Question 1

Figure 21-17 
-Refer to Figure 21-17. When the price of X is $6, the price of Y is $24, and income is $48, Paul's optimal choice is point C. Then the price of Y decreases to $6. Paul's new optimal choice is point

Accepted Answer

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

Question 2

Figure 21-16 
-Refer to Figure 21-16. The price of X is $20, the price of Y is $5, 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) A) and D)
F) All of the above

Question 3

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) B) and D)

Question 4

Calvin is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires. When the substitution effect dominates the income effect, an increase in the interest rate on savings will cause him to

Accepted Answer

A)  increase his savings rate.
B)  decrease his savings rate.
C)  continue saving at the same rate.
D)  Any of the above are possible.E) A) and D)
F) All of the above

Question 5

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 6

Figure 21-1 The downward-sloping line on the figure represents a consumer's budget
constraint. 
-Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Accepted Answer

A)  A.
B)  E.
C)  A and E.
D)  None of the above are correct. All of the points identified on the figure are affordable.E) B) and D)
F) B) and C)

Question 7

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 B)
F) All of the above

Question 8

Hannah and Chris each like jewelry and music by the Rolling Stones. If we were to graph an indifference curve with jewelry on the horizontal axis and CDs by the Rolling Stones on the vertical axis, then

Accepted Answer

A)  Hannah and Chris would have identical indifference curves.
B)  Hannah's indifference curve would be higher than Chris's indifference curve.
C)  Chris's indifference curve would be higher than Hannah's indifference curve.
D)  Because we do not know the intensity of each woman's preferences, we do not have enough information to compare their indifference curves.E) All of the above
F) C) and D)

Question 9

Economic studies of lottery winners and people who have inherited large amounts of money show that

Accepted Answer

A)  the income effect of winning the lottery or inheriting large amounts of money likely outweighs the substitution effect for most people.
B)  the substitution effect of winning the lottery or inheriting large amounts of money likely outweighs the income effect for most people.
C)  most people view leisure as an inferior good.
D)  most people's labor supply is unaffected by changes in wealth.E) All of the above
F) A) and B)

Question 10

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

Question 11

Figure 21-10 
-Refer to Figure 21-10. When comparing bundle A to bundle E, the consumer

Accepted Answer

A)  prefers bundle A because it contains more donuts.
B)  prefers bundle E because it lies on a higher indifference curve.
C)  prefers bundle E because it contains more donuts.
D)  is indifferent between the two bundles.E) B) and D)
F) B) and C)

Question 12

A set of indifference curves that are only slightly bowed inward represent goods that could best be described as

Accepted Answer

A)  perfect substitutes.
B)  perfect complements.
C)  very close substitutes.
D)  very close complements.E) All of the above
F) A) and B)

Question 13

Which of the following statements is necessarily true regarding a point along a budget line?​

Accepted Answer

A)  ​It implies an individual has spent her entire income.
B)  ​It implies an individual is as happy as possible given her income.
C)  ​It implies an individual no longer faces tradeoffs between both goods.
D)  ​It implies an individual would be better off consuming a different bundle of goods.E) A) and B)
F) A) and C)

Question 14

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

Accepted Answer

A)  is equal to the price of the least-expensive good.
B)  exceeds the marginal utility of each good by the greatest amount.
C)  is less than the slope of the budget constraint.
D)  None of the above is correct.E) All of the above
F) A) and D)

Question 15

Andi uses all of her income to purchase books and games. At any two points A and B on Andi's budget constraint,

Accepted Answer

A)  Andi is spending all of her income on books and games.
B)  Andi is spending one half of her income on books and the other half of her income on games.
C)  the price of books relative to the price of games is different.
D)  All of the above are correct.E) All of the above
F) B) and D)

Question 16

​Suppose Alyssa likes oranges twice as much as apples, no matter how many apples or oranges she has. Her indifference curves for oranges and apples

Accepted Answer

A)  ​are right angles.
B)  ​are straight lines.
C)  ​slope upward.
D)  ​cross one another at certain points.E) A) and C)
F) B) and C)

Question 17

Figure 21-10 
-Refer to Figure 21-10. Which of the following statements is correct?

Accepted Answer

A)  Bundle A provides the same utility as bundle E.
B)  Bundle A provides the same utility as bundle C.
C)  Bundle B contains more cake than bundle C.
D)  The bundles along indifference curve Indifference Curve 2 are preferred to those along indifference curve Indifference Curve 3.E) A) and B)
F) None of the above

Question 18

If the consumer's income and all prices simultaneously double, then the optimum consumption bundle will

Accepted Answer

A)  shift outward relative to the original optimum.
B)  move leftward along the original budget constraint.
C)  not change.
D)  shift inward relative to the original optimum.E) A) and B)
F) All of the above

Question 19

"Left" gloves and "right" gloves provide a good example of

Accepted Answer

A)  perfect substitutes.
B)  perfect complements.
C)  negatively sloped indifference curves.
D)  positively sloped indifference curves.E) B) and D)
F) None of the above

Question 20

Explain the difference between inferior and normal goods. As a developing economy experiences increases in income (measured by GDP), what would you predict to happen to demand for inferior goods?

Accepted Answer

Normal goods are those for which consump...

Exam 21: The Theory of Consumer Choice

Which of the following statements is necessarily true regarding a point along a budget line?​

Correct AnswerverifiedShow Answer

Andi uses all of her income to purchase books and games. At any two points A and B on Andi's budget constraint,

Correct AnswerverifiedShow Answer

When two goods are perfect complements, the indifference curves are

Correct AnswerverifiedShow Answer

"Left" gloves and "right" gloves provide a good example of

Correct AnswerverifiedShow Answer

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

Correct AnswerverifiedShow Answer

​Suppose Alyssa likes oranges twice as much as apples, no matter how many apples or oranges she has. Her indifference curves for oranges and apples

Correct AnswerverifiedShow Answer

Explain the difference between inferior and normal goods. As a developing economy experiences increases in income (measured by GDP), what would you predict to happen to demand for inferior goods?

Correct AnswerverifiedNormal goods are those for which consump...View AnswerShow Answer

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

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Figure 21-17 -Refer to Figure 21-17. When the price of X is $6, the price of Y is $24, and income is $48, Paul's optimal choice is point C. Then the price of Y decreases to $6. Paul's new optimal choice is point

Correct AnswerverifiedShow Answer

A set of indifference curves that are only slightly bowed inward represent goods that could best be described as

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

Figure 21-10 -Refer to Figure 21-10. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Figure 21-1 The downward-sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Correct AnswerverifiedShow Answer

Hannah and Chris each like jewelry and music by the Rolling Stones. If we were to graph an indifference curve with jewelry on the horizontal axis and CDs by the Rolling Stones on the vertical axis, then

Correct AnswerverifiedShow Answer

Calvin is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires. When the substitution effect dominates the income effect, an increase in the interest rate on savings will cause him to

Correct AnswerverifiedShow Answer

When two goods are perfect substitutes, the indifference curve is

Correct AnswerverifiedShow Answer

If the consumer's income and all prices simultaneously double, then the optimum consumption bundle will

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Figure 21-10 -Refer to Figure 21-10. When comparing bundle A to bundle E, the consumer

Correct AnswerverifiedShow Answer

Economic studies of lottery winners and people who have inherited large amounts of money show that

Correct AnswerverifiedShow Answer

Which of the following statements is necessarily true regarding a point along a budget line?

Correct Answer
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Suppose Alyssa likes oranges twice as much as apples, no matter how many apples or oranges she has. Her indifference curves for oranges and apples

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Normal goods are those for which consump...
View Answer

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