the substitution effect outweighs the income effect.
C)   an increase in the price decreases the quantity demanded.
D)   Both a and b are correct.E) B) and D)
F) B) and C)

Question 4

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

Accepted Answer

A)   The indifference curves represented in graph a are perfect complements.
B)   The indifference curves represented in graph b are perfect substitutes.
C)   The indifference curves represented in graph c are neither perfect substitutes not perfect complements.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 5

Jack and Diane each buy pizza and paperback novels.Pizza costs $3 per slice,and paperback novels cost $5 each.Jack has a budget of $30,and Diane has a budget of $15 to spend on pizza and paperback novels.Which consumer(s) can afford to purchase 3 slices of pizza and 4 paperback novels?

Accepted Answer

A)   Jack only
B)   Diane only
C)   both Jack and Diane
D)   neither Jack nor DianeE) None of the above
F) B) and C)

Question 6

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

Accepted Answer

A)   remains the same.
B)   shifts outward.
C)   shifts inward.
D)   rotates outward along the horizontal axis.E) All of the above
F) B) and D)

Question 7

Which of the following represents a consumer's optimum?

Accepted Answer

A)   MUx/MUy = Py/Px
B)   MUx/Py = MUy/Px
C)   MUx/Px = MUy/Py
D)   MUy/MUx = Px/PyE) A) and B)
F) B) and C)

Question 8

The slope of the budget constraint reveals the relative price of good X compared to good Y.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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?

Accepted Answer

A)   $150
B)   $100
C)   $75
D)   $37.50E) A) and C)
F) C) and D)

Question 11

Suppose Rich always uses two packets of sugar with his coffee.Rich's indifference curves for sugar and coffee are

Accepted Answer

A)   bowed inward.
B)   bowed outward.
C)   straight lines.
D)   L shaped.E) B) and D)
F) None of the above

Question 12

The bowed shape of the indifference curve reflects the consumer's

Accepted Answer

A)   unwillingness to give up a good that he already has in large quantity.
B)   unwillingness to purchase a good that he already has in large quantity.
C)   greater willingness to give up a good that he already has in large quantity.
D)   greater willingness to purchase a good that he already has in large quantity.E) C) and D)
F) A) and D)

Question 13

If two bundles of goods give a consumer the same satisfaction,the consumer must be

Accepted Answer

A)   on her budget constraint.
B)   in a position of equilibrium.
C)   indifferent between the bundles.
D)   Both a and c are correct.E) All of the above
F) A) and C)

Question 14

The income effect of a price change is unaffected by whether the good is a normal or inferior good.

Accepted Answer

A) True 
 B)False

Question 15

The relationship between the marginal utility that David gets from eating ice cream sundaes and the number of ice cream cones he eats per week is as follows:  David 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)   5E) B) and C)
F) A) and C)

Question 16

When considering household savings,the relative price between consuming when young and consuming when old is the

Accepted Answer

A)   consumption rate.
B)   interest rate that individuals can earn on their private savings.
C)   prime rate.
D)   federal funds rate.E) All of the above
F) A) and B)

Question 17

Figure 21-11 
-Refer to Figure 21-11.The graph illustrates

Accepted Answer

A)   a typical budget constraint.
B)   a typical indifference curve.
C)   an indifference curve where goods X and Y are perfect complements.
D)   an indifference curve where goods X and Y are perfect substitutes.E) A) and B)
F) C) and D)

Question 18

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 reflects an increase in the price of good X only?

Accepted Answer

A)   graph a
B)   graph b
C)   graph c
D)   graph dE) None of the above
F) C) and D)

Question 19

If a consumer purchases more of good X and good Y after her income increases,then neither good X nor good Y is an inferior good for her.

Accepted Answer

A) True 
 B)False

Question 20

Figure 21-12 
-Refer to Figure 21-12.Which of the following statements is correct?

Accepted Answer

A)   The consumer prefers bundle Y to bundle Z.
B)   The consumer is indifference between bundle X and bundle V.
C)   The consumer prefers bundle Y to bundle X.
D)   The consumer prefers bundle Z to bundle V.E) A) and B)
F) B) and C)

Exam 21: The Theory of Consumer Choice

Figure 21-11 -Refer to Figure 21-11.The graph illustrates

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If two bundles of goods give a consumer the same satisfaction,the consumer must be

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Figure 21-12 -Refer to Figure 21-12.Which of the following statements is correct?

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

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A Giffen good is a good for which

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Which of the following represents a consumer's optimum?

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The bowed shape of the indifference curve reflects the consumer's

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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?

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When considering household savings,the relative price between consuming when young and consuming when old is the

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Figure 21-10 -Refer to Figure 21-10.Which of the following comparisons is correct regarding the marginal rate of substitution (MRS) of donuts for cake?

Correct Answer
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If a consumer purchases more of good X and good Y after her income increases,then neither good X nor good Y is an inferior good for her.

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

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

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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 reflects an increase in the price of good X only?

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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?

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Suppose Rich always uses two packets of sugar with his coffee.Rich's indifference curves for sugar and coffee are

Correct Answer
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The income effect of a price change is unaffected by whether the good is a normal or inferior good.

Correct Answer
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Jack and Diane each buy pizza and paperback novels.Pizza costs $3 per slice,and paperback novels cost $5 each.Jack has a budget of $30,and Diane has a budget of $15 to spend on pizza and paperback novels.Which consumer(s) can afford to purchase 3 slices of pizza and 4 paperback novels?

Correct Answer
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The slope of the budget constraint reveals the relative price of good X compared to good Y.

Correct Answer
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Exam 21: The Theory of Consumer Choice

Figure 21-11 -Refer to Figure 21-11.The graph illustrates

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If two bundles of goods give a consumer the same satisfaction,the consumer must be

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Figure 21-12 -Refer to Figure 21-12.Which of the following statements is correct?

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

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A Giffen good is a good for which

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Which of the following represents a consumer's optimum?

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The bowed shape of the indifference curve reflects the consumer's

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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?

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When considering household savings,the relative price between consuming when young and consuming when old is the

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Figure 21-10 -Refer to Figure 21-10.Which of the following comparisons is correct regarding the marginal rate of substitution (MRS) of donuts for cake?

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If a consumer purchases more of good X and good Y after her income increases,then neither good X nor good Y is an inferior good for her.

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

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

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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 reflects an increase in the price of good X only?

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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?

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Suppose Rich always uses two packets of sugar with his coffee.Rich's indifference curves for sugar and coffee are

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The income effect of a price change is unaffected by whether the good is a normal or inferior good.

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Jack and Diane each buy pizza and paperback novels.Pizza costs $3 per slice,and paperback novels cost $5 each.Jack has a budget of $30,and Diane has a budget of $15 to spend on pizza and paperback novels.Which consumer(s) can afford to purchase 3 slices of pizza and 4 paperback novels?

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The slope of the budget constraint reveals the relative price of good X compared to good Y.

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