Question 1

Consumer surplus is

Accepted Answer

A)  the same as Karl Marxʹs notion of surplus value. 
B)  the same as total utility. 
C)  the sum of the extra value placed on each unit of a commodity above the market price paid for each. 
D)  the total value that consumers place on their purchases. 
E)  the marginal value that consumers place on their purchases. 
A)  the same as Karl Marxʹs notion of surplus value. 
B)  the same as total utility. 
C)  the sum of the extra value placed on each unit of a commodity above the market price paid for each. 
D)  the total value that consumers place on their purchases. 
E)  the marginal value that consumers place on their purchases.

Question 2

The table below shows the total value in dollars) that Andrew gets from playing 9-hole rounds of golf.   TABLE 6-3
-Refer to Table 6-3. If the price of a 9-hole round of golf is $19, then Andrew will play rounds per month.

Accepted Answer

A)  2 
B)  3 
C)  4 
D)  5 
E)  6 or more 
A)  2 
B)  3 
C)  4 
D)  5 
E)  6 or more

Question 3

Consider the income and substitution effects of price changes. If the price of a normal good changes, the income effect of the price change will

Accepted Answer

A)  always be larger than the substitution effect. 
B)  always be to increase quantity demanded. 
C)  reinforce the substitution effect. 
D)  produce a positively sloped demand curve. 
E)  oppose the substitution effect. 
A)  always be larger than the substitution effect. 
B)  always be to increase quantity demanded. 
C)  reinforce the substitution effect. 
D)  produce a positively sloped demand curve. 
E)  oppose the substitution effect.

Question 4

If money income is reduced by half, and the prices of all goods consumed by the household are reduced by half, the householdʹs budget line will

Accepted Answer

A)  not change. 
B)  shift inward. 
C)  shift outward. 
D)  become steeper. 
E)  become flatter. 
A)  not change. 
B)  shift inward. 
C)  shift outward. 
D)  become steeper. 
E)  become flatter.

Question 5

Diagrams A, B, and C show 3 individual consumersʹ demand curves for cement. Consumers A, B, and C constitute the entire monthly cement market in this region.
   FIGURE 6-3
-Refer to Figure 6-3. On the regional market demand curve for cement not shown), at which price levels) is there a ʺkinkʺ in the demand curve?

Accepted Answer

A)  $10 
B)  $20 and $30 
C)  $30 and $70 
D)  $40 and $70 
E)  $80 
A)  $10 
B)  $20 and $30 
C)  $30 and $70 
D)  $40 and $70 
E)  $80

Question 6

The table below shows the quantities of toffee bars and bags of cashews that a consumer could consume over a 1-week period.   TABLE 6-1
-Refer to Table 6-1. If the prices of toffee bars and bags of cashews are both $1 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)  2 toffee bars and 5 bags of cashews 
B)  3 toffee bars and 4 bags of cashews 
C)  4 toffee bars and 3 bags of cashews 
D)  5 toffee bars and 2 bags of cashews 
E)  6 toffee bars and 1 bag of cashews 
A)  2 toffee bars and 5 bags of cashews 
B)  3 toffee bars and 4 bags of cashews 
C)  4 toffee bars and 3 bags of cashews 
D)  5 toffee bars and 2 bags of cashews 
E)  6 toffee bars and 1 bag of cashews

Question 7

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

Question 8

A basic hypothesis of marginal utility theory is that the utility a consumer derives from successive units of a good diminishes as total consumption of the good increases. This hypothesis is known as

Accepted Answer

A)  the paradox of value. 
B)  the utility theory of demand. 
C)  utility maximization. 
D)  the law of diminishing marginal utility. 
E)  the law of diminishing total utility. 
A)  the paradox of value. 
B)  the utility theory of demand. 
C)  utility maximization. 
D)  the law of diminishing marginal utility. 
E)  the law of diminishing total utility.

Question 9

The figures below show Chrisʹs consumption of specialty coffee per week.
   FIGURE 6-10
-Refer to Figure 6-10. In general, the absolute value of the slope of the budget lines is equal to

Accepted Answer

A)  the relative price ratio Pspecialty coffee/Pall other goods). 
B)  the relative price ratio Pall other goods/Pspecialty coffee). 
C)  the quantity of all other goods consumed divided by the quantity of specialty coffees consumed. 
D)  $15/value of all other goods. 
E)  the dollar value of all other goods divided by the number of specialty coffees consumed per week. 
A)  the relative price ratio Pspecialty coffee/Pall other goods). 
B)  the relative price ratio Pall other goods/Pspecialty coffee). 
C)  the quantity of all other goods consumed divided by the quantity of specialty coffees consumed. 
D)  $15/value of all other goods. 
E)  the dollar value of all other goods divided by the number of specialty coffees consumed per week.

Question 10

Diagrams A, B, and C show 3 individual consumersʹ demand curves for cement. Consumers A, B, and C constitute the entire monthly cement market in this region.
   FIGURE 6-3
-Refer to Figure 6-3. What is the market demand in cubic metres per month) for cement at a price of $20 per cubic metre?

Accepted Answer

A)  0 
B)  4000 
C)  5000 
D)  10 000 
E)  14 000 
A)  0 
B)  4000 
C)  5000 
D)  10 000 
E)  14 000

Question 11

As a consumer moves along an indifference curve

Accepted Answer

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

Question 12

The demand curve for a good with an income elasticity of less than one

Accepted Answer

A)  must be downward sloping. 
B)  must be upward sloping. 
C)  will be upward sloping only if the substitution effect outweighs the income effect. 
D)  will be upward sloping only if the income effect outweighs the substitution effect. 
E)  indicates a normal good. 
A)  must be downward sloping. 
B)  must be upward sloping. 
C)  will be upward sloping only if the substitution effect outweighs the income effect. 
D)  will be upward sloping only if the income effect outweighs the substitution effect. 
E)  indicates a normal good.

Question 13

The diagram below shows a set of budget lines facing a household.
   FIGURE 6-8
-Refer to Figure 6-8. The movement of the budget line from ab to ef could be caused by

Accepted Answer

A)  a decrease in real income. 
B)  an increase in money income. 
C)  an equal percentage increase in the price of both food and housing. 
D)  a decrease in the price of either food or housing. 
E)  an increase in the price of either food or housing. 
A)  a decrease in real income. 
B)  an increase in money income. 
C)  an equal percentage increase in the price of both food and housing. 
D)  a decrease in the price of either food or housing. 
E)  an increase in the price of either food or housing.

Question 14

FIGURE 6-2
-The market demand curve is derived from

Accepted Answer

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

Question 15

FIGURE 6-2
-Bjorn is a student with a monthly budget of $500, which he allocates between transportation services and ʺall other goods.ʺ Suppose the price of transportation is $5 per unit, and the price of ʺall other goodsʺ is $20 per unit. The marginal utility he currently receives from his consumption of transportation services is 60. What is his marginal utility from the consumption of ʺall other goodsʺ if he is maximizing his utility?

Accepted Answer

A)  5 
B)  20 
C)  25 
D)  200 
E)  240 
A)  5 
B)  20 
C)  25 
D)  200 
E)  240

Question 16

The diagram below shows a set of budget lines facing a household.
   FIGURE 6-8
-Refer to Figure 6-8. The movement of the budget line from ab to ac could be caused by

Accepted Answer

A)  an increase in money income. 
B)  an increase in the price of food. 
C)  an increase in the price of housing. 
D)  a decrease in the price of food. 
E)  a decrease in the price of housing. 
A)  an increase in money income. 
B)  an increase in the price of food. 
C)  an increase in the price of housing. 
D)  a decrease in the price of food. 
E)  a decrease in the price of housing.

Question 17

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

Accepted Answer

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

Question 18

FIGURE 6-2
-If John consumes only two goods, A and B, and he is maximizing his utility subject to his budget constraint,

Accepted Answer

A)  MUA/MUB is at a maximum. 
B)  MUA/MUB equals the ratio of the total utility of A to the total utility of B. 
C)  MUA/MUB equals 1. 
D)  MUA/MUB equals zero. 
E)  MUA/MUB equals the ratio of the price of A to the price of B. 
A)  MUA/MUB is at a maximum. 
B)  MUA/MUB equals the ratio of the total utility of A to the total utility of B. 
C)  MUA/MUB equals 1. 
D)  MUA/MUB equals zero. 
E)  MUA/MUB equals the ratio of the price of A to the price of B.

Question 19

FIGURE 6-2
-John is allocating his household expenditure between groceries and housing in order to maximize total utility. For the quantities of groceries and housing he has chosen, an increase in the price of housing will, ceteris paribus,

Accepted Answer

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

Question 20

FIGURE 6-2
-Refer to Figure 6-2. Suppose the price of X is $2, the price of Y is $1, and the consumerʹs 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)  make no changes he is already maximizing his total utility. 
B)  buy the same amount of X but less Y. 
C)  buy more of X but the same amount Y. 
D)  buy more of X and less Y. 
E)  buy more Y and less X. 
A)  make no changes he is already maximizing his total utility. 
B)  buy the same amount of X but less Y. 
C)  buy more of X but the same amount Y. 
D)  buy more of X and less Y. 
E)  buy more Y and less X.

Exam 6: Consumer Behaviour

Consumer surplus is

The table below shows the total value in dollars) that Andrew gets from playing 9-hole rounds of golf. TABLE 6-3 -Refer to Table 6-3. If the price of a 9-hole round of golf is $19, then Andrew will play rounds per month.

Consider the income and substitution effects of price changes. If the price of a normal good changes, the income effect of the price change will

If money income is reduced by half, and the prices of all goods consumed by the household are reduced by half, the householdʹs budget line will

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

A basic hypothesis of marginal utility theory is that the utility a consumer derives from successive units of a good diminishes as total consumption of the good increases. This hypothesis is known as

The figures below show Chrisʹs consumption of specialty coffee per week. FIGURE 6-10 -Refer to Figure 6-10. In general, the absolute value of the slope of the budget lines is equal to

Diagrams A, B, and C show 3 individual consumersʹ demand curves for cement. Consumers A, B, and C constitute the entire monthly cement market in this region. FIGURE 6-3 -Refer to Figure 6-3. What is the market demand in cubic metres per month) for cement at a price of $20 per cubic metre?

As a consumer moves along an indifference curve

The demand curve for a good with an income elasticity of less than one

The diagram below shows a set of budget lines facing a household. FIGURE 6-8 -Refer to Figure 6-8. The movement of the budget line from ab to ef could be caused by

FIGURE 6-2 -The market demand curve is derived from

The diagram below shows a set of budget lines facing a household. FIGURE 6-8 -Refer to Figure 6-8. The movement of the budget line from ab to ac could be caused by

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

FIGURE 6-2 -If John consumes only two goods, A and B, and he is maximizing his utility subject to his budget constraint,

FIGURE 6-2 -John is allocating his household expenditure between groceries and housing in order to maximize total utility. For the quantities of groceries and housing he has chosen, an increase in the price of housing will, ceteris paribus,

FIGURE 6-2 -Refer to Figure 6-2. Suppose the price of X is $2, the price of Y is $1, and the consumerʹs 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

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