Figure 21–16
1. Refer to Figure 21–16. The price of X is $20, the price of Y is $5, and the consumer’s income is $40. Which point
represents the consumer’s optimal choice?
a.
A
b.
B
c.
C
d.
D
2. Refer to Figure 21–16. The price of X is $5, the price of Y is $20, and the consumer’s income is $40. Which point
represents the consumer’s optimal choice?
a.
A
b.
B
c.
C
d.
D
3. Refer to Figure 21–16. The price of X is $25, the price of Y is $25, and the consumer’s income is $100. Which point
represents the consumer’s optimal choice?
a.
A
b.
B
c.
C
d.
D
Figure 21–17
4. Refer to Figure 21–17. When the price of X is $6, the price of Y is $24, and income is $48, Paul’s optimal choice is
point C. Then the price of Y decreases to $8. Paul’s new optimal choice is point
a.
A.
b.
B.
c.
D.
d.
E.
5. Refer to Figure 21–17. When the price of X is $6, the price of Y is $24, and income is $48, Paul’s optimal choice is
point C. Then the price of Y decreases to $6. Paul’s new optimal choice is point
a.
A.
b.
B.
c.
D.
d.
E.
6. Refer to Figure 21–17. When the price of X is $40, the price of Y is $40, and income is $160, Paul’s optimal choice is
point B. Then Paul’s income increases to $320, and his optimal choice is point E. For Paul,
a.
b.
c.
d.
Figure 21–18
7. Refer to Figure 21–18. Given the budget constraint depicted in the graph, the consumer’s optimal choice will be point
a.
A.
b.
B.
c.
C.
d.
D.
8. Refer to Figure 21–18. It would be possible for the consumer to reach I2 if
a.
the price of Y decreases.
b.
the price of X decreases.
c.
income increases.
d.
All of the above would be correct.
9. Refer to Figure 21–18. Bundle B represents a point where
a.
MRSxy > Py/Px.
b.
MRSxy = Px/Py.
c.
MRSxy < Px/Py.
d.
MRSxy > Px/Py.
10. Refer to Figure 21–18. Bundle C represents a point where
a.
MRSxy > Py/Px.
b.
MRSxy = Px/Py.
c.
MRSxy < Px/Py.
d.
MRSxy > Px/Py.
11. Refer to Figure 21–18. Bundle D represents a point where
a.
MRSxy > Py/Px.
b.
MRSxy = Px/Py.
c.
MRSxy < Px/Py.
d.
MRSxy < Py/Px.
Figure 21–19
12. 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
a.
A.
b.
B.
c.
C.
d.
D.
13. 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 $2. The consumer’s optimal choice is point
a.
A.
b.
B.
c.
C.
d.
D.
14. 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
15. 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 will choose a consumption bundle where the marginal rate of substitution
is
a.
2.
b.
2/3.
c.
1/2.
d.
1/3.
16. Refer to Figure 21–19. Assume that the consumer depicted in the figure has an income of $50. The price of Skittles is
$5 and the price of M&M’s is $5. This consumer will choose a consumption bundle where the marginal rate of substitution
is
a.
10.
b.
5.
c.
1.
d.
1/5.
Figure 21–20
The following graph illustrates a representative consumer’s preferences for marshmallows and chocolate chip cookies:
17. Refer to Figure 21–20. Assume that the consumer has an income of $40, the price of a bag of marshmallows is $2,
and the price of a bag of chocolate chips is $2. The optimizing consumer will choose to purchase which bundle of
marshmallows and chocolate chips?
a.
A
b.
B
c.
C
d.
D
18. Refer to Figure 21–20. Assume that the consumer has an income of $100 and currently optimizes at bundle A. When
the price of marshmallows decreases to $5, which bundle will the optimizing consumer choose?
a.
A
b.
B
c.
C
d.
D
19. Refer to Figure 21–20. Assume that the consumer has an income of $40. If the price of chocolate chips is $4 and the
price of marshmallows is $4, the optimizing consumer would choose to purchase
a.
9 marshmallows and 6 chocolate chips.
b.
10 marshmallows and 10 chocolate chips.
c.
5 marshmallows and 5 chocolate chips.
d.
3 marshmallows and 9 chocolate chips.
20. Refer to Figure 21–20. Assume that the consumer has an income of $80. If the price of chocolate chips is $4 and the
price of marshmallows is $4, the optimizing consumer would choose to purchase
a.
9 marshmallows and 6 chocolate chips.
b.
10 marshmallows and 10 chocolate chips.
c.
5 marshmallows and 5 chocolate chips.
d.
3 marshmallows and 9 chocolate chips.
21. Refer to Figure 21–20. Assume that the consumer has an income of $40. Based on the information available in the
graph, which of the following price-quantity combinations would be on her demand curve for marshmallows if the price
of chocolate chips were $4?
a.
P=$2, Q=3
b.
P=$2, Q=9
c.
P=$4, Q=3
d.
P=$4, Q=9
22. Refer to Figure 21–20. Assume that the consumer depicted the figure has an income of $50. Based on the information
available in the graph, which of the following price-quantity combinations would be on her demand curve for chocolate
chips if the price of marshmallows is $2.50?
a.
P=$2.50, Q=6
b.
P=$2.50, Q=10
c.
P=$5.00, Q=3
d.
P=$5.00, Q=5
23. The goal of the consumer is to
a.
maximize utility.
b.
be on the highest indifference curve.
c.
maximize satisfaction.
d.
All of the above are the goals of the consumer.
24. The goal of the consumer is to
a.
maximize utility.
b.
minimize expenses.
c.
spend more income in the current time period than in the future.
d.
All of the above are the goals of the consumer.
25. When a consumer is purchasing the best combination of two goods, X and Y, subject to a budget constraint, we say
that the consumer is at an optimal choice point. A graph of an optimal choice point shows that it occurs
a.
along the highest attainable indifference curve.
b.
where the indifference curve is tangent to the budget constraint.
c.
where the marginal utility per dollar spent is the same for both X and Y.
d.
All of the above are correct.
26. When a consumer is purchasing the best combination of two goods, X and Y, subject to a budget constraint, we say
that the consumer is at an optimal choice point. A graph of an optimal choice point shows that it occurs
a.
along the highest indifference curve.
b.
along the lowest budget constraint.
c.
where the indifference curve is tangent to the budget constraint.
d.
All of the above are correct.
27. A consumer chooses an optimal consumption point where the
a.
marginal rate of substitution equals the relative price ratio.
b.
slope of the indifference curve equals the slope of the budget constraint.
c.
ratio of the marginal utilities equals the ratio of the prices.
d.
All of the above are correct.
28. A consumer chooses an optimal consumption point where the
a.
marginal rate of substitution equals the relative price ratio.
b.
slope of the indifference curve exceeds the slope of the budget constraint.
c.
ratios of all the marginal utilities are equal.
d.
All of the above are correct.
29. A consumer chooses an optimal consumption point where the
a.
marginal rate of substitution exceeds the relative price ratio.
b.
slope of the indifference curve equals the slope of the budget constraint.
c.
ratio of the prices equals one.
d.
All of the above are correct.
30. A consumer chooses an optimal consumption point where the
a.
marginal rate of substitution is maximized.
b.
slope of the indifference curve exceeds the slope of the budget constraint by the greatest amount.
c.
ratio of the marginal utilities equals the ratio of the prices.
d.
All of the above are correct.
31. Preston goes to the movies every Sunday afternoon. The movie theater offers 4 combinations of popcorn and
beverages: the “mini–combo” costs $5 and includes a small popcorn and a small drink, the “medium–combo” costs $7 and
includes a medium popcorn and a medium drink, the “value–combo” also costs $7 and includes a small popcorn and a
large drink, and the “large–combo” costs $9 and includes a large popcorn and a large drink. Preston always purchases the
“value–combo.” We can conclude that
a.
Preston cannot afford the “large–combo.”
b.
Preston cannot afford the “medium–combo.”
c.
Preston prefers a combo with a larger popcorn-to-beverage ratio.
d.
Preston prefers a combo with a smaller popcorn-to-beverage ratio.
32. Which of the following equations corresponds to an optimal choice point?
(i)
MRS = PX/PY
(ii)
MUX/MUY = PX/PY
(iii)
MUX/PX = MUY/PY
(iv)
MUX/PY = MUY/PX
a.
(i) only
b.
(i), (ii), and (iii) only
c.
(ii) and (iv) only
d.
(i), (ii), (iii), and (iv)
33. 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?
a.
bundle J
b.
bundle K
c.
bundle L
d.
either bundle J or bundle K
34. A consumer chooses an optimal consumption point where the
a.
marginal rate of substitution is maximized.
b.
rate at which the consumer is willing to trade one good for another equals the price ratio.
c.
price ratio is minimized.
d.
All of the above are correct.
35. When considering her budget, the highest indifference curve that a consumer can reach is the
a.
one that is tangent to the budget constraint.
b.
indifference curve farthest from the origin
c.
indifference curve that intersects the budget constraint in at least two places.
d.
None of the above is correct.
36. The relationship between the marginal utility that Casey gets from eating ice cream sundaes and the number of ice
cream cones he eats per week is as follows:
Ice Cream Sundaes
1
2
3
4
5
6
Marginal Utility
20
16
12
8
4
0
Casey receives 3 units of utility from the last dollar spent on each of the other goods he consumes. If ice cream sundaes
cost $4 each, how many ice cream sundaes will he consume per month if he maximizes utility?
a.
2
b.
3
c.
4
d.
5
37. Jerry consumes two goods, hamburgers and ice cream sandwiches. He has maximized his utility given his income. Ice
cream sandwiches costs $2, and he consumes them to the point where the marginal utility he receives is 6. Hamburgers
cost $4, and the relationship between the marginal utility that Jerry gets from eating hamburgers and the number he eats
per month is as follows:
Hamburgers
1
2
3
4
5
6
Marginal Utility
20
16
12
8
4
0
How many hamburgers does Jerry buy each month?
a.
1
b.
2
c.
3
d.
4
38. An optimizing consumer will select a consumption bundle in which
a.
income is maximized, and prices are minimized.
b.
utility is maximized, and prices are minimized.
c.
utility is maximized, subject to budget constraints.
d.
utility is maximized, and indifference curves are linear.
39. If the consumer’s income and all prices simultaneously double, then the optimum consumption bundle will
a.
shift outward relative to the original optimum.
b.
move leftward along the original budget constraint.
c.
not change.
d.
shift inward relative to the original optimum.
40. If the consumer’s income and all prices simultaneously decrease by one-half, then the optimum consumption will
a.
shift outward relative to the original optimum.
b.
move leftward along the original budget constraint.
c.
shift inward relative to the original optimum.
d.
not change.
41. The consumer’s optimum choice is represented by
a.
MUx/MUy = Px/Py.
b.
MUx/Px = MUy/Py.
c.
MRSxy = Px/Py.
d.
All of the above are correct.
42. An optimizing consumer will select the consumption bundle in which the
a.
ratio of total utilities is equal to the relative price ratio.
b.
ratio of income to price equals the marginal rate of substitution.
c.
marginal rate of substitution is equal to the relative price ratio of the goods.
d.
marginal rate of substitution is equal to marginal utility.
43. An optimizing consumer will select the consumption bundle in which the marginal rate of substitution
a.
is equal to the relative price ratio of the goods.
b.
exceeds the marginal utility of each good by the greatest amount.
c.
is less than the slope of the budget constraint.
d.
All of the above are correct.
44. An optimizing consumer will select the consumption bundle in which the marginal rate of substitution
a.
is equal to the price of the least-expensive good.
b.
exceeds the marginal utility of each good by the greatest amount.
c.
is less than the slope of the budget constraint.
d.
None of the above is correct.
45. When the indifference curve is tangent to the budget constraint,
a.
a consumer cannot be made better off without an increase in her income or a price decrease in one of the goods
she consumes.
b.
the consumer is likely to be at a sub-optimal level of consumption.
c.
income is at its optimum for a consumer.
d.
indifference curves are likely to intersect.
46. At the consumer’s optimum
a.
the budget constraint will have a slope of MUx/Px.
b.
it is still possible for the consumer to increase his consumption of both goods.
c.
the indifference curve will intersect the budget constraint at the midpoint of the budget constraint.
d.
the slope of the indifference curve is equal to the slope of the budget constraint.
47. At the consumer’s optimum the
a.
budget constraint will have a slope of MUx/Px.
b.
slope of the indifference curve is equal to the slope of the budget constraint.
c.
indifference curve will intersect the budget constraint at the midpoint of the budget constraint.
d.
Both b and c are correct.
48. The consumer’s optimum is where
a.
MUx/MUy = Py/Px.
b.
MUx/Py = MUy/Px.
c.
MUx/MUy = Px/Py.
d.
None of the above is correct.
49. Which of the following represents a consumer’s optimum?
a.
MUx/MUy = Py/Px
b.
MUx/Py = MUy/Px
c.
MUx/Px = MUy/Py
d.
MUy/MUx = Px/Py
50. A consumer has preferences over two goods, X and Y. Suppose we graph this consumer’s preferences (which satisfy
the usual properties of indifference curves) and budget constraint on a diagram with X on the horizontal axis and Y on the
vertical axis. At the consumer’s current consumption bundle, the consumer is spending all available income, and the
marginal rate of substitution is greater than the slope of the budget constraint. We can conclude that the consumer
a.
is currently maximizing satisfaction subject to the budget constraint.
b.
could increase satisfaction by consuming more X and less Y.
c.
could increase satisfaction by consuming less X and more Y.
d.
could purchase more X and more Y and increase total satisfaction.
51. A consumer has preferences over two goods, X and Y. Suppose we graph this consumer’s preferences (which satisfy
the usual properties of indifference curves) and budget constraint on a diagram with X on the horizontal axis and Y on the
vertical axis. At the consumer’s current consumption bundle, the consumer is spending all available income, and the
marginal rate of substitution is less than the slope of the budget constraint. We can conclude that the consumer
a.
is currently maximizing satisfaction subject to the budget constraint.
b.
could increase satisfaction by consuming more X and less Y.
c.
could increase satisfaction by consuming less X and more Y.
d.
could purchase more X and more Y and increase total satisfaction.
52. 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
53. Traci consumes two goods, lemonade and pretzels. Lemonade costs $2 per glass, and she consumes it to the point
where the marginal utility she receives from her last glass of lemonade is 4. Pretzels cost $3 per bag. The relationship
between the marginal utility Traci gets from eating a bag of pretzels and the number of bags she eats per month is as
follows:
Bags of pretzels
1
2
3
4
5
6
Marginal utility
30
20
12
6
2
0
If Traci is maximizing her utility, how many bags of pretzels does she buy each month?
a.
3
b.
4
c.
5