Question 1

When two goods are perfect substitutes,the indifference curve is

Accepted Answer

A)   a horizontal straight line.
B)   bowed outward.
C)   a downward-sloping straight line.
D)   a right angle.E) A) and D)
F) None of the above

Question 2

Assume that a consumer's indifference curve is a downward-sloping straight line.As the consumer moves from left to right along the horizontal axis,the consumer's marginal rate of substitution

Accepted Answer

A)   increases.
B)   decreases.
C)   remains constant.
D)   increases,then decreases.E) A) and B)
F) A) and C)

Question 3

Billie spends all of her income on soccer balls and jeans,and the price of a pair of jeans is three times the price of soccer balls.In order to maximize total utility,Billie should

Accepted Answer

A)   buy three times as many soccer balls as pairs of jeans.
B)   buy three times as many pairs of jeans as soccer balls.
C)   buy both items until the marginal utility of soccer balls is three times the marginal utility of a pair of jeans.
D)   buy both items until the marginal utility of a pair of jeans is three times the marginal utility of soccer balls.E) All of the above
F) A) and B)

Question 4

Giffen goods violate the law of demand.

Accepted Answer

A) True 
 B)False

Question 5

Using the graph shown,construct a demand curve for M&M's given an income of $10.

Accepted Answer

The answer of Using the graph shown,construct a demand curve...

Question 6

A decrease in a consumer's income

Accepted Answer

A)   increases the slope of the consumer's budget constraint.
B)   has no effect on the consumer's budget constraint.
C)   decreases the slope of the consumer's budget constraint.
D)   has no effect on the slope of the consumer's budget constraint.E) A) and B)
F) B) and D)

Question 7

Figure 21-4
In each case,the budget constraint moves from BC-1 to BC-2.    
-Refer to Figure 21-4.Which of the graphs in the figure could reflect a decrease in income?

Accepted Answer

A)   graph a
B)   graph b
C)   graph d
D)   None of the above is correct.E) B) and C)
F) A) and B)

Question 8

The substitution 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 upward.

Accepted Answer

A) True 
 B)False

Question 9

Traci consumes two goods,lemonade and pretzels.Lemonade costs $1 per glass,and she consumes it to the point where the marginal utility she receives from her last glass of lemonade is 3.Pretzels cost $2 per bag.The relationship between the marginal utility Traci gets from eating a bag of pretzels and the number of bags she eats per month is as follows:  If Traci is maximizing his utility,how much does she spend on potato chips each month?

Accepted Answer

A)   $2
B)   $6
C)   $8
D)   $12E) B) and C)
F) A) and D)

Question 10

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

Accepted Answer

A)   substitution effect of an increase in the price of potato chips.
B)   income effect of an increase in the price of potato chips.
C)   substitution effect of a decrease in the price of potato chips.
D)   income effect of a decrease in the price of potato chips.E) None of the above
F) All of the above

Question 11

Economists have found evidence of a Giffen good when studying the consumption of rice in the Chinese province of Hunan.

Accepted Answer

A) True 
 B)False

Question 12

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)   -2.25E) B) and D)
F) None of the above

Question 13

Figure 21-8 
-Refer to Figure 21-8.If the price of good X is $5,and your budget constraint is DE,what is the price of good Y?

Accepted Answer

A)   $10
B)   $5
C)   $2.50
D)   $1.67E) A) and C)
F) B) and C)

Question 14

When the price of a normal good increases,

Accepted Answer

A)   both the income and substitution effects encourage the consumer to purchase more of the good.
B)   both the income and substitution effects encourage the consumer to purchase less of the good.
C)   the income effect encourages the consumer to purchase more of the good,and the substitution effect encourages the consumer to purchase less of the good.
D)   the income effect encourages the consumer to purchase less of the good,and the substitution effect encourages the consumer to purchase more of the good.E) None of the above
F) A) and B)

Question 15

When considering her budget,the highest indifference curve that a consumer can reach is the

Accepted Answer

A)   one that is tangent to the budget constraint.
B)   indifference curve farthest from the origin
C)   indifference curve that intersects the budget constraint in at least two places.
D)   None of the above is correct.E) None of the above
F) All of the above

Question 16

When two goods are perfect complements,the indifference curves are

Accepted Answer

A)   positively sloped.
B)   negatively sloped.
C)   straight lines.
D)   right angles.E) B) and C)
F) All of the above

Question 17

When two goods are perfect complements,the indifference curves will

Accepted Answer

A)   have a positive slope.
B)   be right angles.
C)   have a constant marginal rate of substitution.
D)   Both b and c are correct.E) B) and C)
F) A) and D)

Question 18

At the consumer's optimum the

Accepted Answer

A)   budget constraint will have a slope of MUx/Px.
B)   slope of the indifference curve is equal to the slope of the budget constraint.
C)   indifference curve will intersect the budget constraint at the midpoint of the budget constraint.
D)   Both b and c are correct.E) A) and D)
F) A) and C)

Question 19

Consider two goods,books and hamburgers.The slope of the consumer's budget constraint is measured by the

Accepted Answer

A)   consumer's income divided by the price of hamburgers.
B)   relative price of books and hamburgers.
C)   consumer's marginal rate of substitution.
D)   number of books purchased divided by the number of hamburgers purchased.E) B) and D)
F) A) and B)

Question 20

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.E) B) and D)
F) A) and D)

Exam 21: The Theory of Consumer Choice

Billie spends all of her income on soccer balls and jeans,and the price of a pair of jeans is three times the price of soccer balls.In order to maximize total utility,Billie should

Correct Answer
verified

The substitution 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 upward.

Correct Answer
verified

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

Correct Answer
verified

When two goods are perfect substitutes,the indifference curve is

Correct Answer
verified

A decrease in a consumer's income

Correct Answer
verified

Using the graph shown,construct a demand curve for M&M's given an income of $10.

Correct Answer
verified

Figure 21-8 -Refer to Figure 21-8.If the price of good X is $5,and your budget constraint is DE,what is the price of good Y?

Correct Answer
verified

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

Correct Answer
verified

When two goods are perfect complements,the indifference curves are

Correct Answer
verified

Assume that a consumer's indifference curve is a downward-sloping straight line.As the consumer moves from left to right along the horizontal axis,the consumer's marginal rate of substitution

Correct Answer
verified

Figure 21-4 In each case,the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-4.Which of the graphs in the figure could reflect a decrease in income?

Correct Answer
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Giffen goods violate the law of demand.

Correct Answer
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When the price of a normal good increases,

Correct Answer
verified

At the consumer's optimum the

Correct Answer
verified

Economists have found evidence of a Giffen good when studying the consumption of rice in the Chinese province of Hunan.

Correct Answer
verified

Consider two goods,books and hamburgers.The slope of the consumer's budget constraint is measured by the

Correct Answer
verified

When two goods are perfect complements,the indifference curves will

Correct Answer
verified

When considering her budget,the highest indifference curve that a consumer can reach is the

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

Billie spends all of her income on soccer balls and jeans,and the price of a pair of jeans is three times the price of soccer balls.In order to maximize total utility,Billie should

Correct AnswerverifiedShow Answer

The substitution 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 upward.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When two goods are perfect substitutes,the indifference curve is

Correct AnswerverifiedShow Answer

A decrease in a consumer's income

Correct AnswerverifiedShow Answer

Using the graph shown,construct a demand curve for M&M's given an income of $10.

Correct AnswerverifiedShow Answer

Figure 21-8 -Refer to Figure 21-8.If the price of good X is $5,and your budget constraint is DE,what is the price of good Y?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When two goods are perfect complements,the indifference curves are

Correct AnswerverifiedShow Answer

Assume that a consumer's indifference curve is a downward-sloping straight line.As the consumer moves from left to right along the horizontal axis,the consumer's marginal rate of substitution

Correct AnswerverifiedShow Answer

Figure 21-4 In each case,the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-4.Which of the graphs in the figure could reflect a decrease in income?

Correct AnswerverifiedShow Answer

Giffen goods violate the law of demand.

Correct AnswerverifiedShow Answer

When the price of a normal good increases,

Correct AnswerverifiedShow Answer

At the consumer's optimum the

Correct AnswerverifiedShow Answer

Economists have found evidence of a Giffen good when studying the consumption of rice in the Chinese province of Hunan.

Correct AnswerverifiedShow Answer

Consider two goods,books and hamburgers.The slope of the consumer's budget constraint is measured by the

Correct AnswerverifiedShow Answer

When two goods are perfect complements,the indifference curves will

Correct AnswerverifiedShow Answer

When considering her budget,the highest indifference curve that a consumer can reach is the

Correct AnswerverifiedShow Answer

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