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Exam 21: The Theory of Consumer Choice

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Question 261

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When a consumer is purchasing the best combination of two goods, X and Y, subject to a budget constraint, we say that the consumer is at an optimal choice point. A graph of an optimal choice point shows that it occurs

A) along the highest indifference curve.
B) along the lowest budget constraint.
C) where the indifference curve is tangent to the budget constraint.
D) All of the above are correct.

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

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Question 262

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A consumer's preferences for right shoes and left shoes can be represented by indifference curves that are

A) bowed out from the origin
B) bowed in toward the origin
C) straight lines
D) right angles

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

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Question 263

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The slope of the budget constraint is determined by the

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 A?

Consider the budget constraint between "spending today" on the horizontal axis and "spending a year from today" on the vertical axis. Suppose that you have $100 today and expect to receive $100 one year from today. Your money market account pays an annual interest rate of 25%, and you may borrow money at that interest rate. Suppose now that the interest rate increases to 40%. What happens to the slope of your budget constraint relative to when the interest rate was 25%? The slope

Figure 21-5 (a) (b) -Refer to Figure 21-5. Assume that a consumer faces the budget constraint shown in graph (a) in January and the budget constraint shown in graph (b) in February. If the consumer's income has remained constant, then what has happened to prices between January and February?

Figure 21-16 -Refer to Figure 21-16. The price of X is $25, the price of Y is $25, and the consumer's income is $100. Which point represents the consumer's optimal choice?

If a consumer consumes two goods, X and Y, and has indifference curves that are bowed inward, the consumer's optional choice occurs when

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.

The marginal rate of substitution

Which effect of a price change moves the consumer along the same indifference curve to a point with a new marginal rate of substitution?

A consumer likes two goods: books and movies. The two bundles shown in the table below lie on the same indifference curve for the consumer. Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four properties of indifference curves?

A decrease in a consumer's income

An increase in the interest rate today leading to a decrease in consumption today violates the law of demand.​

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

If the relative price of a concert ticket is three times the price of a meal at a good restaurant, then the opportunity cost of a concert ticket can be measured by the

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

Figure 21-25 The figure pertains to a particular consumer. On the axes, X represents the quantity of good X and Y represents the quantity of good Y. -Refer to Figure 21-25. Suppose the price of good X is $8, the price of good Y is $10, and the consumer's income is $360. Then the consumer's optimal choice is to buy

Jack and Diane each buy pizza and paperback novels. Pizza costs $3 per slice, and paperback novels cost $5 each. Jack has a budget of $30, and Diane has a budget of $15 to spend on pizza and paperback novels. Which consumer(s) can afford to purchase 5 slices of pizza and 3 paperback novels?

When two goods are perfect complements, the indifference curve is