Question 1

When considering household saving,what is the relative price between "consuming when young" and "consuming when old"

Accepted Answer

A)  the consumption rate
B)  the interest rate
C)  the prime rate
D)  the bank rateE) A) and D)
F) A) and B)

Question 2

Assume that a college student spends all of her income on cola and macaroni and hamburger.During exam week,the price of a box of macaroni is $1.50 and a pound of hamburger costs $4.00.If she has $41 of income,what could she choose to consume

Accepted Answer

A)  6 boxes of macaroni and 8 pounds of hamburger
B)  7 boxes of macaroni and 9 pounds of hamburger
C)  12 boxes of macaroni and 6 pounds of hamburger
D)  14 boxes of macaroni and 5 pounds of hamburgerE) C) and D)
F) B) and C)

Question 3

When two goods are perfect complements,what types of indifference curves will they have

Accepted Answer

A)  indifference curves with a positive slope
B)  indifference curves that are vertical
C)  indifference curves that are horizontal
D)  indifference curves that are right anglesE) A) and B)
F) None of the above

Question 4

What does economic theory predict will be the result of an increase in wages

Accepted Answer

A)  It will cause a wage earner to work more if there is a dominant income effect.
B)  It will cause a wage earner to work less if there is a dominant substitution effect.
C)  It will cause a wage earner to enjoy less leisure if there is a dominant income effect.
D)  It will cause a wage earner to enjoy more leisure if there is a dominant income effect.E) A) and B)
F) B) and C)

Question 5

The substitution effect (in the work-leisure model) induces a person to work less in response to higher wages,which tends to make the labour supply curve slope upward.

Accepted Answer

A) True 
 B)False

Question 6

What type of indifference curve would represent right shoes and left shoes

Accepted Answer

A)  bowed out
B)  bowed in
C)  vertical lines
D)  right anglesE) None of the above
F) A) and B)

Question 7

Figure 21-4
This figure shows a consumer's choice between popcorn and juice.
 
-Refer to Figure 21-4.Which statement best describes a consumer's preference

Accepted Answer

A)  Point A is preferred equally to point E.
B)  Point A is preferred equally to point C.
C)  The bundle associated with point B contains more popcorn than that associated with point C.
D)  The bundles along indifference curve I1 are preferred to those along indifference curve I2.E) All of the above
F) B) and D)

Question 8

Explain the relationship between the budget constraint and the indifference curve at consumer optimum.

Accepted Answer

Since the budget constraint is tangent t...

Question 9

The income effect (in the work-leisure model) induces a person to work harder in response to higher wages,which tends to make the labour supply curve slope upward.

Accepted Answer

A) True 
 B)False

Question 10

Draw a budget constraint that is consistent with the following prices and income:
Income = $200
PY = $50
PX = $25
a.Demonstrate how your original budget constraint would change if income increases to $500.
b.Demonstrate how your original budget constraint would change if PY decreases to $20.
c.Demonstrate how your original budget constraint would change if PX increases to $40.

Accepted Answer

The answer of Draw a budget constraint that is consistent...

Question 11

What would happen to an individual's labour supply schedule if leisure were an inferior good?

Accepted Answer

If leisure were an inferior go...

Question 12

Figure 21-3
 
-Refer to Figure 21-3.In graph (a) ,what is the price of good Y relative to good X (i.e.,PY/PX)

Accepted Answer

A)  1/4
B)  1/3
C)  3/4
D)  3/1E) A) and C)
F) None of the above

Question 13

Figure 21-8
 
-Refer to Figure 21-8.If point B is the consumer's optimum and the price of chocolate chips is $4 per bag,what is the price of a bag of marshmallows

Accepted Answer

A)  $1.50
B)  $2.00
C)  $3.00
D)  $6.00E) All of the above
F) B) and C)

Question 14

When two goods are easily substitutable,such as right and left shoes,the indifference curves are right angles.

Accepted Answer

A) True 
 B)False

Question 15

Which conclusion would crossing indifference curves suggest

Accepted Answer

A)  It is possible to demonstrate that a consumer does not prefer more to less.
B)  Consumers are likely to prefer a redistribution of income from rich to poor.
C)  Differences in consumption choices across individuals are more easily explained than with noncrossing indifference curves.
D)  It is possible to demonstrate that all standard properties of indifference curves are typically satisfied.E) All of the above
F) B) and C)

Question 16

If two bundles of goods satisfy a consumer equally well,what can we say about the consumer

Accepted Answer

A)  She is on her budget constraint.
B)  She is in a position of equilibrium.
C)  She is indifferent between the bundles.
D)  She is optimally satisfied.E) C) and D)
F) A) and B)

Question 17

Why could a labour supply curve be backward bending

Accepted Answer

A)  As wage increases, the opportunity cost of leisure increases even more.
B)  As wage increases, a person can enjoy more leisure because of the income effect
C)  As wage increases, the substitution effect dominates, then the income effect dominates.
D)  As wage increases, the income effect dominates, then the substitution effect dominates.E) A) and B)
F) A) and C)

Question 18

Which characterization applies to an inferior good

Accepted Answer

A)  The average consumer chooses not to consume the good.
B)  The good is not equally valued by all consumers.
C)  An increase in income increases consumption of the good.
D)  An increase in income decreases consumption of the good.E) None of the above
F) B) and D)

Question 19

What type of indifference curve would represent nickels and dimes

Accepted Answer

A)  bowed out
B)  bowed in
C)  vertical lines
D)  right anglesE) None of the above
F) B) and C)

Question 20

If a consumer wants less of a good when her income rises,economists call it an inferior good.

Accepted Answer

A) True 
 B)False

Exam 21: The Theory of Consumer Choice

What would happen to an individual's labour supply schedule if leisure were an inferior good?

Correct Answer
verified
If leisure were an inferior go...
View Answer

The income effect (in the work-leisure model) induces a person to work harder in response to higher wages,which tends to make the labour supply curve slope upward.

Correct Answer
verified

What does economic theory predict will be the result of an increase in wages

Correct Answer
verified

Figure 21-3 -Refer to Figure 21-3.In graph (a) ,what is the price of good Y relative to good X (i.e.,PY/PX)

Correct Answer
verified

Explain the relationship between the budget constraint and the indifference curve at consumer optimum.

Correct Answer
verified
Since the budget constraint is tangent t...
View Answer

If a consumer wants less of a good when her income rises,economists call it an inferior good.

Correct Answer
verified

Which characterization applies to an inferior good

Correct Answer
verified

Figure 21-4 This figure shows a consumer's choice between popcorn and juice. -Refer to Figure 21-4.Which statement best describes a consumer's preference

Correct Answer
verified

When two goods are easily substitutable,such as right and left shoes,the indifference curves are right angles.

Correct Answer
verified

Which conclusion would crossing indifference curves suggest

Correct Answer
verified

Correct Answer
verified

Figure 21-8 -Refer to Figure 21-8.If point B is the consumer's optimum and the price of chocolate chips is $4 per bag,what is the price of a bag of marshmallows

Correct Answer
verified

Assume that a college student spends all of her income on cola and macaroni and hamburger.During exam week,the price of a box of macaroni is $1.50 and a pound of hamburger costs $4.00.If she has $41 of income,what could she choose to consume

Correct Answer
verified

When considering household saving,what is the relative price between "consuming when young" and "consuming when old"

Correct Answer
verified

When two goods are perfect complements,what types of indifference curves will they have

Correct Answer
verified

What type of indifference curve would represent nickels and dimes

Correct Answer
verified

What type of indifference curve would represent right shoes and left shoes

Correct Answer
verified

The substitution effect (in the work-leisure model) induces a person to work less in response to higher wages,which tends to make the labour supply curve slope upward.

Correct Answer
verified

If two bundles of goods satisfy a consumer equally well,what can we say about the consumer

Correct Answer
verified

Why could a labour supply curve be backward bending

Correct Answer
verified

Exam 21: The Theory of Consumer Choice

What would happen to an individual's labour supply schedule if leisure were an inferior good?

Correct AnswerverifiedIf leisure were an inferior go...View AnswerShow Answer

The income effect (in the work-leisure model) induces a person to work harder in response to higher wages,which tends to make the labour supply curve slope upward.

Correct AnswerverifiedShow Answer

What does economic theory predict will be the result of an increase in wages

Correct AnswerverifiedShow Answer

Figure 21-3 -Refer to Figure 21-3.In graph (a) ,what is the price of good Y relative to good X (i.e.,PY/PX)

Correct AnswerverifiedShow Answer

Explain the relationship between the budget constraint and the indifference curve at consumer optimum.

Correct AnswerverifiedSince the budget constraint is tangent t...View AnswerShow Answer

If a consumer wants less of a good when her income rises,economists call it an inferior good.

Correct AnswerverifiedShow Answer

Which characterization applies to an inferior good

Correct AnswerverifiedShow Answer

Figure 21-4 This figure shows a consumer's choice between popcorn and juice. -Refer to Figure 21-4.Which statement best describes a consumer's preference

Correct AnswerverifiedShow Answer

When two goods are easily substitutable,such as right and left shoes,the indifference curves are right angles.

Correct AnswerverifiedShow Answer

Which conclusion would crossing indifference curves suggest

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 21-8 -Refer to Figure 21-8.If point B is the consumer's optimum and the price of chocolate chips is $4 per bag,what is the price of a bag of marshmallows

Correct AnswerverifiedShow Answer

Assume that a college student spends all of her income on cola and macaroni and hamburger.During exam week,the price of a box of macaroni is $1.50 and a pound of hamburger costs $4.00.If she has $41 of income,what could she choose to consume

Correct AnswerverifiedShow Answer

When considering household saving,what is the relative price between "consuming when young" and "consuming when old"

Correct AnswerverifiedShow Answer

When two goods are perfect complements,what types of indifference curves will they have

Correct AnswerverifiedShow Answer

What type of indifference curve would represent nickels and dimes

Correct AnswerverifiedShow Answer

What type of indifference curve would represent right shoes and left shoes

Correct AnswerverifiedShow Answer

The substitution effect (in the work-leisure model) induces a person to work less in response to higher wages,which tends to make the labour supply curve slope upward.

Correct AnswerverifiedShow Answer

If two bundles of goods satisfy a consumer equally well,what can we say about the consumer

Correct AnswerverifiedShow Answer

Why could a labour supply curve be backward bending

Correct AnswerverifiedShow Answer

Correct Answer
verified
If leisure were an inferior go...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Since the budget constraint is tangent t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified