Question 1

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

Question 2

A consumer's budget constraint is drawn with the quantity of pizza measured along the horizontal axis and the price of Pepsi measured along the vertical axis. If the market is offering the consumer the trade-off of 3 pints of Pepsi for 1 pizza, then what is the slope of the consumer's budget constraint?

Accepted Answer

A pizza costs three times as m...

Question 3

Figure 21-7
The following graph shows three possible indifference curves (I)  for a consumer.  ​
-Refer to Figure 21-7. When comparing bundle E to bundle B, the consumer

Accepted Answer

A)  prefers bundle E because it contains more scones.
B)  prefers bundle B because it lies on a higher indifference curve.
C)  prefers bundle B because it contains more scones.
D)  is indifferent between the two bundles.E) All of the above
F) None of the above

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

A good is a normal good if the consumer buys less of it when

Accepted Answer

A)  his income falls.
B)  the price of the good rises.
C)  the price of a substitute good falls.
D)  his income rises.E) None of the above
F) A) and D)

Question 6

Figure 21-19
The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income.
  ​
-Refer to Figure 21-19. Which of the four labeled points is Hannah's optimum?

Accepted Answer

Point B is...

Question 7

The theory of consumer choice is representative of how consumers make decisions but is not intended to be a literal account of the process.

Accepted Answer

A) True 
 B)False

Question 8

Figure 21-19
The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income.
  ​
-Refer to Figure 21-19. If Hannah chose to spend $30,000 on consumption when young, then how much could she spend on consumption when old?

Accepted Answer

The interest rate is

or 25 p...

Question 9

A budget constraint illustrates bundles that a consumer prefers equally, while an indifference curve illustrates bundles that are equally affordable to a consumer.

Accepted Answer

A) True 
 B)False

Question 10

Using our model of consumer choice, is it possible for a consumer to buy less of a particular good when his income rises? Briefly explain.

Accepted Answer

Yes, an increase in ...

Question 11

The marginal rate of substitution is the slope of the budget constraint.

Accepted Answer

A) True 
 B)False

Question 12

Giffen goods violate the law of demand.

Accepted Answer

A) True 
 B)False

Question 13

Figure 21-15 
-Refer to Figure 21-15. Shemar experiences an increase in his hourly wage. His optimal choice point moves from A to B. For Shemar,

Accepted Answer

A)  his labor supply curve is upward sloping.
B)  his labor supply curve is backward bending.
C)  leisure is a normal good.
D)  labor is an inferior good.E) All of the above
F) A) and B)

Question 14

A typical consumer consumes both coffee and donuts. After the consumer's income decreases, the consumer consumes more coffee but fewer donuts than before. For this consumer, donuts are a normal good, but coffee is an inferior good.

Accepted Answer

A) True 
 B)False

Question 15

Figure 21-8  ​
​
-Refer to Figure 21-8. As the consumer moves from A to B to C, the marginal rate of substitution

Accepted Answer

A)  increases.
B)  decreases.
C)  remains constant.
D)  first increases, then decreases.E) A) and B)
F) C) and D)

Question 16

Figure 21-13 
-Refer to Figure 21-13. When the price of X is $40, the price of Y is $10, and the consumer's income is $80, the consumer's optimal choice is C. Then the price of X decreases to $10. The income effect can be illustrated as the movement from

Accepted Answer

A)  C to E.
B)  C to D.
C)  D to E.
D)  E to C.E) All of the above
F) None of the above

Question 17

If a consumer purchases more of good X and good Y after her income increases, then neither good X nor good Y is an inferior good for her.

Accepted Answer

A) True 
 B)False

Question 18

Figure 21-14 
-Refer to Figure 21-14. 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

Accepted Answer

A)  15 units of good X and 24 units of good Y.
B)  20 units of good X and 20 units of good Y.
C)  30 units of good X and 12 units of good Y.
D)  40 units of good X and 4 units of good Y.E) All of the above
F) A) and B)

Question 19

Figure 21-8  ​
​
-Refer to Figure 21-8. As the consumer moves from A to B to C, the consumer's total utility

Accepted Answer

A)  increases.
B)  decreases.
C)  remains constant.
D)  first increases, then decreases.E) B) and C)
F) C) and D)

Question 20

Scenario 21-1
Suppose the price of nachos is $12, the price of water is $3, and the consumer's income is $216. In addition, suppose the consumer's budget constraint illustrates nachos on the horizontal axis and water on the vertical axis.
-Refer to Scenario 21-1. If the consumer's income rises to $288, then the budget line for nachos and water would

Accepted Answer

A)  now intersect the horizontal axis at 24 orders of nachos and the vertical axis at 96 waters.
B)  not change.
C)  now intersect the horizontal axis at 17 orders of nachos and the vertical axis at 67 waters.
D)  rotate outward along the water axis.E) C) and D)
F) A) and D)

Exam 21: The Theory of Consumer Choice

A good is a normal good if the consumer buys less of it when

Correct Answer
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Using our model of consumer choice, is it possible for a consumer to buy less of a particular good when his income rises? Briefly explain.

Correct Answer
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Yes, an increase in ...
View Answer

Correct Answer
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Figure 21-15 -Refer to Figure 21-15. Shemar experiences an increase in his hourly wage. His optimal choice point moves from A to B. For Shemar,

Correct Answer
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Figure 21-8 -Refer to Figure 21-8. As the consumer moves from A to B to C, the marginal rate of substitution

Correct Answer
verified

A typical consumer consumes both coffee and donuts. After the consumer's income decreases, the consumer consumes more coffee but fewer donuts than before. For this consumer, donuts are a normal good, but coffee is an inferior good.

Correct Answer
verified

Figure 21-14 -Refer to Figure 21-14. 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

Correct Answer
verified

The theory of consumer choice is representative of how consumers make decisions but is not intended to be a literal account of the process.

Correct Answer
verified

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.

Correct Answer
verified

A budget constraint illustrates bundles that a consumer prefers equally, while an indifference curve illustrates bundles that are equally affordable to a consumer.

Correct Answer
verified

Correct Answer
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A pizza costs three times as m...
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Figure 21-8 -Refer to Figure 21-8. As the consumer moves from A to B to C, the consumer's total utility

Correct Answer
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Figure 21-13 -Refer to Figure 21-13. When the price of X is $40, the price of Y is $10, and the consumer's income is $80, the consumer's optimal choice is C. Then the price of X decreases to $10. The income effect can be illustrated as the movement from

Correct Answer
verified

The marginal rate of substitution is the slope of the budget constraint.

Correct Answer
verified

Figure 21-19 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. -Refer to Figure 21-19. Which of the four labeled points is Hannah's optimum?

Correct Answer
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Point B is...
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A budget constraint illustrates the

Correct Answer
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Correct Answer
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The interest rate is
or 25 p...
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Giffen goods violate the law of demand.

Correct Answer
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If a consumer purchases more of good X and good Y after her income increases, then neither good X nor good Y is an inferior good for her.

Correct Answer
verified

Figure 21-7 The following graph shows three possible indifference curves (I) for a consumer. -Refer to Figure 21-7. When comparing bundle E to bundle B, the consumer

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

A good is a normal good if the consumer buys less of it when

Correct AnswerverifiedShow Answer

Using our model of consumer choice, is it possible for a consumer to buy less of a particular good when his income rises? Briefly explain.

Correct AnswerverifiedYes, an increase in ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Figure 21-15 -Refer to Figure 21-15. Shemar experiences an increase in his hourly wage. His optimal choice point moves from A to B. For Shemar,

Correct AnswerverifiedShow Answer

Figure 21-8 ​ ​ -Refer to Figure 21-8. As the consumer moves from A to B to C, the marginal rate of substitution

Correct AnswerverifiedShow Answer

A typical consumer consumes both coffee and donuts. After the consumer's income decreases, the consumer consumes more coffee but fewer donuts than before. For this consumer, donuts are a normal good, but coffee is an inferior good.

Correct AnswerverifiedShow Answer

Figure 21-14 -Refer to Figure 21-14. 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

Correct AnswerverifiedShow Answer

The theory of consumer choice is representative of how consumers make decisions but is not intended to be a literal account of the process.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

A budget constraint illustrates bundles that a consumer prefers equally, while an indifference curve illustrates bundles that are equally affordable to a consumer.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA pizza costs three times as m...View AnswerShow Answer

Figure 21-8 ​ ​ -Refer to Figure 21-8. As the consumer moves from A to B to C, the consumer's total utility

Correct AnswerverifiedShow Answer

Figure 21-13 -Refer to Figure 21-13. When the price of X is $40, the price of Y is $10, and the consumer's income is $80, the consumer's optimal choice is C. Then the price of X decreases to $10. The income effect can be illustrated as the movement from

Correct AnswerverifiedShow Answer

The marginal rate of substitution is the slope of the budget constraint.

Correct AnswerverifiedShow Answer

Figure 21-19 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. ​ -Refer to Figure 21-19. Which of the four labeled points is Hannah's optimum?

Correct AnswerverifiedPoint B is...View AnswerShow Answer

A budget constraint illustrates the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe interest rate is or 25 p...View AnswerShow Answer

Giffen goods violate the law of demand.

Correct AnswerverifiedShow Answer

If a consumer purchases more of good X and good Y after her income increases, then neither good X nor good Y is an inferior good for her.

Correct AnswerverifiedShow Answer

Figure 21-7 The following graph shows three possible indifference curves (I) for a consumer. ​ -Refer to Figure 21-7. When comparing bundle E to bundle B, the consumer

Correct AnswerverifiedShow Answer

Correct Answer
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Yes, an increase in ...
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Figure 21-8 -Refer to Figure 21-8. As the consumer moves from A to B to C, the marginal rate of substitution

Correct Answer
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Correct Answer
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A pizza costs three times as m...
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Figure 21-8 -Refer to Figure 21-8. As the consumer moves from A to B to C, the consumer's total utility

Correct Answer
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Correct Answer
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Correct Answer
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Figure 21-19 The figure shows three indifference curves and a budget constraint for a consumer named Hannah. When young, Hannah works and earns income. When old, she is retired and earns no income. -Refer to Figure 21-19. Which of the four labeled points is Hannah's optimum?

Correct Answer
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Point B is...
View Answer

Correct Answer
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Correct Answer
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The interest rate is
or 25 p...
View Answer

Correct Answer
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Correct Answer
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Figure 21-7 The following graph shows three possible indifference curves (I) for a consumer. -Refer to Figure 21-7. When comparing bundle E to bundle B, the consumer

Correct Answer
verified