Question 1

Giffen goods have positively-sloped demand curves because they are

Accepted Answer

A)   inferior goods with no substitution effect.
B)   normal goods with no substitution effect.
C)   inferior goods for which the substitution effect outweighs the income effect.
D)   inferior goods for which the income effect outweighs the substitution effect.E) C) and D)
F) A) and B)

Question 2

If the market is offering consumers the trade-off of 3 pints of Pepsi for 1 pizza, and if the price of a pizza is $9, then what is the price of a pint of Pepsi?

Accepted Answer

The price ...

Question 3

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 4

John is planning ahead for retirement in a two-period world. When John is young he will earn $1 million, and when John is old and retired he will be given $50,000 from Social Security. If the interest rate between the two time periods is 7 percent, what is the slope of John's budget constraint when considering the consumption possibilities between the two periods if consumption when young is graphed on the horizontal axis and consumption when old is graphed on the vertical axis?

Accepted Answer

A)   -0.89
B)   -1.05
C)   -1.07
D)   -1.12E) All of the above
F) None of the above

Question 5

When the price of a good increases, all else equal, the higher price

Accepted Answer

A)   reduces the consumer's set of buying opportunities.
B)   leads to a parallel shift of the budget constraint.
C)   will necessarily lead to an increase in the consumption of goods whose price did not change.
D)   generally discourages the consumption of inferior goods.E) All of the above
F) C) and D)

Question 6

Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the substitution effect associated with a decrease in the price of Ramen noodles, by itself, will result in

Accepted Answer

A)   a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles.
B)   a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles.
C)   an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles.
D)   an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles.E) B) and C)
F) A) and D)

Question 7

A budget constraint shows

Accepted Answer

A)   the maximum utility that a consumer can achieve for a given level of income.
B)   a series of bundles that cost the consumer the same amount of money.
C)   a series of bundles that give the consumer the same level of utility.
D)   All of the above are correct.E) A) and B)
F) B) and D)

Question 8

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

Question 9

In the work-leisure model, suppose consumption and leisure are both normal goods. The income effect of a wage increase results in the worker choosing to

Accepted Answer

A)   work less than before.
B)   work more than before.
C)   possibly work more or less than before.
D)   work more with a higher level of consumption.E) A) and D)
F) A) and C)

Question 10

Suppose a consumer has preferences over two goods, X and Y, which are perfect substitutes. In particular, two units of X is equivalent to one unit of Y. If the price of X is $1, the price of Y is $3, and the consumer has $30 of income to allocate to these two goods, how much of each good should the consumer purchase to maximize satisfaction?

Accepted Answer

A)   30 units of X and 0 units of Y
B)   0 units of X and 10 units of Y
C)   15 units of X and 5 units of Y
D)   15 units of X and 0 units of YE) All of the above
F) A) and D)

Question 11

Figure 21-5
(a)  (b)   
-Refer to Figure 21-5. In graph (b) , what is the price of good Y relative to the price of good X (i.e., PY/PX) ?

Accepted Answer

A)   1/3
B)   1
C)   3
D)   10E) All of the above
F) A) and C)

Question 12

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) A) and C)
F) A) and B)

Question 13

Using our model of consumer choice, is it possible for a consumer to buy less of a particular good when his income rises? Briefly explain.

Accepted Answer

Yes, an increase in ...

Question 14

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 Y only?

Accepted Answer

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

Question 15

Figure 21-22 
-Refer to Figure 21-22. The shift from point B to point C in the figure is due to the

Accepted Answer

A)   substitution effect of an increase in the price of potato chips.
B)   income effect of an increase in the price of potato chips.
C)   substitution effect of a decrease in the price of potato chips.
D)   income effect of a decrease in the price of potato chips.E) A) and D)
F) A) and C)

Question 16

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 and point A is his optimum, then what is the price of a shirt?

Accepted Answer

The price ...

Question 17

The slope of the budget constraint is determined by the

Accepted Answer

A)   relative price of the goods measured on the axes.
B)   relative price of the goods measured on the axes and the consumer's income.
C)   endowment of productive resources.
D)   preferences of the consumer.E) B) and C)
F) B) and D)

Question 18

Abby, Bobbi, and Deborah 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. Abby has a budget of $80, Bobbi has a budget of $60, and Deborah has a budget of $40 to spend on ice cream and paperback novels. Which of the following statements is correct?

Accepted Answer

A)   Each woman faces the same budget constraint.
B)   The slope of the budget constraint is the same for each woman.
C)   The area underneath the budget constraint is larger for Deborah than for Abby.
D)   All of the above are correct.E) B) and D)
F) None of the above

Question 19

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 exterior of the consumer's budget constraint?

Accepted Answer

A)   160 beers and 200 bratwursts
B)   40 beers and 50 bratwursts
C)   80 beers and 100 bratwursts
D)   160 beers and 0 bratwurstsE) A) and D)
F) A) and C)

Question 20

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) B) and C)

Exam 21: The Theory of Consumer Choice

If the market is offering consumers the trade-off of 3 pints of Pepsi for 1 pizza, and if the price of a pizza is $9, then what is the price of a pint of Pepsi?

Correct Answer
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The price ...
View Answer

Correct Answer
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Correct Answer
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Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (b) , what is the price of good Y relative to the price of good X (i.e., PY/PX) ?

Correct Answer
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When the price of a good increases, all else equal, the higher price

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 and point A is his optimum, then what is the price of a shirt?

Correct Answer
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The price ...
View Answer

In the work-leisure model, suppose consumption and leisure are both normal goods. The income effect of a wage increase results in the worker choosing to

Correct Answer
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Correct Answer
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A budget constraint shows

Correct Answer
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Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the substitution effect associated with a decrease in the price of Ramen noodles, by itself, will result in

Correct Answer
verified

Correct Answer
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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 Y only?

Correct Answer
verified

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
verified

Giffen goods have positively-sloped demand curves because they are

Correct Answer
verified

Using our model of consumer choice, is it possible for a consumer to buy less of a particular good when his income rises? Briefly explain.

Correct Answer
verified
Yes, an increase in ...
View Answer

Figure 21-22 -Refer to Figure 21-22. The shift from point B to point C in the figure is due to the

Correct Answer
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Correct 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?

Correct Answer
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The slope of the budget constraint is determined by the

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

If the market is offering consumers the trade-off of 3 pints of Pepsi for 1 pizza, and if the price of a pizza is $9, then what is the price of a pint of Pepsi?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 21-5 (a) (b) -Refer to Figure 21-5. In graph (b) , what is the price of good Y relative to the price of good X (i.e., PY/PX) ?

Correct AnswerverifiedShow Answer

When the price of a good increases, all else equal, the higher price

Correct AnswerverifiedShow Answer

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 and point A is his optimum, then what is the price of a shirt?

Correct AnswerverifiedThe price ...View AnswerShow Answer

In the work-leisure model, suppose consumption and leisure are both normal goods. The income effect of a wage increase results in the worker choosing to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A budget constraint shows

Correct AnswerverifiedShow Answer

Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the substitution effect associated with a decrease in the price of Ramen noodles, by itself, will result in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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 Y only?

Correct AnswerverifiedShow 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

Giffen goods have positively-sloped demand curves because they are

Correct AnswerverifiedShow Answer

Using our model of consumer choice, is it possible for a consumer to buy less of a particular good when his income rises? Briefly explain.

Correct AnswerverifiedYes, an increase in ...View AnswerShow Answer

Figure 21-22 -Refer to Figure 21-22. The shift from point B to point C in the figure is due to the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

The slope of the budget constraint is determined by the

Correct AnswerverifiedShow Answer

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verified
The price ...
View Answer

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The price ...
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Yes, an increase in ...
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