Question 1

A decrease in a consumer's income

Accepted Answer

A)   increases the slope of the consumer's budget constraint.
B)   has no effect on the consumer's budget constraint.
C)   decreases the slope of the consumer's budget constraint.
D)   has no effect on the slope of the consumer's budget constraint.E) All of the above
F) A) and D)

Question 2

Which of the following equations corresponds to an optimal choice point?

Accepted Answer

A)   (i)  only
B)   (i) , (ii) , and (iii)  only
C)   (ii)  and (iv)  only
D)   (i) , (ii) , (iii) , and (iv) E) C) and D)
F) None of the above

Question 3

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

Accepted Answer

A)   becomes steeper.
B)   becomes flatter.
C)   doesn't change because the budget constraint shifts in parallel to the original budget constraint.
D)   doesn't change because the budget constraint shifts out parallel to the original budget constraint.E) A) and B)
F) A) and C)

Question 4

When leisure is a normal good, the income effect from a decrease in wages is evident in

Accepted Answer

A)   a desire to consume more leisure.
B)   a desire to consume less leisure.
C)   an upward-sloping labor-supply curve.
D)   a shift in labor demand.E) B) and C)
F) A) and B)

Question 5

Figure 21-31
The figure shows two indifference curves and two budget constraints for a consumer named Kevin. 
-Refer to Figure 21-31. If Kevin's income is $1,260, then what is the price of a sweater?

Accepted Answer

The price ...

Question 6

Which of the following is not correct?

Accepted Answer

A)   An increase in income shifts a consumer's budget constraint outward.
B)   An increase in the price of good X causes a consumer's budget constraint to rotate inward along the X axis.
C)   A decrease in the price of good Y causes a consumer's budget constraint to rotate outward along the Y axis.
D)   Changes in income affect the slope of the budget constraint as well as its location on a graph.E) A) and B)
F) None of the above

Question 7

Figure 21-8 
-Refer to Figure 21-8. If the price of good X is $5, and your budget constraint is DE, what is the price of good Y?

Accepted Answer

A)   $10
B)   $5
C)   $2.50
D)   $1.67E) B) and D)
F) All of the above

Question 8

When two goods are perfect complements, the indifference curves are right angles.

Accepted Answer

A) True 
 B)False

Question 9

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 substitution effect can be illustrated as the movement from

Accepted Answer

A)   D to E.
B)   D to C.
C)   C to E.
D)   E to D.E) All of the above
F) A) and B)

Question 10

Figure 21-19 
-Refer to Figure 21-19. 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 11

A worker with a backward-bending labor supply curve responds to an increase in wages by working more hours.

Accepted Answer

A) True 
 B)False

Question 12

An increase in a consumer's income

Accepted Answer

A)   increases the slope of the consumer's budget constraint.
B)   has no effect on the slope of the consumer's budget constraint.
C)   decreases the slope of the consumer's budget constraint.
D)   has no effect on the consumer's budget constraint.E) B) and C)
F) None of the above

Question 13

The following diagram shows two budget lines: A and B.  Which of the following could explain the change in the budget line from A to B?

Accepted Answer

A)   a decrease in income and a decrease in the price of X
B)   a decrease in income and an increase in the price of X
C)   an increase in income and a decrease in the price of X
D)   an increase in income and an increase in the price of XE) None of the above
F) A) and D)

Question 14

Suppose a consumer spends her income on two goods: iTunes music downloads and books. The consumer has $100 to allocate to these two goods, the price of a downloaded song is $1, and the price of a book is $20. What is the maximum number of books the consumer can purchase?

Accepted Answer

A)   100
B)   20
C)   10
D)   5E) B) and D)
F) All of the above

Question 15

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 $10, the price of good Y is $5, and the consumer's income is $210. Then the consumer's optimal choice is represented by a point on which curve?

Accepted Answer

A)   I1
B)   I2
C)   I3
D)   I4E) None of the above
F) A) and B)

Question 16

When Joshua's income increases, he purchases more prime­rib dinners than he did before his income increased. For Joshua, prime-rib dinners are a(n)

Accepted Answer

A)   normal good.
B)   inferior good.
C)   optimal good.
D)   Giffen good.E) B) and C)
F) None of the above

Question 17

Figure 21-24
The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. 
-Refer to Figure 21-24. Steve

Accepted Answer

A)   gains 1.1 pounds of pears and becomes better off by moving from point A to point B.
B)   gains 1.1 pounds of pears and becomes better off by moving from point A to point C.
C)   gains 1.1 pounds of pears and becomes better off by moving from point B to point C.
D)   gives up 1.1 pounds of pears and becomes better off by moving from point C to point B.E) A) and C)
F) B) and C)

Question 18

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, coffee is a normal good, but donuts are an inferior good.

Accepted Answer

A) True 
 B)False

Question 19

A normal good is one

Accepted Answer

A)   the average consumer chooses to consume at a normal level.
B)   the average consumer chooses to consume over other similar goods.
C)   for which an increase in income increases consumption of the good.
D)   for which an increase in income decreases consumption of the good.E) A) and C)
F) A) and D)

Question 20

Taylor spends all of her income on tank tops and running shoes, and the price of a pair of running shoes is four times the price of a tank top. In order to maximize total utility, Taylor should buy

Accepted Answer

A)   four times as many tank tops as pairs of running shoes.
B)   four times as many pairs of running shoes as tank tops.
C)   both items until the marginal utility of a pair of running shoes is four times the marginal utility of a tank top.
D)   both items until the marginal utility of a tank top is four times the marginal utility of a pair of running shoes.E) A) and B)
F) A) and C)

Exam 21: The Theory of Consumer Choice

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 substitution effect can be illustrated as the movement from

Correct Answer
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Correct Answer
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Suppose a consumer spends her income on two goods: iTunes music downloads and books. The consumer has $100 to allocate to these two goods, the price of a downloaded song is $1, and the price of a book is $20. What is the maximum number of books the consumer can purchase?

Correct Answer
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When two goods are perfect complements, the indifference curves are right angles.

Correct Answer
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When Joshua's income increases, he purchases more primerib dinners than he did before his income increased. For Joshua, prime-rib dinners are a(n)

Correct Answer
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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, coffee is a normal good, but donuts are an inferior good.

Correct Answer
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An increase in a consumer's income

Correct Answer
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Figure 21-19 -Refer to Figure 21-19. 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 Answer
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Correct Answer
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A worker with a backward-bending labor supply curve responds to an increase in wages by working more hours.

Correct Answer
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The following diagram shows two budget lines: A and B. Which of the following could explain the change in the budget line from A to B?

Correct Answer
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Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. Steve

Correct Answer
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A decrease in a consumer's income

Correct Answer
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Which of the following equations corresponds to an optimal choice point?

Correct Answer
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Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. If Kevin's income is $1,260, then what is the price of a sweater?

Correct Answer
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The price ...
View Answer

Taylor spends all of her income on tank tops and running shoes, and the price of a pair of running shoes is four times the price of a tank top. In order to maximize total utility, Taylor should buy

Correct Answer
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Figure 21-8 -Refer to Figure 21-8. If the price of good X is $5, and your budget constraint is DE, what is the price of good Y?

Correct Answer
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A normal good is one

Correct Answer
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When leisure is a normal good, the income effect from a decrease in wages is evident in

Correct Answer
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Which of the following is not correct?

Correct Answer
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Exam 21: The Theory of Consumer Choice

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 substitution effect can be illustrated as the movement from

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose a consumer spends her income on two goods: iTunes music downloads and books. The consumer has $100 to allocate to these two goods, the price of a downloaded song is $1, and the price of a book is $20. What is the maximum number of books the consumer can purchase?

Correct AnswerverifiedShow Answer

When two goods are perfect complements, the indifference curves are right angles.

Correct AnswerverifiedShow Answer

When Joshua's income increases, he purchases more prime­rib dinners than he did before his income increased. For Joshua, prime-rib dinners are a(n)

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, coffee is a normal good, but donuts are an inferior good.

Correct AnswerverifiedShow Answer

An increase in a consumer's income

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Figure 21-19 -Refer to Figure 21-19. 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

Correct AnswerverifiedShow Answer

A worker with a backward-bending labor supply curve responds to an increase in wages by working more hours.

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The following diagram shows two budget lines: A and B. Which of the following could explain the change in the budget line from A to B?

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Figure 21-24 The figure shows three indifference curves and a budget constraint for a certain consumer named Steve. -Refer to Figure 21-24. Steve

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A decrease in a consumer's income

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Which of the following equations corresponds to an optimal choice point?

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Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. If Kevin's income is $1,260, then what is the price of a sweater?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Taylor spends all of her income on tank tops and running shoes, and the price of a pair of running shoes is four times the price of a tank top. In order to maximize total utility, Taylor should buy

Correct AnswerverifiedShow Answer

Figure 21-8 -Refer to Figure 21-8. If the price of good X is $5, and your budget constraint is DE, what is the price of good Y?

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A normal good is one

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When leisure is a normal good, the income effect from a decrease in wages is evident in

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Which of the following is not correct?

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When Joshua's income increases, he purchases more primerib dinners than he did before his income increased. For Joshua, prime-rib dinners are a(n)

Correct Answer
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Correct Answer
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The price ...
View Answer

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