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Exam 21: The Theory of Consumer Choice

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Question 281

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Figure 21-18 -Refer to Figure 21-18. Bundle D represents a point where

A) MRS_xy > P_y/P_x.
B) MRS_xy = P_x/P_y.
C) MRS_xy < P_x/P_y.
D) MRS_xy < P_y/P_x.

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

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Question 282

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A consumer's indifference curves are straight lines when, for the consumer, the goods in question are __________.

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Question 283

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If income increases and prices are unchanged, the consumer's budget constraint

Figure 21-14 -Refer to Figure 21-14. Which of the graphs illustrates indifference curves for which the marginal rate of substitution is undefined?

If a consumer experiences a decrease in income, the new budget constraint will have the same slope as the old budget constraint.

Answer the following questions based on the table. A consumer is able to consume the following bundles of rice and beans when the price of rice is $2 and the price of beans is $3. a.How much is this consumer's income? b.Draw a budget constraint given this information. Label it B. c.Construct a new budget constraint showing the change if the price of rice falls $1. Label this C. d.Given the original prices for rice ($2) and beans ($3), construct a new budget constraint if this consumer's income increased to $48. Label this D.

The theory of consumer choice most closely examines which of the following Ten Principles of Economics?

Janet prefers cashews to almonds. She prefers macadamia nuts to peanuts, but she is indifferent between almonds and peanuts. Which of the following statements can we say for sure?

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?

Figure 21-6 -Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of Mt. Dew is $2, and the value of A is 200. What is the price of popcorn?

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 $4. The consumer's optimal choice is point

For Brent, the income effect of a wage increase is stronger than the substitution effect. In response to a wage increase, will Brent work more hours or will he work fewer hours?

The theory of consumer choice provides the foundation for understanding the

The income effect of an increase in the interest rate will result in an increase in​ consumption when

Figure 21-31 The figure shows two indifference curves and two budget constraints for a consumer named Kevin. -Refer to Figure 21-31. Suppose Kevin is optimally purchasing 12 shirts and 28 sweaters, and he is spending $648 on shirts. What is the price of a sweater?

Because people are more willing to trade away goods that they have in abundance and less willing to trade away goods of which they have little, indifference curves are ___________.

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

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

Hold the prices of goods, as well as Amy's preferences, constant. If Amy's income increases, then

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?