Question 1

If Hector's marginal rate of substitution between pens and pencils is constant, regardless of how many pens and pencils he has, then his indifference curves

Accepted Answer

A)  are right angles.
B)  are straight lines.
C)  slope upward.
D)  cross one another at certain points.E) None of the above
F) All of the above

Question 2

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

Question 3

When indifference curves are downward sloping, the marginal rate of substitution is usually constant.

Accepted Answer

A) True 
 B)False

Question 4

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

Question 5

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) A) and B)
F) A) and C)

Question 6

A family on a trip budgets $800 for meals and hotel accommodations. Suppose the price of a meal is $40. In addition, suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals. How many meals could the family afford if they gave up two nights in the hotel?

Accepted Answer

A)  1
B)  2
C)  5
D)  8E) B) and C)
F) All of the above

Question 7

Indifference curves that cross would suggest that

Accepted Answer

A)  the consumer does not prefer more to less.
B)  the consumer is likely to prefer a redistribution of income from rich to poor.
C)  different individuals have different preferences for the same goods.
D)  the marginal rate of substitution is the same for both indifference curves.E) B) and C)
F) B) and D)

Question 8

If the market is offering consumers the trade-off of 3 pints of Pepsi for 1 pizza, and if the price of a pizza is $9, then what is the price of a pint of Pepsi?

Accepted Answer

The price ...

Question 9

Taylor spends all of her income on tank tops and running shoes, and the price of a pair of running shoes is four times the price of a tank top. In order to maximize total utility, Taylor should buy

Accepted Answer

A)  four times as many tank tops as pairs of running shoes.
B)  four times as many pairs of running shoes as tank tops.
C)  both items until the marginal utility of a pair of running shoes is four times the marginal utility of a tank top.
D)  both items until the marginal utility of a tank top is four times the marginal utility of a pair of running shoes.E) None of the above
F) B) and C)

Question 10

When two goods are perfect substitutes, the

Accepted Answer

A)  indifference curve is a horizontal straight line.
B)  marginal rate of substitution is constant.
C)  indifference curve is a vertical straight line.
D)  Both a and b are correct.E) A) and C)
F) B) and C)

Question 11

Figure 21-23 
-Refer to Figure 21-23. When the price of X is $80, the price of Y is $20, and the consumer's income is $160, the consumer's optimal choice is D. Then the price of X decreases to $20. The income effect can be illustrated as the movement from

Accepted Answer

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

Question 12

Giffen goods are inferior goods for which the income effect dominates the substitution effect.

Accepted Answer

A) True 
 B)False

Question 13

If an increase in the interest rate raises savings, then

Accepted Answer

A)  the substitution effect is greater than the income effect.
B)  the income effect is greater than the substitution effect.
C)  the income effect and the substitution effect move in the same direction.
D)  we are unable to determine the sizes of the income and substitution effects without more information.E) A) and C)
F) A) and D)

Question 14

All of the following are properties of typical indifference curves except

Accepted Answer

A)  higher indifference curves are preferred to lower ones.
B)  indifference curves are downward sloping.
C)  indifference curves do not cross.
D)  indifference curves are bowed outward.E) B) and C)
F) None of the above

Question 15

If a consumer purchases more of good B when his income rises, good B is an inferior good.

Accepted Answer

A) True 
 B)False

Question 16

​Suppose the price of good X increases and consumers purchase more of good Y. Which of the following statements is necessarily true about good Y?

Accepted Answer

A)  ​Good Y is a normal good.
B)  ​Good Y is an inferior good, but not a Giffen good.
C)  ​Good Y is an inferior good and a Giffen good.
D)  ​Good Y could be a normal or inferior good.E) All of the above
F) None of the above

Question 17

Which of the following is an example of a Giffen good?

Accepted Answer

A)  fish in Japan
B)  rice in the Chinese province of Hunan
C)  pork in India
D)  Both a and b are correct.E) A) and C)
F) A) and B)

Question 18

For Meg, the substitution effect of an interest-rate increase is stronger than the income effect. In response to a higher interest rate, will Meg save more or will she save less?

Accepted Answer

In response to a hig...

Question 19

Figure 21-10 
-Refer to Figure 21-10. A person who chooses to consume bundle C is likely to

Accepted Answer

A)  receive higher total satisfaction at bundle C than at bundle A.
B)  spend more on bundle C than bundle A.
C)  receive higher marginal utility from cake than from donuts.
D)  receive higher marginal utility from donuts than from cake.E) B) and C)
F) A) and D)

Question 20

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. 
-Refer to Figure 21-31. If Kevin's income is $1,260, then what is the price of a sweater?

Accepted Answer

The price ...

Exam 21: The Theory of Consumer Choice

For Meg, the substitution effect of an interest-rate increase is stronger than the income effect. In response to a higher interest rate, will Meg save more or will she save less?

Correct AnswerverifiedIn response to a hig...View AnswerShow Answer

All of the following are properties of typical indifference curves except

Correct AnswerverifiedShow Answer

​Suppose the price of good X increases and consumers purchase more of good Y. Which of the following statements is necessarily true about good Y?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Giffen goods are inferior goods for which the income effect dominates the substitution effect.

Correct AnswerverifiedShow Answer

If Hector's marginal rate of substitution between pens and pencils is constant, regardless of how many pens and pencils he has, then his indifference curves

Correct AnswerverifiedShow Answer

Taylor spends all of her income on tank tops and running shoes, and the price of a pair of running shoes is four times the price of a tank top. In order to maximize total utility, Taylor should buy

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 21-10 -Refer to Figure 21-10. A person who chooses to consume bundle C is likely to

Correct AnswerverifiedShow Answer

If the market is offering consumers the trade-off of 3 pints of Pepsi for 1 pizza, and if the price of a pizza is $9, then what is the price of a pint of Pepsi?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. If Kevin's income is $1,260, then what is the price of a sweater?

Correct AnswerverifiedThe price ...View AnswerShow Answer

A family on a trip budgets $800 for meals and hotel accommodations. Suppose the price of a meal is $40. In addition, suppose the family could afford a total of 8 nights in a hotel if they don't buy any meals. How many meals could the family afford if they gave up two nights in the hotel?

Correct AnswerverifiedShow Answer

When indifference curves are downward sloping, the marginal rate of substitution is usually constant.

Correct AnswerverifiedShow Answer

Figure 21-23 -Refer to Figure 21-23. When the price of X is $80, the price of Y is $20, and the consumer's income is $160, the consumer's optimal choice is D. Then the price of X decreases to $20. The income effect can be illustrated as the movement from

Correct AnswerverifiedShow Answer

If an increase in the interest rate raises savings, then

Correct AnswerverifiedShow Answer

Indifference curves that cross would suggest that

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

Which of the following is an example of a Giffen good?

Correct AnswerverifiedShow Answer

When two goods are perfect substitutes, the

Correct AnswerverifiedShow Answer

If a consumer purchases more of good B when his income rises, good B is an inferior good.

Correct AnswerverifiedShow Answer

Correct Answer
verified
In response to a hig...
View Answer

Correct Answer
verified

Suppose the price of good X increases and consumers purchase more of good Y. Which of the following statements is necessarily true about good Y?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The price ...
View Answer

Correct Answer
verified
The price ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified