Question 1

Which of the following statements is necessarily true regarding a point along a budget line?​

Accepted Answer

A)  ​It implies an individual has spent her entire income.
B)  ​It implies an individual is as happy as possible given her income.
C)  ​It implies an individual no longer faces tradeoffs between both goods.
D)  ​It implies an individual would be better off consuming a different bundle of goods.E) A) and D)
F) A) and C)

Question 2

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 an increase in the price of good X only?

Accepted Answer

A)  graph a
B)  graph b
C)  graph c
D)  graph dE) A) and B)
F) A) and C)

Question 3

The theory of consumer choice illustrates the

Accepted Answer

A)  importance of property rights in creating efficient markets.
B)  ability of a single economic actor to have a substantial influence on market prices.
C)  the trade-offs that people face in their role as purchasers.
D)  All of the above are correct.E) All of the above
F) A) and D)

Question 4

Scenario 21-1
Suppose the price of hot wings is $10, the price of beer is $1, and the consumer's income is $50. In addition, suppose the consumer's budget constraint illustrates hot wings on the horizontal axis and beer on the vertical axis.
-Refer to Scenario 21-1. If the consumer's income rises to $60, then the budget line for hot wings and beer would

Accepted Answer

A)  now intersect the horizontal axis at 6 orders of hot wings and the vertical axis at 60 beers.
B)  not change.
C)  now intersect the horizontal axis at 4 orders of hot wings and the vertical axis at 16 beers.
D)  rotate outward along the beer axis.E) A) and B)
F) All of the above

Question 5

Scenario 21-1
Suppose the price of hot wings is $10, the price of beer is $1, and the consumer's income is $50. In addition, suppose the consumer's budget constraint illustrates hot wings on the horizontal axis and beer on the vertical axis.
-Refer to Scenario 21-1. If the price of beer doubles to $2, then the

Accepted Answer

A)  budget constraint intersects the vertical axis at 25 beers.
B)  slope of the budget constraint rises to -2.
C)  slope of the budget constraint falls to -4.
D)  budget constraint shifts inward in a parallel fashion.E) A) and B)
F) All of the above

Question 6

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 could reflect a simultaneous decrease in the prices of both goods? (i) 
Graph a
(ii) 
Graph b
(iii) 
Graph c
(iv) 
Graph d

Accepted Answer

A)  (i)  only
B)  (iv)  only
C)  (ii)  or (iii)  only
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 7

Figure 21-15 On the graph, Qx represents the quantity of good x and Qy represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves. x represents the quantity of good x and Qy represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves.   -Refer to Figure 21-15. For Barbara, the marginal rate of substitution between goods y and x A) increases as she moves downward and to the right along one of her indifference curves. B) decreases as she moves downward and to the right along one of her indifference curves. C) remains constant as she moves downward and to the right along one of her indifference curves. D) is undefined for any movement along any one of her indifference curves." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-15. For Barbara, the marginal rate of substitution between goods y and x

Accepted Answer

A)  increases as she moves downward and to the right along one of her indifference curves.
B)  decreases as she moves downward and to the right along one of her indifference curves.
C)  remains constant as she moves downward and to the right along one of her indifference curves.
D)  is undefined for any movement along any one of her indifference curves.E) All of the above
F) A) and B)

Question 8

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 $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) B) and C)
F) C) and D)

Question 9

Figure 21-12 
-Refer to Figure 21-12. The marginal rate of substitution between bundles V and Z is

Accepted Answer

A)  greater than the marginal rate of substitution between bundles Z and T.
B)  less than the marginal rate of substitution between bundles Z and T.
C)  equal to the marginal rate of substitution between bundles Z and T.
D)  We are unable to compare the marginal rates of substitution.E) C) and D)
F) A) and C)

Question 10

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. From the figure we can determine how much income Hannah earns when young and we can determine the interest rate. Could the interest rate rise to a level at which Hannah could afford to be at point D?

Accepted Answer

No. The point (0, 40000) is the horizont...

Question 11

Bundle J contains 10 units of good X and 5 units of good Y. Bundle K contains 5 units of good X and 10 units of good Y. Bundle L contains 10 units of good X and 10 units of good Y. Assume that the consumer's preferences satisfy the four properties of indifference curves. The price of X is $1, the price of Y is $2, and the consumer has an income of $20. Which bundle will the consumer choose?

Accepted Answer

A)  bundle J
B)  bundle K
C)  bundle L
D)  either bundle J or bundle KE) None of the above
F) A) and B)

Question 12

Which of the following is most likely an inferior good?

Accepted Answer

A)  an antique car
B)  gasoline
C)  a bus ticket
D)  an airline ticketE) All of the above
F) C) and D)

Question 13

Suppose Caroline is indifferent between tea and coffee as long as she consumes an equivalent amount of caffeine. Suppose that coffee has twice as much caffeine as tea. Which graph would illustrate a representative indifference curve?

Accepted Answer

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

Question 14

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

Accepted Answer

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) All of the above
F) A) and B)

Question 15

Figure 21-5
(a) 
(b)   
-Refer to Figure 21-5. In graph (b) , if income is equal to $420, then the price of good X is

Accepted Answer

A)  $1.
B)  $3.
C)  $10.
D)  $30.E) A) and B)
F) All of the above

Question 16

Jordan is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires. When the income effect dominates the substitution effect, an increase in the interest rate on savings will cause him to

Accepted Answer

A)  decrease his savings rate.
B)  increase his savings rate.
C)  continue saving at the current rate.
D)  Any of the above could be correct.E) All of the above
F) B) and D)

Question 17

Figure 21-29
The figure below illustrates the preferences of a representative consumer, Nathaniel. 
-Refer to Figure 21-29. A change in Nathaniel's optimum from point A to point B results from

Accepted Answer

A)  a change in Nathaniel's preferences.
B)  an increase in the income Nathaniel receives when he is young.
C)  an increase in the interest rate.
D)  a decrease in the interest rate.E) A) and C)
F) B) and C)

Question 18

At a consumer's optimal choice, the consumer chooses the combination of goods that equates the marginal rate of substitution and the price ratio.

Accepted Answer

A) True 
 B)False

Question 19

Figure 21-21 
-Refer to Figure 21-21. 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) A) and B)
F) A) and C)

Question 20

Figure 21-30 The graph shows two budget constraints for a consumer. 
-Refer to Figure 21-30. Suppose the price of a hamburger is $10 and Budget Constraint A applies. What is the consumer's income? What is the price of a light bulb?

Accepted Answer

The consumer's incom...

Exam 21: The Theory of Consumer Choice

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No. The point (0, 40000) is the horizont...
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At a consumer's optimal choice, the consumer chooses the combination of goods that equates the marginal rate of substitution and the price ratio.

Correct Answer
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Correct Answer
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Suppose Caroline is indifferent between tea and coffee as long as she consumes an equivalent amount of caffeine. Suppose that coffee has twice as much caffeine as tea. Which graph would illustrate a representative indifference curve?

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 an increase in the price of good X only?

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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 could reflect a simultaneous decrease in the prices of both goods? (i) Graph a (ii) Graph b (iii) Graph c (iv) Graph d

Correct Answer
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Which of the following statements is necessarily true regarding a point along a budget line?

Correct Answer
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Figure 21-12 -Refer to Figure 21-12. The marginal rate of substitution between bundles V and Z is

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Figure 21-15 On the graph, Q_x represents the quantity of good x and Q_y represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves. -Refer to Figure 21-15. For Barbara, the marginal rate of substitution between goods y and x

Correct Answer
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Which of the following is most likely an inferior good?

Correct Answer
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Figure 21-29 The figure below illustrates the preferences of a representative consumer, Nathaniel. -Refer to Figure 21-29. A change in Nathaniel's optimum from point A to point B results from

Correct Answer
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Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (b) , if income is equal to $420, then the price of good X is

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

Correct Answer
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Figure 21-30 The graph shows two budget constraints for a consumer. -Refer to Figure 21-30. Suppose the price of a hamburger is $10 and Budget Constraint A applies. What is the consumer's income? What is the price of a light bulb?

Correct Answer
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The consumer's incom...
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Figure 21-21 -Refer to Figure 21-21. 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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Correct Answer
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The theory of consumer choice illustrates the

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Jordan is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires. When the income effect dominates the substitution effect, an increase in the interest rate on savings will cause him to

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

Correct AnswerverifiedNo. The point (0, 40000) is the horizont...View AnswerShow Answer

At a consumer's optimal choice, the consumer chooses the combination of goods that equates the marginal rate of substitution and the price ratio.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose Caroline is indifferent between tea and coffee as long as she consumes an equivalent amount of caffeine. Suppose that coffee has twice as much caffeine as tea. Which graph would illustrate a representative indifference curve?

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 an increase in the price of good X only?

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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 could reflect a simultaneous decrease in the prices of both goods? (i) Graph a (ii) Graph b (iii) Graph c (iv) Graph d

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Which of the following statements is necessarily true regarding a point along a budget line?​

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Figure 21-12 -Refer to Figure 21-12. The marginal rate of substitution between bundles V and Z is

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Figure 21-15 On the graph, Qx represents the quantity of good x and Qy represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves. -Refer to Figure 21-15. For Barbara, the marginal rate of substitution between goods y and x

Correct AnswerverifiedShow Answer

Which of the following is most likely an inferior good?

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Figure 21-29 The figure below illustrates the preferences of a representative consumer, Nathaniel. -Refer to Figure 21-29. A change in Nathaniel's optimum from point A to point B results from

Correct AnswerverifiedShow Answer

Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (b) , if income is equal to $420, then the price of good X is

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

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Figure 21-30 The graph shows two budget constraints for a consumer. -Refer to Figure 21-30. Suppose the price of a hamburger is $10 and Budget Constraint A applies. What is the consumer's income? What is the price of a light bulb?

Correct AnswerverifiedThe consumer's incom...View AnswerShow Answer

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Figure 21-21 -Refer to Figure 21-21. 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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Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The theory of consumer choice illustrates the

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Jordan is planning ahead for retirement and must decide how much to spend and how much to save while he's working in order to have money to spend when he retires. When the income effect dominates the substitution effect, an increase in the interest rate on savings will cause him to

Correct AnswerverifiedShow Answer

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No. The point (0, 40000) is the horizont...
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Which of the following statements is necessarily true regarding a point along a budget line?

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Figure 21-15 On the graph, Q_x represents the quantity of good x and Q_y represents the quantity of good y. The lines drawn on the graph represent three of Barbara's indifference curves. -Refer to Figure 21-15. For Barbara, the marginal rate of substitution between goods y and x

Correct Answer
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The consumer's incom...
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