Question 1

If, for a particular consumer, the marginal utility of ties is greater than the marginal utility of shirts, this consumer should:

Accepted Answer

A)  buy more ties and fewer shirts. 
B)  buy more shirts and fewer ties. 
C)  buy the same amount of each. 
D)  not do anything until more information is available. 
A)  buy more ties and fewer shirts. 
B)  buy more shirts and fewer ties. 
C)  buy the same amount of each. 
D)  not do anything until more information is available.

Question 2

Which of the following statements is false?

Accepted Answer

A)  The income effect of normal goods counters the substitution effect so the demand curve is upsloping. 
B)  The income effect and the substitution effect reinforce each other when there are price changes for a normal good. 
C)  The income effect represents the decrease in quantity demanded caused by the implicit change in income due to a fall in the price of an inferior good but not for a normal good. 
D)  The substitution effect represents the change in quantity demanded solely due to a change in the relative price of a good. 
A)  The income effect of normal goods counters the substitution effect so the demand curve is upsloping. 
B)  The income effect and the substitution effect reinforce each other when there are price changes for a normal good. 
C)  The income effect represents the decrease in quantity demanded caused by the implicit change in income due to a fall in the price of an inferior good but not for a normal good. 
D)  The substitution effect represents the change in quantity demanded solely due to a change in the relative price of a good.

Question 3

According to the utility model of consumer demand, the law of diminishing marginal utility indicates that the demand curve is:

Accepted Answer

A)  flat. 
B)  downward sloping. 
C)  U-shaped. 
D)  upward sloping. 
A)  flat. 
B)  downward sloping. 
C)  U-shaped. 
D)  upward sloping.

Question 4

-(Exhibit: Consumer Equilibrium 1) Assume that the price of both goods X and Y is $1 per unit, and you have $7 of income to spend on both goods. To maximize utility, you would consume ________ units of X and _______ units of Y.

Accepted Answer

A)  2; 5 
B)  3; 4 
C)  4; 3 
D)  5; 2 
A)  2; 5 
B)  3; 4 
C)  4; 3 
D)  5; 2

Question 5

For a(n) _______ good, an increase in income will lead to an increase in _______ .

Accepted Answer

A)  inferior; consumption 
B)  normal; supply 
C)  normal; consumption 
D)  inferior; supply 
A)  inferior; consumption 
B)  normal; supply 
C)  normal; consumption 
D)  inferior; supply

Question 6

The income effect of a price change is named the way it is because it refers to a change in money income.

Accepted Answer

A) True 
 B)False

Question 7

A theoretical good for which the demand curve is upward sloping is a(n):

Accepted Answer

A)  Giffen good. 
B)  substitute good. 
C)  normal good. 
D)  complement good. 
A)  Giffen good. 
B)  substitute good. 
C)  normal good. 
D)  complement good.

Question 8

If the first four units of a good consumed have marginal utilities of 60, 50, 40, and 30, respectively, this trend is an indication of the:

Accepted Answer

A)  maximization of utility. 
B)  law of diminishing marginal utility. 
C)  law of consumer equilibrium. 
D)  minimization of utility. 
A)  maximization of utility. 
B)  law of diminishing marginal utility. 
C)  law of consumer equilibrium. 
D)  minimization of utility.

Question 9

If consumer income, preferences, and the prices of all other goods remain constant while the price of X varies, the amount purchased of X is defined by the:

Accepted Answer

A)  demand curve. 
B)  price-consumption curve. 
C)  income-consumption curve. 
D)  price line. 
A)  demand curve. 
B)  price-consumption curve. 
C)  income-consumption curve. 
D)  price line.

Question 10

Which of the following statements is true because of the law of diminishing marginal utility?

Accepted Answer

A)  When a customer continues to eat more pie at the Pie Palace, each additional piece of pie gives a larger amount of marginal utility. 
B)  When a customer continues to eat more pie at the Pie Palace, each additional piece of pie gives a smaller amount of marginal utility. 
C)  The marginal utility of a piece of pie is maximum when the total utility of pie is zero. 
D)  The total utility of pie is at a maximum while the marginal utility of pie is still increasing. 
A)  When a customer continues to eat more pie at the Pie Palace, each additional piece of pie gives a larger amount of marginal utility. 
B)  When a customer continues to eat more pie at the Pie Palace, each additional piece of pie gives a smaller amount of marginal utility. 
C)  The marginal utility of a piece of pie is maximum when the total utility of pie is zero. 
D)  The total utility of pie is at a maximum while the marginal utility of pie is still increasing.

Question 11

The utility of a good simply indicates its usefulness.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  35. 
B)  15. 
C)  10. 
D)  5. 
A)  35. 
B)  15. 
C)  10. 
D)  5.

Question 13

Assume that as the price of cauliflower falls the income effect causes consumers to buy less cauliflower. We can conclude that cauliflower is:

Accepted Answer

A)  an inferior good. 
B)  nasty tasting. 
C)  a normal good. 
D)  expensive. 
A)  an inferior good. 
B)  nasty tasting. 
C)  a normal good. 
D)  expensive.

Question 14

Assume that the marginal utilities for the first three units of a good consumed are 200, 150, and 125, respectively. The total utility when 2 units are consumed is:

Accepted Answer

A)  150. 
B)  200. 
C)  350. 
D)  475. 
A)  150. 
B)  200. 
C)  350. 
D)  475.

Question 15

-(Exhibit: Consumer Equilibrium 2) Given the exhibit, which of the following statements is (are) true?

Accepted Answer

A)  Point I is the point of utility maximization. 
B)  At the point of utility maximization, the rate at which the consumer is willing to exchange one good for another is less than the rate at which the goods can be exchanged in the market. 
C)  MRSx,y > Px/Py  
D)  All of the above statements are true. 
A)  Point I is the point of utility maximization. 
B)  At the point of utility maximization, the rate at which the consumer is willing to exchange one good for another is less than the rate at which the goods can be exchanged in the market. 
C)  MRSx,y > Px/Py  
D)  All of the above statements are true.

Question 16

The substitution effect of a price change is described by which of the following statements?

Accepted Answer

A)  When the price of a good falls, consumers have more real income with the same nominal income and will now buy more of the good. 
B)  When the price of a good falls, consumers will now substitute this lower priced good for relatively higher priced goods. 
C)  The substitution effect is the relative change in the amount of a good consumed when the price of another good changes. 
D)  The substitution effect shows how a change in income will affect the quantity of a good purchased. 
A)  When the price of a good falls, consumers have more real income with the same nominal income and will now buy more of the good. 
B)  When the price of a good falls, consumers will now substitute this lower priced good for relatively higher priced goods. 
C)  The substitution effect is the relative change in the amount of a good consumed when the price of another good changes. 
D)  The substitution effect shows how a change in income will affect the quantity of a good purchased.

Question 17

-(Exhibit: Consumer Equilibrium 2) Assume the consumer is currently operating at point I. The consumer could gain more utility by choosing point _______ , all other things held unchanged.

Accepted Answer

A)  J 
B)  G 
C)  K 
D)  None of the above is true. 
A)  J 
B)  G 
C)  K 
D)  None of the above is true.

Question 18

Consumers will maximize utility whenever the total benefits of consumption of the good exceed the total cost of the good.

Accepted Answer

A) True 
 B)False

Question 19

-(Exhibit: Consumer Equilibrium 2) Given the exhibit and the budget constraint, the maximization of consumer utility would occur at point _______ with the consumption of _______ of X and _______ of Y.

Accepted Answer

A)  J; OS; OP 
B)  I; OS;OP 
C)  J; ON;OF 
D)  I; ON;OM 
A)  J; OS; OP 
B)  I; OS;OP 
C)  J; ON;OF 
D)  I; ON;OM

Question 20

Suppose a consumer really likes rutabagas and likes broccoli fairly well. Suppose the prices of both goods are $0.60 per pound and that the consumer is maximizing utility. We can conclude that:

Accepted Answer

A)  the marginal utilities of both goods are the same. 
B)  the marginal utility of rutabagas is greater than the marginal utility of broccoli. 
C)  the marginal utility of broccoli is greater than the marginal utility of rutabagas. 
D)  the marginal utility of both goods is zero. 
A)  the marginal utilities of both goods are the same. 
B)  the marginal utility of rutabagas is greater than the marginal utility of broccoli. 
C)  the marginal utility of broccoli is greater than the marginal utility of rutabagas. 
D)  the marginal utility of both goods is zero.

Exam 7: Cost and Industry Structure

If, for a particular consumer, the marginal utility of ties is greater than the marginal utility of shirts, this consumer should:

Which of the following statements is false?

According to the utility model of consumer demand, the law of diminishing marginal utility indicates that the demand curve is:

-(Exhibit: Consumer Equilibrium 1) Assume that the price of both goods X and Y is $1 per unit, and you have $7 of income to spend on both goods. To maximize utility, you would consume ________ units of X and _______ units of Y.

For a(n) _______ good, an increase in income will lead to an increase in _______ .

The income effect of a price change is named the way it is because it refers to a change in money income.

A theoretical good for which the demand curve is upward sloping is a(n):

If the first four units of a good consumed have marginal utilities of 60, 50, 40, and 30, respectively, this trend is an indication of the:

If consumer income, preferences, and the prices of all other goods remain constant while the price of X varies, the amount purchased of X is defined by the:

Which of the following statements is true because of the law of diminishing marginal utility?

The utility of a good simply indicates its usefulness.

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

Assume that as the price of cauliflower falls the income effect causes consumers to buy less cauliflower. We can conclude that cauliflower is:

Assume that the marginal utilities for the first three units of a good consumed are 200, 150, and 125, respectively. The total utility when 2 units are consumed is:

-(Exhibit: Consumer Equilibrium 2) Given the exhibit, which of the following statements is (are) true?

The substitution effect of a price change is described by which of the following statements?

-(Exhibit: Consumer Equilibrium 2) Assume the consumer is currently operating at point I. The consumer could gain more utility by choosing point _______ , all other things held unchanged.

Consumers will maximize utility whenever the total benefits of consumption of the good exceed the total cost of the good.

-(Exhibit: Consumer Equilibrium 2) Given the exhibit and the budget constraint, the maximization of consumer utility would occur at point _______ with the consumption of _______ of X and _______ of Y.

Suppose a consumer really likes rutabagas and likes broccoli fairly well. Suppose the prices of both goods are $0.60 per pound and that the consumer is maximizing utility. We can conclude that:

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

-(Exhibit: Consumer Equilibrium 1) Assume that the price of both goods X and Y is $1 per unit, and you have $7 of income to spend on both goods. To maximize utility, you would consume __ units of X and _ units of Y.

For a(n) _ good, an increase in income will lead to an increase in _ .

-(Exhibit: Consumer Equilibrium 2) Given the exhibit and the budget constraint, the maximization of consumer utility would occur at point ___ with the consumption of _ of X and _____ of Y.