Question 1

The budget constraint sets the limits placed on a consumer's choices regarding consumption.

Accepted Answer

A) True 
 B)False

Question 2

-(Exhibit: Utility) Total utility is maximized at the _______ unit.

Accepted Answer

A)  first 
B)  second 
C)  fourth 
D)  sixth 
A)  first 
B)  second 
C)  fourth 
D)  sixth

Question 3

The utility-maximizing condition is achieved by equating the ratio of marginal utility to price for all goods.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is (are) true?

Accepted Answer

A)  A budget constraint limits what a poor consumer can spend, but there is no similar constraint on rich people. 
B)  Utility maximization requires seeking the greatest utility from a given budget. 
C)  In consumer choice theory, we assume all goods and services are normal. 
D)  All of the above are true. 
A)  A budget constraint limits what a poor consumer can spend, but there is no similar constraint on rich people. 
B)  Utility maximization requires seeking the greatest utility from a given budget. 
C)  In consumer choice theory, we assume all goods and services are normal. 
D)  All of the above are true.

Question 5

If there is an increase in the price of good Z and the quantity demanded of Z goes down, a possible explanation for this is:

Accepted Answer

A)  Z is a normal good. 
B)  the substitution effect. 
C)  Z is a Giffen good. 
D)  both A and B are correct. 
A)  Z is a normal good. 
B)  the substitution effect. 
C)  Z is a Giffen good. 
D)  both A and B are correct.

Question 6

Total utility is at a maximum when marginal utility is zero.

Accepted Answer

A) True 
 B)False

Question 7

Negatively sloped demand curves can be explained by the law of diminishing marginal utility.

Accepted Answer

A) True 
 B)False

Question 8

The maximum amount of one good a consumer would be willing to give up in order to obtain an additional unit of another is called the:

Accepted Answer

A)  marginal rate of substitution. 
B)  marginal rate of utility exchange. 
C)  average rate of substitution. 
D)  marginal rate of exchange. 
A)  marginal rate of substitution. 
B)  marginal rate of utility exchange. 
C)  average rate of substitution. 
D)  marginal rate of exchange.

Question 9

If a consumer purchases a combination of commodities x and y such that MUx/Px = 20 and MUy/Py = 10, 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 10

The income effect of a normal good will not reinforce the substitution effect.

Accepted Answer

A) True 
 B)False

Question 11

Given the consumer's income, a decrease in the prices of both commodities X and Y will shift the budget line for those goods to the right.

Accepted Answer

A) True 
 B)False

Question 12

Along an indifference curve, the combination of 10 units of X and 1 unit of Y represents a larger total utility than the combination of 5 units of X and 5 units of Y.

Accepted Answer

A) True 
 B)False

Question 13

You decide to decrease the quantity of ice cream purchased each month when the price increases in part because the higher price causes an implicit reduction in your income. This is an indication of the:

Accepted Answer

A)  income effect. 
B)  utility effect. 
C)  consumption effect. 
D)  substitution effect. 
A)  income effect. 
B)  utility effect. 
C)  consumption effect. 
D)  substitution effect.

Question 14

Which of the following is not an explanation as to why the demand curve is negatively sloped?

Accepted Answer

A)  the law of diminishing marginal utility 
B)  the law of increasing total utility 
C)  the substitution effect 
D)  the income effect 
A)  the law of diminishing marginal utility 
B)  the law of increasing total utility 
C)  the substitution effect 
D)  the income effect

Question 15

If a consumer purchases a combination of commodities a and b such that MUa/Pa = 40 and MUb/Pb = 60, to maximize utility, the consumer should buy:

Accepted Answer

A)  less of both a and b. 
B)  less of a and more of b. 
C)  more of both a and b. 
D)  more of a and less of b. 
A)  less of both a and b. 
B)  less of a and more of b. 
C)  more of both a and b. 
D)  more of a and less of b.

Question 16

-(Exhibit: Consumer Equilibrium 3) The highest attainable level of utility, given budget constraint FL, is at point:

Accepted Answer

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

Question 17

Which of the following is (are) true?

Accepted Answer

A)  The goal of a consumer is to maximize utility. 
B)  A consumer will consume each good at a level that yields the maximum utility possible. 
C)  Rich consumers are not constrained by income or budget constraints. 
D)  A and C are true. 
A)  The goal of a consumer is to maximize utility. 
B)  A consumer will consume each good at a level that yields the maximum utility possible. 
C)  Rich consumers are not constrained by income or budget constraints. 
D)  A and C are true.

Question 18

The conceptual measure of the satisfaction a person obtains by consuming a given quantity of a good or service during a given time period is:

Accepted Answer

A)  average product. 
B)  marginal cost. 
C)  marginal revenue. 
D)  total utility. 
A)  average product. 
B)  marginal cost. 
C)  marginal revenue. 
D)  total utility.

Question 19

Assume that the total utilities corresponding to the first five units of a product consumed are 10, 15, 19, 22, and 24, respectively. The marginal utility of the third unit is:

Accepted Answer

A)  19. 
B)  15. 
C)  4. 
D)  3. 
A)  19. 
B)  15. 
C)  4. 
D)  3.

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, consuming 5 pounds of rutabagas and 1/2 pound of broccoli per month. 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

The budget constraint sets the limits placed on a consumer's choices regarding consumption.

-(Exhibit: Utility) Total utility is maximized at the _______ unit.

The utility-maximizing condition is achieved by equating the ratio of marginal utility to price for all goods.

Which of the following is (are) true?

If there is an increase in the price of good Z and the quantity demanded of Z goes down, a possible explanation for this is:

Total utility is at a maximum when marginal utility is zero.

Negatively sloped demand curves can be explained by the law of diminishing marginal utility.

The maximum amount of one good a consumer would be willing to give up in order to obtain an additional unit of another is called the:

If a consumer purchases a combination of commodities x and y such that MUx/Px = 20 and MUy/Py = 10, to maximize utility, the consumers should buy.

The income effect of a normal good will not reinforce the substitution effect.

Given the consumer's income, a decrease in the prices of both commodities X and Y will shift the budget line for those goods to the right.

Along an indifference curve, the combination of 10 units of X and 1 unit of Y represents a larger total utility than the combination of 5 units of X and 5 units of Y.

You decide to decrease the quantity of ice cream purchased each month when the price increases in part because the higher price causes an implicit reduction in your income. This is an indication of the:

Which of the following is not an explanation as to why the demand curve is negatively sloped?

If a consumer purchases a combination of commodities a and b such that MUa/Pa = 40 and MUb/Pb = 60, to maximize utility, the consumer should buy:

-(Exhibit: Consumer Equilibrium 3) The highest attainable level of utility, given budget constraint FL, is at point:

Which of the following is (are) true?

The conceptual measure of the satisfaction a person obtains by consuming a given quantity of a good or service during a given time period is:

Assume that the total utilities corresponding to the first five units of a product consumed are 10, 15, 19, 22, and 24, respectively. The marginal utility of the third unit is:

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, consuming 5 pounds of rutabagas and 1/2 pound of broccoli per month. 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

If a consumer purchases a combination of commodities x and y such that MU_x/P_x = 20 and MU_y/P_y = 10, to maximize utility, the consumers should buy.

If a consumer purchases a combination of commodities a and b such that MU_a/P_a = 40 and MU_b/P_b = 60, to maximize utility, the consumer should buy: