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


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 D)
F) A) and B)

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Preston goes to the movies every Sunday afternoon. The movie theater offers 4 combinations of popcorn and beverages: the "mini­combo" costs $5 and includes a small popcorn and a small drink, the "medium­combo" costs $7 and includes a medium popcorn and a medium drink, the "value­combo" also costs $7 and includes a small popcorn and a large drink, and the "large­combo" costs $9 and includes a large popcorn and a large drink. Preston always purchases the "value­combo." We can conclude that


A) Preston cannot afford the "large­combo."
B) Preston cannot afford the "medium­combo."
C) Preston prefers a combo with a larger popcorn-to-beverage ratio.
D) Preston prefers a combo with a smaller popcorn-to-beverage ratio.

E) A) and B)
F) None of the above

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The slope of the budget constraint is determined by the


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

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The theory of consumer choice illustrates the


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

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Figure 21-19 Figure 21-19 -Refer to Figure 21-19. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, which of the following would cause the consumer to move to point A? A) a decrease in the price of Skittles B) a decrease in the price of M&M's C) an increase in the price of Skittles D) an increase in the price of M&M's -Refer to Figure 21-19. Assume that the consumer depicted in the figure faces prices and income such that she optimizes at point B. According to the graph, which of the following would cause the consumer to move to point A?


A) a decrease in the price of Skittles
B) a decrease in the price of M&M's
C) an increase in the price of Skittles
D) an increase in the price of M&M's

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

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A Giffen good is one for which the quantity demanded rises as the price rises because the income effect


A) reinforces the substitution effect.
B) reinforces and is greater than the substitution effect.
C) counteracts but is smaller than the substitution effect.
D) counteracts and is greater than the substitution effect.

E) B) and C)
F) All of the above

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Suppose a consumer spends her income on two goods: music CDs and DVDs. The price of a CD is $8, and the price of a DVD is $20. If we graph the budget constraint by measuring the quantity of CDs purchased on the vertical axis and the quantity of DVDs on the horizontal axis, what is the slope of the budget constraint?


A) -5.0
B) -2.5
C) -0.4
D) The slope of the budget constraint cannot be determined without knowing the income the consumer has available to spend on the two goods.

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

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

A) True
B) False

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Figure 21-9 Figure 21-9 -Refer to Figure 21-9. If the price of good Y is $5, what is the price of good X? A) $500 B) $150 C) $16.67 D) $1.50 -Refer to Figure 21-9. If the price of good Y is $5, what is the price of good X?


A) $500
B) $150
C) $16.67
D) $1.50

E) None of the above
F) A) and B)

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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. 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. At two of the four labeled points, Hannah is equally happy. Identify those two points. -Refer to Figure 21-32. At two of the four labeled points, Hannah is equally happy. Identify those two points.

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Hannah is ...

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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?


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 Y

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

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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


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 D)
F) C) and D)

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Figure 21-6 Figure 21-6 -Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of popcorn is $2, and the value of B is 100. What is the price of Mt. Dew? A) $1 B) $2 C) $5 D) $100 -Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of popcorn is $2, and the value of B is 100. What is the price of Mt. Dew?


A) $1
B) $2
C) $5
D) $100

E) A) and D)
F) None of the above

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The theory of consumer choice examines


A) the determination of output in competitive markets.
B) the tradeoffs inherent in decisions made by consumers.
C) how consumers select inputs into manufacturing production processes.
D) the determination of prices in competitive markets.

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

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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. 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. What is the value of the interest rate that Hannah earns on her saving? -Refer to Figure 21-32. What is the value of the interest rate that Hannah earns on her saving?

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The interest rate is...

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Which of the following statements is not correct?


A) If Fiona gets a higher wage and works more, the substitution effect is greater than the income effect for her.
B) If Miguel experiences a wage decrease and works less, the income effect is greater than the substitution effect for him.
C) If the substitution effect is greater than the income effect, the labor-supply curve is upward sloping.
D) If the income effect is greater than the substitution effect, the labor-supply curve is downward sloping.

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

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Which of the following is an example of a Giffen good?


A) potatoes during the Irish potato famine
B) rice in the Chinese province of Hunan
C) fish in Japan
D) Both a and b are correct.

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

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When the price of an inferior good decreases,


A) both the income and substitution effects encourage the consumer to purchase more of the good.
B) both the income and substitution effects encourage the consumer to purchase less of the good.
C) the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good.
D) the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good.

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

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Teresa faces prices of $6.00 for a unit of good X and $1.50 for a unit of good Y. At her optimum, Teresa is willing to give up 1 unit of good X for units of good Y.

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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?

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The price ...

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