Question 1

Indifference theory is based on the assumption that

Accepted Answer

A) consumers can always say which of two consumption bundles they prefer without having to say by how much they prefer it. 
B) the consumer is able to quantify the difference in total utility received from two different consumption bundles. 
C) the consumer has equated the marginal utilities of all products,and is therefore indifferent between consumption bundles. 
D) the consumer receives the same utility and is therefore indifferent between any two consumption bundles. 
E) consumers are not able to rank consumption bundles in order of preference. 
A) consumers can always say which of two consumption bundles they prefer without having to say by how much they prefer it. 
B) the consumer is able to quantify the difference in total utility received from two different consumption bundles. 
C) the consumer has equated the marginal utilities of all products,and is therefore indifferent between consumption bundles. 
D) the consumer receives the same utility and is therefore indifferent between any two consumption bundles. 
E) consumers are not able to rank consumption bundles in order of preference. A

Question 2

The table below shows the total value (in dollars)that Andrew gets from playing 9- hole rounds of golf. $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Rounds of } \
\text { Golf per } \
\text { Month }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Value } \
( \$ )
\end{array} \
\hline 0 & 0 \
\hline 1 & 40 \
\hline 2 & 70 \
\hline 3 & 92 \
\hline 4 & 108 \
\hline 5 & 120 \
\hline 6 & 130 \
\hline 7 & 130 \
\hline
\end{array}$$ TABLE 6- 3
-Refer to Table 6- 3.If the price of a 9- hole round of golf is $16,and Andrew is maximizing his utility,then his consumer surplus will be

Accepted Answer

A) $310. 
B) $92. 
C) $108. 
D) $16. 
E) $44. 
A) $310. 
B) $92. 
C) $108. 
D) $16. 
E) $44. E

Question 3

The market demand curve is derived from

Accepted Answer

A) a weighted average of the quantity demanded of all individuals in the economy at each price. 
B) the vertical summation of individual demand curves. 
C) market data provided by Statistics Canada. 
D) the average quantity demanded of all individuals in the economy. 
E) the horizontal summation of individual demand curves. 
A) a weighted average of the quantity demanded of all individuals in the economy at each price. 
B) the vertical summation of individual demand curves. 
C) market data provided by Statistics Canada. 
D) the average quantity demanded of all individuals in the economy. 
E) the horizontal summation of individual demand curves. E

Question 4

The figures below show Chris's consumption of specialty coffee per week.
   FIGURE 6- 10
-Refer to Figure 6- 10.The line connecting points A,B and C is _.The line connecting points D,E and F is .

Accepted Answer

A) the demand curve; the budget line 
B) the income- consumption line; the budget line 
C) the price- consumption line; the demand curve 
D) the budget line; the price- consumption line 
E) the income- consumption line; the demand curve 
A) the demand curve; the budget line 
B) the income- consumption line; the budget line 
C) the price- consumption line; the demand curve 
D) the budget line; the price- consumption line 
E) the income- consumption line; the demand curve

Question 5

Suppose a consumer can purchase only two goods,beef and chicken.If the price of beef falls (with all other variables held constant),and the consumption of chicken increases,we can conclude that the increased consumption of chicken is due to

Accepted Answer

A) a change in the consumer's preference toward chicken. 
B) neither the income effect nor the substitution effect. 
C) the substitution effect only. 
D) both the income effect and the substitution effect. 
E) the income effect only. 
A) a change in the consumer's preference toward chicken. 
B) neither the income effect nor the substitution effect. 
C) the substitution effect only. 
D) both the income effect and the substitution effect. 
E) the income effect only.

Question 6

Consider the income and substitution effects of price changes.For a product with an income elasticity greater than one,a price increase will cause the consumer's real income to

Accepted Answer

A) rise and the quantity purchased to rise. 
B) fall and the quantity purchased to rise. 
C) remain constant. 
D) fall and the quantity purchased to fall. 
E) rise and the quantity purchased to fall. 
A) rise and the quantity purchased to rise. 
B) fall and the quantity purchased to rise. 
C) remain constant. 
D) fall and the quantity purchased to fall. 
E) rise and the quantity purchased to fall.

Question 7

The table below shows the quantities of toffee bars and bags of cashews that a consumer could consume over a 1- week period. $\begin{array}{|c|c|c|c|c|}
&\text { Toffee (bars)}&&\text { Cashews (bags) }\
\hline \text { Units } & \begin{array}{c}
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Utility }
\end{array} \
\hline 1 & 10 & 10 & 12 & 12 \
\hline 2 & 8 & 18 & 10 & 22 \
\hline 3 & 5 & 23 & 7 & 29 \
\hline 4 & 3 & 26 & 5 & 34 \
\hline 5 & 1 & 27 & 2 & 36 \
\hline 6 & 0 & 27 & 1 & 37 \
\hline 7 & 0 & 27 & 0 & 27 \
\hline
\end{array}$ TABLE 6- 1
-Suppose a utility- maximizing person consumes only two goods,hamburgers and milkshakes.Suppose the price of milkshakes rises and all other variables remain constant.As a result,this person will certainly

Accepted Answer

A) not increase his consumption of both milkshakes and hamburgers. 
B) increase his/her consumption of milkshakes. 
C) purchase more milkshakes and fewer hamburgers. 
D) consume more hamburgers and the same amount of milkshakes. 
E) reduce his/her consumption of both milkshakes and hamburgers. 
A) not increase his consumption of both milkshakes and hamburgers. 
B) increase his/her consumption of milkshakes. 
C) purchase more milkshakes and fewer hamburgers. 
D) consume more hamburgers and the same amount of milkshakes. 
E) reduce his/her consumption of both milkshakes and hamburgers.

Question 8

If all consumers in an economy have maximized their utility,and they face a given set of market prices,then each consumer will have identical

Accepted Answer

A) total utilities for each good. 
B) consumption of each good. 
C) marginal utilities per unit of each good. 
D) marginal utilities for each good. 
E) ratios of marginal utility to price for each good. 
A) total utilities for each good. 
B) consumption of each good. 
C) marginal utilities per unit of each good. 
D) marginal utilities for each good. 
E) ratios of marginal utility to price for each good.

Question 9

Given a particular consumer's indifference map,the further the indifference curve is from the origin

Accepted Answer

A) the higher the marginal rate of substitution. 
B) the higher the level of satisfaction. 
C) the more goods are included. 
D) the lower the marginal rate of substitution. 
E) the lower the level of satisfaction. 
A) the higher the marginal rate of substitution. 
B) the higher the level of satisfaction. 
C) the more goods are included. 
D) the lower the marginal rate of substitution. 
E) the lower the level of satisfaction.

Question 10

The table below shows the total value (in dollars)that Andrew gets from playing 9- hole rounds of golf. $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Rounds of } \
\text { Golf per } \
\text { Month }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Value } \
( \$ )
\end{array} \
\hline 0 & 0 \
\hline 1 & 40 \
\hline 2 & 70 \
\hline 3 & 92 \
\hline 4 & 108 \
\hline 5 & 120 \
\hline 6 & 130 \
\hline 7 & 130 \
\hline
\end{array}$$ TABLE 6- 3
-Consumer surplus is

Accepted Answer

A) the total value that a consumer receives from the purchase of a particular good. 
B) the consumption of a commodity above and beyond the amount required by the consumer. 
C) a measure of the gains that a consumer forgoes by buying this product rather than another. 
D) the difference between what the consumer is willing to pay for all the units consumed and what he or she actually paid. 
E) the sum of the marginal values to the consumer. 
A) the total value that a consumer receives from the purchase of a particular good. 
B) the consumption of a commodity above and beyond the amount required by the consumer. 
C) a measure of the gains that a consumer forgoes by buying this product rather than another. 
D) the difference between what the consumer is willing to pay for all the units consumed and what he or she actually paid. 
E) the sum of the marginal values to the consumer.

Question 11

FIGURE 6- 2  
-Refer to Figure 6- 2.Suppose the price of X is $2,the price of Y is $1,and the consumer's income is $10.The consumer is currently buying 4 units of good X and 2 units of good Y.In order to maximize his utility,he should

Accepted Answer

A) buy the same amount of X but less Y. 
B) make no changes-he is already maximizing his total utility. 
C) buy less of X and more Y. 
D) buy more of X but the same amount Y. 
E) buy more of X and less Y. 
A) buy the same amount of X but less Y. 
B) make no changes-he is already maximizing his total utility. 
C) buy less of X and more Y. 
D) buy more of X but the same amount Y. 
E) buy more of X and less Y.

Question 12

Christine is allocating her household expenditure between cleaning services and gardening services in order to maximize the household's total utility.For the quantities of cleaning and gardening services she has chosen,an increase in the price of cleaning service will,ceteris paribus,

Accepted Answer

A) increase the marginal utility of a unit of cleaning service. 
B) have no effect on the marginal utility per dollar spent on cleaning service. 
C) reduce the marginal utility of a unit of cleaning service. 
D) reduce the marginal utility per dollar spent on cleaning service. 
E) increase the marginal utility per dollar spent on cleaning service. 
A) increase the marginal utility of a unit of cleaning service. 
B) have no effect on the marginal utility per dollar spent on cleaning service. 
C) reduce the marginal utility of a unit of cleaning service. 
D) reduce the marginal utility per dollar spent on cleaning service. 
E) increase the marginal utility per dollar spent on cleaning service.

Question 13

If the income effect of a price change is negative and larger in absolute terms than the substitution effect,then the demand curve will be

Accepted Answer

A) of indeterminate slope. 
B) downward sloping. 
C) horizontal. 
D) vertical. 
E) upward sloping. 
A) of indeterminate slope. 
B) downward sloping. 
C) horizontal. 
D) vertical. 
E) upward sloping.

Question 14

FIGURE 6- 2  
-As a consumer moves along an indifference curve

Accepted Answer

A) the combination of goods and the consumer's income level will remain constant. 
B) the combination of goods will vary,but the level of money income remains constant. 
C) the combination of goods will vary but the level of utility remains constant. 
D) his level of utility will vary as the combinations of goods varies. 
E) the combination of goods he prefers will remain constant,but the level of satisfaction will vary. 
A) the combination of goods and the consumer's income level will remain constant. 
B) the combination of goods will vary,but the level of money income remains constant. 
C) the combination of goods will vary but the level of utility remains constant. 
D) his level of utility will vary as the combinations of goods varies. 
E) the combination of goods he prefers will remain constant,but the level of satisfaction will vary.

Question 15

Consider the pizza market,with a downward- sloping demand curve and an upward- sloping supply curve.Suppose 100 pizzas are purchased at the free- market equilibrium price.The consumer surplus on the 100th pizza is

Accepted Answer

A) positive. 
B) zero. 
C) negative. 
D) unknown. 
E) non- negative. 
A) positive. 
B) zero. 
C) negative. 
D) unknown. 
E) non- negative.

Question 16

The table below shows the quantities of toffee bars and bags of cashews that a consumer could consume over a 1- week period. $\begin{array}{|c|c|c|c|c|}
&\text { Toffee (bars)}&&\text { Cashews (bags) }\
\hline \text { Units } & \begin{array}{c}
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Utility }
\end{array} \
\hline 1 & 10 & 10 & 12 & 12 \
\hline 2 & 8 & 18 & 10 & 22 \
\hline 3 & 5 & 23 & 7 & 29 \
\hline 4 & 3 & 26 & 5 & 34 \
\hline 5 & 1 & 27 & 2 & 36 \
\hline 6 & 0 & 27 & 1 & 37 \
\hline 7 & 0 & 27 & 0 & 27 \
\hline
\end{array}$ TABLE 6- 1
-Refer to Table 6- 1.If the price of toffee bars is $1 each,bags of cashews are $2 each,and this consumer has $7 per week to spend on these two snacks,how many of each will he/she purchase to maximize utility?

Accepted Answer

A) 3 toffee bars and 2 bags of cashews 
B) 0 toffee bars and 3 bags of cashews 
C) 7 toffee bars and 0 bags of cashews 
D) 1 toffee bars and 3 bags of cashews 
E) 2 toffee bars and 2 bags of cashews 
A) 3 toffee bars and 2 bags of cashews 
B) 0 toffee bars and 3 bags of cashews 
C) 7 toffee bars and 0 bags of cashews 
D) 1 toffee bars and 3 bags of cashews 
E) 2 toffee bars and 2 bags of cashews

Question 17

The Smith family is allocating its monthly household expenditure between only two goods,food and clothing.Suppose that the price of food is $5 per unit,and the price of clothing is $10 per unit and that the marginal utility that the family is receiving from its consumption of food is currently 25.What is the family's marginal utility from its consumption of clothing if it is maximizing its utility?

Accepted Answer

A) 10 
B) 50 
C) 25 
D) 5 
E) 12.5 
A) 10 
B) 50 
C) 25 
D) 5 
E) 12.5

Question 18

Assume a person reveals the following demand conditions.At a price of $10,quantity demanded is zero; and at a price of $1,quantity demanded is 10 units.

Accepted Answer

A) The consumer surplus will be zero at a price of $10. 
B) Demand decreases as the price decreases. 
C) The lower the price the smaller the consumer surplus. 
D) The consumer surplus is zero at a price of $1. 
E) The consumer surplus will be the area under the entire demand curve. 
A) The consumer surplus will be zero at a price of $10. 
B) Demand decreases as the price decreases. 
C) The lower the price the smaller the consumer surplus. 
D) The consumer surplus is zero at a price of $1. 
E) The consumer surplus will be the area under the entire demand curve.

Question 19

Assume an individual with a downward- sloping demand curve is paying a single price for each unit of some commodity.He will experience consumer surplus on

Accepted Answer

A) all units that were not bought at that particular price. 
B) none of the units. 
C) all of the units bought. 
D) the first unit only. 
E) all units bought with the possible exception of the last unit. 
A) all units that were not bought at that particular price. 
B) none of the units. 
C) all of the units bought. 
D) the first unit only. 
E) all units bought with the possible exception of the last unit.

Question 20

The total value that Doug places on his consumption of computer games equals

Accepted Answer

A) the price multiplied by quantity demanded. 
B) the total amount he pays for all the games he purchases. 
C) price times marginal value. 
D) his marginal utility multiplied by quantity demanded. 
E) his total expenditure on computer games plus his consumer surplus. 
A) the price multiplied by quantity demanded. 
B) the total amount he pays for all the games he purchases. 
C) price times marginal value. 
D) his marginal utility multiplied by quantity demanded. 
E) his total expenditure on computer games plus his consumer surplus.

Indifference theory is based on the assumption that

The market demand curve is derived from

The figures below show Chris's consumption of specialty coffee per week. FIGURE 6- 10 -Refer to Figure 6- 10.The line connecting points A,B and C is _.The line connecting points D,E and F is .

Suppose a consumer can purchase only two goods,beef and chicken.If the price of beef falls (with all other variables held constant),and the consumption of chicken increases,we can conclude that the increased consumption of chicken is due to

Consider the income and substitution effects of price changes.For a product with an income elasticity greater than one,a price increase will cause the consumer's real income to

If all consumers in an economy have maximized their utility,and they face a given set of market prices,then each consumer will have identical

Given a particular consumer's indifference map,the further the indifference curve is from the origin

The table below shows the total value (in dollars)that Andrew gets from playing 9- hole rounds of golf. Rounds of Golf per Month Total Value (\ ) 0 0 1 40 2 70 3 92 4 108 5 120 6 130 7 130 TABLE 6- 3 -Consumer surplus is

FIGURE 6- 2 -Refer to Figure 6- 2.Suppose the price of X is $2,the price of Y is $1,and the consumer's income is $10.The consumer is currently buying 4 units of good X and 2 units of good Y.In order to maximize his utility,he should

Christine is allocating her household expenditure between cleaning services and gardening services in order to maximize the household's total utility.For the quantities of cleaning and gardening services she has chosen,an increase in the price of cleaning service will,ceteris paribus,

If the income effect of a price change is negative and larger in absolute terms than the substitution effect,then the demand curve will be

FIGURE 6- 2 -As a consumer moves along an indifference curve

Consider the pizza market,with a downward- sloping demand curve and an upward- sloping supply curve.Suppose 100 pizzas are purchased at the free- market equilibrium price.The consumer surplus on the 100th pizza is

Assume a person reveals the following demand conditions.At a price of $10,quantity demanded is zero; and at a price of $1,quantity demanded is 10 units.

Assume an individual with a downward- sloping demand curve is paying a single price for each unit of some commodity.He will experience consumer surplus on

The total value that Doug places on his consumption of computer games equals

Economic Issues and Concepts

Economic Theories,data,and Graphs

Demand,supply,and Price

Elasticity

Markets in Action

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly,cartels,and Price Discrimination

Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets

Interest Rates and the Capital Market

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

The Gains From International Trade

Trade Policy

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Exam 6: Consumer Behaviour

Indifference theory is based on the assumption that

The market demand curve is derived from

The figures below show Chris's consumption of specialty coffee per week. FIGURE 6- 10 -Refer to Figure 6- 10.The line connecting points A,B and C is _.The line connecting points D,E and F is .

Suppose a consumer can purchase only two goods,beef and chicken.If the price of beef falls (with all other variables held constant),and the consumption of chicken increases,we can conclude that the increased consumption of chicken is due to

Consider the income and substitution effects of price changes.For a product with an income elasticity greater than one,a price increase will cause the consumer's real income to

If all consumers in an economy have maximized their utility,and they face a given set of market prices,then each consumer will have identical

Given a particular consumer's indifference map,the further the indifference curve is from the origin

The table below shows the total value (in dollars)that Andrew gets from playing 9- hole rounds of golf. Rounds of Golf per Month Total Value (\ ) 0 0 1 40 2 70 3 92 4 108 5 120 6 130 7 130 TABLE 6- 3 -Consumer surplus is

FIGURE 6- 2 -Refer to Figure 6- 2.Suppose the price of X is $2,the price of Y is $1,and the consumer's income is $10.The consumer is currently buying 4 units of good X and 2 units of good Y.In order to maximize his utility,he should

Christine is allocating her household expenditure between cleaning services and gardening services in order to maximize the household's total utility.For the quantities of cleaning and gardening services she has chosen,an increase in the price of cleaning service will,ceteris paribus,

If the income effect of a price change is negative and larger in absolute terms than the substitution effect,then the demand curve will be

FIGURE 6- 2 -As a consumer moves along an indifference curve

Consider the pizza market,with a downward- sloping demand curve and an upward- sloping supply curve.Suppose 100 pizzas are purchased at the free- market equilibrium price.The consumer surplus on the 100th pizza is

Assume a person reveals the following demand conditions.At a price of $10,quantity demanded is zero; and at a price of $1,quantity demanded is 10 units.

Assume an individual with a downward- sloping demand curve is paying a single price for each unit of some commodity.He will experience consumer surplus on

The total value that Doug places on his consumption of computer games equals

Economic Issues and Concepts

Economic Theories,data,and Graphs

Demand,supply,and Price

Elasticity

Markets in Action

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly,cartels,and Price Discrimination

Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets

Interest Rates and the Capital Market

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

The Gains From International Trade

Trade Policy

Filters