Question 1

Economists use the term "marginal utility" to describe the

Accepted Answer

A) inverse of the measure of total utility. 
B) average utility of each unit of a good consumed. 
C) change in total satisfaction caused by consumption of an additional unit of a good. 
D) price paid for every unit consumed. 
E) total satisfaction received from consumption of a good. 
A) inverse of the measure of total utility. 
B) average utility of each unit of a good consumed. 
C) change in total satisfaction caused by consumption of an additional unit of a good. 
D) price paid for every unit consumed. 
E) total satisfaction received from consumption of a good.

Question 2

Consider the income and substitution effects of price changes.The substitution effect is the change in quantity demanded that occurs

Accepted Answer

A) when one good is substituted for another. 
B) with a change in the relative prices of two or more goods. 
C) as a result of a change in relative prices,with real income held constant. 
D) as a result of a change in relative prices with money income held constant. 
E) as a result of a change in absolute prices,with real income held constant. 
A) when one good is substituted for another. 
B) with a change in the relative prices of two or more goods. 
C) as a result of a change in relative prices,with real income held constant. 
D) as a result of a change in relative prices with money income held constant. 
E) as a result of a change in absolute prices,with real income held constant.

Question 3

The substitution effect of a price change leads consumers to _ their demand for goods whose prices have risen.The income effect leads consumers to buy less of all goods whose prices have risen.

Accepted Answer

A) reduce; normal 
B) reduce; Giffen 
C) increase; normal 
D) increase; inferior 
E) reduce; complement 
A) reduce; normal 
B) reduce; Giffen 
C) increase; normal 
D) increase; inferior 
E) reduce; complement

Question 4

The substitution effect is

Accepted Answer

A) the change in quantity demanded that occurs when one good is substituted for another. 
B) the change in quantity demanded that occurs as a result of a change in absolute prices,with real income held constant. 
C) the change in quantity demanded that occurs as a result of a change in relative prices with money income held constant. 
D) the change in quantity demanded that occurs as a result of a change in relative prices with real income held constant. 
E) the change in the relative prices of two or more goods. 
A) the change in quantity demanded that occurs when one good is substituted for another. 
B) the change in quantity demanded that occurs as a result of a change in absolute prices,with real income held constant. 
C) the change in quantity demanded that occurs as a result of a change in relative prices with money income held constant. 
D) the change in quantity demanded that occurs as a result of a change in relative prices with real income held constant. 
E) the change in the relative prices of two or more goods.

Question 5

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
-If total utility from the consumption of some product is decreasing as more units are consumed,then marginal utility must be

Accepted Answer

A) decreasing. 
B) increasing at a decreasing rate. 
C) decreasing at an increasing rate. 
D) positive. 
E) negative. 
A) decreasing. 
B) increasing at a decreasing rate. 
C) decreasing at an increasing rate. 
D) positive. 
E) negative.

Question 6

When a consumer's marginal rate of substitution between X and Y is equal to the ratio of prices for X and Y,and when the consumer is spending all available income,then

Accepted Answer

A) the consumer is not maximizing his utility. 
B) the budget line is tangent to the indifference curve at all quantities of X and Y. 
C) a higher indifference curve can be reached given the existing budget line. 
D) all budget lines are tangent to all indifference curves. 
E) the budget line is tangent to an indifference curve. 
A) the consumer is not maximizing his utility. 
B) the budget line is tangent to the indifference curve at all quantities of X and Y. 
C) a higher indifference curve can be reached given the existing budget line. 
D) all budget lines are tangent to all indifference curves. 
E) the budget line is tangent to an indifference curve.

Question 7

A consumer maximizes his or her utility when expenditures are allocated such that

Accepted Answer

A) the utility received per dollar spent on the last unit of each good is equal. 
B) the marginal utility is zero for each good consumed utility. 
C) the utility received from the last unit of each good is equal. 
D) the total number of dollars spent on each good is equal. 
E) the total utility from each good is equal. 
A) the utility received per dollar spent on the last unit of each good is equal. 
B) the marginal utility is zero for each good consumed utility. 
C) the utility received from the last unit of each good is equal. 
D) the total number of dollars spent on each good is equal. 
E) the total utility from each good is equal.

Question 8

In indifference curve analysis,the consumer's utility- maximizing point is where

Accepted Answer

A) the indifference curve farthest from the origin intersects with the budget line that is farthest from the origin. 
B) the consumer's marginal utility curve is tangent to the relevant budget line. 
C) the price- consumption line is tangent to the budget line. 
D) one indifference curve is tangent to the relevant budget line. 
E) each indifference curve has the same slope as the relevant budget line. 
A) the indifference curve farthest from the origin intersects with the budget line that is farthest from the origin. 
B) the consumer's marginal utility curve is tangent to the relevant budget line. 
C) the price- consumption line is tangent to the budget line. 
D) one indifference curve is tangent to the relevant budget line. 
E) each indifference curve has the same slope as the relevant budget line.

Question 9

The marginal rate of substitution measures the tradeoff between the

Accepted Answer

A) different values that two consumers place on a good. 
B) prices of two goods along a budget line. 
C) amount of one good the consumer is willing to purchase and its own price. 
D) different indifference curves. 
E) amount of one good the consumer is willing to give up in exchange for another good along an indifference curve. 
A) different values that two consumers place on a good. 
B) prices of two goods along a budget line. 
C) amount of one good the consumer is willing to purchase and its own price. 
D) different indifference curves. 
E) amount of one good the consumer is willing to give up in exchange for another good along an indifference curve.

Question 10

An individual's consumer surplus from some product can be eliminated entirely by: 1.raising the price until very few units are bought.
2.charging a price for each unit that is equal to the individual's marginal value for each unit.
3.raising the price until zero units are purchased.

Accepted Answer

A) 1 only 
B) 2 only 
C) 3 only 
D) 2 or 3 
E) 1 or 2,but not 3. 
A) 1 only 
B) 2 only 
C) 3 only 
D) 2 or 3 
E) 1 or 2,but not 3.

Question 11

Given a typical downward- sloping demand curve in a market that has reached its equilibrium,the consumer surplus

Accepted Answer

A) is calculated as the product of market price and quantity consumed. 
B) is measured by the area above the market price and under the demand curve. 
C) is measured by the area below the market price and under the demand curve. 
D) is measured by the area immediately above the demand curve. 
E) cannot be measured given the information. 
A) is calculated as the product of market price and quantity consumed. 
B) is measured by the area above the market price and under the demand curve. 
C) is measured by the area below the market price and under the demand curve. 
D) is measured by the area immediately above the demand curve. 
E) cannot be measured given the information.

Question 12

At a garage sale,Ken purchases a used bicycle for $8 when he was willing to pay $25.If the bicycle costs $75 new,Ken's consumer surplus is

Accepted Answer

A) $50. 
B) $67. 
C) $17. 
D) $33. 
E) $0. 
A) $50. 
B) $67. 
C) $17. 
D) $33. 
E) $0.

Question 13

Assume you are consuming two goods,X and Y.X and Y are both normal goods but they are not close complements.The price of good X increases but the price of Y remains unchanged.However,you are given enough additional income to ensure that your utility remains unchanged.What happens to your consumption of good X?

Accepted Answer

A) it increases or decreases 
B) it increases over the long run 
C) it stays the same 
D) it decreases 
E) it increases 
A) it increases or decreases 
B) it increases over the long run 
C) it stays the same 
D) it decreases 
E) it increases

Economists use the term "marginal utility" to describe the

Consider the income and substitution effects of price changes.The substitution effect is the change in quantity demanded that occurs

The substitution effect of a price change leads consumers to _ their demand for goods whose prices have risen.The income effect leads consumers to buy less of all goods whose prices have risen.

The substitution effect is

When a consumer's marginal rate of substitution between X and Y is equal to the ratio of prices for X and Y,and when the consumer is spending all available income,then

A consumer maximizes his or her utility when expenditures are allocated such that

In indifference curve analysis,the consumer's utility- maximizing point is where

The marginal rate of substitution measures the tradeoff between the

An individual's consumer surplus from some product can be eliminated entirely by: 1.raising the price until very few units are bought. 2.charging a price for each unit that is equal to the individual's marginal value for each unit. 3.raising the price until zero units are purchased.

Given a typical downward- sloping demand curve in a market that has reached its equilibrium,the consumer surplus

At a garage sale,Ken purchases a used bicycle for $8 when he was willing to pay $25.If the bicycle costs $75 new,Ken's consumer surplus is

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

Economists use the term "marginal utility" to describe the

Consider the income and substitution effects of price changes.The substitution effect is the change in quantity demanded that occurs

The substitution effect of a price change leads consumers to _ their demand for goods whose prices have risen.The income effect leads consumers to buy less of all goods whose prices have risen.

The substitution effect is

When a consumer's marginal rate of substitution between X and Y is equal to the ratio of prices for X and Y,and when the consumer is spending all available income,then

A consumer maximizes his or her utility when expenditures are allocated such that

In indifference curve analysis,the consumer's utility- maximizing point is where

The marginal rate of substitution measures the tradeoff between the

An individual's consumer surplus from some product can be eliminated entirely by: 1.raising the price until very few units are bought. 2.charging a price for each unit that is equal to the individual's marginal value for each unit. 3.raising the price until zero units are purchased.

Given a typical downward- sloping demand curve in a market that has reached its equilibrium,the consumer surplus

At a garage sale,Ken purchases a used bicycle for $8 when he was willing to pay $25.If the bicycle costs $75 new,Ken's consumer surplus is

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