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Exam 21: The Theory of Consumer Choice

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Question 151

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When Ryan has an income of $2,000, he consumes 30 units of good A and 50 units of good B. After Ryan's income decreases to $1,500, he consumes 23 units of good A and 55 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.

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

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Question 152

Multiple Choice

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Suppose a consumer spends her income on two goods: music CDs and DVDs. The consumer has $200 to allocate to these two goods, the price of a CD is $10, and the price of a DVD is $20. What is the maximum number of CDs the consumer can purchase?

A) 10
B) 20
C) 40
D) 50

E) None of the above
F) All of the above

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Question 153

Multiple Choice

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Figure 21-11 -Refer to Figure 21-11. What is the consumer's marginal rate of substitution?

On a graph we draw a consumer's budget constraint, measuring the number of apples on the horizontal axis and the number of light bulbs on the vertical axis. If the slope of the budget constraint is -2, then

Figure 21-9 -Refer to Figure 21-9. If the price of good Y is $5, what is the price of good X?

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?

Figure 21-11 -Refer to Figure 21-11. What is the consumer's marginal rate of substitution as she moves from A to B?

A consumer's optimal choice is affected by income, prices of goods, and preferences.

A typical consumer consumes both coffee and donuts. After the consumer's income decreases, the consumer consumes more coffee but fewer donuts than before. For this consumer, donuts are a normal good, but coffee is an inferior good.

When a consumer spends less time enjoying leisure and more time working, she has

Jack and Diane each buy pizza and paperback novels. Pizza costs $3 per slice, and paperback novels cost $5 each. Jack has a budget of $30, and Diane has a budget of $15 to spend on pizza and paperback novels. Which consumer(s) can afford to purchase 3 slices of pizza and 4 paperback novels?

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 interior of the consumer's budget constraint?

Pepsi and pizza are normal goods. When the price of pizza rises, the substitution effect causes Pepsi to be relatively

Goods x and y are available to Jeff. At Jeff's optimum, the marginal utility per dollar spent on good x equals __________________.

Figure 21-30 The graph shows two budget constraints for a consumer. -Refer to Figure 21-30. Suppose Budget Constraint B applies. If the consumer's income is $90 and if he is buying 5 light bulbs, then how much money is he spending on hamburgers?

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 DVD?

If the income effect counteracts the substitution effect, we know that the good in question is a(n)

The marginal rate of substitution between goods A and B measures the price of A relative to the price of B.

Figure 21-11 -Refer to Figure 21-11. As the consumer moves from point A to B to C to D, the consumer's marginal rate of substitution

Scenario 21-4 Frank spends all of his income of $240 per month on shirts and hats. The price of a shirt is $40 and the price of a hat is $30. -Refer to Scenario 21-4. What is the slope of Frank's budget constraint if it is drawn with the quantity of shirts on the horizontal axis and the quantity of hats on the vertical axis?