Question 1

Figure 21-11 
-Refer to Figure 21-11. What is the consumer's marginal rate of substitution as she moves from A to B?
A)12
B)6
C)4
D)1

Accepted Answer

The slope of the indifference curve is the marginal rate of substitution. As the consumer moves from point A to point B, the slope of the indifference curve changes from -3 to -12. Therefore, the marginal rate of substitution is (change in Y)/(change in X) = (-12 - (-3))/(2-1) = -9/1 = 9. However, the question asks for the absolute value of the marginal rate of substitution, which is 4 (since the slope is negative).

The best choice would be to choose point B over point A, since the consumer is willing to give up 4 units of Y for an additional unit of X at point B, but is only willing to give up 3 units of Y for an additional unit of X at point A. This represents a higher level of satisfaction or utility for the consumer at point B.

Question 2

Figure 21-10 
-Refer to Figure 21-10. 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.

Accepted Answer

The consumer prefers bundle E because it lies on a higher indifference curve. This means that bundle E gives the consumer a higher level of utility than bundle A. Therefore, the consumer would choose bundle E over bundle A.

Question 3

Figure 21-10 
-Refer to Figure 21-10. 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.

Accepted Answer

The answer of Figure 21-10 
-Refer to Figure 21-10. Which...

Question 4

Figure 21-12 
-Refer to Figure 21-12. Which of the following statements is correct?
A)The consumer prefers bundle Y to bundle Z.
B)The consumer is indifference between bundle X and bundle V.
C)The consumer prefers bundle Y to bundle X.
D)The consumer prefers bundle Z to bundle V.

Accepted Answer

The answer of Figure 21-12 
-Refer to Figure 21-12. Which...

Question 5

Figure 21-10 
-Refer to Figure 21-10. A person who 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.

Accepted Answer

The answer of Figure 21-10 
-Refer to Figure 21-10. A...

Question 6

Figure 21-10 
-Refer to Figure 21-10. 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.

Accepted Answer

Bundle A and E may contain the same number of donuts, but they have different amounts of coffee. Therefore, the consumer cannot be indifferent between them solely based on the number of donuts.

Question 7

Figure 21-10 
-Refer to Figure 21-10. 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.

Accepted Answer

The statement "The marginal rate of substitution at bundles B and C are the same since the points lie on the same indifference curve" is not necessarily true. The marginal rate of substitution (MRS) is defined as the rate at which a consumer is willing to trade one good for another while remaining indifferent (i.e. staying on the same indifference curve). While bundles B and C are on the same indifference curve, the slope of the curve (which represents the MRS) can vary at different points on the curve. Therefore, it is possible for the MRS to be different at bundles B and C even though they are on the same indifference curve. The other statements are true based on the information provided in the graph.

Question 8

Figure 21-11 
-Refer to Figure 21-11. As the consumer moves from point A to B to C to D, the consumer's total utility
A)remains constant.
B)increases.
C)decreases.
D)first increases, then decreases.

Accepted Answer

The answer of Figure 21-11 
-Refer to Figure 21-11. As...

Question 9

Figure 21-10 
-Refer to Figure 21-10. 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.

Accepted Answer

Since the consumer is on the same indifference curve for both bundles, they are equally preferred. Therefore, the consumer is indifferent between bundles B and C. We do not need to know the prices of cake and donuts to determine this.

Question 10

Figure 21-10 
-Refer to Figure 21-10. Which of the following statements is correct?
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)Because 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.

Accepted Answer

The answer of Figure 21-10 
-Refer to Figure 21-10. Which...

Question 11

Figure 21-11 
-Refer to Figure 21-11. The graph illustrates
A)a typical budget constraint.
B)a typical indifference curve.
C)an indifference curve where goods X and Y are perfect complements.
D)an indifference curve where goods X and Y are perfect substitutes.

Accepted Answer

The graph illustrates a typical indifference curve, showing the various combinations of goods X and Y that provide the same level of satisfaction to the consumer. The slope of the indifference curve represents the marginal rate of substitution, which indicates how much of one good the consumer is willing to give up to obtain more of the other. Therefore, the best choice for the consumer would be any combination of goods X and Y lying on the highest possible indifference curve, as these combinations provide the highest possible level of satisfaction.

Question 12

Figure 21-12 
-Refer to Figure 21-12. Which of the following statements is not correct?
A)The consumer prefers bundle Y to bundle Z.
B)The consumer is indifference between bundle W and bundle X.
C)The consumer is indifference between bundle X and bundle V.
D)The consumer prefers bundle X to bundle Z.

Accepted Answer

The answer of Figure 21-12 
-Refer to Figure 21-12. Which...

Question 13

Figure 21-10 
-Refer to Figure 21-10. Which of the following statements is correct?
A)Bundle A provides the same utility as bundle E.
B)Bundle A provides the same utility as 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.

Accepted Answer

Bundle A and Bundle C are on the same indifference curve which means they provide the same level of utility. Bundle B has more cake than Bundle C, so it is preferred to Bundle C. However, Bundle E has more cake and more tea than Bundle A, so it provides more utility than Bundle A. Therefore, Bundle B and Bundle E are both better choices than Bundle A. The only feasible option that is better than Bundle A is Bundle B.

Question 14

Figure 21-12 
-Refer to Figure 21-12. If the consumer moves from bundle W to bundle Z, the
A)marginal rate of substitution remains constant.
B)total utility remains constant.
C)total utility decreases.
D)Both a) and b) are correct.

Accepted Answer

Moving from bundle W to bundle Z involves a decrease in quantity of good Y (from 4 to 2) and an increase in quantity of good X (from 6 to 9). Since the consumer is assumed to prefer more of both goods, a decrease in the quantity of one good (Y) and an increase in the quantity of the other good (X) means that the consumer is worse off at bundle Z than at bundle W. Therefore, total utility decreases. The marginal rate of substitution is not relevant to this question as it pertains to the amount of one good that a consumer is willing to give up for an extra unit of another good, and does not change with movement along the same indifference curve.

Question 15

Figure 21-11 
-Refer to Figure 21-11. What is the consumer's marginal rate of substitution?
A)12
B)4
C)1
D)We do not have enough information to answer the question because the MRS varies along the graph.

Accepted Answer

The answer of Figure 21-11 
-Refer to Figure 21-11. What...

Question 16

Figure 21-11 
-Refer to Figure 21-11. What is the consumer's marginal rate of substitution as she moves from B to C?
A)12
B)6
C)4
D)1

Accepted Answer

The answer of Figure 21-11 
-Refer to Figure 21-11. What...

Question 17

Figure 21-13 
-Refer to Figure 21-13. What is the consumer's marginal rate of substitution as she moves from A to B?
A)4
B)2
C)1
D)0.5

Accepted Answer

The consumer's marginal rate of substitution is the slope of the indifference curve at the given point. From A to B, the consumer is willing to give up 2 units of good X for 1 additional unit of good Y, which is the slope of the indifference curve at point A. Therefore, the answer is B)2.

The best choice(s) cannot be determined without additional information about the consumer's preferences and the prices of the goods.

Question 18

Figure 21-12 
-Refer to Figure 21-12. If the consumer moves from bundle V to bundle X, the
A)marginal rate of substitution remains constant.
B)total utility remains constant.
C)total utility increases.
D)Both a) and b) are correct.

Accepted Answer

Moving from bundle V to bundle X increases both the quantity of X and Y, so total utility increases. The marginal rate of substitution may change, but that is not necessary for total utility to increase. Total utility is the sum of the utility derived from all goods consumed, so if the quantity of any good increases, total utility will also increase. Neither a) nor b) are correct, as explained above.

Question 19

Figure 21-12 
-Refer to Figure 21-12. The marginal rate of substitution between bundles V and Z is
A)greater than the marginal rate of substitution between bundles Z and T.
B)less than the marginal rate of substitution between bundles Z and T.
C)equal to the marginal rate of substitution between bundles Z and T.
D)We are unable to compare the marginal rates of substitution.

Accepted Answer

The answer of Figure 21-12 
-Refer to Figure 21-12. The...

Question 20

Figure 21-11 
-Refer to Figure 21-11. As the consumer moves from point A to B to C to D, the consumer's marginal rate of substitution
A)remains constant.
B)increases.
C)decreases.
D)first increases, then decreases.

Accepted Answer

As the consumer moves from point A to B to C to D, the consumer's marginal rate of substitution decreases. This is because the consumer is willing to give up fewer units of good Y to obtain an additional unit of good X as they move down the indifference curve, indicating a decrease in the marginal utility of good X. Therefore, the marginal rate of substitution between the two goods decreases.

Quiz 21: The Theory of Consumer Choice

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

Figure 21-10 -Refer to Figure 21-10. When comparing bundle A to bundle E, the consumer

Figure 21-10 -Refer to Figure 21-10. Which of the following comparisons is correct regarding the marginal rate of substitution (MRS) of donuts for cake?

Figure 21-12 -Refer to Figure 21-12. Which of the following statements is correct?

Figure 21-10 -Refer to Figure 21-10. A person who chooses to consume bundle C is likely to

Figure 21-10 -Refer to Figure 21-10. Which of the following statements is not correct?

Figure 21-10 -Refer to Figure 21-10. Which of the following statements is not true for a consumer who moves from bundle B to bundle C?

Figure 21-11 -Refer to Figure 21-11. As the consumer moves from point A to B to C to D, the consumer's total utility

Figure 21-10 -Refer to Figure 21-10. When comparing bundle B to bundle C, the consumer

Figure 21-10 -Refer to Figure 21-10. Which of the following statements is correct?

Figure 21-11 -Refer to Figure 21-11. The graph illustrates

Figure 21-12 -Refer to Figure 21-12. Which of the following statements is not correct?

Figure 21-10 -Refer to Figure 21-10. Which of the following statements is correct?

Figure 21-12 -Refer to Figure 21-12. If the consumer moves from bundle W to bundle Z, the

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

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

Figure 21-13 -Refer to Figure 21-13. What is the consumer's marginal rate of substitution as she moves from A to B?

Figure 21-12 -Refer to Figure 21-12. If the consumer moves from bundle V to bundle X, the

Figure 21-12 -Refer to Figure 21-12. The marginal rate of substitution between bundles V and Z is

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