Question 1

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.

Accepted Answer

The theory of consumer choice explains how individuals make decisions about what to buy and how much to buy, based on their budget constraint and preferences. This understanding is essential in determining demand for a particular product or service, and therefore provides a more complete understanding of demand.

Question 2

Figure 21-1
The downward­sloping line on the figure represents a consumer's budget constraint. 
-Refer to Figure 21-1. If the consumer's income is $140, then what is the price of a CD?
A) $3
B) $5
C) $7
D) $9

Accepted Answer

C

Question 3

The theory of consumer choice is to demand as the theory of
A) public goods is to supply.
B) oligopoly is to supply.
C) the competitive firm is to supply.
D) comparative advantage is to supply.

Accepted Answer

The theory of consumer choice deals with how consumers make decisions about what goods and services to purchase given their limited incomes and the prices of the available options. This is directly related to the behavior of firms in competitive markets, which determine the supply of goods and services available for consumers to choose from. Therefore, the theory of consumer choice is most similar to the theory of the competitive firm and its behavior in supplying goods and services to the market.

Question 4

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.

Accepted Answer

The theory of consumer choice explains how consumers make decisions regarding which goods and services to purchase based on their preferences and budget constraints. This directly relates to the demand for a firm's product, as the choices and decisions made by consumers will determine the level of demand for that product.

Question 5

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 time on leisure and less time on work
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

Accepted Answer

Choosing to purchase more of all goods is not a tradeoff as it does not involve sacrificing anything in exchange for something else. It is simply a decision to consume more overall. The other options all involve giving up something (such as time, future consumption, or one good) in exchange for something else.

Question 6

Figure 21-1
The downward­sloping line on the figure represents a consumer's budget constraint. 
-Refer to Figure 21-1. If the price of a CD is $12, then the consumer's income amounts to
A) $140.
B) $180.
C) $210.
D) $240.

Accepted Answer

The answer of Figure 21-1
The downward­sloping line on the figure...

Question 7

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.

Accepted Answer

All three questions relate to microeconomics and specifically the theory of consumer choice. Question 1 is about the relationship between quantity demanded and price, question 2 is about how the wage rate affects the amount of labor supplied, and question 3 is about how the interest rate affects the amount of saving done by households. These concepts all fall under the umbrella of microeconomic theory and the study of how individuals make decisions about consumption and production.

Question 8

Figure 21-1
The downward­sloping line on the figure represents a consumer's budget constraint. 
-Refer to Figure 21-1. A consumer who chooses to spend all of her income could be at which point(s) on the figure?
A) A only
B) E only
C) B, C, or D only
D) A, B, C, or D only

Accepted Answer

The answer of Figure 21-1
The downward­sloping line on the figure...

Question 9

Figure 21-2
The downward­sloping line on the figure represents a consumer's budget constraint. 
-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

Accepted Answer

Points that are affordable lie on or below the budget constraint line. Therefore, V, W, X, and Y are affordable options, while Z is not.

Question 10

The theory of consumer choice most closely examines which of the following Ten Principles of Economics?
A) People face trade-offs.
B) Governments can sometimes improve market outcomes.
C) Trade can make everyone better off.
D) Markets are usually a good way to organize economic activity.

Accepted Answer

The answer of The theory of consumer choice most closely...

Question 11

The theory of consumer choice illustrates the
A) importance of property rights in creating efficient markets.
B) ability of a single economic actor to have a substantial influence on market prices.
C) the trade-offs that people face in their role as purchasers.
D) All of the above are correct.

Accepted Answer

The theory of consumer choice shows that people face trade-offs when making purchasing decisions, such as choosing between different products with varying prices and qualities. This is an important concept for understanding how markets function and how consumers make decisions. While property rights and individual economic actors can also impact market efficiency and prices, they are not the main focus of the theory of consumer choice.

Question 12

The theory of consumer choice
A) underlies the concept of the demand for a particular good.
B) underlies the concept of the supply of a particular good.
C) ignores, for the sake of simplicity, the trade-offs that consumers face.
D) can be applied to many questions about household decisions, but it cannot be applied to questions concerning wages and labor supply.

Accepted Answer

The theory of consumer choice forms the basis for the concept of demand. It explains how consumers make decisions about which goods and services to buy based on their preferences and budget constraints, and it shows how those decisions translate into the demand curve for a particular product.

Question 13

The theory of consumer choice examines how
A) firms make profit-maximizing decisions.
B) consumers make utility-maximizing decisions.
C) wages are determined in competitive labor markets.
D) prices are determined in competitive goods markets.

Accepted Answer

The theory of consumer choice specifically focuses on how consumers make decisions to maximize their own utility, or satisfaction, given limited resources and various options. The other answer choices are related to different economic theories and concepts.

Question 14

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.

Accepted Answer

When a consumer spends less time enjoying leisure and more time working, she earns more income, which allows her to afford more consumption.

Question 15

Figure 21-2
The downward­sloping line on the figure represents a consumer's budget constraint. 
-Refer to Figure 21-2. A consumer who chooses to spend all of her income could be at which point(s) on the figure?
A) V only
B) Z only
C) V, W, X, or Y only
D) W, X, or Y only

Accepted Answer

A consumer who chooses to spend all of her income would be at a point on the budget constraint line. Points V and Z are not on the budget constraint line, so they are not possible choices. Points W, X, and Y are all possible choices for a consumer who spends all of her income, as they all lie on the budget constraint line. Therefore, the best choice is D.

Question 16

Figure 21-2
The downward­sloping line on the figure represents a consumer's budget constraint. 
-Refer to Figure 21-2. If the consumer's income is $100, then what is the price of an apple?
A) $0.50
B) $0.75
C) $1.00
D) $1.25

Accepted Answer

The answer of Figure 21-2
The downward­sloping line on the figure...

Question 17

Figure 21-1
The downward­sloping line on the figure represents a consumer's budget constraint. 
-Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of
A) A.
B) E.
C) A and E.
D) None of the above are correct. All of the points identified on the figure are affordable.

Accepted Answer

The answer of Figure 21-1
The downward­sloping line on the figure...

Question 18

Figure 21-2
The downward­sloping line on the figure represents a consumer's budget constraint. 
-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.

Accepted Answer

The answer of Figure 21-2
The downward­sloping line on the figure...

Question 19

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.

Accepted Answer

The theory of consumer choice focuses on how individuals allocate their income among different goods and services to maximize their utility. This understanding is essential to fully grasp the demand side of the market. On the other hand, the theory of the competitive firm explains how businesses make production decisions to maximize profits, which is crucial for understanding the supply side of the market. Therefore, option B correctly identifies that the theory of consumer choice provides a more complete understanding of demand, while the theory of the competitive firm provides a more complete understanding of supply.

Question 20

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.

Accepted Answer

The theory of consumer choice focuses on the tradeoffs that consumers make when deciding what goods or services to purchase with their limited income. It considers how consumers weigh the benefits and costs of different options and make rational choices to maximize their utility or satisfaction.

Quiz 21: The Theory of Consumer Choice

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

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the consumer's income is $140, then what is the price of a CD?

The theory of consumer choice is to demand as the theory of

The theory of consumer choice provides the foundation for understanding the

Which of the following does not represent a tradeoff facing a consumer?

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the price of a CD is $12, then the consumer's income amounts to

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?

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

Figure 21-2 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. Which points are affordable?

The theory of consumer choice most closely examines which of the following Ten Principles of Economics?

The theory of consumer choice illustrates the

The theory of consumer choice

The theory of consumer choice examines how

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

Figure 21-2 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

Figure 21-2 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. If the consumer's income is $100, then what is the price of an apple?

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Figure 21-2 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. Which of the following statements is not correct?

Which of the following statements is correct?

The theory of consumer choice examines

Quiz 21: The Theory of Consumer Choice

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

Figure 21-1 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the consumer's income is $140, then what is the price of a CD?

The theory of consumer choice is to demand as the theory of

The theory of consumer choice provides the foundation for understanding the

Which of the following does not represent a tradeoff facing a consumer?

Figure 21-1 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the price of a CD is $12, then the consumer's income amounts to

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?

Figure 21-1 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

Figure 21-2 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. Which points are affordable?

The theory of consumer choice most closely examines which of the following Ten Principles of Economics?

The theory of consumer choice illustrates the

The theory of consumer choice

The theory of consumer choice examines how

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

Figure 21-2 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

Figure 21-2 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. If the consumer's income is $100, then what is the price of an apple?

Figure 21-1 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Figure 21-2 The downward­sloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. Which of the following statements is not correct?

Which of the following statements is correct?

The theory of consumer choice examines

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the consumer's income is $140, then what is the price of a CD?

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. If the price of a CD is $12, then the consumer's income amounts to

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

Figure 21-2 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. Which points are affordable?

Figure 21-2 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. A consumer who chooses to spend all of her income could be at which point(s) on the figure?

Figure 21-2 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. If the consumer's income is $100, then what is the price of an apple?

Figure 21-1 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of

Figure 21-2 The downwardsloping line on the figure represents a consumer's budget constraint. -Refer to Figure 21-2. Which of the following statements is not correct?