Question 1

-(Exhibit: Consumer Equilibrium 3) Assume that you are consuming the combination of goods at point G. 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 2

In prisoner of war camps, as described in the Case in Point, economists would expect to find:

Accepted Answer

A)  the law of diminishing marginal doesn't hold. 
B)  trade prohibited by the lack of money to facilitate exchange. 
C)  that each prisoner consumes all the rations given to them by their captors. 
D)  none of the above. 
A)  the law of diminishing marginal doesn't hold. 
B)  trade prohibited by the lack of money to facilitate exchange. 
C)  that each prisoner consumes all the rations given to them by their captors. 
D)  none of the above.

Question 3

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

Accepted Answer

A)  15. 
B)  10. 
C)  5. 
D)  0. 
A)  15. 
B)  10. 
C)  5. 
D)  0.

Question 4

It is through a consumer's reaction to different _______ that we can trace the consumer's ________ curve for a good.

Accepted Answer

A)  prices; supply 
B)  prices; total utility 
C)  budgets; demand 
D)  prices; demand 
A)  prices; supply 
B)  prices; total utility 
C)  budgets; demand 
D)  prices; demand

Question 5

Following an income-compensated price change, you decide to increase the quantity of pizza purchased each month when the price decreases and therefore purchase fewer hamburgers. This is an indication of the:

Accepted Answer

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

Question 6

Which of the following is true?

Accepted Answer

A)  The law of diminishing marginal utility is seldom verified in economic analysis. 
B)  The law of diminishing marginal utility is never verified in economic analysis. 
C)  The law of diminishing marginal utility has been proven to be true in economic analysis. 
D)  The law of diminishing marginal utility has never been proven true, but it is verified by economists as consistent with the analysis of real-world demand. 
A)  The law of diminishing marginal utility is seldom verified in economic analysis. 
B)  The law of diminishing marginal utility is never verified in economic analysis. 
C)  The law of diminishing marginal utility has been proven to be true in economic analysis. 
D)  The law of diminishing marginal utility has never been proven true, but it is verified by economists as consistent with the analysis of real-world demand.

Question 7

According to the Case in Point on the discovery of an upward-sloping demand curve, an example of a Giffen good:

Accepted Answer

A)  is rice for poor consumers in southern China. 
B)  potatoes during the Irish famine. 
C)  tortillas for poor consumers in Mexico. 
D)  would be all inferior goods. 
A)  is rice for poor consumers in southern China. 
B)  potatoes during the Irish famine. 
C)  tortillas for poor consumers in Mexico. 
D)  would be all inferior goods.

Question 8

The income 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 an implicit increase in income and can now buy more of the good. 
B)  When the price of a good falls, consumers will now substitute this lower priced good for more higher priced goods. 
C)  The income effect is the relative change in the amount of a good consumed when the price of another good changes. 
D)  The income effect shows how a change in income at a given price will affect the quantity of a good purchased. 
A)  When the price of a good falls, consumers have an implicit increase in income and can now buy more of the good. 
B)  When the price of a good falls, consumers will now substitute this lower priced good for more higher priced goods. 
C)  The income effect is the relative change in the amount of a good consumed when the price of another good changes. 
D)  The income effect shows how a change in income at a given price will affect the quantity of a good purchased.

Question 9

Which of the following is true regarding a budget constraint?

Accepted Answer

A)  The budget constraint indicates that consumers desire more income. 
B)  The budget constraint indicates that there are limits on the consumption possibilities for a consumer. 
C)  The budget constraint is based on some, but not all of the prices for goods that consumers may want to buy. 
D)  All of the above statements describe the budget constraint. 
A)  The budget constraint indicates that consumers desire more income. 
B)  The budget constraint indicates that there are limits on the consumption possibilities for a consumer. 
C)  The budget constraint is based on some, but not all of the prices for goods that consumers may want to buy. 
D)  All of the above statements describe the budget constraint.

Question 10

When the price of a normal good increases, the substitution effect will:

Accepted Answer

A)  result in the quantity demanded going down so much that the income effect is unable to increase demand. 
B)  work with the income effect to exert pressure on the quantity demanded to fall. 
C)  work with the income effect to exert pressure on the quantity demanded to increase. 
D)  work in a direction opposite the income effect. 
A)  result in the quantity demanded going down so much that the income effect is unable to increase demand. 
B)  work with the income effect to exert pressure on the quantity demanded to fall. 
C)  work with the income effect to exert pressure on the quantity demanded to increase. 
D)  work in a direction opposite the income effect.

Question 11

Whatever the time period involved, a consumer's spending will be _______ by his or her _______ .

Accepted Answer

A)  unlimited; marginal utility 
B)  limited; marginal utility 
C)  limited; budget 
D)  unlimited; budget 
A)  unlimited; marginal utility 
B)  limited; marginal utility 
C)  limited; budget 
D)  unlimited; budget

Question 12

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. Suppose the price of an apple is $0.20, while the price of a Reese's Peanut Butter Cup is $0.25. To maximize her total utility, assuming that the goods are divisible, she would:

Accepted Answer

A)  consume more Reese's Butter Cups and fewer apples. 
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 Reese's Butter Cups and fewer apples. 
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 13

Total Utility and Marginal Utility from Consumption of Good A
  
-(Exhibit: Total Utility and Marginal Utility from Consumption of Good A) Marginal utility of good A is found by:

Accepted Answer

A)  dividing total utility by the number of units consumed of good A. 
B)  dividing the change in the number of units of A by the change in total utility of A. 
C)  computing the change in total utility of A resulting from the consumption of one more unit of A. 
D)  doing none of the above. 
A)  dividing total utility by the number of units consumed of good A. 
B)  dividing the change in the number of units of A by the change in total utility of A. 
C)  computing the change in total utility of A resulting from the consumption of one more unit of A. 
D)  doing none of the above.

Question 14

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

Accepted Answer

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

Question 15

Which of the following statements is true regarding utility?

Accepted Answer

A)  Utility can be measured. 
B)  Utility cannot be measured. 
C)  Utility, at the margin, eventually increases as more of a good is consumed. 
D)  A and C are true. 
A)  Utility can be measured. 
B)  Utility cannot be measured. 
C)  Utility, at the margin, eventually increases as more of a good is consumed. 
D)  A and C are true.

Question 16

Greater levels of utility are achieved:

Accepted Answer

A)  on higher indifference curves. 
B)  on lower indifference curves. 
C)  by moving up to the left on a given indifference curve. 
D)  by moving down to the right on a given indifference curve. 
A)  on higher indifference curves. 
B)  on lower indifference curves. 
C)  by moving up to the left on a given indifference curve. 
D)  by moving down to the right on a given indifference curve.

Question 17

Following an income-compensated price change, you decide to decrease the quantity of ice cream purchased each month when the price increases and purchase more frozen yogurt instead. This is an indication of the:

Accepted Answer

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

Question 18

The marginal rate of substitution increases as the consumer moves from left to right along a given indifference curve.

Accepted Answer

A) True 
 B)False

Question 19

-(Exhibit: Consumer Equilibrium 3) An unattainable 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 20

When the price of a normal good falls, the substitution effect contributes to a(n) _______ in the quantity demanded and the income effect _______ the substitution effect.

Accepted Answer

A)  decrease; reinforces 
B)  increase; reinforces 
C)  increase; opposes 
D)  decrease; opposes 
A)  decrease; reinforces 
B)  increase; reinforces 
C)  increase; opposes 
D)  decrease; opposes

Exam 7: Cost and Industry Structure

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

In prisoner of war camps, as described in the Case in Point, economists would expect to find:

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

It is through a consumer's reaction to different _______ that we can trace the consumer's ________ curve for a good.

Following an income-compensated price change, you decide to increase the quantity of pizza purchased each month when the price decreases and therefore purchase fewer hamburgers. This is an indication of the:

Which of the following is true?

According to the Case in Point on the discovery of an upward-sloping demand curve, an example of a Giffen good:

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

Which of the following is true regarding a budget constraint?

When the price of a normal good increases, the substitution effect will:

Whatever the time period involved, a consumer's spending will be _______ by his or her _______ .

Total Utility and Marginal Utility from Consumption of Good A -(Exhibit: Total Utility and Marginal Utility from Consumption of Good A) Marginal utility of good A is found by:

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

Which of the following statements is true regarding utility?

Greater levels of utility are achieved:

Following an income-compensated price change, you decide to decrease the quantity of ice cream purchased each month when the price increases and purchase more frozen yogurt instead. This is an indication of the:

The marginal rate of substitution increases as the consumer moves from left to right along a given indifference curve.

-(Exhibit: Consumer Equilibrium 3) An unattainable level of utility, given budget constraint FL, is at point:

When the price of a normal good falls, the substitution effect contributes to a(n) _______ in the quantity demanded and the income effect _______ the substitution effect.

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

It is through a consumer's reaction to different _ that we can trace the consumer's __ curve for a good.

Whatever the time period involved, a consumer's spending will be _ by his or her _ .

When the price of a normal good falls, the substitution effect contributes to a(n) _ in the quantity demanded and the income effect _ the substitution effect.