Question 1

Market demand curves are found by:

Accepted Answer

A)  determining the quantities demanded by all buyers at each price. 
B)  adding the individual supply curves at each price. 
C)  recording the quantities supplied in the market at each price. 
D)  doing all of the above. 
A)  determining the quantities demanded by all buyers at each price. 
B)  adding the individual supply curves at each price. 
C)  recording the quantities supplied in the market at each price. 
D)  doing all of the above.

Question 2

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

Accepted Answer

A)  125. 
B)  150. 
C)  200. 
D)  350. 
A)  125. 
B)  150. 
C)  200. 
D)  350.

Question 3

You decide to increase the quantity of pizza purchased each month when the price decreases in part because the lower price causes an implicit increase in your income. This is an indication of the:

Accepted Answer

A)  output effect. 
B)  income effect. 
C)  substitution effect. 
D)  distribution effect. 
A)  output effect. 
B)  income effect. 
C)  substitution effect. 
D)  distribution effect.

Question 4

The law of diminishing marginal utility:

Accepted Answer

A)  is the tendency of total utility to increase until an individual's budget is no longer constrained. 
B)  refers to the tendency of marginal utility to decline beyond some level of consumption during a period. 
C)  indicates that, if a good is inferior, less of it will be purchased when income falls during a period. 
D)  assumes all goods are normal. 
A)  is the tendency of total utility to increase until an individual's budget is no longer constrained. 
B)  refers to the tendency of marginal utility to decline beyond some level of consumption during a period. 
C)  indicates that, if a good is inferior, less of it will be purchased when income falls during a period. 
D)  assumes all goods are normal.

Question 5

The slope of a(n) _______ curve shows the rate at which two goods can be exchanged _______ the consumer's ________ .

Accepted Answer

A)  marginal utility; which increases; marginal utility 
B)  indifference; without affecting; total utility 
C)  iso-utility; without affecting; budget 
D)  indifference; without affecting; budget 
A)  marginal utility; which increases; marginal utility 
B)  indifference; without affecting; total utility 
C)  iso-utility; without affecting; budget 
D)  indifference; without affecting; budget

Question 6

If two combinations of two goods yield the same level of satisfaction, then they are:

Accepted Answer

A)  on the same price line. 
B)  on the same budget constraint. 
C)  on the same indifference curve. 
D)  on different indifference curves. 
A)  on the same price line. 
B)  on the same budget constraint. 
C)  on the same indifference curve. 
D)  on different indifference curves.

Question 7

The law of diminishing marginal utility indicates that the slope of the marginal utility curve eventually becomes:

Accepted Answer

A)  negative. 
B)  vertical. 
C)  horizontal. 
D)  positive. 
A)  negative. 
B)  vertical. 
C)  horizontal. 
D)  positive.

Question 8

If a consumer derives more utility by spending an additional $1 on good X rather than on good Y, then:

Accepted Answer

A)  MUx/Px > MUy/Py. 
B)  MUx/Px = MUy/Py. 
C)  MUx/Px y/Py. 
D)  Px/MUx > Py/MUy. 
A)  MUx/Px > MUy/Py. 
B)  MUx/Px = MUy/Py. 
C)  MUx/Px y/Py. 
D)  Px/MUx > Py/MUy.

Question 9

According to the substitution effect, a decrease in the price of a product leads to an increase in the quantity of the product demanded because buyers:

Accepted Answer

A)  have more real income. 
B)  purchase fewer substitute goods. 
C)  purchase more of the now relatively less expensive good. 
D)  purchase more complementary goods. 
A)  have more real income. 
B)  purchase fewer substitute goods. 
C)  purchase more of the now relatively less expensive good. 
D)  purchase more complementary goods.

Question 10

A budget constraint is:

Accepted Answer

A)  a consumer's restriction on spending. 
B)  a consumer's total utility. 
C)  a consumer's marginal utility. 
D)  the income effect. 
A)  a consumer's restriction on spending. 
B)  a consumer's total utility. 
C)  a consumer's marginal utility. 
D)  the income effect.

Question 11

The increase in quantity demanded due to a price reduction is a result of the _______ and the ________.

Accepted Answer

A)  budget effect; income effect 
B)  income effect; demand effect 
C)  substitution effect; income effect 
D)  demand effect; budget effect 
A)  budget effect; income effect 
B)  income effect; demand effect 
C)  substitution effect; income effect 
D)  demand effect; budget effect

Question 12

-(Exhibit: Consumer Equilibrium 2) The lowest level of total utility shown in the exhibit is associated with point _______ on curve _______ .

Accepted Answer

A)  H; A 
B)  I; B 
C)  G; C 
D)  J; A 
A)  H; A 
B)  I; B 
C)  G; C 
D)  J; A

Question 13

Assume that a person is consuming the utility-maximizing quantities of pork and chicken. We can conclude that:

Accepted Answer

A)  the price of pork equals the price of chicken. 
B)  the marginal utility of pork equals the marginal utility of chicken. 
C)  the ratio of the marginal utility to price is the same for pork and for chicken. 
D)  both A and B are true. 
A)  the price of pork equals the price of chicken. 
B)  the marginal utility of pork equals the marginal utility of chicken. 
C)  the ratio of the marginal utility to price is the same for pork and for chicken. 
D)  both A and B are true.

Question 14

If a consumer purchases a combination of commodities x and y such that MUx/Px = 30 and MUy/Py = 40, to maximize utility, the consumers should buy.

Accepted Answer

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

Question 15

The utility-maximization condition for two goods is achieved by equating the:

Accepted Answer

A)  prices of both goods. 
B)  marginal utilities of both goods. 
C)  ratios of total utility to price of both goods. 
D)  ratios of marginal utility to price of both goods. 
A)  prices of both goods. 
B)  marginal utilities of both goods. 
C)  ratios of total utility to price of both goods. 
D)  ratios of marginal utility to price of both goods.

Question 16

According to the utility model of consumer demand, the demand curve is downward sloping because of the law of:

Accepted Answer

A)  diminishing marginal utility. 
B)  increasing cost. 
C)  utility minimization. 
D)  diminishing consumer surplus. 
A)  diminishing marginal utility. 
B)  increasing cost. 
C)  utility minimization. 
D)  diminishing consumer surplus.

Question 17

Sally Garcia devotes all of her income to the consumption of two goods, apples and Reese's Peanut Butter Cups. She has just discovered that at her current level of consumption the marginal utility of an apple is 6 and the marginal utility of a Reese's Peanut Butter Cup is 8. To maximize her total utility, she would:

Accepted Answer

A)  consume more of both goods. 
B)  consume less of both goods. 
C)  consume more apples and fewer Reese's Butter Cups. 
D)  there is not enough information to justify a change in her current level of consumption. 
A)  consume more of both goods. 
B)  consume less of both goods. 
C)  consume more apples and fewer Reese's Butter Cups. 
D)  there is not enough information to justify a change in her current level of consumption.

Question 18

How much utility is gained by spending an additional dollar on good X?

Accepted Answer

A)  It is the average utility of good X divided by the price of good X. 
B)  MUx/Px  
C)  TUx/Px  
D)  None of the above are correct. 
A)  It is the average utility of good X divided by the price of good X. 
B)  MUx/Px  
C)  TUx/Px  
D)  None of the above are correct.

Question 19

If a consumer buys more of good X and less of good Y, the _______ of good X will _______ , and the ________ of good Y will _______ .

Accepted Answer

A)  marginal utility; fall; marginal utility; rise 
B)  marginal utility; rise; marginal utility; fall 
C)  total utility; fall; marginal utility; rise 
D)  marginal utility; rise; total utility; rise 
A)  marginal utility; fall; marginal utility; rise 
B)  marginal utility; rise; marginal utility; fall 
C)  total utility; fall; marginal utility; rise 
D)  marginal utility; rise; total utility; rise

Question 20

Discuss in some detail how a consumer will maximize total utility from the consumption of two goods, given the budget constraint, the marginal utilities, and the prices of the two goods.

Accepted Answer

To maximize total utility from the consu

Exam 7: Cost and Industry Structure

Market demand curves are found by:

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

You decide to increase the quantity of pizza purchased each month when the price decreases in part because the lower price causes an implicit increase in your income. This is an indication of the:

The law of diminishing marginal utility:

The slope of a(n) _______ curve shows the rate at which two goods can be exchanged _______ the consumer's ________ .

If two combinations of two goods yield the same level of satisfaction, then they are:

The law of diminishing marginal utility indicates that the slope of the marginal utility curve eventually becomes:

If a consumer derives more utility by spending an additional $1 on good X rather than on good Y, then:

According to the substitution effect, a decrease in the price of a product leads to an increase in the quantity of the product demanded because buyers:

A budget constraint is:

The increase in quantity demanded due to a price reduction is a result of the _______ and the ________.

-(Exhibit: Consumer Equilibrium 2) The lowest level of total utility shown in the exhibit is associated with point _______ on curve _______ .

Assume that a person is consuming the utility-maximizing quantities of pork and chicken. We can conclude that:

If a consumer purchases a combination of commodities x and y such that MUx/Px = 30 and MUy/Py = 40, to maximize utility, the consumers should buy.

The utility-maximization condition for two goods is achieved by equating the:

According to the utility model of consumer demand, the demand curve is downward sloping because of the law of:

How much utility is gained by spending an additional dollar on good X?

If a consumer buys more of good X and less of good Y, the _______ of good X will _______ , and the ________ of good Y will _______ .

Discuss in some detail how a consumer will maximize total utility from the consumption of two goods, given the budget constraint, the marginal utilities, and the prices of the two goods.

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

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The slope of a(n) ___ curve shows the rate at which two goods can be exchanged _ the consumer's ______ .

The increase in quantity demanded due to a price reduction is a result of the _ and the __.

-(Exhibit: Consumer Equilibrium 2) The lowest level of total utility shown in the exhibit is associated with point _ on curve _ .

If a consumer purchases a combination of commodities x and y such that MU_x/P_x = 30 and MU_y/P_y = 40, to maximize utility, the consumers should buy.

If a consumer buys more of good X and less of good Y, the ___ of good X will _ , and the of good Y will _ .