Question 1

As more of a good is consumed by an individual,

Accepted Answer

A) marginal utility increases. 
B) total utility initially increases. 
C) price falls. 
D) price increases. 
E) total utility stays constant. 
A) marginal utility increases. 
B) total utility initially increases. 
C) price falls. 
D) price increases. 
E) total utility stays constant.

Question 2

Suppose that Mary's willingness to pay for T-shirts is $20 for one T-shirt, $26 for two T-shirts, $30 for three T-shirts, and $32 for four T-shirts. Draw Mary's demand curve for T-shirts. If the price of a T-shirt is $6, how many T-shirts would Mary buy? What is Mary's consumer surplus? Show the consumer surplus in a diagram. Now suppose that a sale reduces the price of T-shirts to $4. How many T-shirts will Mary buy now? What is the new consumer surplus?

Accepted Answer

@#IMG-DLM& If the price of a T-shirt is $6, then M

Question 3

As you move down your indifference curve, total utility decreases.

Accepted Answer

A) True 
 B)False

Question 4

Other things being equal, if there is a price increase of a good measured on the vertical axis, the budget constraint shifts outward.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following represents the substitution effect of an increase in the price of apples?

Accepted Answer

A) A decrease in the consumer's real income 
B) A decrease in the quantity of apples purchased 
C) A decrease in the quantities of all goods purchased by the consumer 
D) A shift of consumption from other goods to apples 
E) A decrease in the opportunity cost of consuming apples 
A) A decrease in the consumer's real income 
B) A decrease in the quantity of apples purchased 
C) A decrease in the quantities of all goods purchased by the consumer 
D) A shift of consumption from other goods to apples 
E) A decrease in the opportunity cost of consuming apples

Question 6

When utility derived from many goods is multiplied or divided by any number, the new utility measure indicates

Accepted Answer

A) a different set of preferences for the highest and the lowest quantities of goods consumed, but the same preferences for the middle quantities. 
B) the same preferences as before. 
C) a different set of preferences only for the highest quantities of goods consumed. 
D) a different set of preferences only for the lowest quantities of goods consumed. 
E) an entirely different set of preferences. 
A) a different set of preferences for the highest and the lowest quantities of goods consumed, but the same preferences for the middle quantities. 
B) the same preferences as before. 
C) a different set of preferences only for the highest quantities of goods consumed. 
D) a different set of preferences only for the lowest quantities of goods consumed. 
E) an entirely different set of preferences.

Question 7

Exhibit 5-3  
-Exhibit 5-3 shows Alison's total utility from consuming yogurt. Which of the following is true?

Accepted Answer

A) The marginal utility of the second cup of yogurt is 1 unit of utility. 
B) The marginal utility of the third cup of yogurt is 20 units of utility. 
C) The marginal utility of the fourth cup of yogurt is 1 unit of utility. 
D) The marginal utility of the fourth cup of yogurt is 21 units of utility. 
E) The marginal utility of the first cup of yogurt is 0. 
A) The marginal utility of the second cup of yogurt is 1 unit of utility. 
B) The marginal utility of the third cup of yogurt is 20 units of utility. 
C) The marginal utility of the fourth cup of yogurt is 1 unit of utility. 
D) The marginal utility of the fourth cup of yogurt is 21 units of utility. 
E) The marginal utility of the first cup of yogurt is 0.

Question 8

Refer to the table below. Calculate the total utility of 4 cans of Coca-Cola.

Accepted Answer

Add the marginal uti

Question 9

Exhibit 5A-2  
-A budget line indicates different combinations of two products that can be purchased by a consumer with a given budget.

Accepted Answer

A) True 
 B)False

Question 10

When marginal utility is positive but decreasing, an increase in quantity decreases total utility.

Accepted Answer

A) True 
 B)False

Question 11

The height of a demand curve represents the

Accepted Answer

A) value that a consumer is willing to pay for a good. 
B) price that a producer wishes to charge for a good. 
C) price that a consumer must pay the producer of a good. 
D) minimum value that consumers consider about a good. 
E) total volume of exchange in a market. 
A) value that a consumer is willing to pay for a good. 
B) price that a producer wishes to charge for a good. 
C) price that a consumer must pay the producer of a good. 
D) minimum value that consumers consider about a good. 
E) total volume of exchange in a market.

Question 12

Water is cheaper than diamonds because

Accepted Answer

A) water is a less useful resource. 
B) markets fail to reflect value. 
C) water yields lower total utility. 
D) the last drop of water consumed yields lower marginal utility. 
E) people receive negative utility from water. 
A) water is a less useful resource. 
B) markets fail to reflect value. 
C) water yields lower total utility. 
D) the last drop of water consumed yields lower marginal utility. 
E) people receive negative utility from water.

Question 13

The additional satisfaction gained from consuming one more unit of a product or service is

Accepted Answer

A) marginal utility. 
B) total utility. 
C) the same for every person. 
D) average utility. 
E) not measurable. 
A) marginal utility. 
B) total utility. 
C) the same for every person. 
D) average utility. 
E) not measurable.

Question 14

Total utility always increases when a person increases the consumption of one good while reducing the consumption of another.

Accepted Answer

A) True 
 B)False

Question 15

Indifference curves

Accepted Answer

A) are straight lines. 
B) show the different combinations of goods and services that consumers prefer. 
C) must intersect. 
D) bow outward with respect to the origin. 
E) do not intersect. 
A) are straight lines. 
B) show the different combinations of goods and services that consumers prefer. 
C) must intersect. 
D) bow outward with respect to the origin. 
E) do not intersect.

Question 16

Exhibit 5-8  
-Refer to Exhibit 5-8. If Stephanie and Roger are the only consumers, at a price of $3, the total consumer surplus is

Accepted Answer

A) $4. 
B) $3. 
C) $1. 
D) $11. 
E) $2. 
A) $4. 
B) $3. 
C) $1. 
D) $11. 
E) $2.

Question 17

Other things being equal, if the price of a good rises, the consumer surplus of that good

Accepted Answer

A) rises. 
B) falls. 
C) remains the same. 
D) rises and then falls. 
E) cannot be determined given the available information. 
A) rises. 
B) falls. 
C) remains the same. 
D) rises and then falls. 
E) cannot be determined given the available information.

Question 18

The maximum combinations of goods and services a consumer can buy because he or she has a limited amount of money to spend is called the

Accepted Answer

A) production possibilities. 
B) marginal propensity to consume. 
C) maximum total utility curve. 
D) indifference curve. 
E) budget constraint. 
A) production possibilities. 
B) marginal propensity to consume. 
C) maximum total utility curve. 
D) indifference curve. 
E) budget constraint.

Question 19

The budget constraint is the set of all prices of the goods an individual regularly consumes.

Accepted Answer

A) True 
 B)False

Question 20

At any point on an indifference curve for an individual consuming two goods, A and B, with A on the vertical axis and B on the horizontal axis, the slope is equal to

Accepted Answer

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

Exam 5: The Demand Curve and the Behavior of Consumers

As more of a good is consumed by an individual,

As you move down your indifference curve, total utility decreases.

Other things being equal, if there is a price increase of a good measured on the vertical axis, the budget constraint shifts outward.

Which of the following represents the substitution effect of an increase in the price of apples?

When utility derived from many goods is multiplied or divided by any number, the new utility measure indicates

Exhibit 5-3 -Exhibit 5-3 shows Alison's total utility from consuming yogurt. Which of the following is true?

Refer to the table below. Calculate the total utility of 4 cans of Coca-Cola.

Exhibit 5A-2 -A budget line indicates different combinations of two products that can be purchased by a consumer with a given budget.

When marginal utility is positive but decreasing, an increase in quantity decreases total utility.

The height of a demand curve represents the

Water is cheaper than diamonds because

The additional satisfaction gained from consuming one more unit of a product or service is

Total utility always increases when a person increases the consumption of one good while reducing the consumption of another.

Indifference curves

Exhibit 5-8 -Refer to Exhibit 5-8. If Stephanie and Roger are the only consumers, at a price of $3, the total consumer surplus is

Other things being equal, if the price of a good rises, the consumer surplus of that good

The maximum combinations of goods and services a consumer can buy because he or she has a limited amount of money to spend is called the

The budget constraint is the set of all prices of the goods an individual regularly consumes.

At any point on an indifference curve for an individual consuming two goods, A and B, with A on the vertical axis and B on the horizontal axis, the slope is equal to

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

Filters