Question 1

The amount by which an additional unit of a good or service increases a consumer's total utility, all other things unchanged, is:

Accepted Answer

A)  marginal utility. 
B)  maximum utility. 
C)  average utility. 
D)  required utility. 
A)  marginal utility. 
B)  maximum utility. 
C)  average utility. 
D)  required utility. A

Question 2

An inferior good is likely to be a(n) _______ good that people _______ .

Accepted Answer

A)  cheap; don't like much 
B)  expensive; like a lot 
C)  expensive; don't like much 
D)  luxury; must have 
A)  cheap; don't like much 
B)  expensive; like a lot 
C)  expensive; don't like much 
D)  luxury; must have A

Question 3

Total Utility and Marginal Utility from Consumption of Good A
  
-(Exhibit: Total Utility and Marginal Utility from Consumption of Good A) Marginal utility eventually decreases with the consumption of additional units of good A because of the law of:

Accepted Answer

A)  increasing costs. 
B)  decreasing total returns. 
C)  diminishing average returns. 
D)  diminishing marginal utility. 
A)  increasing costs. 
B)  decreasing total returns. 
C)  diminishing average returns. 
D)  diminishing marginal utility. D

Question 4

Jill Smith, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream. She had just achieved the utility-maximizing solution in her consumption of the two goods when the price of peanut butter rose. As she adjusts to this event, she will consume:

Accepted Answer

A)  more peanut butter and more ice cream. 
B)  less peanut butter and less ice cream. 
C)  more peanut butter and less ice cream. 
D)  less peanut butter and more ice cream. 
A)  more peanut butter and more ice cream. 
B)  less peanut butter and less ice cream. 
C)  more peanut butter and less ice cream. 
D)  less peanut butter and more ice cream.

Question 5

The term utility is used by economists in describing consumer preferences.

Accepted Answer

A) True 
 B)False

Question 6

If a consumer purchases a combination of commodities x and y such that MUx/Px = 50 and MUy/Py = 40, to maximize utility, the consumers should buy.

Accepted Answer

A)  more of x and less of y. 
B)  more of both x and y. 
C)  less of x and more of y. 
D)  less of both x and y. 
A)  more of x and less of y. 
B)  more of both x and y. 
C)  less of x and more of y. 
D)  less of both x and y.

Question 7

A consumer is in equilibrium along the portion of an indifference curve that lies below a budget line.

Accepted Answer

A) True 
 B)False

Question 8

-(Exhibit: Utility) The marginal utility for the sixth unit is:

Accepted Answer

A)  -5. 
B)  0. 
C)  5. 
D)  -10. 
A)  -5. 
B)  0. 
C)  5. 
D)  -10.

Question 9

The law of diminishing marginal utility exists for the first three units of a good if they have total utilities of:

Accepted Answer

A)  8, 17, 27. 
B)  9, 17, 27. 
C)  9, 19, 30. 
D)  10, 19, 27. 
A)  8, 17, 27. 
B)  9, 17, 27. 
C)  9, 19, 30. 
D)  10, 19, 27.

Question 10

-(Exhibit: Utility) The law of diminishing marginal utility is first observed at the _______ unit.

Accepted Answer

A)  second 
B)  third 
C)  fifth 
D)  sixth 
A)  second 
B)  third 
C)  fifth 
D)  sixth

Question 11

In terms of indifference curves, an increase in total utility is represented by a:

Accepted Answer

A)  shift to the right to a higher indifference curve. 
B)  shift to the left to a lower indifference curve. 
C)  movement upward along an indifference curve. 
D)  movement downward along an indifference curve. 
A)  shift to the right to a higher indifference curve. 
B)  shift to the left to a lower indifference curve. 
C)  movement upward along an indifference curve. 
D)  movement downward along an indifference curve.

Question 12

-(Exhibit: Consumer Equilibrium 1) Assume that the price of good X is $1 per unit and the price of good Y is $2 per unit, and you consume 4 units of good X and 2 units of good Y. To maximize utility, assuming that the goods are divisible, you would consume:

Accepted Answer

A)  less of both X and Y. 
B)  more of both X and Y. 
C)  less of X and more of Y. 
D)  more of X and less of Y. 
A)  less of both X and Y. 
B)  more of both X and Y. 
C)  less of X and more of Y. 
D)  more of X and less of Y.

Question 13

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag. If you have $5 to spend and decide to purchase 8 boxes of Cracker Jacks, the maximum quantity of M&Ms that you can purchase is ________ bags.

Accepted Answer

A)  4 
B)  8 
C)  10 
D)  12 
A)  4 
B)  8 
C)  10 
D)  12

Question 14

When MUx/Px > MUy/Py, the buyer should decrease the quantity of X purchased.

Accepted Answer

A) True 
 B)False

Question 15

If you are willing to give up 10 units of good Y (on the vertical axis) for 5 units of good X (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:

Accepted Answer

A)  0.5. 
B)  2. 
C)  5. 
D)  10. 
A)  0.5. 
B)  2. 
C)  5. 
D)  10.

Question 16

-(Exhibit: Consumer Equilibrium 3) The lowest level of utility shown in the exhibit is associated with:

Accepted Answer

A)  indifference curve X. 
B)  indifference curve Y. 
C)  indifference curve Z. 
D)  either indifference curve X or Y. 
A)  indifference curve X. 
B)  indifference curve Y. 
C)  indifference curve Z. 
D)  either indifference curve X or Y.

Question 17

-(Exhibit: Consumer Equilibrium 3) Assume that you are consuming the combination of goods at point K. Given budget constraint FL, utility can:

Accepted Answer

A)  be increased by consuming more of good A and less of good B. 
B)  be increased by consuming less of good A and more of good B. 
C)  be increased by consuming more of both goods. 
D)  not be increased. 
A)  be increased by consuming more of good A and less of good B. 
B)  be increased by consuming less of good A and more of good B. 
C)  be increased by consuming more of both goods. 
D)  not be increased.

Question 18

If income falls, normal goods will experience an increase in consumption.

Accepted Answer

A) True 
 B)False

Question 19

Michael Kawamura, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream. He had just achieved the utility-maximizing solution in his consumption of the two goods when the price of peanut butter fell. As he adjusts to this event he will consume:

Accepted Answer

A)  more peanut butter and less ice cream. 
B)  less peanut butter and less ice cream. 
C)  more peanut butter and more ice cream. 
D)  less peanut butter and more ice cream. 
A)  more peanut butter and less ice cream. 
B)  less peanut butter and less ice cream. 
C)  more peanut butter and more ice cream. 
D)  less peanut butter and more ice cream.

Question 20

In terms of indifference curves, the equilibrium-purchase combination is determined by the:

Accepted Answer

A)  intersection of a budget line and an indifference curve. 
B)  tangency of a budget line and an indifference curve. 
C)  tangency of a price consumption curve and an income consumption curve. 
D)  intersection of an income consumption curve and a price consumption curve. 
A)  intersection of a budget line and an indifference curve. 
B)  tangency of a budget line and an indifference curve. 
C)  tangency of a price consumption curve and an income consumption curve. 
D)  intersection of an income consumption curve and a price consumption curve.

Exam 7: Cost and Industry Structure

The amount by which an additional unit of a good or service increases a consumer's total utility, all other things unchanged, is:

An inferior good is likely to be a(n) _______ good that people _______ .

Total Utility and Marginal Utility from Consumption of Good A -(Exhibit: Total Utility and Marginal Utility from Consumption of Good A) Marginal utility eventually decreases with the consumption of additional units of good A because of the law of:

Jill Smith, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream. She had just achieved the utility-maximizing solution in her consumption of the two goods when the price of peanut butter rose. As she adjusts to this event, she will consume:

The term utility is used by economists in describing consumer preferences.

If a consumer purchases a combination of commodities x and y such that MUx/Px = 50 and MUy/Py = 40, to maximize utility, the consumers should buy.

A consumer is in equilibrium along the portion of an indifference curve that lies below a budget line.

-(Exhibit: Utility) The marginal utility for the sixth unit is:

The law of diminishing marginal utility exists for the first three units of a good if they have total utilities of:

-(Exhibit: Utility) The law of diminishing marginal utility is first observed at the _______ unit.

In terms of indifference curves, an increase in total utility is represented by a:

-(Exhibit: Consumer Equilibrium 1) Assume that the price of good X is $1 per unit and the price of good Y is $2 per unit, and you consume 4 units of good X and 2 units of good Y. To maximize utility, assuming that the goods are divisible, you would consume:

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag. If you have $5 to spend and decide to purchase 8 boxes of Cracker Jacks, the maximum quantity of M&Ms that you can purchase is ________ bags.

When MUx/Px > MUy/Py, the buyer should decrease the quantity of X purchased.

If you are willing to give up 10 units of good Y (on the vertical axis) for 5 units of good X (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:

-(Exhibit: Consumer Equilibrium 3) The lowest level of utility shown in the exhibit is associated with:

-(Exhibit: Consumer Equilibrium 3) Assume that you are consuming the combination of goods at point K. Given budget constraint FL, utility can:

If income falls, normal goods will experience an increase in consumption.

Michael Kawamura, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream. He had just achieved the utility-maximizing solution in his consumption of the two goods when the price of peanut butter fell. As he adjusts to this event he will consume:

In terms of indifference curves, the equilibrium-purchase combination is determined by the:

Welcome to Economics

Demand and Supply

Labor and Financial Markets

Elasticity

Consumer Choices

Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly and Antitrust Policy

Environmental Protection and Negative Externalities

Positive Externalities and Public Goods

Poverty and Economic Inequality

Issues in Labor Markets: Unions, Discrimination, Immigration

Information, Risk, and Insurance

Financial Markets

Public Economy

The Macroeconomic Perspective

Economic Growth

Unemployment

Inflation

The International Trade and Capital Flows

The Aggregate Demandaggregate Supply Model

The Keynesian Perspective

The Neoclassical Perspective

Money and Banking

Monetary Policy and Bank Regulation

Exchange Rates and International Capital Flows

Government Budgets and Fiscal Policy

The Impacts of Government Borrowing

Macroeconomic Policy Around the World

International Trade

Globalization and Protectionism

Filters

An inferior good is likely to be a(n) _ good that people _ .

If a consumer purchases a combination of commodities x and y such that MU_x/P_x = 50 and MU_y/P_y = 40, to maximize utility, the consumers should buy.

When MU_x/P_x > MU_y/P_y, the buyer should decrease the quantity of X purchased.