Question 1

An optimizing consumer will select the consumption bundle in which the

Accepted Answer

A)  ratio of total utilities is equal to the relative price ratio.
B)  ratio of income to price equals the marginal rate of substitution.
C)  marginal rate of substitution is equal to the relative price ratio of the goods.
D)  marginal rate of substitution is equal to marginal utility.E) All of the above
F) A) and B)

Question 2

Goods x and y are available to Jeff. At Jeff's optimum, the marginal utility per dollar spent on good x equals __________________.

Accepted Answer

the margin...

Question 3

The following diagram shows two budget lines: A and B.  Which of the following could explain the change in the budget line from A to B?

Accepted Answer

A)  a simultaneous decrease in the price of X and the price of Y
B)  an increase in income
C)  a decrease in income and a decrease in the price of Y
D)  Both a and b are correct.E) A) and B)
F) C) and D)

Question 4

Preston goes to the movies every Sunday afternoon. The movie theater offers 4 combinations of popcorn and beverages: the "mini-combo" costs $5 and includes a small popcorn and a small drink, the "medium-combo" costs $7 and includes a medium popcorn and a medium drink, the "value-combo" also costs $7 and includes a small popcorn and a large drink, and the "large-combo" costs $9 and includes a large popcorn and a large drink. Preston always purchases the "value-combo." We can conclude that

Accepted Answer

A)  Preston cannot afford the "large-combo."
B)  Preston cannot afford the "medium-combo."
C)  Preston prefers a combo with a larger popcorn-to-beverage ratio.
D)  Preston prefers a combo with a smaller popcorn-to-beverage ratio.E) A) and B)
F) A) and C)

Question 5

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. 
-Refer to Figure 21-24. Which of the following pairs of prices matches the appearance of the budget constraint?

Accepted Answer

A)  price of apples = $6/pound; price of pears = $4/pound
B)  price of apples = $4/pound; price of pears = $6/pound
C)  price of apples = $6/pound; price of pears = $5/pound
D)  price of apples = $5/pound; price of pears = $6/poundE) A) and B)
F) All of the above

Question 6

Suppose good X is on the horizontal axis, good Y is on the vertical axis, and the slope of an individual's budget line is -2. Which of the following is true?​

Accepted Answer

A)  ​Good Y is twice as expensive as good X.
B)  ​The consumer gives up two units of good Y for each unit of good X she purchases.
C)  ​The opportunity cost of good X is one half of a unit of good Y.
D)  ​All of the above are correct.E) None of the above
F) A) and C)

Question 7

A budget constraint illustrates the

Accepted Answer

A)  prices that a consumer chooses to pay for products he consumes.
B)  purchases made by consumers.
C)  consumption bundles that a consumer can afford.
D)  consumption bundles that give a consumer equal satisfaction.E) A) and B)
F) A) and C)

Question 8

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 C)
F) A) and B)

Question 9

Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the income effect associated with a decrease in the price of a textbook will result in

Accepted Answer

A)  a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles.
B)  a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles.
C)  an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles.
D)  an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles.E) All of the above
F) B) and D)

Question 10

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

Accepted Answer

A) True 
 B)False

Question 11

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

Question 12

The indifference curves for perfect substitutes are right angles.

Accepted Answer

A) True 
 B)False

Question 13

Figure 21-8 
-Refer to Figure 21-8. You have $300 to spend on good X and good Y. If good X costs $30 and good Y costs $50, your budget constraint is

Accepted Answer

A)  AB.
B)  BC.
C)  CD.
D)  DE.E) A) and B)
F) A) and C)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Clark enjoys fishing and hunting. He divides his leisure hours between the two outdoor activities. Suppose we were to draw Clark's indifference curves for the two activities, placing fishing on the horizontal axis and hunting on the vertical axis. If Clark's indifference curves are bowed inward, then

Accepted Answer

A)  the rate at which he is willing to give up an hour of hunting for an hour of fishing changes depending on how many hours of each activity he has done. For example, if Clark has already fished a lot in one week, he will be more willing to give up an hour of fishing for an hour of hunting than if he has only fished a little that week.
B)  the rate at which he is willing to give up an hour of hunting for an hour of fishing is constant because he must derive the same enjoyment out of each activity.
C)  the rate at which he is willing to give up an hour of hunting for an hour of fishing changes depending on how many hours of each activity he has done. For example, if Clark has already fished a lot in one week, he will be less willing to give up an hour of fishing for an hour of hunting than if he has only fished a little that week.
D)  Clark's indifference curves will not cross. When indifference curves are bowed outward, the indifference curves must cross.E) None of the above
F) A) and B)

Question 16

When a consumer experiences a price decrease for an inferior good, if the income effect is

Accepted Answer

A)  less than the substitution effect, the demand curve will be downward sloping.
B)  greater than the substitution effect, the demand curve will be upward sloping.
C)  less than the substitution effect, the demand curve will be upward sloping.
D)  both a)  and b)  are correct.E) A) and B)
F) A) and C)

Question 17

Gerald spends his weekly income on gin and cocktail olives. The price of gin has risen from $7 to $9 per bottle, the price of cocktail olives has fallen from $6 to $5 per jar, and Gerald's income has stayed fixed at $46 per week. Since the price changes, Gerald has been buying 4 bottles of gin and 2 jars of cocktail olives per week. At the original prices, 4 bottles of gin and 2 jars of cocktail olives would have

Accepted Answer

A)  exactly exhausted his income.
B)  cost more than his income.
C)  cost less than his income.
D)  could have maximized his satisfaction given his budget constraint.E) None of the above
F) B) and D)

Question 18

The theory of consumer choice examines

Accepted Answer

A)  the determination of output in competitive markets.
B)  the tradeoffs inherent in decisions made by consumers.
C)  how consumers select inputs into manufacturing production processes.
D)  the determination of prices in competitive markets.E) None of the above
F) A) and C)

Question 19

Indifference curves tend to be bowed inward because of diminishing

Accepted Answer

A)  marginal rates of substitution.
B)  demand for the good as prices rise.
C)  income.
D)  Both a and b are correct.E) None of the above
F) A) and B)

Question 20

Figure 21-16 
-Refer to Figure 21-16. The price of X is $5, the price of Y is $20, and the consumer's income is $40. Which point represents the consumer's optimal choice?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) B) and D)
F) A) and C)

Exam 21: The Theory of Consumer Choice

Which of the following represents a consumer's optimum?

Correct Answer
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The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

Correct Answer
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Suppose good X is on the horizontal axis, good Y is on the vertical axis, and the slope of an individual's budget line is -2. Which of the following is true?

Correct Answer
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Indifference curves tend to be bowed inward because of diminishing

Correct Answer
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Correct Answer
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A budget constraint illustrates the

Correct Answer
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Correct Answer
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The theory of consumer choice examines

Correct Answer
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The following diagram shows two budget lines: A and B. Which of the following could explain the change in the budget line from A to B?

Correct Answer
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An optimizing consumer will select the consumption bundle in which the

Correct Answer
verified

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. Which of the following pairs of prices matches the appearance of the budget constraint?

Correct Answer
verified

When the price of an inferior good decreases,

Correct Answer
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Goods x and y are available to Jeff. At Jeff's optimum, the marginal utility per dollar spent on good x equals __________________.

Correct Answer
verified
the margin...
View Answer

When a consumer experiences a price decrease for an inferior good, if the income effect is

Correct Answer
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Correct Answer
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The indifference curves for perfect substitutes are right angles.

Correct Answer
verified

Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the income effect associated with a decrease in the price of a textbook will result in

Correct Answer
verified

Figure 21-16 -Refer to Figure 21-16. The price of X is $5, the price of Y is $20, and the consumer's income is $40. Which point represents the consumer's optimal choice?

Correct Answer
verified

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

Correct Answer
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Figure 21-8 -Refer to Figure 21-8. You have $300 to spend on good X and good Y. If good X costs $30 and good Y costs $50, your budget constraint is

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

Which of the following represents a consumer's optimum?

Correct AnswerverifiedShow Answer

The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to substitute one good for the other.

Correct AnswerverifiedShow Answer

Suppose good X is on the horizontal axis, good Y is on the vertical axis, and the slope of an individual's budget line is -2. Which of the following is true?​

Correct AnswerverifiedShow Answer

Indifference curves tend to be bowed inward because of diminishing

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A budget constraint illustrates the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The theory of consumer choice examines

Correct AnswerverifiedShow Answer

The following diagram shows two budget lines: A and B. Which of the following could explain the change in the budget line from A to B?

Correct AnswerverifiedShow Answer

An optimizing consumer will select the consumption bundle in which the

Correct AnswerverifiedShow Answer

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. Which of the following pairs of prices matches the appearance of the budget constraint?

Correct AnswerverifiedShow Answer

When the price of an inferior good decreases,

Correct AnswerverifiedShow Answer

Goods x and y are available to Jeff. At Jeff's optimum, the marginal utility per dollar spent on good x equals __________________.

Correct Answerverifiedthe margin...View AnswerShow Answer

When a consumer experiences a price decrease for an inferior good, if the income effect is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The indifference curves for perfect substitutes are right angles.

Correct AnswerverifiedShow Answer

Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the income effect associated with a decrease in the price of a textbook will result in

Correct AnswerverifiedShow Answer

Figure 21-16 -Refer to Figure 21-16. The price of X is $5, the price of Y is $20, and the consumer's income is $40. Which point represents the consumer's optimal choice?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 21-8 -Refer to Figure 21-8. You have $300 to spend on good X and good Y. If good X costs $30 and good Y costs $50, your budget constraint is

Correct AnswerverifiedShow Answer

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Suppose good X is on the horizontal axis, good Y is on the vertical axis, and the slope of an individual's budget line is -2. Which of the following is true?

Correct Answer
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the margin...
View Answer

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