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Exam 21: The Theory of Consumer Choice.

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Question 51

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When Jamar has an income of $2,000,he consumes 30 units of good A and 50 units of good B.After Jamar's income decreases to $1,500,he consumes 33 units of good A and 45 units of good B.Which of the following statements is correct?

A) Both goods A and B are normal goods.
B) Both goods A and B are inferior goods.
C) Good A is a normal good, and good B is an inferior good.
D) Good A is an inferior good, and good B is a normal good.

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Question 52

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

A) graph a
B) graph b
C) graph c
D) All of the above are correct.

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Question 53

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All of the following are properties of typical indifference curves except

A consumer is currently spending all of her available income on two goods: music CDs and DVDs.At her current consumption bundle,she is spending twice as much on CDs as she is on DVDs.If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs,what is the price of a CD?

How are the following three questions related: 1) Do all demand curves slope downward? 2) How do wages affect labor supply? 3) How do interest rates affect household saving?

Which of the following examples would illustrate a backward-sloping labor supply-curve?

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.

Assume that a person consumes two goods,Coke and Snickers.Use a graph to demonstrate how the consumer adjusts his/her optimal consumption bundle when the price of Coke decreases.Carefully label all curves and axes.What will happen to consumption if Coke is a normal good? What will happen to consumption if Coke is an inferior good? (Remember to explain the possible change when the income effect dominates and when the substitution effect dominates.)

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?

The substitution effect of an increase in the interest rate will result in an increase in

Kristi 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,Kristi should buy

If goods A and B are perfect substitutes,then the marginal rate of substitution of good A for good B is constant.

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 directly on the consumer's budget constraint?

An optimizing consumer will select a consumption bundle in which

Suppose that Jake likes to consume one glass of milk with every three chocolate chip cookies.For Jake,an additional cookie has no value unless he can consume it with the appropriate proportion of milk.Jake's indifference curves for milk and cookies are

A good is an inferior good if the consumer buys less of it when

A rational person can have a negatively-sloped labor supply curve.

Figure 21-12 -Refer to Figure 21-12.Which of the following statements is correct?

When the indifference curve is tangent to the budget constraint,

Suppose Caroline will only drink a cup of coffee if she can add two packets of sugar to it.Which graph would illustrate a representative indifference curve?