Question 1

If the first four units of a good consumed have marginal utilities of 10, 9, 8, and 7, respectively, this trend is an indication of the:

Accepted Answer

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

Question 2

The ability of a good to satisfy a want refers to its:

Accepted Answer

A)  utility. 
B)  usefulness. 
C)  worthiness. 
D)  necessity. 
A)  utility. 
B)  usefulness. 
C)  worthiness. 
D)  necessity.

Question 3

Total Utility and Marginal Utility from Consumption of Good A
  
-(Exhibit: Total Utility and Marginal Utility from Consumption of Good A) If 2 units of A are consumed, the total utility received is _______ , and the marginal utility of the second unit is _______ .

Accepted Answer

A)   4; 9 
B)   9; 4 
C)   12; 3 
D)   14; 9 
A)   4; 9 
B)   9; 4 
C)   12; 3 
D)   14; 9

Question 4

In the early 1970s, the handheld calculator came out on the market. Before that time ,the desktop calculator was an important item for those who had to make calculations. Use the theory of consumer maximizing behavior to explain what happened in the desktop calculator market and the handheld calculator market since then.

Accepted Answer

The theory of consumer maximizing behavi

Question 5

-(Exhibit: Consumer Equilibrium 1) Assume that the price of both goods is $1 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 X and more of Y. 
B)  more of both X and Y. 
C)  less of both X and Y. 
D)  more of X and less of Y. 
A)  less of X and more of Y. 
B)  more of both X and Y. 
C)  less of both X and Y. 
D)  more of X and less of Y.

Question 6

A curve that represents combinations of two goods that yield equal levels of satisfaction is a(n):

Accepted Answer

A)  indifference curve. 
B)  budget curve. 
C)  marginal utility curve. 
D)  price-consumption curve. 
A)  indifference curve. 
B)  budget curve. 
C)  marginal utility curve. 
D)  price-consumption curve.

Question 7

A budget line is based on given:

Accepted Answer

A)  tastes. 
B)  money income. 
C)  satisfaction. 
D)  consumer preferences. 
A)  tastes. 
B)  money income. 
C)  satisfaction. 
D)  consumer preferences.

Question 8

A consumer's downward-sloping demand curve for a good reflects the fact that the marginal utility of the good increases as more of it is consumed.

Accepted Answer

A) True 
 B)False

Question 9

If the marginal utility from consuming a good is less than zero, total utility must be falling.

Accepted Answer

A) True 
 B)False

Question 10

In the case of Giffen goods, the income effect dominates the substitution effect.

Accepted Answer

A) True 
 B)False

Question 11

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:

Accepted Answer

A)  the marginal utility of peanut butter and of ice cream will rise. 
B)  the marginal utility of peanut butter and of ice cream will fall. 
C)  the marginal utility of peanut butter will fall, and the marginal utility of ice cream will rise. 
D)  the marginal utility of peanut butter will rise, and the marginal utility of ice cream will fall. 
A)  the marginal utility of peanut butter and of ice cream will rise. 
B)  the marginal utility of peanut butter and of ice cream will fall. 
C)  the marginal utility of peanut butter will fall, and the marginal utility of ice cream will rise. 
D)  the marginal utility of peanut butter will rise, and the marginal utility of ice cream will fall.

Question 12

The change in a consumer's consumption of a good in response to an income-compensated price change is called the:

Accepted Answer

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

Question 13

Which of the following statements is (are) true?

Accepted Answer

A)  As a consumer consumes more and more of a good or service, its marginal utility eventually falls. 
B)  Utility is a quality inherent in the good or service itself. 
C)  Marginal utility is the change in total utility resulting from consuming one more or one less unit of a good. 
D)  Both A and C are true. 
A)  As a consumer consumes more and more of a good or service, its marginal utility eventually falls. 
B)  Utility is a quality inherent in the good or service itself. 
C)  Marginal utility is the change in total utility resulting from consuming one more or one less unit of a good. 
D)  Both A and C are true.

Question 14

A change in the ability to purchase a good because its price has increased is most closely related to the:

Accepted Answer

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

Question 15

-(Exhibit: Consumer Equilibrium 1) Assume that the price of good X is $5 per unit, the price of good Y is $1 per unit, and you have $10 of income to spend on both goods. To maximize utility, you would consume _______ units of X and _______ units of Y.

Accepted Answer

A)  0; 1 
B)  1; 5 
C)  4; 6 
D)  5; 5 
A)  0; 1 
B)  1; 5 
C)  4; 6 
D)  5; 5

Question 16

If the combination of two goods is a point of tangency between the budget line and an indifference curve, then:

Accepted Answer

A)  consumer equilibrium has been achieved. 
B)  some available income has not been spent. 
C)  utility can be decreased by consuming more of both goods. 
D)  utility can be increased by consuming more of one good and less of the other. 
A)  consumer equilibrium has been achieved. 
B)  some available income has not been spent. 
C)  utility can be decreased by consuming more of both goods. 
D)  utility can be increased by consuming more of one good and less of the other.

Question 17

If a consumer purchases a combination of commodities x and y such that MUx/Px = 20 and MUy/Py = 5, to maximize utility, the consumers should buy.

Accepted Answer

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

Question 18

Which of the following statements most fully explains a driver's decision, as discussed in the Case in Point on Changing Lane and Raising Utility, to pay to use a highway express lane?

Accepted Answer

A)  The total utility of using the lane must be greater than zero. 
B)  The marginal utility per dollar on using the lane must be greater than zero. 
C)  The marginal utility per dollar spent on the lane must be equal to the price per gallon of gasoline plus associated driving costs. 
D)  The marginal utility per dollar spent on the lane must be greater than the marginal utility per dollar spent on the next best alternative. 
A)  The total utility of using the lane must be greater than zero. 
B)  The marginal utility per dollar on using the lane must be greater than zero. 
C)  The marginal utility per dollar spent on the lane must be equal to the price per gallon of gasoline plus associated driving costs. 
D)  The marginal utility per dollar spent on the lane must be greater than the marginal utility per dollar spent on the next best alternative.

Question 19

Utility is most closely related to the term:

Accepted Answer

A)  usefulness. 
B)  satisfaction. 
C)  requirement. 
D)  necessity. 
A)  usefulness. 
B)  satisfaction. 
C)  requirement. 
D)  necessity.

Question 20

Combinations of two goods that yield equal levels of utility are shown on a(n) _______ curve.

Accepted Answer

A)  indifference 
B)  budget 
C)  marginal utility 
D)  utility maximizing 
A)  indifference 
B)  budget 
C)  marginal utility 
D)  utility maximizing

Exam 7: Cost and Industry Structure

If the first four units of a good consumed have marginal utilities of 10, 9, 8, and 7, respectively, this trend is an indication of the:

The ability of a good to satisfy a want refers to its:

Total Utility and Marginal Utility from Consumption of Good A -(Exhibit: Total Utility and Marginal Utility from Consumption of Good A) If 2 units of A are consumed, the total utility received is _______ , and the marginal utility of the second unit is _______ .

-(Exhibit: Consumer Equilibrium 1) Assume that the price of both goods is $1 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:

A curve that represents combinations of two goods that yield equal levels of satisfaction is a(n):

A budget line is based on given:

A consumer's downward-sloping demand curve for a good reflects the fact that the marginal utility of the good increases as more of it is consumed.

If the marginal utility from consuming a good is less than zero, total utility must be falling.

In the case of Giffen goods, the income effect dominates the substitution effect.

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:

The change in a consumer's consumption of a good in response to an income-compensated price change is called the:

Which of the following statements is (are) true?

A change in the ability to purchase a good because its price has increased is most closely related to the:

-(Exhibit: Consumer Equilibrium 1) Assume that the price of good X is $5 per unit, the price of good Y is $1 per unit, and you have $10 of income to spend on both goods. To maximize utility, you would consume _______ units of X and _______ units of Y.

If the combination of two goods is a point of tangency between the budget line and an indifference curve, then:

If a consumer purchases a combination of commodities x and y such that MUx/Px = 20 and MUy/Py = 5, to maximize utility, the consumers should buy.

Which of the following statements most fully explains a driver's decision, as discussed in the Case in Point on Changing Lane and Raising Utility, to pay to use a highway express lane?

Utility is most closely related to the term:

Combinations of two goods that yield equal levels of utility are shown on a(n) _______ curve.

Welcome to Economics

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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

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Public Economy

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Economic Growth

Unemployment

Inflation

The International Trade and Capital Flows

The Aggregate Demandaggregate Supply Model

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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

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Filters

Total Utility and Marginal Utility from Consumption of Good A -(Exhibit: Total Utility and Marginal Utility from Consumption of Good A) If 2 units of A are consumed, the total utility received is _ , and the marginal utility of the second unit is _ .

-(Exhibit: Consumer Equilibrium 1) Assume that the price of good X is $5 per unit, the price of good Y is $1 per unit, and you have $10 of income to spend on both goods. To maximize utility, you would consume _ units of X and _ units of Y.

If a consumer purchases a combination of commodities x and y such that MU_x/P_x = 20 and MU_y/P_y = 5, to maximize utility, the consumers should buy.