Question 1

Exhibit 5A-1  
-Refer to Exhibit 5A-1. Which of the following statements is false?

Accepted Answer

A) At point C, MUX/MUY > PX/PY. 
B) Curve I2 represents a greater level of utility than I1. 
C) If the individual started at point A and moved to point B, the most likely cause was a decrease in the price of X. 
D) In moving from point A to point B, the individual is moving down along his or her demand curve for good Y. 
E) At point B, MUX/PX = MUY/PY. 
A) At point C, MUX/MUY > PX/PY. 
B) Curve I2 represents a greater level of utility than I1. 
C) If the individual started at point A and moved to point B, the most likely cause was a decrease in the price of X. 
D) In moving from point A to point B, the individual is moving down along his or her demand curve for good Y. 
E) At point B, MUX/PX = MUY/PY. D

Question 2

The height of the demand curve is the amount of marginal benefit.

Accepted Answer

A) True 
 B)False  True

Question 3

A point on the budget constraint represents the fact that the consumer spends less than her or his income.

Accepted Answer

A) True 
 B)False  False

Question 4

The slope of a budget line for two goods, A and B, with A on the vertical axis and B on the horizontal axis, is equal to

Accepted Answer

A) -PA/PB. 
B) PB/PA. 
C) -PB/PA. 
D) -MUA/PB. 
E) PA/PB. 
A) -PA/PB. 
B) PB/PA. 
C) -PB/PA. 
D) -MUA/PB. 
E) PA/PB.

Question 5

Which of the following statements about market demand curves is true?

Accepted Answer

A) Only similar demand curves can be summed to make market demand. 
B) Market demand curves are usually shaped similar to individual demand curves. 
C) The inclusion of many individuals' demand curves makes market demand smooth. 
D) Market demand shifts upward as each additional individual demand curve is added. 
E) Market demand shifts downward as each additional individual demand curve is added. 
A) Only similar demand curves can be summed to make market demand. 
B) Market demand curves are usually shaped similar to individual demand curves. 
C) The inclusion of many individuals' demand curves makes market demand smooth. 
D) Market demand shifts upward as each additional individual demand curve is added. 
E) Market demand shifts downward as each additional individual demand curve is added.

Question 6

The term utility maximization means that

Accepted Answer

A) individuals consume to gain as much utility as possible, given the limits of the budget constraint. 
B) total utility does not change with a change in income. 
C) once utility is at its maximum, leftover income can be saved. 
D) individuals consume the maximum amount of a good that the budget constraint makes possible. 
E) individuals maximize their usefulness to society. 
A) individuals consume to gain as much utility as possible, given the limits of the budget constraint. 
B) total utility does not change with a change in income. 
C) once utility is at its maximum, leftover income can be saved. 
D) individuals consume the maximum amount of a good that the budget constraint makes possible. 
E) individuals maximize their usefulness to society.

Question 7

Like marginal utility, marginal benefit

Accepted Answer

A) measures satisfaction for a consumer. 
B) is used to analyze government behavior. 
C) decreases with increased consumption of a good. 
D) is a purely theoretical, immeasurable quantity. 
E) is a dollar measure. 
A) measures satisfaction for a consumer. 
B) is used to analyze government behavior. 
C) decreases with increased consumption of a good. 
D) is a purely theoretical, immeasurable quantity. 
E) is a dollar measure.

Question 8

Consumer surplus is

Accepted Answer

A) equivalent to value in use. 
B) equivalent to value in exchange. 
C) the difference between total expenditure and what consumers have to pay per unit. 
D) total expenditure divided by the price per unit. 
E) the difference between what consumers would be willing to pay and what they have to pay. 
A) equivalent to value in use. 
B) equivalent to value in exchange. 
C) the difference between total expenditure and what consumers have to pay per unit. 
D) total expenditure divided by the price per unit. 
E) the difference between what consumers would be willing to pay and what they have to pay.

Question 9

To maximize utility, the amount that a consumer is willing to pay for one more unit of a good must equal the marginal benefit of that unit of good.

Accepted Answer

A) True 
 B)False

Question 10

A change in the price of a good changes a consumer's budget constraint and causes a shift of the demand curve.

Accepted Answer

A) True 
 B)False

Question 11

The budget constraint

Accepted Answer

A) is the combined price of all goods and services an individual can consume. 
B) is the total amount of money an individual can spend on goods and services per period of time. 
C) is the maximum amount of money an individual can gain without earning it. 
D) applies only to society as a whole, not to individuals. 
E) is the total amount of utility an individual can receive from goods and services per period of time. 
A) is the combined price of all goods and services an individual can consume. 
B) is the total amount of money an individual can spend on goods and services per period of time. 
C) is the maximum amount of money an individual can gain without earning it. 
D) applies only to society as a whole, not to individuals. 
E) is the total amount of utility an individual can receive from goods and services per period of time.

Question 12

Marginal utility can be positive, zero, or negative.

Accepted Answer

A) True 
 B)False

Question 13

An individual's demand curve is not continuous mainly because

Accepted Answer

A) total utility is not continuous. 
B) marginal benefit is not continuous. 
C) quantity is not continuous. 
D) marginal utility is not continuous. 
E) price is not continuous. 
A) total utility is not continuous. 
B) marginal benefit is not continuous. 
C) quantity is not continuous. 
D) marginal utility is not continuous. 
E) price is not continuous.

Question 14

Exhibit 5-7  
-The market demand curve represents the utility maximization behavior of a typical consumer.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 5-7  
-Exhibit 5-7 shows the willingness of Monet and Andrew to pay for latte. If the market price of one cup of latte is $2, then the total demand for latte equals

Accepted Answer

A) 3 cups. 
B) 6 cups. 
C) 7 cups. 
D) 8 cups. 
E) 10 cups. 
A) 3 cups. 
B) 6 cups. 
C) 7 cups. 
D) 8 cups. 
E) 10 cups.

Question 16

Exhibit 5-5  
-Refer to Exhibit 5-5. The maximum amount that a consumer is willing to pay for the tenth unit of the good is

Accepted Answer

A) $0. 
B) $2.5. 
C) $5.0. 
D) $7.5. 
E) impossible to determine given the available information. 
A) $0. 
B) $2.5. 
C) $5.0. 
D) $7.5. 
E) impossible to determine given the available information.

Question 17

Exhibit 5-1  
-Refer to Exhibit 5-1. At 4 cans of soda, total utility is

Accepted Answer

A) 27 units. 
B) 9 units. 
C) 189 units. 
D) 135 units. 
E) 162 units. 
A) 27 units. 
B) 9 units. 
C) 189 units. 
D) 135 units. 
E) 162 units.

Question 18

To obtain utility, a consumer must

Accepted Answer

A) do unto others as he or she would have them do unto him or her. 
B) save. 
C) consume. 
D) work. 
E) be happy. 
A) do unto others as he or she would have them do unto him or her. 
B) save. 
C) consume. 
D) work. 
E) be happy.

Question 19

Why does an individual consume a good so that marginal benefit is equal to price?

Accepted Answer

Marginal benefit reflects willingness to

Question 20

In terms of indifference curve analysis, equilibrium occurs at the point of tangency of the indifference curve and the demand curve.

Accepted Answer

A) True 
 B)False

Exam 5: The Demand Curve and the Behavior of Consumers

Exhibit 5A-1 -Refer to Exhibit 5A-1. Which of the following statements is false?

The height of the demand curve is the amount of marginal benefit.

A point on the budget constraint represents the fact that the consumer spends less than her or his income.

The slope of a budget line for two goods, A and B, with A on the vertical axis and B on the horizontal axis, is equal to

Which of the following statements about market demand curves is true?

The term utility maximization means that

Like marginal utility, marginal benefit

Consumer surplus is

To maximize utility, the amount that a consumer is willing to pay for one more unit of a good must equal the marginal benefit of that unit of good.

A change in the price of a good changes a consumer's budget constraint and causes a shift of the demand curve.

The budget constraint

Marginal utility can be positive, zero, or negative.

An individual's demand curve is not continuous mainly because

Exhibit 5-7 -The market demand curve represents the utility maximization behavior of a typical consumer.

Exhibit 5-7 -Exhibit 5-7 shows the willingness of Monet and Andrew to pay for latte. If the market price of one cup of latte is $2, then the total demand for latte equals

Exhibit 5-5 -Refer to Exhibit 5-5. The maximum amount that a consumer is willing to pay for the tenth unit of the good is

Exhibit 5-1 -Refer to Exhibit 5-1. At 4 cans of soda, total utility is

To obtain utility, a consumer must

Why does an individual consume a good so that marginal benefit is equal to price?

In terms of indifference curve analysis, equilibrium occurs at the point of tangency of the indifference curve and the demand curve.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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