Question 1

The income effect of a change in the price of a good is illustrated by a shift of the demand curve.

Accepted Answer

A) True 
 B)False  False

Question 2

Suppose that Joe and Jane have been eating hotdogs until only one is left. Jane claims that she should get the last hotdog because she is hungrier. Jane has made a(n)

Accepted Answer

A)  price elasticity statement. 
B)  positive comparison. 
C)  interpersonal utility comparison. 
D)  irrational statement. 
E)  average comparison. 
A)  price elasticity statement. 
B)  positive comparison. 
C)  interpersonal utility comparison. 
D)  irrational statement. 
E)  average comparison. C

Question 3

Exhibit 5-1  
-Refer to Exhibit 5-1. At 4 cans of soda, total utility is

Accepted Answer

A)  27 units. 
B)  9 units. 
C)  189 units. 
D)  135 units. 
E)  162 units. 
A)  27 units. 
B)  9 units. 
C)  189 units. 
D)  135 units. 
E)  162 units. E

Question 4

The area between the demand curve and the price line is called

Accepted Answer

A)  shortage. 
B)  the budget constraint. 
C)  marginal benefit. 
D)  consumer surplus. 
E)  marginal utility. 
A)  shortage. 
B)  the budget constraint. 
C)  marginal benefit. 
D)  consumer surplus. 
E)  marginal utility.

Question 5

The change in total benefit as measured by willingness to pay for one more unit of a good is called

Accepted Answer

A)  marginal benefit. 
B)  marginal cost. 
C)  marginal utility. 
D)  total utility. 
E)  product price. 
A)  marginal benefit. 
B)  marginal cost. 
C)  marginal utility. 
D)  total utility. 
E)  product price.

Question 6

The market demand curve is derived graphically by

Accepted Answer

A)  adding the prices paid by all individuals in the market at each quantity demanded. 
B)  adding the quantity demanded by all individuals in the market at each specific price. 
C)  adding the marginal utilities for all individuals in the market at each specific price. 
D)  the process of vertical summation. 
E)  adding the prices all individuals are willing to pay at each specific quantity demanded. 
A)  adding the prices paid by all individuals in the market at each quantity demanded. 
B)  adding the quantity demanded by all individuals in the market at each specific price. 
C)  adding the marginal utilities for all individuals in the market at each specific price. 
D)  the process of vertical summation. 
E)  adding the prices all individuals are willing to pay at each specific quantity demanded.

Question 7

Diamonds are expensive because they have high marginal benefits.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is true? The substitution effect of an increase in the price of tea refers to the
(A) decrease in the quantity demanded of tea and the increase in the demand for its substitutes, such as coffee.
(B) decrease in the quantity demanded of both tea and its substitutes, such as coffee.
(C) increase in the quantity demanded of tea and the decrease in the quantity demanded for its substitutes, such as coffee.

Accepted Answer

The substitution effect of an

Question 9

Other things being equal, if the price of a good rises, the consumer surplus of that good

Accepted Answer

A)  rises. 
B)  falls. 
C)  remains the same. 
D)  rises and then falls. 
E)  cannot be determined given the available information. 
A)  rises. 
B)  falls. 
C)  remains the same. 
D)  rises and then falls. 
E)  cannot be determined given the available information.

Question 10

Exhibit 5-10  
-Refer to Exhibit 5-10. Assume that Stephanie and Roger are the only consumers in the market. Calculate consumer surplus for Stephanie, Roger, and the market as a whole if market price is $1.

Accepted Answer

Stephanie consumes 3 units, with consume

Question 11

A point on the budget constraint represents the fact that the consumer spends less than her or his income.

Accepted Answer

A) True 
 B)False

Question 12

The marginal utility of consuming a good increases at a decreasing rate.

Accepted Answer

A) True 
 B)False

Question 13

Suppose Jose receives diminishing marginal benefits from consuming more cups of latte. Do you think that Jose may eventually receive negative marginal benefits from consuming an additional cup of latte?

Accepted Answer

People typically experience de

Question 14

An individual's demand curve is not continuous mainly because

Accepted Answer

A)  total utility is not continuous. 
B)  marginal benefit is not continuous. 
C)  quantity is not continuous. 
D)  marginal utility is not continuous. 
E)  price is not continuous. 
A)  total utility is not continuous. 
B)  marginal benefit is not continuous. 
C)  quantity is not continuous. 
D)  marginal utility is not continuous. 
E)  price is not continuous.

Question 15

Exhibit 5-5  
-Refer to Exhibit 5-5. The maximum amount that a consumer is willing to pay for the tenth unit of the good is

Accepted Answer

A)  $0. 
B)  $2.5. 
C)  $5.0. 
D)  $7.5. 
E)  impossible to determine given the available information. 
A)  $0. 
B)  $2.5. 
C)  $5.0. 
D)  $7.5. 
E)  impossible to determine given the available information.

Question 16

Suppose that Joe has $50 to spend on food and clothing. If Joe now has $100, then it is most likely that he will

Accepted Answer

A)  increase both food and clothing consumption. 
B)  increase food consumption but decrease clothing consumption. 
C)  decrease food consumption but increase clothing consumption. 
D)  decrease both food and clothing consumption. 
E)  not change food or clothing consumption. 
A)  increase both food and clothing consumption. 
B)  increase food consumption but decrease clothing consumption. 
C)  decrease food consumption but increase clothing consumption. 
D)  decrease both food and clothing consumption. 
E)  not change food or clothing consumption.

Question 17

Suppose a consumer can spend $1,000 on food and clothing. The price of food is $5 per unit and the price of clothing is $20 per unit. Also suppose the consumer was consuming 100 units of food and 25 units of clothing, and then the price of food rose to $10. Which of the following statements is true?

Accepted Answer

A)  The maximum amount of food the consumer can buy is 100 units. 
B)  The maximum amount of clothing the consumer can buy is 25 units. 
C)  The maximum amount of food the consumer can buy is 50 units. 
D)  If the consumer does not reduce food consumption, clothing consumption can be 12.5 units, at best. 
E)  The consumer can consume 50 units of clothing. 
A)  The maximum amount of food the consumer can buy is 100 units. 
B)  The maximum amount of clothing the consumer can buy is 25 units. 
C)  The maximum amount of food the consumer can buy is 50 units. 
D)  If the consumer does not reduce food consumption, clothing consumption can be 12.5 units, at best. 
E)  The consumer can consume 50 units of clothing.

Question 18

Exhibit 5-6  
-Exhibit 5-6 shows Andy's marginal benefit from latte consumption. If the price of one cup of latte is $2.50, then which of the following is true?

Accepted Answer

A)  Andy will consume 1 cup of latte. 
B)  Andy will consume 2 cups of latte. 
C)  Andy will consume 3 cups of latte. 
D)  Andy will consume 4 cups of latte. 
E)  Andy will not consume any latte. 
A)  Andy will consume 1 cup of latte. 
B)  Andy will consume 2 cups of latte. 
C)  Andy will consume 3 cups of latte. 
D)  Andy will consume 4 cups of latte. 
E)  Andy will not consume any latte.

Question 19

The height of a demand curve is consumer surplus.

Accepted Answer

A) True 
 B)False

Question 20

Marginal benefit is dependent on

Accepted Answer

A)  which country's currency is used to measure it. 
B)  preferences. 
C)  the law of demand. 
D)  total utility. 
E)  production costs. 
A)  which country's currency is used to measure it. 
B)  preferences. 
C)  the law of demand. 
D)  total utility. 
E)  production costs.

The income effect of a change in the price of a good is illustrated by a shift of the demand curve.

Suppose that Joe and Jane have been eating hotdogs until only one is left. Jane claims that she should get the last hotdog because she is hungrier. Jane has made a(n)

Exhibit 5-1 -Refer to Exhibit 5-1. At 4 cans of soda, total utility is

The area between the demand curve and the price line is called

The change in total benefit as measured by willingness to pay for one more unit of a good is called

The market demand curve is derived graphically by

Diamonds are expensive because they have high marginal benefits.

Other things being equal, if the price of a good rises, the consumer surplus of that good

Exhibit 5-10 -Refer to Exhibit 5-10. Assume that Stephanie and Roger are the only consumers in the market. Calculate consumer surplus for Stephanie, Roger, and the market as a whole if market price is $1.

A point on the budget constraint represents the fact that the consumer spends less than her or his income.

The marginal utility of consuming a good increases at a decreasing rate.

Suppose Jose receives diminishing marginal benefits from consuming more cups of latte. Do you think that Jose may eventually receive negative marginal benefits from consuming an additional cup of latte?

An individual's demand curve is not continuous mainly because

Exhibit 5-5 -Refer to Exhibit 5-5. The maximum amount that a consumer is willing to pay for the tenth unit of the good is

Suppose that Joe has $50 to spend on food and clothing. If Joe now has $100, then it is most likely that he will

Suppose a consumer can spend $1,000 on food and clothing. The price of food is $5 per unit and the price of clothing is $20 per unit. Also suppose the consumer was consuming 100 units of food and 25 units of clothing, and then the price of food rose to $10. Which of the following statements is true?

Exhibit 5-6 -Exhibit 5-6 shows Andy's marginal benefit from latte consumption. If the price of one cup of latte is $2.50, then which of the following is true?

The height of a demand curve is consumer surplus.

Marginal benefit is dependent on

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

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Exam 5: The Demand Curve and the Behavior of Consumers

The income effect of a change in the price of a good is illustrated by a shift of the demand curve.

Suppose that Joe and Jane have been eating hotdogs until only one is left. Jane claims that she should get the last hotdog because she is hungrier. Jane has made a(n)

Exhibit 5-1 -Refer to Exhibit 5-1. At 4 cans of soda, total utility is

The area between the demand curve and the price line is called

The change in total benefit as measured by willingness to pay for one more unit of a good is called

The market demand curve is derived graphically by

Diamonds are expensive because they have high marginal benefits.

Other things being equal, if the price of a good rises, the consumer surplus of that good

Exhibit 5-10 -Refer to Exhibit 5-10. Assume that Stephanie and Roger are the only consumers in the market. Calculate consumer surplus for Stephanie, Roger, and the market as a whole if market price is $1.

A point on the budget constraint represents the fact that the consumer spends less than her or his income.

The marginal utility of consuming a good increases at a decreasing rate.

Suppose Jose receives diminishing marginal benefits from consuming more cups of latte. Do you think that Jose may eventually receive negative marginal benefits from consuming an additional cup of latte?

An individual's demand curve is not continuous mainly because

Exhibit 5-5 -Refer to Exhibit 5-5. The maximum amount that a consumer is willing to pay for the tenth unit of the good is

Suppose that Joe has $50 to spend on food and clothing. If Joe now has $100, then it is most likely that he will

Exhibit 5-6 -Exhibit 5-6 shows Andy's marginal benefit from latte consumption. If the price of one cup of latte is $2.50, then which of the following is true?

The height of a demand curve is consumer surplus.

Marginal benefit is dependent on

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters