Question 1

Figure 21-2 The downward-sloping line on the figure represents a consumer's budget
constraint. 
-Refer to Figure 21-2. Which of the following statements is correct?

Accepted Answer

A)  Points W, X, and Y all cost the consumer the same amount of money.
B)  Point V is unaffordable for the consumer given his budget constraint.
C)  Point Z costs less than point V.
D)  Points W, X, and Y give the consumer the same level of satisfaction.E) A) and B)
F) A) and C)

Question 2

Just as the theory of the competitive firm provides a more complete understanding of supply, the theory of consumer choice provides a more complete understanding of

Accepted Answer

A)  demand.
B)  profits.
C)  production possibility frontiers.
D)  wages.E) A) and D)
F) None of the above

Question 3

When the price of an inferior good decreases,

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) B) and D)
F) C) and D)

Question 4

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.E) A) and D)
F) None of the above

Question 5

The consumer's optimal choice is the one in which the marginal utility per dollar spent on good X is

Accepted Answer

A)  equal to the marginal utility per dollar saved on good X.
B)  greater than the marginal utility per dollar spent on good Y.
C)  equal to the marginal utility per dollar spent on good Y.
D)  less than the marginal utility per dollar spent on good Y.E) None of the above
F) B) and D)

Question 6

Hold the prices of goods, as well as Amy's preferences, constant. If Amy's income increases, then

Accepted Answer

A)  both her indifference curves and budget constraint change.
B)  her indifference curves change, but her budget constraint does not change.
C)  her budget constraint changes, but her indifference curves do not change.
D)  neither her indifference curves nor her budget constraint change.E) A) and B)
F) All of the above

Question 7

Consumer will always consume more of a good if their income increases.

Accepted Answer

A) True 
 B)False

Question 8

At a consumer's optimal choice, the consumer chooses the combination of goods such that the ratio of the marginal utilities equals the ratio of the prices.

Accepted Answer

A) True 
 B)False

Question 9

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 D)

Question 10

The direction of the substitution effect is not influenced by whether the good is normal or inferior.

Accepted Answer

A) True 
 B)False

Question 11

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) B) and C)
F) None of the above

Question 12

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. 
-Refer to Figure 21-31. If the price of a shirt is $36 and point A is Kevin's optimum, then what is Kevin's income?

Accepted Answer

Kevin's in...

Question 13

Which of the following statements is not correct?

Accepted Answer

A)  If Fiona gets a higher wage and works more, the substitution effect is greater than the income effect for her.
B)  If Miguel experiences a wage decrease and works less, the income effect is greater than the substitution effect for him.
C)  If the substitution effect is greater than the income effect, the labor-supply curve is upward sloping.
D)  If the income effect is greater than the substitution effect, the labor-supply curve is downward sloping.E) All of the above
F) A) and D)

Question 14

An increase in a consumer's income

Accepted Answer

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

Question 15

The substitution effect of an increase in the interest rate will result in an increase in

Accepted Answer

A)  consumption when young and increase in savings when young.
B)  consumption when old and an increase in savings when young.
C)  consumption when young and an increase in savings when old.
D)  savings when old and an increase in consumption when old.E) C) and D)
F) B) and D)

Question 16

The indifference curves for perfect substitutes are straight lines.

Accepted Answer

A) True 
 B)False

Question 17

Indifference curves that cross violate the property of

Accepted Answer

A)  the marginal rate of substitution.
B)  transitivity.
C)  indifference curves bowing inward.
D)  They do not violate any properties of indifference curves.E) All of the above
F) A) and B)

Question 18

Figure 21-18 
-Refer to Figure 21-18. Given the budget constraint depicted in the graph, the consumer's optimal choice will be point

Accepted Answer

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

Question 19

A consumer chooses an optimal consumption point where the

Accepted Answer

A)  marginal rate of substitution exceeds the relative price ratio.
B)  slope of the indifference curve equals the slope of the budget constraint.
C)  ratio of the prices equals one.
D)  All of the above are correct.E) A) and D)
F) A) and B)

Question 20

Figure 21-15 On the graph, Qx represents the quantity of good x and Qy represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves. x represents the quantity of good x and Qy represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves.   -Refer to Figure 21-15. For Barbara, goods x and y are A) imperfect complements. B) imperfect substitutes. C) perfect substitutes. D) perfect complements." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-15. For Barbara, goods x and y are

Accepted Answer

A)  imperfect complements.
B)  imperfect substitutes.
C)  perfect substitutes.
D)  perfect complements.E) None of the above
F) B) and C)

Exam 21: The Theory of Consumer Choice

Figure 21-15 On the graph, Qx represents the quantity of good x and Qy represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves. -Refer to Figure 21-15. For Barbara, goods x and y are

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An increase in a consumer's income

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At a consumer's optimal choice, the consumer chooses the combination of goods such that the ratio of the marginal utilities equals the ratio of the prices.

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Consumer will always consume more of a good if their income increases.

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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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Which of the following statements is not correct?

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Just as the theory of the competitive firm provides a more complete understanding of supply, the theory of consumer choice provides a more complete understanding of

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

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The indifference curves for perfect substitutes are straight lines.

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Indifference curves that cross violate the property of

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When the price of an inferior good decreases,

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Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. If the price of a shirt is $36 and point A is Kevin's optimum, then what is Kevin's income?

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The direction of the substitution effect is not influenced by whether the good is normal or inferior.

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The substitution effect of an increase in the interest rate will result in an increase in

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An optimizing consumer will select a consumption bundle in which

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The consumer's optimal choice is the one in which the marginal utility per dollar spent on good X is

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Figure 21-2 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. Which of the following statements is correct?

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Hold the prices of goods, as well as Amy's preferences, constant. If Amy's income increases, then

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A consumer chooses an optimal consumption point where the

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Figure 21-18 -Refer to Figure 21-18. Given the budget constraint depicted in the graph, the consumer's optimal choice will be point

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Figure 21-15 On the graph, Q_x represents the quantity of good x and Q_y represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves. -Refer to Figure 21-15. For Barbara, goods x and y are

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Kevin's in...
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