Question 1

Suppose the price of good X falls. As a result, the quantity demanded for good X increases for a particular consumer. For this consumer, the substitution effect induced the consumer to purchase more X while the income effect induced the consumer to purchase less X. We can infer that X is a(n)

Accepted Answer

A)  normal good.
B)  inferior good.
C)  Giffen good.
D)  luxury good.E) All of the above
F) C) and D)

Question 2

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. Barbara is happier at A) point B than at point A. B) point B than at point C. C) point C than at point D. D) All of the above are correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-15. Barbara is happier at

Accepted Answer

A)  point B than at point A.
B)  point B than at point C.
C)  point C than at point D.
D)  All of the above are correct.E) C) and D)
F) A) and B)

Question 3

Suppose a consumer spends her income on two goods: music CDs and DVDs. The consumer has $200 to allocate to these two goods, the price of a CD is $10, and the price of a DVD is $20. What is the maximum number of CDs the consumer can purchase?

Accepted Answer

A)  10
B)  20
C)  40
D)  50E) C) and D)
F) None of the above

Question 4

If Chad's labor-supply curve is upward-sloping, then, for Chad,

Accepted Answer

A)  an increase in the wage creates an income effect that is greater than the substitution effect.
B)  an increase in the wage creates a substitution effect that is greater than the income effect.
C)  leisure and consumption are perfect substitutes.
D)  leisure and consumption are perfect complements.E) None of the above
F) C) and D)

Question 5

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 substitution 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) A) and C)
F) None of the above

Question 6

The substitution effect of a price change is depicted by a

Accepted Answer

A)  movement along the budget constraint holding satisfaction constant.
B)  shift in the budget constraint at the old prices.
C)  movement along the consumer's new indifference curve at the new prices.
D)  movement along the original indifference curve to the point where the marginal rate of substitution equals the price ratio for the new set of prices.E) A) and B)
F) C) and D)

Question 7

Higher indifference curves are preferred to lower ones as long as the

Accepted Answer

A)  marginal rate of substitution is diminishing.
B)  products in the bundle are "bads" and not "goods."
C)  products in the bundle are "goods" and not "bads."
D)  budget constraint does not shift.E) None of the above
F) All of the above

Question 8

Suppose an individual is choosing between Netflix and Redbox movies. He has $16 a month to spend on movies. The price of a Redbox movie is $1 while Netflix offers unlimited movies for a monthly fee of $8. Which of the following represents this individual's budget line?

Accepted Answer

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

Question 9

Scenario 21-3
Scott knows that he will ultimately face retirement. Assume that Scott will experience two periods in his life, one in which he works and earns income, and one in which he is retired and earns no income. Scott can earn $250,000 during his working period and nothing in his retirement period. He must both save and consume in his work period with an interest rate of 10 percent on savings.
-Refer to Scenario 21-3. If the interest rate on savings increases,

Accepted Answer

A)  Scott will decrease his savings in the work period if the income effect is greater than the substitution effect for him.
B)  Scott will increase his savings in the work period if the income effect is greater than the substitution effect for him.
C)  Scott will increase his savings in the work period if the substitution effect is greater than the income effect for him.
D)  Both a and c are correct.E) All of the above
F) None of the above

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

Mark 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 Mark's income has stayed fixed at $46 per week. If you measure gin on the vertical axis and cocktail olives on the horizontal axis, then the budget constraint

Accepted Answer

A)  is steeper after the price changes.
B)  is flatter after the price changes.
C)  is the same after the price changes.
D)  shifts in a parallel fashion to the old budget constraint after the price changes.E) C) and D)
F) All of the above

Question 12

Suppose a consumer has an income of $800 per month and that she spends her entire income each month on beer and bratwurst. The price of a pint of beer is $5, and the price of a bratwurst is $4. Which of the following combinations of beers and bratwursts represents a point that would lie to the exterior of the consumer's budget constraint?

Accepted Answer

A)  160 beers and 200 bratwursts
B)  40 beers and 50 bratwursts
C)  80 beers and 100 bratwursts
D)  160 beers and 0 bratwurstsE) A) and D)
F) B) and D)

Question 13

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) B) and D)
F) All of the above

Question 14

Is it possible for a normal good to be a Giffen good? Briefly explain.

Accepted Answer

No, only i...

Question 15

A family on a trip budgets $1,000 for meals and gasoline. If the price of a meal for the family is $50 and if gasoline costs $3.50 per gallon, then how many meals can the family buy if they buy 100 gallons of gasoline?

Accepted Answer

A)  13
B)  16
C)  19
D)  21E) A) and C)
F) A) and B)

Question 16

When two goods are perfect complements, the indifference curves are right angles.

Accepted Answer

A) True 
 B)False

Question 17

Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. 
-Refer to Figure 21-24. At his optimum, Steve is buying

Accepted Answer

A)  0.6 pounds of apples.
B)  2.0 pounds of apples.
C)  4.5 pounds of apples.
D)  5.5 pounds of apples.E) B) and C)
F) A) and D)

Question 18

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, the marginal rate of substitution between goods y And x A) increases as she moves downward and to the right along one of her indifference curves. B) decreases as she moves downward and to the right along one of her indifference curves. C) remains constant as she moves downward and to the right along one of her indifference curves. D) is undefined for any movement along any one of her indifference curves." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-15. For Barbara, the marginal rate of substitution between goods y
And x

Accepted Answer

A)  increases as she moves downward and to the right along one of her indifference curves.
B)  decreases as she moves downward and to the right along one of her indifference curves.
C)  remains constant as she moves downward and to the right along one of her indifference curves.
D)  is undefined for any movement along any one of her indifference curves.E) A) and D)
F) A) and C)

Question 19

Figure 21-2 The downward-sloping line on the figure represents a consumer's budget
constraint. 
-Refer to Figure 21-2. If the consumer's income is $100, then what is the price of an apple?

Accepted Answer

A)  $0.50
B)  $0.75
C)  $1.00
D)  $1.25E) None of the above
F) B) and C)

Question 20

A consumer maximizes utility when she consumes at a point where​

Accepted Answer

A)  ​the marginal utility of each good is the same.
B)  ​the marginal utility per dollar spent on each good is the same.
C)  ​the price of each good is the same.
D)  ​All of the above statements are true.E) A) and B)
F) All of the above

Exam 21: The Theory of Consumer Choice

The substitution effect of a price change is depicted by a

Correct Answer
verified

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. Barbara is happier at

Correct Answer
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Higher indifference curves are preferred to lower ones as long as the

Correct Answer
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Suppose an individual is choosing between Netflix and Redbox movies. He has $16 a month to spend on movies. The price of a Redbox movie is $1 while Netflix offers unlimited movies for a monthly fee of $8. Which of the following represents this individual's budget line?

Correct Answer
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Correct Answer
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Correct Answer
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Suppose the price of good X falls. As a result, the quantity demanded for good X increases for a particular consumer. For this consumer, the substitution effect induced the consumer to purchase more X while the income effect induced the consumer to purchase less X. We can infer that X is a(n)

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

Correct Answer
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When two goods are perfect complements, the indifference curves are right angles.

Correct Answer
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Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. At his optimum, Steve is buying

Correct Answer
verified

Is it possible for a normal good to be a Giffen good? Briefly explain.

Correct Answer
verified
No, only i...
View Answer

Suppose a consumer spends her income on two goods: music CDs and DVDs. The consumer has $200 to allocate to these two goods, the price of a CD is $10, and the price of a DVD is $20. What is the maximum number of CDs the consumer can purchase?

Correct Answer
verified

A family on a trip budgets $1,000 for meals and gasoline. If the price of a meal for the family is $50 and if gasoline costs $3.50 per gallon, then how many meals can the family buy if they buy 100 gallons of gasoline?

Correct Answer
verified

A consumer maximizes utility when she consumes at a point where

Correct Answer
verified

Figure 21-2 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. If the consumer's income is $100, then what is the price of an apple?

Correct Answer
verified

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, the marginal rate of substitution between goods y And x

Correct Answer
verified

If Chad's labor-supply curve is upward-sloping, then, for Chad,

Correct Answer
verified

Correct Answer
verified

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 substitution effect can be illustrated as the movement from

Correct Answer
verified

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

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

The substitution effect of a price change is depicted by a

Correct AnswerverifiedShow Answer

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. Barbara is happier at

Correct AnswerverifiedShow Answer

Higher indifference curves are preferred to lower ones as long as the

Correct AnswerverifiedShow Answer

Suppose an individual is choosing between Netflix and Redbox movies. He has $16 a month to spend on movies. The price of a Redbox movie is $1 while Netflix offers unlimited movies for a monthly fee of $8. Which of the following represents this individual's budget line?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose the price of good X falls. As a result, the quantity demanded for good X increases for a particular consumer. For this consumer, the substitution effect induced the consumer to purchase more X while the income effect induced the consumer to purchase less X. We can infer that X is a(n)

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When two goods are perfect complements, the indifference curves are right angles.

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. At his optimum, Steve is buying

Correct AnswerverifiedShow Answer

Is it possible for a normal good to be a Giffen good? Briefly explain.

Correct AnswerverifiedNo, only i...View AnswerShow Answer

Suppose a consumer spends her income on two goods: music CDs and DVDs. The consumer has $200 to allocate to these two goods, the price of a CD is $10, and the price of a DVD is $20. What is the maximum number of CDs the consumer can purchase?

Correct AnswerverifiedShow Answer

A family on a trip budgets $1,000 for meals and gasoline. If the price of a meal for the family is $50 and if gasoline costs $3.50 per gallon, then how many meals can the family buy if they buy 100 gallons of gasoline?

Correct AnswerverifiedShow Answer

A consumer maximizes utility when she consumes at a point where​

Correct AnswerverifiedShow Answer

Figure 21-2 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. If the consumer's income is $100, then what is the price of an apple?

Correct AnswerverifiedShow Answer

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, the marginal rate of substitution between goods y And x

Correct AnswerverifiedShow Answer

If Chad's labor-supply curve is upward-sloping, then, for Chad,

Correct AnswerverifiedShow Answer

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 substitution effect can be illustrated as the movement from

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

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. Barbara is happier at

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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No, only i...
View Answer

Correct Answer
verified

Correct Answer
verified

A consumer maximizes utility when she consumes at a point where

Correct Answer
verified

Correct Answer
verified

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, the marginal rate of substitution between goods y And x

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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