曼昆《经济学原理》（微观）第五版测试题库 (21)

Chapter 21
The Theory of Consumer Choice
TRUE/FALSE
1. The theory of consumer choice illustrates that people face tradeoffs, which is one of the Ten Principles of
Economics.
ANS: T DIF: 1 REF: 21-0 NAT: Analytic
LOC: Utility and consumer choice TOP: Consumer choice
MSC: Definitional
2. A consumer’s budget constraint for goods X and Y is determined by how much the consumer likes good X
relative to good Y.
ANS: F DIF: 2 REF: 21-1 NAT: Analytic
LOC: Utility and consumer choice TOP: Budget constraint
MSC: Definitional
3. The slope of the budget constraint reveals the relative price of good X compared to good Y.
MSC: Applicative
4. A budget constraint illustrates bundles that a consumer prefers equally, while an indifference curve illustrates
bundles that are equally affordable to a consumer.
ANS: F DIF: 2 REF: 21-1 | 21-2 NAT: Analytic
MSC: Applicative
5. For a typical consumer, most indifference curves are bowed inward.
LOC: Utility and consumer choice TOP: Indifference curves
MSC: Interpretive
6. For a typical consumer, most indifference curves are downward sloping.
MSC: Interpretive
7. For a typical consumer, indifference curves can intersect if they satisfy the property of transitivity.
MSC: Interpretive
8. When two goods are perfect complements, the indifference curves are right angles.
LOC: Utility and consumer choice TOP: Perfect complements
MSC: Interpretive
9. The indifference curves for left shoes and right shoes are right angles.
MSC: Applicative
10. The indifference curves for perfect substitutes are straight lines.
LOC: Utility and consumer choice TOP: Perfect substitutes
MSC: Applicative
126

Chapter 21/The Theory of Consumer Choice 127
11. The indifference curves for nickels and dimes are straight lines.
MSC: Applicative
12. When two goods are perfect substitutes, the indifference curves are right angles.
LOC: Utility and consumer choice TOP: Perfect complements | Perfect substitutes
MSC: Interpretive
13. If goods A and B are perfect substitutes, then the marginal rate of substitution of good A for good B is
constant.
LOC: Utility and consumer choice TOP: Marginal rate of substitution | Perfect substitutes
MSC: Interpretive
14. The slope at any point on an indifference curve equals the absolute price at which a consumer is willing to
substitute one good for the other.
LOC: Utility and consumer choice TOP: Marginal rate of substitution
MSC: Interpretive
15. The marginal rate of substitution between goods A and B measures the price of A relative to the price of B.
MSC: Definitional
16. The marginal rate of substitution is the slope of the budget constraint.
MSC: Definitional
17. The marginal rate of substitution is the slope of the indifference curve.
MSC: Definitional
18. At a consumer’s optimal choice, the consumer chooses the combination of goods that equates the marginal
rate of substitution and the price ratio.
LOC: Utility and consumer choice TOP: Optimization
MSC: Interpretive
19. At a consumer’s optimal choice, the consumer chooses the combination of goods such that the ratio of the
marginal utilities equals the ratio of the prices.
MSC: Interpretive
20. If consumers purchase more of a good when their income rises, the good is a normal good.
LOC: Utility and consumer choice TOP: Normal goods | Inferior goods
MSC: Definitional
21. If a consumer purchases more of good B when his income rises, good B is an inferior good.
LOC: Utility and consumer choice TOP: Normal goods | Inferior goods
MSC: Definitional

22. If a consumer purchases more of good A when her income falls, good A is an inferior good.
LOC: Utility and consumer choice TOP: Inferior goods
MSC: Definitional
23. The income effect of a price change is unaffected by whether the good is a normal or inferior good.
LOC: Utility and consumer choice TOP: Income effect
MSC: Interpretive
24. The income effect of a price change is the change in consumption that results from the movement to a new
indifference curve.
LOC: Utility and consumer choice TOP: Income effect
MSC: Interpretive
25. The direction of the substitution effect is not influenced by whether the good is normal or inferior.
LOC: Utility and consumer choice KEY: Substitution effect
MSC: Analytical
26. The substitution effect of a price change is the change in consumption that results from the movement to a new
indifference curve.
LOC: Utility and consumer choice TOP: Substitution effect
MSC: Interpretive
27. All points on a demand curve are optimal consumption points.
LOC: Utility and consumer choice TOP: Demand MSC: Analytical
28. Economists use the term Giffen good to describe a good that violates the law of demand.
LOC: Utility and consumer choice TOP: Giffen good MSC: Interpretive
29. Giffen goods are inferior goods for which the income effect dominates the substitution effect.
LOC: Utility and consumer choice TOP: Giffen good MSC: Definitional
30. Economists have found evidence of a Giffen good when studying the consumption of rice in the Chinese
province of Hunan.
LOC: Utility and consumer choice TOP: Giffen good MSC: Applicative
31. Katie wins $1 million in her state’s lottery. If Katie drastically reduces the number of hours she works after
she wins the money, we can infer that the income effect is larger than the substitution effect for her.
LOC: Utility and consumer choice TOP: Labor supply
MSC: Interpretive
32. Susie wins $1 million in her state’s lottery. If Susie keeps working after she wins the money, we can infer that
the income effect is larger than the substitution effect for her.
MSC: Interpretive
33. A rational person can have a negatively-sloped labor supply curve.
MSC: Applicative

34. The substitution effect in the work-leisure model induces a person to work less in response to higher wages,
which tends to make the labor-supply curve slope upward.
MSC: Interpretive
35. The income effect in the work-leisure model induces a person to work less in response to higher wages, which
tends to make the labor-supply curve slope backward.
MSC: Interpretive
36. Some economists have advocated reducing the taxation of interest and other capital income, arguing that such
a policy change would raise the after-tax interest rate that savers can earn and would thereby encourage people
to save more.
LOC: Utility and consumer choice TOP: Consumption-saving decision
MSC: Interpretive
37. A rise in the interest rate will generally result in people consuming more when they are old if the substitution
effect outweighs the income effect.
MSC: Interpretive
38. A rise in the interest rate will generally result in people consuming less when they are old if the substitution
effect outweighs the income effect.
MSC: Interpretive
SHORT ANSWER
1. 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.
RICE BEANS
12 0
6 4
0 8
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.

ANS:
a. $24
b.
c.
d.
DIF: 2 REF: 21-1 NAT: Analytic LOC: Utility and consumer choice
TOP: Budget constraint MSC: Applicative
2. Draw a budget constraint that is consistent with the following prices and income.
Income = 200
PY = 50
PX = 25
a. Demonstrate how your original budget constraint would change if income increases to 500.
b. Demonstrate how your original budget constraint would change if PY decreases to 20.
c. Demonstrate how your original budget constraint would change if PX increases to 40.
ANS:

3. Assume that a consumer faces the following budget constraints.
a. Assuming that income is the same on both occasions, describe the difference in relative prices
between Panel A and Panel B.
b. If income in Panel B is $126, what is the price of good X?
c. If income in Panel A is $84, what is the price of good Y?
d. Assuming that the price of good X is the same on both occasions, describe the difference in
income and price of good Y between Panel A and Panel B.
ANS:
a. The price of good Y is relatively higher in Panel A than Panel B. Said another way, the price of
X is relatively lower in Panel A than Panel B.
b. $9
c. $12
d. Income in Panel A is twice the income in Panel B, and the price of Y in Panel B is 1/18 the
price of Y in Panel A.
4. Evaluate the following statement, Warren Buffet is the second richest person in the world. He doesn't face
any constraint on his ability to purchase commodities he wants.
ANS:
Everyone faces scarcity of resources, regardless of how rich they are because wants are assumed to be infinite.
TOP: Budget constraint MSC: Interpretive
5. List and briefly explain each of the four properties of indifference curves.
ANS:
1: Higher indifference curves are preferred to lower ones, because consumers usually prefer more of something to
less of it. 2: Indifference curves are downward sloping. The slope of an indifference curve reflects the rate at which
the consumer is willing to substitute one good for another. If the quantity of one good is reduced, the quantity of the
other good must increase in order for the consumer to be equally happy. 3: Indifference curves do not cross. If
indifference curves did cross, the same point could be on two different curves, thus contradicting the assumption that
consumers prefer more of both goods to less. 4: Indifference curves are bowed inward. This is 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 less.
TOP: Indifference curves MSC: Interpretive

6. Draw indifference curves that reflect the following preferences.
a. pencils with white erasers and pencils with pink erasers
b. left shoes and right shoes
c. potatoes and rice
d. income and polluted water
ANS:
TOP: Indifference curves MSC: Applicative

7. Graphically demonstrate the conditions associated with a consumer optimum. Carefully label all curves and
axes.
ANS:
Where M=Income
TOP: Optimization MSC: Applicative
8. Explain the relationship between the budget constraint and indifference curve at a consumer’s optimum.
ANS:
Since the budget constraint is tangent to the indifference curve at a consumer’s optimum, the slope of the budget
constraint (relative market prices) and the slope of the indifference curve (the marginal rate of substitution) are equal
at the optimal consumption point.
TOP: Consumer choice MSC: Interpretive

9. 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.)
ANS:
If Coke is a normal good, the consumption of Coke will increase when the price decreases. If Coke is an inferior
good and the substitution effect dominates, the consumption of Coke will increase when the price decreases. If Coke
is an inferior good and the income effect dominates, the consumption of Coke will decrease when the price
decreases. If consumption decreases, the demand curve is upward sloping, and Coke would be a Giffen good.
Giffen goods are very rare in the real world, and Coke is not likely to be one.
TOP: Consumer choice MSC: Applicative

10. Using the graph shown, construct a demand curve for MM's given an income of $10.
ANS:
TOP: Demand MSC: Analytical

11. Using indifference curves and budget constraints, graphically illustrate the substitution and income effect that
would result from a change in the price of a normal good.
ANS:
The graph above illustrates a price decrease for potato chips. Moving from point A to point B illustrates the
substitution effect, while moving from point B to point C illustrates the income effect.
TOP: Income effect | Substitution effect MSC: Applicative
12. Explain the difference between inferior and normal goods. As a developing economy experiences increases in
income (measured by GDP), what would you predict to happen to demand for inferior goods?
ANS:
Normal goods are those for which consumption increases as income rises. Inferior goods are those for which
consumption decreases as income rises. We would expect the demand for inferior goods to decrease as developing
countries experience increases in income.
TOP: Inferior goods | Normal goods MSC: Interpretive
13. Janet knows that she will ultimately face retirement. Assume that Janet will experience two periods in her life,
one in which she works and earns income, and one in which she is retired and earns no income. Janet can earn
$250,000 during her working period and nothing in her retirement period. She must both save and consume in
her work period and can earn 10 percent interest on her savings.
a. Use a graph to demonstrate Janet's budget constraint.
b. On your graph, show Janet at an optimal level of consumption in the work period equal to
$150,000. What is the implied optimal level of consumption in her retirement period?
c. Now, using your graph from part b above, demonstrate how Janet will be affected by an increase
in the interest rate on savings to 14 percent. Discuss the role of income and substitution effects in
determining whether Janet will increase, or decrease her savings in the work period.
ANS:
a. see graph below
b. see graph below
c. see graph below

Substitution effect: Retirement spending becomes less costly, so she should increase saving.
Income effect: As income increases she should increase consumption in both periods (thus reducing her saving in
the work period.)
TOP: Consumption-saving decision MSC: Applicative
Sec 00 - The Theory of Consumer Choice
MULTIPLE CHOICE
1. Which of the following does not represent a tradeoff facing a consumer?
a. choosing to purchase more of all goods
b. choosing to spend more leisure time and less working time
c. choosing to spend more now and consume less in the future
d. choosing to purchase less of one good in order to purchase more of another good
ANS: A DIF: 1 REF: 21-0 NAT: Analytic
MSC: Applicative
2. 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?
a. They all relate to macroeconomics.
b. They all relate to monetary economics.
c. They all relate to the theory of consumer choice.
d. They are not related to each other in any way.
ANS: C DIF: 1 REF: 21-0 NAT: Analytic
MSC: Applicative
3. Just as the theory of the competitive firm provides a more complete understanding of supply, the theory of
consumer choice provides a more complete understanding of
a. demand.
b. profits.
c. production possibility frontiers.
d. wages.

MSC: Interpretive
4. Which of the following statements is correct?
a. The theory of consumer choice provides a more complete understanding of supply, just as the
theory of the competitive firm provides a more complete understanding of demand.
b. The theory of consumer choice provides a more complete understanding of demand, just as the
theory of the competitive firm provides a more complete understanding of supply.
c. Monetary theory provides a more complete understanding of demand, just as the theory of the
competitive firm provides a more complete understanding of supply.
d. The theory of public choice provides a more complete understanding of supply, just as the theory of
the competitive firm provides a more complete understanding of demand.
ANS: B DIF: 1 REF: 21-0 NAT: Analytic
MSC: Interpretive
5. When a consumer spends less time enjoying leisure and more time working, she has
a. lower income and therefore cannot afford more consumption.
b. lower income and therefore can afford more consumption.
c. higher income and therefore cannot afford more consumption.
d. higher income and therefore can afford more consumption.
ANS: D DIF: 1 REF: 21-0 NAT: Analytic
MSC: Interpretive
6. The theory of consumer choice provides the foundation for understanding the
a. structure of a firm.
b. profitability of a firm.
c. demand for a firm's product.
d. supply of a firm's product.
MSC: Definitional
7. 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.
MSC: Definitional
8. The theory of consumer choice most closely examines which of the following Ten Principles of Economics?
a. People face trade-offs.
b. The cost of something is what you give up to get it.
c. Trade can make everyone better off.
d. Markets are usually a good way to organize economic activity.
MSC: Interpretive

Sec 01- The Theory of Consumer Choice - The Budget Constraint: What the Consumer
Can Afford
MULTIPLE CHOICE
1. Karen, Tara, and Chelsea each buy ice cream and paperback novels to enjoy on hot summer days. Ice cream
costs $5 per gallon, and paperback novels cost $8 each. Karen has a budget of $80, Tara has a budget of $60,
and Chelsea has a budget of $40 to spend on ice cream and paperback novels. Who can afford to purchase 8
gallons of ice cream and 5 paperback novels?
a. Karen, Tara, and Chelsea
b. Karen only
c. Tara and Chelsea but not Karen
d. none of the women
MSC: Applicative
b. Karen only
c. Tara and Chelsea but not Karen
MSC: Applicative
b. Karen only
c. Karen and Tara but not Chelsea
MSC: Applicative
and Chelsea has a budget of $40 to spend on ice cream and paperback novels. Which of the following
statements is correct?
a. Each woman faces the same budget constraint.
b. The slope of the budget constraint is the same for each woman.
c. The area underneath the budget constraint is larger for Chelsea than for Karen.
d. All of the above are correct.
MSC: Applicative

5. 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?
a. 160 beers and 200 bratwursts
b. 40 beers and 50 bratwursts
c. 80 beers and 100 bratwursts
d. 160 beers and 0 bratwursts
MSC: Analytical
following combinations of beers and bratwursts represents a point that would lie to the exterior of the
consumer’s budget constraint?
MSC: Analytical
following combinations of beers and bratwursts represents a point that would lie directly on the consumer’s
budget constraint?
MSC: Analytical
8. Consider two goods, books and hamburgers. The slope of the consumer's budget constraint is measured by the
a. consumer's income divided by the price of hamburgers.
b. relative price of books and hamburgers.
c. consumer's marginal rate of substitution.
d. number of books purchased divided by the number of hamburgers purchased.
MSC: Interpretive
9. Suppose a consumer spends his income on CDs and DVDs. If his income decreases, the budget constraint for
CDs and DVDs will
a. shift outward, parallel to the original budget constraint.
b. shift inward, parallel to the original budget constraint.
c. rotate outward along the CD axis because he can afford more CDs.
d. rotate outward along the DVD axis because he can afford more DVDs.
MSC: Analytical

10. When the price of a shirt falls, the
a. quantity of shirts demanded falls.
b. quantity of shirts demanded rises.
c. quantity of shirts supplied rises.
d. demand for shirts falls.
LOC: Utility and consumer choice TOP: Demand MSC: Analytical
11. A budget constraint illustrates the
a. prices that a consumer chooses to pay for products he consumes.
b. purchases made by consumers.
c. consumption bundles that a consumer can afford.
d. consumption bundles that give a consumer equal satisfaction.
MSC: Definitional
12. Assume that a college student spends her income on books and pizza. The price of a pizza is $8, and the price
of a book is $15. If she has $100 of income, she could choose to consume
a. 8 pizzas and 4 books.
b. 4 pizzas and 5 books.
c. 9 pizzas and 3 books.
d. 4 pizzas and 3 books.
MSC: Applicative
13. Assume that a college student spends her income on mac-n-cheese and CDs. The price of one box of mac-n-cheese
is $1, and the price of one CD is $12. If she has $100 of income, she could choose to consume
a. 15 boxes of mac-n-cheese and 6 CDs.
b. 20 boxes of mac-n-cheese and 7 CDs.
c. 10 boxes of mac-n-cheese and 8 CDs.
d. 30 boxes of mac-n-cheese and 6 CDs.
MSC: Applicative
14. A consumer who doesn't spend all of her income
a. would be at a point outside of her budget constraint.
b. would be at a point inside her budget constraint.
c. must not be consuming positive quantities of all goods.
d. must be consuming at a point where her budget constraint touches one of the axes.
MSC: Interpretive
15. An increase in income will cause a consumer's budget constraint to
a. shift outward, parallel to its initial position.
b. shift inward, parallel to its initial position.
c. pivot around the horizontal axis.
d. pivot around the vertical axis.
MSC: Analytical

Figure 21-1
16. Refer to Figure 21-1. Which point in the figure showing a consumer’s budget constraint represents the
consumer's income divided by the price of a CD?
a. point A
b. point C
c. point D
d. point E
MSC: Applicative
17. Refer to Figure 21-1. A consumer that chooses to spend all of her income could be at which point(s) on the
budget constraint?
a. A only
b. E only
c. B, C, or D only
d. A, B, C, or D only
MSC: Applicative
18. Refer to Figure 21-1. All of the points identified in the figure represent affordable consumption options with
the exception of
a. A.
b. E.
c. A and E.
d. None. All points are affordable.
MSC: Applicative

Figure 21-2
W
V
X
Y
Z
Pizza
Pepsi
19. Refer to Figure 21-2. A consumer that chooses to spend all of her income could be at which point(s) on the
budget constraint?
a. V only
b. Z only
c. V, W, X, or Y only
d. W, X, or Y only
MSC: Applicative
20. Refer to Figure 21-2. Which points are affordable?
a. W, X, and Y only
b. Z only
c. V, W, X, and Y only
d. V, W, X, Y, and Z
MSC: Applicative
21. Refer to Figure 21-2. Which of the following statements is not correct?
a. Points W, X, and Y all cost the consumer the same amount of money.
b. Point Z is unaffordable for the consumer given his budget constraint.
c. Point V costs less than point Z.
d. Points W, X, and Y give the consumer the same level of satisfaction.
MSC: Analytical
22. Refer to Figure 21-2. Which of the following statements is correct?
a. Points W, X, and Y all cost the consumer the same amount of money.
b. Point V is unaffordable for the consumer given his budget constraint.
c. Point Z costs less than point V.
d. Points W, X, and Y give the consumer the same level of satisfaction.
MSC: Analytical

Figure 21-3
In each case, the budget constraint moves from BC-1 to BC-2.
(a)
BC-2 BC-1
x
y
(b)
BC-1 BC-2
x
y
BC-1
BC-2
(c)
x
y
BC-2
BC-1
(d)
x
y
23. Refer to Figure 21-3. Which of the graphs in the figure reflects a decrease in the price of good X only?
a. graph a
b. graph b
c. graph c
d. graph d
MSC: Analytical
24. Refer to Figure 21-3. Which of the graphs in the figure reflects an increase in the price of good Y only?
a. graph a
b. graph b
c. graph c
d. graph d
MSC: Analytical
25. Refer to Figure 21-3. Which of the graphs in the figure could reflect a decrease in the prices of both goods?
a. graph a
b. graph b
c. graph c
d. None of the above is correct.
MSC: Analytical

26. 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?
a. a decrease in the price of X
b. an increase in the price of Y
c. a decrease in the price of Y
d. More than one of the above could explain this change.
MSC: Analytical
a. a simultaneous decrease in the price of X and the price of Y
b. an increase in income
c. an increase in income and a decrease in the price of Y
d. Both a and b are correct.
MSC: Analytical

a. a decrease in income and a decrease in the price of X
b. a decrease in income and an increase in the price of X
c. an increase in income and a decrease in the price of X
d. an increase in income and an increase in the price of X
MSC: Analytical
29. 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.
MSC: Definitional
30. The slope of the budget constraint is all of the following except
a. the relative price of two goods.
b. the rate at which a consumer can trade one good for another.
c. the marginal rate of substitution.
d. constant.
MSC: Definitional

Figure 21-4
31. Refer to Figure 21-4. In graph (a), if income is equal to $120, the price of good Y is
a. $1
b. $2
c. $3
d. $4
MSC: Applicative
32. Refer to Figure 21-4. In graph (a), what is the price of good Y relative to good X (i.e., Py/Px)?
a. 1/3
b. 1/4
c. 3
d. 4
MSC: Applicative
33. Refer to Figure 21-4. In graph (b), what is the price of good X relative to good Y (i.e., Px/Py)?
a. 2/7
b. 3/6
c. 7/2
d. 7
MSC: Applicative
34. Refer to Figure 21-4. Assume that a consumer faces both budget constraints in graph (a) and graph (b) on two
different occasions. If her income has remained constant, what has happened to prices?
a. The price of X in graph (a) is higher than the price of X in graph (b).
b. The price of Y in graph (a) is higher than the price of Y in graph (b).
c. The prices of both X and Y are lower in graph (a).
d. None of the above is true.
MSC: Analytical

35. 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
MSC: Applicative
36. Suppose a consumer spends her income on two goods: iTunes music downloads and books. The consumer has
$100 to allocate to these two goods, the price of a downloaded song is $1, and the price of a book is $20.
What is the maximum number of books the consumer can purchase?
a. 100
b. 20
c. 10
d. 5
MSC: Applicative
37. 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 placing the quantity of CDs purchased 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.
MSC: Applicative
38. Suppose a consumer is currently spending all of her available income on two goods: music CDs and DVDs. If
the price of a CD is $9, the price of a DVD is $18, and she is currently consuming 10 CDs and 5 DVDs, what
is the consumer's income?
a. $90
b. $180
c. $270
d. $360
MSC: Applicative
39. 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?
a. $4
b. $8
c. $12
d. $20
MSC: Analytical

40. The following diagram shows a budget constraint for a particular consumer.
If the price of X is $10, what is the price of Y?
a. $15
b. $25
c. $35
d. $70
MSC: Analytical
10 20 30 40 50 60 70 80 90 x
40
30
20
10
y
If the price of X is $5, what is the price of Y?
a. $2
b. $10
c. $30
d. $300
MSC: Analytical

10 20 30 40 50 60 70 80 90 x
40
30
20
10
y
If the price of X is $5, what is the consumer’s income?
a. $2
b. $10
c. $30
d. $300
MSC: Analytical
43. Budget constraints exist for consumers because
a. their utility from consuming goods eventually reaches a maximum level.
b. even with unlimited incomes they have to pay for each good they consume.
c. they have to pay for goods, and they have limited incomes.
d. prices and incomes are inversely related.
MSC: Interpretive
44. A family on a trip budgets $800 for meals and gasoline. If the price of a meal for the family is $50, how many
meals can the family buy if they do not buy any gasoline?
a. 8
b. 16
c. 24
d. 32
MSC: Applicative
45. A family on a trip budgets $800 for meals and hotel accommodations. Suppose the price of a meal is $40. In
addition, suppose the family could afford a total of 8 nights in a hotel if they don’t buy any meals. How many
meals could the family afford if they gave up two nights in the hotel?
a. 1
b. 2
c. 5
d. 8
MSC: Applicative
46. If the price of bread is zero, the budget constraint between bread (on the vertical axis) and cheese (on the
horizontal axis) would
a. be vertical.
b. coincide with the vertical axis.
c. coincide with the horizontal axis.
d. be horizontal.
MSC: Analytical

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.
47. 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. budget constraint intersects the vertical axis at 100 beers.
d. budget constraint shifts inward in a parallel fashion.
MSC: Applicative
48. Refer to Scenario 21-1. If the consumer's income rises to $60, then the budget line for hot wings and beer
would
a. now intersect the horizontal axis at 6 orders of hot wings and the vertical axis at 60 beers.
b. not change.
c. now intersect the horizontal axis at 4 orders of hot wings and the vertical axis at 16 beers.
d. rotate outward along the beer axis.
MSC: Applicative
49. An increase in a consumer's income
a. increases the slope of the consumer's budget constraint.
b. has no effect on the slope of the consumer's budget constraint.
c. decreases the slope of the consumer's budget constraint.
d. has no effect on the consumer's budget constraint.
MSC: Analytical
50. A decrease in a consumer's income
a. increases the slope of the consumer's budget constraint.
b. has no effect on the consumer's budget constraint.
c. decreases the slope of the consumer's budget constraint.
d. has no effect on the slope of the consumer's budget constraint.
MSC: Analytical
51. Mark spends his weekly income on gin and cocktail olives. The price of gin has risen from $7 to $9 per bottle,
the price of cocktail olives has fallen from $6 to $5 per jar, and Mark's income has stayed fixed at $46 per
week. Since the price changes, Mark has been buying 4 bottles of gin and 2 jars of cocktail olives per week. At
the original prices, 4 bottles of gin and 2 jars of cocktail olives would have
a. exactly exhausted his income.
b. cost more than his income.
c. cost less than his income.
d. could have maximized his satisfaction given his budget constraint.
MSC: Applicative

52. Mark spends his weekly income on gin and cocktail olives. The price of gin has risen from $7 to $9 per bottle,
the price of cocktail olives has fallen from $6 to $5 per jar, and Mark's income has stayed fixed at $46 per
week. If you illustrate gin on the vertical axis and cocktail olives on the horizontal axis, then the budget
constraint
a. is steeper after the price changes.
b. is flatter after the price changes.
c. is the same after the price changes.
d. shifts in a parallel fashion to the old budget constraint after the price changes.
MSC: Applicative
53. Suppose the only two goods that Brett consumes are wine and cheese. When wine sells for $10 a bottle and
cheese sell for $10 a pound, he buys 6 bottles of wine and 4 pounds of cheese — spending his entire income of
$100. One day the price of wine falls to $5 a bottle and the price of cheese increases to $20 a pound, while his
income does not change. The bundle of wine and cheese that he purchased at the old prices now costs
a. the same amount at the new prices.
b. less than Brett's income at the new prices.
c. more than Brett's income at the new prices.
d. We do not have enough information to answer the question.
MSC: Applicative
54. Suppose the only two goods that Brett consumes are wine and cheese. When wine sells for $10 a bottle and
cheese sell for $10 a pound, he buys 6 bottles of wine and 4 pounds of cheese — spending his entire income of
$100. One day the price of wine falls to $5 a bottle, and the price of cheese increases to $20 a pound, while his
income does not change. If you illustrate wine on the vertical axis and cheese on the horizontal axis, then
a. the slope of Brett's budget has not changed.
b. the slope of Brett's budget constraint is flatter at the new prices.
c. the slope of Brett's budget constraint is steeper at the new prices.
d. Brett's budget constraint has shifted in a parallel fashion to the budget constraint with the old prices.
MSC: Applicative
55. If the relative price of a concert ticket is three times the price of a meal at a good restaurant, then the
opportunity cost of a concert ticket can be measured by the
a. slope of the budget constraint.
b. slope of an indifference curve.
c. marginal rate of substitution.
d. income effect.
MSC: Analytical

Figure 21-5
A
B
Popcorn
Mt. Dew
56. Refer to Figure 21-5. 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
MSC: Analytical
57. Refer to Figure 21-5. Suppose a consumer has $200 in income, the price of popcorn is $1, and the price of
Mt. Dew is $2. What is the value of A?
a. 200
b. 100
c. 50
d. 25
MSC: Analytical
58. Refer to Figure 21-5. Suppose the price of popcorn is $2, the price of Mt. Dew is $4, the value of A is 30,
and the value of B is 15. How much income does the consumer have?
a. $120
b. $80
c. $60
d. $30
MSC: Analytical

Figure 21-6
A
B
Books
DVDs
59. Refer to Figure 21-6. Suppose a consumer has $500 in income, the price of a book is $10, and the value of B
is 50. What is the price of a DVD?
a. $5
b. $10
c. $50
d. $100
MSC: Analytical
60. Refer to Figure 21-6. Suppose a consumer has $200 in income, the price of a book is $5, and the price of a
DVD is $10. What is the value of A?
a. 40
b. 20
c. 10
d. 2
MSC: Analytical
61. Refer to Figure 21-6. Suppose the price of a book is $15, the price of a DVD is $10, the value of A is 5, and
the value of B is 7.5. How much income does the consumer have?
a. $150
b. $100
c. $75
d. $37.50
MSC: Analytical
Sec 02 - The Theory of Consumer Choice - Preferences: What the Consumer Wants
MULTIPLE CHOICE
1. An indifference curve illustrates
a. a firm’s profits.
b. a consumer’s budget.
c. a consumer’s preferences.
d. the prices of two goods.

MSC: Definitional
2. Economists represent a consumer's preferences using
a. demand curves.
b. budget constraints.
c. indifference curves.
d. supply curves.
MSC: Definitional
3. If two bundles of goods give a consumer the same satisfaction, the consumer must be
a. on her budget constraint.
b. in a position of equilibrium.
c. indifferent between the bundles.
d. Both a and c are correct.
MSC: Interpretive
4. Indifference curves graphically represent
a. an income level sufficient to allow an individual to achieve a given level of satisfaction.
b. the constraints faced by individuals.
c. an individual's preferences.
d. the relative price of commodities.
MSC: Definitional
5. A consumer
a. is equally satisfied with any indifference curve.
b. prefers indifference curves with positive slopes.
c. prefers higher indifference curves to lower indifference curves.
d. prefers indifference curves that are straight lines to indifference curves that are right angles..
MSC: Interpretive
6. A consumer's preferences provide a
a. ranking of the set of bundles that happen to fall on indifference curves.
b. relative ranking of bundles that provide more of all goods.
c. framework for evaluating market equilibriums.
d. complete ranking of all possible consumption bundles.
MSC: Definitional

7. If Walter has one hour of leisure time in which to watch a sporting event on television, his preferences are as
follows: Walter prefers watching football to watching baseball, but he prefers watching baseball to watching
basketball. He is indifferent between watching baseball and watching hockey. Bundle A contains one hour of
football and zero hours of all other sports. Bundle B contains one hour of baseball and zero hours of all other
sports. Bundle C contains one hour of basketball and zero hours of all other sports. Bundle D contains one
hour of hockey and zero hours of all other sports. If we were to graph Walter’s preferences using indifference
curves, which of the following bundles would be on the same indifference curve?
a. A, B, and C only
b. B and D only
c. A and D only
d. There is no combination of the sports that could be drawn on the same indifference curve.
MSC: Definitional
8. Diana and Sarah each like jewelry and music by the Rolling Stones. If we were to graph an indifference curve
with jewelry on the horizontal axis and cd’s by the Rolling Stones on the vertical axis, then
a. Diana and Sarah would have identical indifference curves.
b. Diana’s indifference curve would be higher than Sarah’s indifference curve.
c. Sarah’s indifference curve would be higher than Diana’s indifference curve.
d. Because we do not know the intensity of each woman’s preferences, we do not have enough
information to compare their indifference curves.
MSC: Analytical
9. Both Diana and Sarah like jazz music and music by the Beatles. Diana likes music by the Beatles much better
than jazz music, whereas Sarah prefers jazz music to music by the Beatles. If we were to graph an
indifference curve with cd’s by the Beatles on the horizontal axis and jazz cd’s on the vertical axis, then
a. Diana and Sarah would have identical indifference curves.
b. Diana’s indifference curve would be steeper than Sarah’s indifference curve.
c. Sarah’s indifference curve would be steeper than Diana’s indifference curve.
d. We do not have enough information to compare their indifference curves.
MSC: Analytical
10. Alicia is a vegetarian, so she does not eat beef. That is, beef provides no additional utility to Alicia. She loves
potatoes, however. If we illustrate Alicia’s indifference curves by drawing beef on the horizontal axis and
potatoes on the vertical axis, her indifference curves will
a. slope downward.
b. be vertical straight lines.
c. slope upward.
d. be horizontal straight lines.
MSC: Analytical
11. Irene is a vegetarian, so she does not eat pork. That is, pork provides no additional utility to Irene. She loves
broccoli, however. If we illustrate Irene’s indifference curves by drawing broccoli on the horizontal axis and
pork on the vertical axis, her indifference curves will
a. slope downward.
b. be vertical straight lines.
c. slope upward.
d. be horizontal straight lines.
MSC: Analytical

Figure 21-7
D
B
A
E
C
Indifference Curve 3
Cake
Donuts
12. Refer to Figure 21-7. When comparing bundle A to bundle E, the consumer
a. prefers bundle A because it contains more donuts.
b. prefers bundle E because it lies on a higher indifference curve.
c. prefers bundle E because it contains more donuts.
d. is indifferent between the two bundles.
MSC: Analytical
13. Refer to Figure 21-7. When comparing bundle B to bundle C, the consumer
a. prefers bundle B because it contains more donuts.
b. is indifferent between the two bundles.
c. prefers bundle C because it contains more cake.
d. In order to compare bundle B to bundle C, we must know the prices of cake and donuts.
MSC: Analytical
14. Refer to Figure 21-7. A person that chooses to consume bundle C is likely to
a. receive higher total satisfaction at bundle C than at bundle A.
b. spend more on bundle C than bundle A.
c. receive higher marginal utility from cake than from donuts.
d. receive higher marginal utility from donuts than from cake.
MSC: Analytical
a. Bundle A is preferred equally to bundle E.
b. Bundle A is preferred equally to bundle C.
c. Bundle B contains more cake than bundle C.
d. The bundles along indifference curve Indifference Curve 2 are preferred to those along indifference
curve Indifference Curve 3.
MSC: Analytical

a. If a consumer moves from bundle C to bundle A, her loss of cake cannot be compensated for by an
increase in donuts.
b. Bundle E is preferred to all other points identified in the figure.
c. Since more is preferred to less, bundle C may be preferred to bundle E in some circumstances for
this consumer.
d. Even though bundle E has more of both goods than bundle B, we could draw a different set of
indifference curves in which bundle B is preferred to bundle E.
MSC: Analytical
17. Refer to Figure 21-7. Which of the following statements is not true for a consumer who moves from bundle B
to bundle C?
a. At bundle C the consumer would be willing to give up a larger amount of cake in exchange for a
donut than at bundle B.
b. The marginal rate of substitution at bundles B and C are the same since the points lie on the same
indifference curve.
c. The consumer is willing to sacrifice donuts to obtain cake.
d. The consumer receives the same level of satisfaction at bundles B and C.
MSC: Analytical
18. Refer to Figure 21-7. Which of the following statements is not correct?
a. Bundles on Indifference Curve 3 are preferred to bundles on Indifference Curve 1.
b. The consumer is indifferent between bundles A and E because they contain the same number of
donuts.
c. The consumer is indifference between bundles B and C.
d. The consumer prefers bundle C to bundle D.
MSC: Analytical
19. Refer to Figure 21-7. Which of the following comparisons is correct regarding the marginal rate of
substitution (MRS) of donuts for cake?
a. The MRS is greater between bundles A and B than between bundles B and C.
b. The MRS is greater between bundles B and C than between bundles A and B.
c. The MRS is the same between bundles A and B and bundles B and C because all three bundles lie
on the same indifference curve.
d. The MRS is greater between bundles E and B than between bundles B and D.
MSC: Analytical
20. Each of the following are characteristics of an indifference curve map except
a. moving northeast to a new indifference curve will increase utility.
b. points on the same indifference curve yield equal utility.
c. the axes represent levels of utility for each of the goods.
d. indifference curves cannot cross.
MSC: Applicative

21. Bundle A contains 10 units of good X and 5 units of good Y. Bundle B contains 5 units of good X and 10
units of good Y. Bundle C contains 10 units of good X and 10 units of good Y. The consumer is indifferent
between bundle A and bundle B. Assume that the consumer’s preferences satisfy the four properties of
indifference curves. Which of the following statements is correct?
a. The consumer must prefer bundle C to either bundle A or B.
b. Bundle A and bundle B lie on the same indifference curve.
c. The consumer must prefer bundle B to bundle C.
d. Both a) and b) are correct.
MSC: Applicative
22. A consumer has preferences over two goods: books and movies. The two bundles shown in the table below lie
on the same indifference curve for the consumer.
Bundle Books Movies
A 2 3
B 3 2
Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four
properties of indifference curves?
a. 1 movie and 5 books
b. 3 movies and 3 books
c. 5 movies and 1 book
d. 1 movie and 7 books
MSC: Analytical
23. A consumer has preferences over two goods: books and movies. The three bundles shown in the table below
lie on the same indifference curve for the consumer.
Bundle Books Movies
A 2 4
B 4 2
C 3 3
Which of the following properties of indifference curves would this consumer's preferences violate?
a. Indifference curves are downward sloping.
b. Indifference curves do not cross.
c. Indifference curves are bowed inward.
d. These bundles do not violate any of the properties of indifference curves.
MSC: Analytical
24. Laura consumes only beer and chips. Her indifference curves are all bowed inward. Consider the bundles
(2,6), (4,4), and (6,2). If Laura is indifferent between (2,6) and (6,2), then Laura must
a. prefer (4,4) to (6,2).
b. be indifferent between (4,4) and (6,2).
c. prefer (6,2) to (4,4).
d. prefer (2,6) to (4,4).
MSC: Analytical

25. Which of the following is a property of indifference curves?
a. Indifference curves usually intersect.
b. Indifference curves have positive slopes.
c. Indifference curves are downward sloping and always linear.
d. Indifference curves are bowed in toward the origin.
MSC: Interpretive
26. All of the following are properties of indifference curves except
a. higher indifference curves are preferred to lower ones.
b. indifference curves are downward sloping.
c. indifference curves do not cross.
d. indifference curves are bowed outward.
MSC: Interpretive
27. Which of the following is a property of a typical indifference curve?
a. upward sloping
b. bowed away from the origin
c. do not intersect
d. lower ones are preferred to higher ones
MSC: Interpretive
28. Which of the following is a property of a typical indifference curve?
a. upward sloping
c. they often intersect
d. higher ones are preferred to lower ones
MSC: Interpretive
29. Which of the following is not a property of a typical indifference curve?
a. downward sloping
c. do not intersect
d. higher ones are preferred to lower ones
MSC: Interpretive
30. Higher indifference curves are preferred to lower ones as long as the
a. marginal rate of substitution is diminishing.
b. products in the bundle are “bads” not “goods.”
c. products in the bundle are “goods” not “bads.”
d. budget constraint does not shift.
MSC: Interpretive

31. 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?
a. Janet prefers cashews to macadamia nuts.
b. Janet prefers peanuts to cashews.
c. Janet prefers macadamia nuts to almonds.
d. Janet prefers almonds to macadamia nuts.
LOC: Utility and consumer choice TOP: Transitivity MSC: Applicative
32. Indifference curves that cross would suggest that
a. the consumer does not prefer more to less.
b. the consumer is likely to prefer a redistribution of income from rich to poor.
c. different individuals have different preferences for the same goods.
d. the marginal rate of substitution is the same for both indifference curves.
LOC: Utility and consumer choice TOP: Transitivity MSC: Analytical
33. Which of the following is not correct?
a. Indifference curves are downward sloping.
b. Indifference curves that are closer to the origin are preferred to indifference curves that are further
from the origin.
c. Indifference curves are bowed in toward the origin.
d. Indifference curves do not cross.
MSC: Interpretive
34. When indifference curves are bowed in toward the origin,
a. consumers are less inclined to trade away goods they are lacking.
b. consumers' willingness to trade away goods they have in abundance diminishes.
c. an increase in income will shift the indifference curve away from the origin.
d. a decrease in income will shift the indifference curve away from the origin.
MSC: Analytical
35. Indifference curves tend to be bowed inward because of diminishing
a. marginal rates of substitution.
b. demand for the good as prices rise.
c. income.
MSC: Interpretive
36. The slope of an indifference curve is
a. the rate of change of consumer's preferences.
b. the marginal rate of preference.
c. the marginal rate of substitution.
d. always equal to the slope of the budget constraint.
MSC: Definitional

37. The rate at which a consumer is willing to exchange one good for another, and maintain a constant level of
satisfaction, is called the
a. relative expenditure ratio.
b. value of marginal product.
c. marginal rate of substitution.
d. relative price ratio.
MSC: Definitional
38. The marginal rate of substitution is
a. the slope of a budget constraint.
b. always constant.
c. the slope of an indifference curve.
d. the point at which the budget constraint and the indifference curve are tangent.
MSC: Definitional
39. The rate at which a consumer is willing to trade one good for another to maintain the same level of satisfaction
is affected by the
a. prices of the products.
b. amount of each good the consumer is currently consuming.
c. consumer’s income.
d. marginal value product.
MSC: Analytical
40. Bob enjoys fishing and hunting. He divides his leisure hours between the two outdoor activities. Suppose we
were to draw Bob’s indifference curves for the two activities, placing fishing on the horizontal axis and
hunting on the vertical axis. If Bob’s indifference curves are bowed inward, then
a. the rate at which he is willing to give up an hour of hunting for an hour of fishing changes
depending on how many hours of each activity he has done. For example, if Bob has already fished
a lot in one week, he will be more willing to give up an hour of fishing for an hour of hunting than
if he has only fished a little that week.
b. the rate at which he is willing to give up an hour of hunting for an hour of fishing is constant
because he must derive the same enjoyment out of each activity.
c. the rate at which he is willing to give up an hour of hunting for an hour of fishing changes
depending on how many hours of each activity he has done. For example, if Bob has already fished
a lot in one week, he will be less willing to give up an hour of fishing for an hour of hunting than if
he has only fished a little that week.
d. Bob’s indifference curves will not cross. When indifference curves are bowed outward, the
indifference curves must cross.
MSC: Analytical
41. The marginal rate of substitution
a. varies along an indifference curve if the curve is bowed inward.
b. is constant along an indifference curve if the curve is a straight line.
c. is greater when a consumer has more of two goods rather than less of two goods.
MSC: Analytical

42. Bundle L contains 10 units of good X and 20 units of good Y. Bundle M contains 8 units of good X and 21
units of good Y. The consumer is indifferent between bundle L and bundle M. Assume that the consumer’s
preferences satisfy the four properties of indifference curves. Which of the following correctly expresses the
marginal rate of substitution of good X for good Y between these two points?
a. The consumer will give up 1 unit of good X to gain 2 units of good Y.
b. The consumer will give up 2 units of good X to gain 1 unit of good Y.
c. The price of good X is twice as large as the price of good Y.
d. The price of good X is half as large as the price of good Y.
MSC: Applicative
43. Assume that a consumer’s indifference curve is bowed inward and satisfies the other three properties of
indifference curves. As the consumer moves from left to right along the horizontal axis, the consumer’s
marginal rate of substitution
a. increases.
b. decreases.
c. remains constant.
d. increases, then decreases.
MSC: Analytical
44. Assume that a consumer’s indifference curve is bowed outward but satisfies the other three properties of
indifference curves. As the consumer moves from left to right along the horizontal axis, the consumer’s
marginal rate of substitution
a. increases.
b. decreases.
MSC: Analytical
45. Assume that a consumer’s indifference curve is a downward-sloping straight line. As the consumer moves
from left to right along the horizontal axis, the consumer’s marginal rate of substitution
a. increases.
b. decreases.
MSC: Analytical
46. If an indifference curve is bowed in toward the origin, the marginal rate of substitution is
a. not likely to reflect the relative value of goods.
b. likely to be constant for all bundles along the indifference curve.
c. likely to be identical to the price ratio for each bundle along the indifference curve.
d. different for each bundle along the indifference curve.
MSC: Interpretive
47. As long as a consumer remains on the same indifference curve,
a. she is indifferent to all points that lie on any other indifference curve.
b. her preferences will not affect the marginal rate of substitution.
c. she is unable to decide which bundle of goods to choose.
d. she is indifferent among the points on that curve.

MSC: Interpretive
48. The bowed shape of the indifference curve reflects the consumer's
a. unwillingness to give up a good that he already has in large quantity.
b. unwillingness to purchase a good that he already has in large quantity.
c. greater willingness to give up a good that he already has in large quantity.
d. greater willingness to purchase a good that he already has in large quantity.
MSC: Interpretive
49. The following diagram shows one indifference curve representing the preferences for goods X and Y for one
consumer.
What is the marginal rate of substitution between points A and B?
a. 2/5
b. 1
c. 5/2
d. 3
MSC: Analytical

50. The following diagram shows one indifference curve representing the preferences for goods X and Y for one
consumer.
What is the marginal rate of substitution between points A and B?
a. 1/2
b. 4/3
c. 2
d. 3
MSC: Analytical
Figure 21-8
y (a)
(b)
x
y (c)
x
x
y
51. Refer to Figure 21-8. Which of the graphs shown may represent indifference curves?
a. graph a
b. graph b
c. graph c
MSC: Analytical
52. Refer to Figure 21-8. Which of the graphs shown represent indifference curves for perfect complements?
a. graph a
b. graph b
c. graph c
MSC: Interpretive

53. Refer to Figure 21-8. Which of the graphs shown represent indifference curves for perfect substitutes?
a. graph a
b. graph b
c. graph c
MSC: Interpretive
a. The indifference curves represented in graph a are perfect complements.
b. The indifference curves represented in graph b are perfect substitutes.
c. The indifference curves represented in graph c are neither perfect substitutes not perfect
complements.
LOC: Utility and consumer choice TOP: Perfect substitutes | Perfect complements
MSC: Interpretive
a. The indifference curves represented in graph a are perfect substitutes.
b. The indifference curves represented in graph b are perfect complements.
c. The indifference curves represented in graph c are neither perfect substitutes not perfect
complements.
LOC: Utility and consumer choice TOP: Perfect substitutes | Perfect complements
MSC: Interpretive
56. When two goods are perfect substitutes, the marginal rate of substitution
a. is constant along the indifference curve.
b. decreases as the scarcity of one good increases.
c. increases as the scarcity of one good increases.
d. changes to reflect the consumer’s changing preferences for the goods.
MSC: Interpretive
57. Consider the indifference curve map for nickels and quarters. Assume nickels are on the vertical axis and
quarters are on the horizontal axis. The indifference curves for nickels and quarters are
a. straight lines with slope of -1/5
b. straight lines with a slope of -1.
c. straight lines with a slope of -5.
d. L shaped.
MSC: Applicative
58. A consumer’s preferences for $1 bills and $20 bills can be represented by indifference curves that are
a. bowed out from the origin
b. bowed in toward the origin
c. straight lines
d. right angles
MSC: Interpretive

59. When two goods are perfect substitutes, the indifference curve is
a. a horizontal straight line.
b. bowed outward.
c. a downward-sloping straight line.
d. a right angle.
MSC: Applicative
60. When two goods are perfect substitutes, the
a. indifference curve is a horizontal straight line.
b. marginal rate of substitution is constant.
c. indifference curve is a vertical straight line.
MSC: Applicative
61. When two goods are perfect substitutes, the
a. indifference curve is a downward-sloping straight line.
b. marginal rate of substitution is constant.
c. indifference curve is a vertical straight line.
MSC: Applicative

62. Suppose Caroline is indifferent between tea and coffee as long as she consumes an equivalent amount of
caffeine. Suppose that coffee has twice as much caffeine as tea. Which graph would illustrate a representative
indifference curve?
a.
1 2 3 4 5 6 7 8 9 Coffee
1 2 3 4 5 6 7 8 9
Tea
b.
1 2 3 4 5 6 7 8 9 Coffee
1 2 3 4 5 6 7 8 9
Tea
c.
1 2 3 4 5 6 7 8 9 Coffee
1 2 3 4 5 6 7 8 9
Tea
d.
1 2 3 4 5 6 7 8 9 Coffee
1 2 3 4 5 6 7 8 9
Tea
MSC: Applicative
63. A set of indifference curves that are only slightly bowed inward represent goods that could best be described
as
a. perfect substitutes.
b. perfect complements.
c. very close substitutes.
d. very close complements.
MSC: Analytical
64. When two goods are perfect complements, the indifference curve is
a. a horizontal straight line.
b. bowed outward.
c. a downward-sloping straight line.
d. a right angle.

MSC: Applicative
65. A consumer’s preferences for right shoes and left shoes can be represented by indifference curves that are
a. bowed out from the origin
b. bowed in toward the origin
c. straight lines
d. right angles
MSC: Interpretive
66. When two goods are perfect complements, the indifference curves will
a. have a positive slope.
b. be right angles.
c. have a constant marginal rate of substitution.
d. Both b and c are correct.
MSC: Interpretive
67. Left gloves and right gloves provide a good example of
a. perfect substitutes.
b. perfect complements.
c. negatively sloped indifference curves.
d. positively sloped indifference curves.
MSC: Analytical
68. When two goods are perfect complements, the indifference curves are
a. positively sloped.
b. negatively sloped.
c. straight lines.
d. right angles.
MSC: Interpretive
69. Suppose Rich always uses two packets of sugar with his coffee. Rich's indifference curves for sugar and coffee
are
a. bowed inward.
b. bowed outward.
c. straight lines.
d. L shaped.
MSC: Applicative
70. A consumer has preferences over two goods: pizza and beer. The four bundles shown in the table below lie on
the same indifference curve for the consumer.
Bundle Pizza Beer
A 2 8
B 2 2
C 9 2
D 6 2

Which of the following statements regarding these bundles is correct?
a. The goods are perfect substitutes for this consumer.
b. The goods are perfect complements for this consumer.
c. These bundles violate the property that indifference curves are bowed inward.
d. These bundles violate the property that indifference curves do not cross.
MSC: Analytical
Sec 03 - The Theory of Consumer Choice - Optimization: What the Consumer Chooses
MULTIPLE CHOICE
1. 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.
MSC: Interpretive
2. 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.
MSC: Interpretive
3. 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.
MSC: Analytical
4. 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.
MSC: Analytical
5. 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.

MSC: Interpretive
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.
MSC: Interpretive
7. Carlos 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. Carlos always purchases the “value-combo.” We can conclude that
a. Carlos cannot afford the “large-combo.”
b. Carlos cannot afford the “medium-combo.”
c. Carlos prefers a combo with a larger popcorn-to-beverage ratio.
d. Carlos prefers a combo with a smaller popcorn-to-beverage ratio.
MSC: Analytical
8. 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)
MSC: Analytical
9. 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
MSC: Applicative
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.

MSC: Interpretive
11. 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.
MSC: Interpretive
12. The relationship between the marginal utility that Wendy gets from eating hamburgers and the number of
hamburgers she eats per month is as follows:
Hamburgers 1 2 3 4 5 6
Marginal Utility 20 16 12 8 4 0
Wendy receives 3 units of utility from the last dollar spent on each of the other goods she consumes. If hamburgers
cost $4 each, how many hamburgers will she consume per month if she maximizes utility?
a. 2
b. 3
c. 4
d. 5
MSC: Applicative
13. Wilbur consumes two goods, bacon and eggs. He has maximized his utility given his income. Eggs costs $2
per dozen, and he consumes them to the point where the marginal utility he receives is 6. Bacon cost $4 per
serving, and the relationship between the marginal utility that Wilbur gets from eating bacon and the number
of servings he eats per month is as follows:
Servings of Bacon 1 2 3 4 5 6
Marginal Utility 20 16 12 8 4 0
How many servings of bacon does Wilbur buy each month?
a. 1
b. 2
c. 3
d. 4
MSC: Applicative
14. 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.
MSC: Interpretive

15. If the consumer's income and all prices simultaneously double, then the optimum consumption bundle will
a. shift outward relative to the old optimum.
b. move leftward along the old budget constraint.
c. not change.
d. shift inward relative to the old optimum.
MSC: Applicative
16. If the consumer's income and all prices simultaneously decrease by one-half, then the optimum consumption
will
a. shift outward relative to the old optimum.
b. move leftward along the old budget constraint.
c. shift inward relative to the old optimum.
d. not change.
MSC: Applicative
17. The consumer's optimum choice is represented by
a. MUx/MUy = Px/Py.
b. MUx/Px = MUy/Py.
c. MRSxy = Px/Py.
MSC: Interpretive
18. 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.
MSC: Interpretive
19. When the indifference curve is tangent to the budget constraint,
a. a consumer cannot be made better off without increasing her income.
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.
MSC: Interpretive
20. 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.
MSC: Interpretive

21. At the consumer's optimum
a. the budget constraint will have a slope of MUx/Px.
b. the slope of the indifference curve is equal to the slope of the budget constraint.
c. the indifference curve will intersect the budget constraint at the midpoint of the budget constraint.
d. Both b and c are correct.
MSC: Interpretive
Figure 21-9
22. Refer to Figure 21-9. Given the budget constraint depicted in the graph, the consumer will choose bundle
a. B.
b. C.
c. D.
d. E.
MSC: Analytical
23. Refer to Figure 21-9. 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.
MSC: Analytical
24. Refer to Figure 21-9. Bundle B represents a point where
a. MRSxy Py/Px.
b. MRSxy = Px/Py.
c. MRSxy Px/Py.
d. MRSxy Px/Py.
MSC: Analytical

25. Refer to Figure 21-9. Bundle C represents a point where
a. MRSxy Py/Px.
b. MRSxy = Px/Py.
c. MRSxy Px/Py.
d. MRSxy Px/Py.
MSC: Analytical
26. Refer to Figure 21-9. Bundle D represents a point where
a. MRSxy Py/Px.
b. MRSxy = Px/Py.
c. MRSxy Px/Py.
d. MRSxy Py/Px.
MSC: Analytical
27. The consumer's optimum is where
a. MUx/MUy = Py/Px.
b. MUx/Py = MUy/Px.
c. Px/MUx = Py/MUy.
d. MUx/MUy = Px/Py.
MSC: Definitional
Figure 21-10
28. Refer to Figure 21-10. Assume that the consumer depicted in the figure has an income of $20. The price of
Skittles is $2 and the price of MM's is $4. This consumer will choose a consumption bundle where the
marginal rate of substitution is
a. 2.
b. 2/3.
c. 1/2.
d. 1/3.
MSC: Applicative

Skittles is $2 and the price of MM's is $4. This consumer will choose consumption bundle
a. A.
b. B.
c. C.
d. D.
MSC: Applicative
Skittles is $5 and the price of MM'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.
MSC: Applicative
Skittles is $2 and the price of MM's is $2. This consumer will choose to optimize by purchasing bundle
a. A.
b. B.
c. C.
d. D.
MSC: Interpretive
32. Refer to Figure 21-10. 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 MM's
c. an increase in the price of Skittles
d. an increase in the price of MM's
MSC: Analytical

Figure 21-11
33. Refer to Figure 21-11. Assume that the consumer depicted in the figure 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
MSC: Applicative
34. Refer to Figure 21-11. Assume that the consumer depicted in the figure 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
MSC: Applicative
35. Refer to Figure 21-11. Assume that the consumer depicted in the figure 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.
MSC: Applicative
36. Refer to Figure 21-11. Assume that the consumer depicted in the figure 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.

MSC: Applicative
37. Refer to Figure 21-11. Assume that the consumer depicted in the figure 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 is $4?
a. P=$2, Q=3
b. P=$2, Q=9
c. P=$4, Q=3
d. P=$4, Q=9
MSC: Applicative
38. Refer to Figure 21-11. 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 marshmallows if the price of chocolate chips 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
MSC: Applicative
39. 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
MSC: Interpretive
40. 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.
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.
MSC: Analytical
41. 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.
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.

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