FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 21: The Theory of Consumer Choice

Show Answer

Share

---

All types

Filters

Study Flashcards

Question 31

Multiple Choice

Review LaterAdd Note

Review Later

The consumer's optimum choice is represented by

) undefined
) undefined

Correct Answer

verified

Show Answer

Question 32

Multiple Choice

Review LaterAdd Note

Review Later

When considering her budget, the highest indifference curve that a consumer can reach is the

A) one that is tangent to the budget constraint.
B) indifference curve farthest from the origin
C) indifference curve that intersects the budget constraint in at least two places.
D) None of the above is correct.

E) None of the above
F) All of the above

Correct Answer

verified

Show Answer

Question 33

Multiple Choice

Review LaterAdd Note

Given a consumer's indifference map, the demand curve for a good can

The indifference curves for perfect substitutes are straight lines.

We can use the theory of consumer choice to analyze

If the price of a good increases, all else equal, consumers perceive

Figure 21-32 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 21-32. If Hannah chose to spend $30,000 on consumption when young, then how much could she spend on consumption when old?

A consumer chooses an optimal consumption point where the

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 interior of the consumer's budget constraint?

At the consumer's optimum

Higher education is a normal good. If its price falls,

What is significant about a point on a graph at which an indifference curve is tangent to a budget constraint?

Figure 21-27 -Refer to Figure 21-27. Anna experiences an increase in her hourly wage. Her optimal choice point moves from A to B. For Anna,

Scenario 21-2 Lawrence 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. Lawrence is typically awake for 112 hours each week (he sleeps an average of 8 hours each day) . For each hour Lawrence spends writing, he can earn $75. Lawrence 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 Lawrence 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?

A consumer's optimal choice is affected by income, prices of goods, and preferences.

If the consumer's income and all prices simultaneously decrease by one-half, then the optimum consumption will

Consider the indifference curve map and budget constraint for two goods, beef and potatoes. Suppose the good measured on the horizontal axis, potatoes, is a Giffen good. Beef is measured on the vertical axis and is a normal good. When the price of potatoes increases, the substitution effect causes

Janet knows that she will ultimately face retirement. Assume that Janet will experience two periods in her life, one in which she works and earns income, and one in which she is retired and earns no income. Janet can earn $250,000 during her working period and nothing in her retirement period. She must both save and consume in her work period and can earn 10 percent interest on her savings. a. Use a graph to demonstrate Janet's budget constraint. b. On your graph, show Janet at an optimal level of consumption in the work period equal to $150,000. What is the implied optimal level of consumption in her retirement period? c. Now, using your graph from part b above, demonstrate how Janet will be affected by an increase in the interest rate on savings to 14 percent. Discuss the role of income and substitution effects in determining whether Janet will increase, or decrease her savings in the work period. <sub

Figure 21-9 -Refer to Figure 21-9. If the consumer has $600 in income, what is the price of good Y?