Question 1

Scenario 21-2
Fred has recently graduated from college with a degree in journalism and economics.He has decided to pursue a career as a freelance journalist writing for business newspapers and magazines.Fred is typically awake for 112 hours each week (he sleeps an average of 8 hours each day) .For each hour Fred spends writing,he can earn $75.Fred is such a good writer that he can get paid for as many hours of writing as he chooses to work.
-Refer to Scenario 21-2.If Fred decides to spend 80 hours a week playing volleyball on the beach,and the rest of his time writing,how much income will he have available to spend on consumption goods?

Accepted Answer

A)   $900
B)   $1,500
C)   $2,400
D)   $3,000E) A) and B)
F) C) and D)

Question 2

The income effect of a price change is unaffected by whether the good is a normal or inferior good.

Accepted Answer

A) True 
 B)False

Question 3

Economists have found evidence of a Giffen good when studying the consumption of rice in the Chinese province of Hunan.

Accepted Answer

A) True 
 B)False

Question 4

Figure 21-5 
-Refer to Figure 21-5.Suppose a consumer has $100 in income,the price of popcorn is $2,and the value of B is 100.What is the price of Mt.Dew?

Accepted Answer

A)   $1
B)   $2
C)   $5
D)   $100E) A) and B)
F) B) and D)

Question 5

Figure 21-9 xy > Py/Px. B)  MRSxy = Px/Py. C)  MRSxy x/Py. D)  MRSxy y/Px." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-9.Bundle D represents a point where

Accepted Answer

A)   MRSxy > Py/Px.
B)   MRSxy = Px/Py.
C)   MRSxy x/Py.
D)   MRSxy y/Px.E) C) and D)
F) A) and C)

Question 6

Amy spends all of her income on jewelry and jeans,and the price of a pair of jeans is three times the price of jewelry.In order to maximize total utility,Amy should

Accepted Answer

A)   buy three times as much jewelry as pairs of jeans.
B)   buy three times as many pairs of jeans as jewelry.
C)   buy both items until the marginal utility of jewelry is three times the marginal utility of a pair of jeans.
D)   buy both items until the marginal utility of a pair of jeans is three times the marginal utility of jewelry.E) A) and B)
F) C) and D)

Question 7

Figure 21-6 
-Refer to Figure 21-6.Suppose a consumer has $200 in income,the price of a book is $5,and the price of a DVD is $10.What is the value of A?

Accepted Answer

A)   40
B)   20
C)   10
D)   2E) B) and C)
F) A) and C)

Question 8

The slope of the budget constraint reveals the relative price of good X compared to good Y.

Accepted Answer

A) True 
 B)False

Question 9

Figure 21-3
In each case,the budget constraint moves from BC-1 to BC-2.    
-Refer to Figure 21-3.Which of the graphs in the figure reflects a decrease in the price of good X only?

Accepted Answer

A)   graph a
B)   graph b
C)   graph c
D)   graph dE) None of the above
F) A) and B)

Question 10

Indifference curves graphically represent

Accepted Answer

A)   an income level sufficient to allow an individual to achieve a given level of satisfaction.
B)   the constraints faced by individuals.
C)   an individual's preferences.
D)   the relative price of commodities.E) None of the above
F) A) and C)

Question 11

Karen,Tara,and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days.Ice cream costs $5 per gallon,and paperback novels cost $8 each.Karen has a budget of $80,Tara has a budget of $60,and Chelsea has a budget of $40 to spend on ice cream and paperback novels.Who can afford to purchase 8 gallons of ice cream and 5 paperback novels?

Accepted Answer

A)   Karen,Tara,and Chelsea
B)   Karen only
C)   Tara and Chelsea but not Karen
D)   none of the womenE) A) and B)
F) C) and D)

Question 12

Bob enjoys fishing and hunting.He divides his leisure hours between the two outdoor activities.Suppose we were to draw Bob's indifference curves for the two activities,placing fishing on the horizontal axis and hunting on the vertical axis.If Bob'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 Bob 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 Bob 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)   Bob's indifference curves will not cross.When indifference curves are bowed outward,the indifference curves must cross.E) B) and C)
F) None of the above

Question 13

When Sam has an income of $1,000,he consumes 30 units of good A and 50 units of good B.After Sam's income increases to $1,500,he consumes 60 units of good A and 45 units of good B.Which of the following statements is correct?

Accepted Answer

A)   Both goods A and B are normal goods.
B)   Both goods A and B are inferior goods.
C)   Good A is a normal good,and good B is an inferior good.
D)   Good A is an inferior good,and good B is a normal good.E) None of the above
F) A) and B)

Question 14

A consumer's preferences provide a

Accepted Answer

A)   ranking of the set of bundles that happen to fall on indifference curves.
B)   relative ranking of bundles that provide more of all goods.
C)   framework for evaluating market equilibriums.
D)   complete ranking of all possible consumption bundles.E) A) and B)
F) None of the above

Question 15

The substitution effect in the work-leisure model induces a person to work less in response to higher wages,which tends to make the labor-supply curve slope upward.

Accepted Answer

A) True 
 B)False

Question 16

The following diagram shows one indifference curve representing the preferences for goods X and Y for one consumer. 
What is the marginal rate of substitution between points A and B?

Accepted Answer

A)   1/2
B)   4/3
C)   2
D)   3E) B) and D)
F) B) and C)

Question 17

Assume that a college student purchases only coffee and Snickers bars.If coffee is an inferior good and Snickers bars are a normal good,then the income effect associated with an increase in the price of a Snickers bar will result in

Accepted Answer

A)   a decrease in the consumption of Snickers bars and a decrease in the consumption of coffee.
B)   a decrease in the consumption of Snickers bars and an increase in the consumption of coffee.
C)   an increase in the consumption of Snickers bars and an increase in the consumption of coffee.
D)   an increase in the consumption of Snickers bars and a decrease in the consumption of coffee.E) None of the above
F) A) and C)

Question 18

Figure 21-5 
-Refer to Figure 21-5.Suppose the price of popcorn is $2,the price of Mt.Dew is $4,the value of A is 30,and the value of B is 15.How much income does the consumer have?

Accepted Answer

A)   $120
B)   $80
C)   $60
D)   $30E) A) and B)
F) B) and D)

Question 19

Harry experiences an increase in his wages.The hours of labor that he supplies to the market would decrease if

Accepted Answer

A)   the income effect is larger than the substitution effect.
B)   the substitution effect is larger than the income effect.
C)   neither the income effect nor the substitution effect apply to Harry's labor-leisure tradeoff.
D)   Harry views both labor and leisure as inferior goods.E) A) and C)
F) B) and C)

Question 20

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

Accepted Answer

A)   the budget effect
B)   the preference effect
C)   the substitution effect
D)   the income effectE) A) and D)
F) A) and C)

Exam 21: The Theory of Consumer Choice

Assume that a college student purchases only coffee and Snickers bars.If coffee is an inferior good and Snickers bars are a normal good,then the income effect associated with an increase in the price of a Snickers bar will result in

Correct Answer
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Figure 21-5 -Refer to Figure 21-5.Suppose a consumer has $100 in income,the price of popcorn is $2,and the value of B is 100.What is the price of Mt.Dew?

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

Correct Answer
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The slope of the budget constraint reveals the relative price of good X compared to good Y.

Correct Answer
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When Sam has an income of $1,000,he consumes 30 units of good A and 50 units of good B.After Sam's income increases to $1,500,he consumes 60 units of good A and 45 units of good B.Which of the following statements is correct?

Correct Answer
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The income effect of a price change is unaffected by whether the good is a normal or inferior good.

Correct Answer
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Figure 21-3 In each case,the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3.Which of the graphs in the figure reflects a decrease in the price of good X only?

Correct Answer
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Amy spends all of her income on jewelry and jeans,and the price of a pair of jeans is three times the price of jewelry.In order to maximize total utility,Amy should

Correct Answer
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Correct Answer
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A consumer's preferences provide a

Correct Answer
verified

The substitution effect in the work-leisure model induces a person to work less in response to higher wages,which tends to make the labor-supply curve slope upward.

Correct Answer
verified

The following diagram shows one indifference curve representing the preferences for goods X and Y for one consumer. What is the marginal rate of substitution between points A and B?

Correct Answer
verified

Figure 21-6 -Refer to Figure 21-6.Suppose a consumer has $200 in income,the price of a book is $5,and the price of a DVD is $10.What is the value of A?

Correct Answer
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Figure 21-9 -Refer to Figure 21-9.Bundle D represents a point where

Correct Answer
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Economists have found evidence of a Giffen good when studying the consumption of rice in the Chinese province of Hunan.

Correct Answer
verified

Figure 21-5 -Refer to Figure 21-5.Suppose the price of popcorn is $2,the price of Mt.Dew is $4,the value of A is 30,and the value of B is 15.How much income does the consumer have?

Correct Answer
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Indifference curves graphically represent

Correct Answer
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Harry experiences an increase in his wages.The hours of labor that he supplies to the market would decrease if

Correct Answer
verified

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

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

Assume that a college student purchases only coffee and Snickers bars.If coffee is an inferior good and Snickers bars are a normal good,then the income effect associated with an increase in the price of a Snickers bar will result in

Correct AnswerverifiedShow Answer

Figure 21-5 -Refer to Figure 21-5.Suppose a consumer has $100 in income,the price of popcorn is $2,and the value of B is 100.What is the price of Mt.Dew?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The slope of the budget constraint reveals the relative price of good X compared to good Y.

Correct AnswerverifiedShow Answer

When Sam has an income of $1,000,he consumes 30 units of good A and 50 units of good B.After Sam's income increases to $1,500,he consumes 60 units of good A and 45 units of good B.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The income effect of a price change is unaffected by whether the good is a normal or inferior good.

Correct AnswerverifiedShow Answer

Figure 21-3 In each case,the budget constraint moves from BC-1 to BC-2. -Refer to Figure 21-3.Which of the graphs in the figure reflects a decrease in the price of good X only?

Correct AnswerverifiedShow Answer

Amy spends all of her income on jewelry and jeans,and the price of a pair of jeans is three times the price of jewelry.In order to maximize total utility,Amy should

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A consumer's preferences provide a

Correct AnswerverifiedShow Answer

The substitution effect in the work-leisure model induces a person to work less in response to higher wages,which tends to make the labor-supply curve slope upward.

Correct AnswerverifiedShow Answer

The following diagram shows one indifference curve representing the preferences for goods X and Y for one consumer. What is the marginal rate of substitution between points A and B?

Correct AnswerverifiedShow Answer

Figure 21-6 -Refer to Figure 21-6.Suppose a consumer has $200 in income,the price of a book is $5,and the price of a DVD is $10.What is the value of A?

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Figure 21-9 -Refer to Figure 21-9.Bundle D represents a point where

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Economists have found evidence of a Giffen good when studying the consumption of rice in the Chinese province of Hunan.

Correct AnswerverifiedShow Answer

Figure 21-5 -Refer to Figure 21-5.Suppose the price of popcorn is $2,the price of Mt.Dew is $4,the value of A is 30,and the value of B is 15.How much income does the consumer have?

Correct AnswerverifiedShow Answer

Indifference curves graphically represent

Correct AnswerverifiedShow Answer

Harry experiences an increase in his wages.The hours of labor that he supplies to the market would decrease if

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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