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Unformatted text preview: Chapter 21 The Theory of Consumer Choice MULTIPLE CHOICE 1. Consider two goods, pizza and Pepsi. The slope of the consumers budget constraint is measured by the a. consumers income divided by the price of Pepsi. b. relative price of pizza and Pepsi. c. consumers income divided by the price of pizza. d. spending on pizza divided by the consumers income. ANSWER: b. relative price of pizza and Pepsi. TYPE: M DIFFICULTY: 1 SECTION: 1 2. If a consumers income decreases, the budget constraint for Pepsi and pizza will a. shift outward, parallel to the old budget constraint. b. shift inward, parallel to the old budget constraint. c. rotate outward towards pizza because we can afford more pizza. d. rotate outward towards Pepsi because we can afford more Pepsi. ANSWER: b. shift inward, parallel to the old budget constraint. TYPE: M DIFFICULTY: 2 SECTION: 1 3. If the relative price of a ticket to a concert is 3 times the price of a meal at a good restaurant, the opportunity cost of a concert ticket is the a. slope of the budget constraint. b. slope of the indifference curve. c. intercept on the concert axis. d. intercept on the restaurant axis. ANSWER: a. slope of the budget constraint. TYPE: M DIFFICULTY: 1 SECTION: 1 4. When the price of a pair of jeans rises, the a. quantity of jeans demanded falls. b. quantity of jeans demanded rises. c. quantity of jeans supplied falls. d. demand for jeans falls. ANSWER: a. quantity of jeans demanded falls. TYPE: M DIFFICULTY: 1 SECTION: 1 5. The theory of consumer choice provides the foundation for understanding a. the structure of a firm. b. the profitability of a firm. c. a firms product demand. d. a firms product supply. ANSWER: c. a firms product demand. TYPE: M DIFFICULTY: 1 SECTION: 1 129 130 Chapter 21/The Theory of Consumer Choice 6. The theory of consumer choice can often provide insight into the behavior of a. individuals who make rational choices. b. individuals who make constrained choices. c. individuals who are unaware of how to maximize their well-being. d. irrational consumers. ANSWER: b. individuals who make constrained choices. TYPE: M DIFFICULTY: 2 SECTION: 4 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....
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This note was uploaded on 10/22/2010 for the course BUSINESS BAIU09 taught by Professor Mr.ken during the Spring '10 term at American InterContinental University Dunwoody.
- Spring '10