Question 1

Lucy buys only magazines and CDs.Both are normal goods.Lucy's income decreases,but the prices of magazines and CDs do not change.Marginal utility theory predicts that

Accepted Answer

A) Lucy buys more magazines and more CDs. 
B) Lucy buys fewer magazines and fewer CDs. 
C) Lucy's demand curve for magazines shifts leftward. 
D) Lucy's demand curve for CDs shifts leftward. 
E) B,C,and D are correct. 
A) Lucy buys more magazines and more CDs. 
B) Lucy buys fewer magazines and fewer CDs. 
C) Lucy's demand curve for magazines shifts leftward. 
D) Lucy's demand curve for CDs shifts leftward. 
E) B,C,and D are correct.

Question 2

A behavioural economist will explain Tom's donation to charity by saying that Tom is displaying

Accepted Answer

A) the endowment effect. 
B) bounded rationality. 
C) bounded self-interest. 
D) bounded will-power. 
E) the neuro effect. 
A) the endowment effect. 
B) bounded rationality. 
C) bounded self-interest. 
D) bounded will-power. 
E) the neuro effect.

Question 3

Use the table below to answer the following question.
Table 8.2.5
 $$\begin{array} { | c | c | c | } 
\hline \text { Hours per month } & \begin{array} { c } 
\text { Marginal utility } \
\text { from golf }
\end{array} & \begin{array} { c } 
\text { Marginal utility } \
\text { from tennis }
\end{array} \
\hline 1 & 80 & 40 \
\hline 2 & 60 & 36 \
\hline 3 & 40 & 30 \
\hline 4 & 30 & 10 \
\hline 5 & 20 & 5 \
\hline 6 & 10 & 2 \
\hline 7 & 6 & 1 \
\hline
\end{array}$$
-Refer to Table 8.2.5.Cindy enjoys golf and tennis.The table shows the marginal utility she gets from each activity. Cindy has $70 a month to spend,and she can spend as much time as she likes on her leisure pursuits.The price of an hour of golf is $10,and the price of an hour of tennis is $5.
Cindy decides to golf for 5 hours a month and play tennis for 4 hours a month.
If Cindy spends a dollar more on golf and a dollar less on tennis,her total utility ________.
If Cindy spends a dollar less on golf and a dollar more on tennis,her total utility ________.

Accepted Answer

A) decreases;decreases 
B) increases;decreases 
C) decreases;increases 
D) increases;increases 
E) does not change;does not change 
A) decreases;decreases 
B) increases;decreases 
C) decreases;increases 
D) increases;increases 
E) does not change;does not change

Question 4

If the marginal utilities from two goods are not equal,then the consumer

Accepted Answer

A) cannot be in equilibrium. 
B) should increase consumption of the good with the lower marginal utility. 
C) should decrease consumption of the good with the lower marginal utility. 
D) may possibly be in equilibrium. 
E) will definitely be in equilibrium. 
A) cannot be in equilibrium. 
B) should increase consumption of the good with the lower marginal utility. 
C) should decrease consumption of the good with the lower marginal utility. 
D) may possibly be in equilibrium. 
E) will definitely be in equilibrium.

Question 5

Billy Jean loves to read and she has decided that she will buy all of her books at the bookstore at the outlet mall.One day she is in Chapters and sees a book from the Globe and Mail Best Sellers list that she wants to read and she decides to buy it. Buying the book means that she will not be able to take her Mom out for coffee this week.
Billy Jean's decision is an example of

Accepted Answer

A) bounded economics. 
B) bounded self-interest. 
C) bounded will-power. 
D) bounded rationality. 
E) all of the above. 
A) bounded economics. 
B) bounded self-interest. 
C) bounded will-power. 
D) bounded rationality. 
E) all of the above.

Question 6

Ben spends $50 a year on 2 bunches of flowers and $50 a year on 10,000 litres of tap water.Ben is maximizing utility.His marginal utility from water is 0.5 units per litre. ________ more valuable to Ben than ________.
Ben's expenditure on flowers and water illustrates the paradox of value because Ben's marginal utility from flowers is ________ than his marginal utility from water and his total utility from flowers is ________ than his total utility from water.

Accepted Answer

A) Water is;flowers;greater;less 
B) Water is;flowers;less;greater 
C) Flowers are;water;greater;less 
D) Flowers are;water;less;greater 
E) None of the above because Ben values flowers and water equally 
A) Water is;flowers;greater;less 
B) Water is;flowers;less;greater 
C) Flowers are;water;greater;less 
D) Flowers are;water;less;greater 
E) None of the above because Ben values flowers and water equally

Question 7

The budget line

Accepted Answer

A) shows the limits to a household's consumption choices. 
B) shows the households total utility. 
C) is downward sloping because it illustrates decreasing marginal utility. 
D) shows how a household's consumption choices change as income changes. 
E) Both A and D are correct. 
A) shows the limits to a household's consumption choices. 
B) shows the households total utility. 
C) is downward sloping because it illustrates decreasing marginal utility. 
D) shows how a household's consumption choices change as income changes. 
E) Both A and D are correct.

Question 8

Utility is similar to temperature because

Accepted Answer

A) both are positive. 
B) both are negative. 
C) both have units of measurement that are arbitrary. 
D) both are observable. 
E) both are measured in the same scale. 
A) both are positive. 
B) both are negative. 
C) both have units of measurement that are arbitrary. 
D) both are observable. 
E) both are measured in the same scale.

Question 9

You are consuming hot dogs and Cokes and believe you are maximizing utility for your entire budget of $12.The price of a hot dog is $2 and the price of a Coke is $2.Suppose the price of hot dogs rises to $4 and the price of a Coke remains at $2.You adjust your consumption of hot dogs and Cokes and believe you are once again receiving maximum total utility from the meal.Which one of the following can you conclude?

Accepted Answer

A) The total utility from hot dogs is maximized. 
B) The marginal utilities from hot dogs and Cokes must be equal. 
C) The marginal utility from hot dogs must rise compared to the marginal utility from Cokes. 
D) You are purchasing 2 hot dogs and 2 Cokes. 
E) You are purchasing 1 hot dog and 4 Cokes. 
A) The total utility from hot dogs is maximized. 
B) The marginal utilities from hot dogs and Cokes must be equal. 
C) The marginal utility from hot dogs must rise compared to the marginal utility from Cokes. 
D) You are purchasing 2 hot dogs and 2 Cokes. 
E) You are purchasing 1 hot dog and 4 Cokes.

Question 10

The three limitations on human rationality that behavioural economics emphasizes are

Accepted Answer

A) bounded rationality,bounded utility,and bounded self-interest. 
B) bounded rationality,bounded will-power,and bounded self-interest. 
C) bounded utility,bounded will-power,and bounded self-interest. 
D) bounded rationality,bounded will-power,and bounded utility. 
E) bounded rationality,bounded surplus,and bounded utility. 
A) bounded rationality,bounded utility,and bounded self-interest. 
B) bounded rationality,bounded will-power,and bounded self-interest. 
C) bounded utility,bounded will-power,and bounded self-interest. 
D) bounded rationality,bounded will-power,and bounded utility. 
E) bounded rationality,bounded surplus,and bounded utility.

Question 11

Use the table below to answer the following questions.
Table 8.2.1
Windsurfing equipment rents for $10 per hour,snorkeling equipment for $5 per hour.
 $$\begin{array}{l}
\hline  \text { Hours }&\text { Total Utility }&\text { Total Utility }\\text { per Month }&\text { from Windsurfing }&\text { from Snorkeling }\
\hline 1 & 60 & 20 \
2 & 110 & 38 \
3 & 150 & 53 \
4 & 180 & 64 \
5 & 200 & 70
\end{array}$$
-Consider Devon's total utility from snorkeling and windsurfing in Table 8.2.1.Suppose Devon's total income is $35.If the price of windsurfing rises to $20 per hour,what is Devon's cross elasticity of demand of snorkeling with respect to the price of windsurfing?

Accepted Answer

A) 1.0 
B) 0.67 
C) 1.5 
D) 10 
E) 1.33 
A) 1.0 
B) 0.67 
C) 1.5 
D) 10 
E) 1.33

Question 12

In consumer equilibrium,a consumer equates the

Accepted Answer

A) total utility from each good. 
B) marginal utility from each good. 
C) total utility per dollar on each good. 
D) marginal utility per dollar on each good. 
E) total income spent on each good with total utility from each good. 
A) total utility from each good. 
B) marginal utility from each good. 
C) total utility per dollar on each good. 
D) marginal utility per dollar on each good. 
E) total income spent on each good with total utility from each good.

Question 13

Beverly is currently in consumer equilibrium.An increase in her income

Accepted Answer

A) increases her total utility. 
B) decreases her total utility. 
C) increases her marginal utility from all goods. 
D) decreases her marginal utility from all goods. 
E) increases her consumption of all goods. 
A) increases her total utility. 
B) decreases her total utility. 
C) increases her marginal utility from all goods. 
D) decreases her marginal utility from all goods. 
E) increases her consumption of all goods.

Question 14

Total utility is always

Accepted Answer

A) greater than marginal utility. 
B) less than marginal utility. 
C) decreasing when marginal utility is decreasing. 
D) decreasing when marginal utility is increasing. 
E) increasing when marginal utility is positive. 
A) greater than marginal utility. 
B) less than marginal utility. 
C) decreasing when marginal utility is decreasing. 
D) decreasing when marginal utility is increasing. 
E) increasing when marginal utility is positive.

Question 15

If Sean thinks that the choice between going to Olive Garden or Red Lobster is simply too confusing,a behavioural economist will explain that Sean is showing

Accepted Answer

A) the endowment effect. 
B) bounded rationality. 
C) bounded self-interest. 
D) bounded will-power. 
E) irrational behaviour. 
A) the endowment effect. 
B) bounded rationality. 
C) bounded self-interest. 
D) bounded will-power. 
E) irrational behaviour.

Question 16

If Katie purchases two slices of pizza and six breadsticks to maximize her total utility,then

Accepted Answer

A) a slice of pizza costs three times as much as a breadstick. 
B) her marginal utility from the second slice of pizza divided by the price of a slice of pizza is equal to her marginal utility from the sixth breadstick divided by the price of a breadstick. 
C) a breadstick costs three times as much as a slice of pizza. 
D) she spends more on pizza than she spends on breadsticks. 
E) B and D are both correct. 
A) a slice of pizza costs three times as much as a breadstick. 
B) her marginal utility from the second slice of pizza divided by the price of a slice of pizza is equal to her marginal utility from the sixth breadstick divided by the price of a breadstick. 
C) a breadstick costs three times as much as a slice of pizza. 
D) she spends more on pizza than she spends on breadsticks. 
E) B and D are both correct.

Question 17

If a consumer spends all his income and his marginal utility per dollar is equal for all goods,then

Accepted Answer

A) marginal utility is maximized. 
B) total utility is maximized. 
C) he cannot be better off even with more income. 
D) the proportion of income spent on each good must be equal. 
E) the number of units bought of each good must be equal. 
A) marginal utility is maximized. 
B) total utility is maximized. 
C) he cannot be better off even with more income. 
D) the proportion of income spent on each good must be equal. 
E) the number of units bought of each good must be equal.

Question 18

The paradox of value asks why

Accepted Answer

A) bad things happen to good people. 
B) the price of water is low and the price of a diamond is high,but water is essential to life while diamonds are not. 
C) the good die young. 
D) total utility is greater than marginal utility. 
E) the standard of living is higher in North America than in South America. 
A) bad things happen to good people. 
B) the price of water is low and the price of a diamond is high,but water is essential to life while diamonds are not. 
C) the good die young. 
D) total utility is greater than marginal utility. 
E) the standard of living is higher in North America than in South America.

Question 19

If Soula is maximizing her utility,and two goods have the same marginal utility,she

Accepted Answer

A) buys only one. 
B) buys equal quantities of both. 
C) is paying the same price for each good. 
D) receives the same total utility from each good. 
E) none of the above. 
A) buys only one. 
B) buys equal quantities of both. 
C) is paying the same price for each good. 
D) receives the same total utility from each good. 
E) none of the above.

Question 20

Harold can consume apples and oranges.He likes them equally well and currently is in consumer equilibrium.Then the price of oranges rises,while his income remains the same.What will happen to his consumption?

Accepted Answer

A) consumption of oranges increases;consumption of apples decreases 
B) consumption of oranges increases;consumption of apples increases 
C) consumption of oranges decreases;consumption of apples decreases 
D) consumption of oranges decreases;consumption of apples increases 
E) consumption of oranges decreases;consumption of apples could either increase or decrease 
A) consumption of oranges increases;consumption of apples decreases 
B) consumption of oranges increases;consumption of apples increases 
C) consumption of oranges decreases;consumption of apples decreases 
D) consumption of oranges decreases;consumption of apples increases 
E) consumption of oranges decreases;consumption of apples could either increase or decrease

Lucy buys only magazines and CDs.Both are normal goods.Lucy's income decreases,but the prices of magazines and CDs do not change.Marginal utility theory predicts that

A behavioural economist will explain Tom's donation to charity by saying that Tom is displaying

If the marginal utilities from two goods are not equal,then the consumer

The budget line

Utility is similar to temperature because

The three limitations on human rationality that behavioural economics emphasizes are

In consumer equilibrium,a consumer equates the

Beverly is currently in consumer equilibrium.An increase in her income

Total utility is always

If Sean thinks that the choice between going to Olive Garden or Red Lobster is simply too confusing,a behavioural economist will explain that Sean is showing

If Katie purchases two slices of pizza and six breadsticks to maximize her total utility,then

If a consumer spends all his income and his marginal utility per dollar is equal for all goods,then

The paradox of value asks why

If Soula is maximizing her utility,and two goods have the same marginal utility,she

Harold can consume apples and oranges.He likes them equally well and currently is in consumer equilibrium.Then the price of oranges rises,while his income remains the same.What will happen to his consumption?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Possibilities,preferences,and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

Exam 8: Utility and Demand

Lucy buys only magazines and CDs.Both are normal goods.Lucy's income decreases,but the prices of magazines and CDs do not change.Marginal utility theory predicts that

A behavioural economist will explain Tom's donation to charity by saying that Tom is displaying

If the marginal utilities from two goods are not equal,then the consumer

The budget line

Utility is similar to temperature because

The three limitations on human rationality that behavioural economics emphasizes are

In consumer equilibrium,a consumer equates the

Beverly is currently in consumer equilibrium.An increase in her income

Total utility is always

If Sean thinks that the choice between going to Olive Garden or Red Lobster is simply too confusing,a behavioural economist will explain that Sean is showing

If Katie purchases two slices of pizza and six breadsticks to maximize her total utility,then

If a consumer spends all his income and his marginal utility per dollar is equal for all goods,then

The paradox of value asks why

If Soula is maximizing her utility,and two goods have the same marginal utility,she

Harold can consume apples and oranges.He likes them equally well and currently is in consumer equilibrium.Then the price of oranges rises,while his income remains the same.What will happen to his consumption?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Possibilities,preferences,and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters