Question 1

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) A) and D)
F) A) and C)

Question 2

Mariah spends her income on rice and beans.At her optimum,Mariah's

Accepted Answer

A)   utility from consuming rice is equal to her utility from consuming beams.
B)   marginal utility of rice is equal to her marginal utility of beans.
C)   marginal utility per dollar spent on rice equals her marginal utility per dollar spent on beans.
D)   marginal rate of substitution is equal to 1.E) A) and D)
F) A) and C)

Question 3

A field experiment conducted by economists in the Chinese province of Hunan provided evidence that,for poor households in that province,rice is a __________ good.

Accepted Answer

The answer of A field experiment conducted by economists in...

Question 4

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 5

Figure 21-25
The figure below illustrates the preferences for a representative consumer,Christopher. 
-Refer to Figure 21-25.Interest rates increase by 3 percent.Christopher's optimal choice point moves from A to B.Christopher consumes

Accepted Answer

A)   less while he is younger and saves more than he did before interest rates increased.
B)   more while he is younger and saves more than he did before interest rates increased.
C)   less while he is younger and saves less than he did before interest rates increased.
D)   more while he is younger and saves less than he did before interest rates increased.E) A) and C)
F) A) and B)

Question 6

Figure 21-18 
-Refer to Figure 21-18.Assume that the consumer depicted in the figure has an income of $20.The price of Skittles is $2 and the price of M&M's is $4.The consumer's optimal choice is point

Accepted Answer

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

Question 7

Figure 21-10 
-Refer to Figure 21-10.Which of the following statements is not correct?

Accepted Answer

A)   Bundles on Indifference Curve 3 are preferred to bundles on Indifference Curve 1.
B)   The consumer is indifferent between bundles A and E because they contain the same number of donuts.
C)   The consumer is indifference between bundles B and C.
D)   The consumer prefers bundle C to bundle D.E) B) and D)
F) C) and D)

Question 8

The theory of consumer choice illustrates that people face tradeoffs,which is one of the Ten Principles of Economics.

Accepted Answer

A) True 
 B)False

Question 9

Figure 21-20 
-Refer to Figure 21-20.Suppose that a consumer is originally at point R.Then the price of good X decreases.Which of the following represents the income effect of the price decrease?

Accepted Answer

A)   the movement from point R to point S
B)   the movement from point R to point T
C)   the movement from point T to point S
D)   None of the above is correct.E) All of the above
F) A) and B)

Question 10

A consumer consumes two normal goods,popcorn and Pepsi.The price of Pepsi rises.The substitution effect,by itself,suggests that the consumer will consume

Accepted Answer

A)   more popcorn and more Pepsi.
B)   less popcorn and less Pepsi.
C)   more popcorn and less Pepsi.
D)   less popcorn and more Pepsi.E) A) and D)
F) All of the above

Question 11

An individual's demand curve for a good is derived by varying the

Accepted Answer

A)   income level and observing the resulting total utility derived from both goods.
B)   price of one good and observing the resulting quantities of the other good.
C)   budget line to the left and calculating the loss in total utility.
D)   price of one good and observing the resulting quantities demanded of that good.E) B) and C)
F) B) and D)

Question 12

A consumer is currently spending all of her available income on two goods: music CDs and DVDs.At her current consumption bundle,she is spending twice as much on CDs as she is on DVDs.If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs,what is the price of a DVD?

Accepted Answer

A)   $4
B)   $8
C)   $12
D)   $20E) A) and C)
F) A) and D)

Question 13

Figure 21-18 
-Refer to Figure 21-18.Assume that the consumer depicted in the figure has an income of $20.The price of Skittles is $2 and the price of M&M's is $2.The consumer's optimal choice is point

Accepted Answer

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

Question 14

For a typical consumer,most indifference curves are downward sloping.

Accepted Answer

A) True 
 B)False

Question 15

A consumer's preferences provide a ranking of

Accepted Answer

A)   all possible consumption bundles.
B)   only the consumption bundles that fall on the same indifference curve.
C)   consumption bundles based their prices.
D)   consumption bundles based on the consumer's income.E) B) and C)
F) C) and D)

Question 16

Irene is a vegetarian,so she does not eat pork.That is,pork provides no additional utility to Irene.She loves broccoli,however.If we illustrate Irene's indifference curves by drawing broccoli on the horizontal axis and pork on the vertical axis,her indifference curves will

Accepted Answer

A)   slope downward.
B)   be vertical straight lines.
C)   slope upward.
D)   be horizontal straight lines.E) B) and C)
F) A) and C)

Question 17

Figure 21-16 
-Refer to Figure 21-16.When the price of X is $6,the price of Y is $24,and income is $48,Steve's optimal choice is point C.Then the price of Y decreases to $8.Steve's new optimal choice is point

Accepted Answer

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

Question 18

If we observe that Jamie's budget constraint has moved outward,then we know for certain that

Accepted Answer

A)   her income must have increased.
B)   she will be indifferent between goods X and Y.
C)   the price of one or both of the goods must have decreased.
D)   she can reach a higher indifference curve.E) A) and B)
F) None of the above

Question 19

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 20

A rise in the interest rate will generally result in people consuming more when they are old if the substitution effect outweighs the income effect.

Accepted Answer

A) True 
 B)False

Exam 21: The Theory of Consumer Choice

A consumer is currently spending all of her available income on two goods: music CDs and DVDs.At her current consumption bundle,she is spending twice as much on CDs as she is on DVDs.If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs,what is the price of a DVD?

Correct AnswerverifiedShow Answer

A field experiment conducted by economists in the Chinese province of Hunan provided evidence that,for poor households in that province,rice is a __________ good.

Correct AnswerverifiedShow Answer

Irene is a vegetarian,so she does not eat pork.That is,pork provides no additional utility to Irene.She loves broccoli,however.If we illustrate Irene's indifference curves by drawing broccoli on the horizontal axis and pork on the vertical axis,her indifference curves will

Correct AnswerverifiedShow Answer

Figure 21-25 The figure below illustrates the preferences for a representative consumer,Christopher. -Refer to Figure 21-25.Interest rates increase by 3 percent.Christopher's optimal choice point moves from A to B.Christopher consumes

Correct AnswerverifiedShow Answer

Mariah spends her income on rice and beans.At her optimum,Mariah's

Correct AnswerverifiedShow Answer

Figure 21-18 -Refer to Figure 21-18.Assume that the consumer depicted in the figure has an income of $20.The price of Skittles is $2 and the price of M&M's is $4.The consumer's optimal choice is point

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Figure 21-20 -Refer to Figure 21-20.Suppose that a consumer is originally at point R.Then the price of good X decreases.Which of the following represents the income effect of the price decrease?

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Figure 21-18 -Refer to Figure 21-18.Assume that the consumer depicted in the figure has an income of $20.The price of Skittles is $2 and the price of M&M's is $2.The consumer's optimal choice is point

Correct AnswerverifiedShow Answer

A consumer consumes two normal goods,popcorn and Pepsi.The price of Pepsi rises.The substitution effect,by itself,suggests that the consumer will consume

Correct AnswerverifiedShow Answer

Indifference curves graphically represent

Correct AnswerverifiedShow Answer

Figure 21-16 -Refer to Figure 21-16.When the price of X is $6,the price of Y is $24,and income is $48,Steve's optimal choice is point C.Then the price of Y decreases to $8.Steve's new optimal choice is point

Correct AnswerverifiedShow Answer

The theory of consumer choice illustrates that people face tradeoffs,which is one of the Ten Principles of Economics.

Correct AnswerverifiedShow Answer

If we observe that Jamie's budget constraint has moved outward,then we know for certain that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An individual's demand curve for a good is derived by varying the

Correct AnswerverifiedShow Answer

A rise in the interest rate will generally result in people consuming more when they are old if the substitution effect outweighs the income effect.

Correct AnswerverifiedShow Answer

For a typical consumer,most indifference curves are downward sloping.

Correct AnswerverifiedShow Answer

A consumer's preferences provide a ranking of

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

Figure 21-10 -Refer to Figure 21-10.Which of the following statements is not correct?

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