Question 1

FIGURE 6- 10
-Refer to Figure 6- 10. Suppose the consumer begins at E1. The income and substitution effects of the reduction in the price of X are represented as follows:

Accepted Answer

A)  the distance Q1Q2 shows the income effect and the distance Q2Q3 shows the substitution effect. 
B)  the distance Q1Q2 shows the substitution effect and the distance Q2Q3 shows the income effect. 
C)  the distance Q1d shows the substitution effect and the distance Q2e shows the income effect. 
D)  the distance de shows the income effect and the distance cd shows the substitution effect. 
E)  the distance Q1Q3 shows the substitution effect and the distance Q2Q3 shows the income effect. 
A)  the distance Q1Q2 shows the income effect and the distance Q2Q3 shows the substitution effect. 
B)  the distance Q1Q2 shows the substitution effect and the distance Q2Q3 shows the income effect. 
C)  the distance Q1d shows the substitution effect and the distance Q2e shows the income effect. 
D)  the distance de shows the income effect and the distance cd shows the substitution effect. 
E)  the distance Q1Q3 shows the substitution effect and the distance Q2Q3 shows the income effect. B

Question 2

FIGURE 6- 3
-Refer to Figure 6- 3. For both goods, the price falls from P0 to P1. The substitution effect is illustrated by the change in quantity demanded from A to B; the income effect is illustrated by the change in quantity demanded from B to C. Good X is certainly a(n) good.

Accepted Answer

A)  luxury 
B)  normal 
C)  Giffen 
D)  inferior 
E)  necessity 
A)  luxury 
B)  normal 
C)  Giffen 
D)  inferior 
E)  necessity D

Question 3

$\text { Toffee (bars) \quad Cashews (bags) }$
$\begin{array}{|l|l|l|l|l|}
\hline \text { Units } & \begin{array}{l}
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array}{l}
\text { Total } \
\text { Utility }
\end{array} & \text { Marginal } & \text { Total } \
&&& \text { Utility } & \text { Utility } \
\hline 1 & 10 & 10 & 12 & 12 \
\hline 2 & 8 & 18 & 10 & 22 \
\hline 3 & 5 & 23 & 7 & 29 \
\hline 4 & 3 & 26 & 5 & 34 \
\hline 5 & 1 & 27 & 2 & 36 \
\hline 6 & 0 & 27 & 1 & 37 \
\hline 7 & 0 & 27 & 0 & 27 \
\hline
\end{array}$
$\text { TABLE 6- } 1$
-Refer to Table 6- 1. If this consumer purchases 3 toffee bars and 4 bags of cashews per week, his/her total utility will be

Accepted Answer

A)  7 
B)  23 
C)  31 
D)  54 
E)  57 
A)  7 
B)  23 
C)  31 
D)  54 
E)  57 E

Question 4

$\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Toffee (bars) }$$\quad\quad\quad\quad\quad\text { Cashews (bags) }$
$\begin{array}{|l|l|l|l|l|}
\hline  \text { units}&\text {marginal utility }&\text {total utility }&\text {marginal utility }&\text {total utility }\
\hline 1 & 10 & 10 & 12 & 12 \
\hline 2 & 8 & 18 & 10 & 22 \
\hline 3 & 5 & 23 & 7 & 29 \
\hline 4 & 3 & 26 & 5 & 34 \
\hline 5 & 1 & 27 & 2 & 36 \
\hline 6 & 0 & 27 & 1 & 37 \
\hline 7 & 0 & 27 & 0 & 27 \
\hline 
\end{array}$
$\text { TABLE 6-1 }$ FIGURE 6- 8
-Refer to Figure 6- 8. In part (ii), the line joining points X, Y, and Z is known as , which shows how .

Accepted Answer

A)  an indifference map; the value of various combinations of two goods changes. 
B)  an income- consumption line; consumption changes with changing relative prices and constant income 
C)  a price- consumption line; consumption changes as relative prices change, with money income constant 
D)  an income- consumption line; consumption changes as income changes, with relative prices held constant 
E)  a price- consumption line; consumption changes as money income and relative prices change 
A)  an indifference map; the value of various combinations of two goods changes. 
B)  an income- consumption line; consumption changes with changing relative prices and constant income 
C)  a price- consumption line; consumption changes as relative prices change, with money income constant 
D)  an income- consumption line; consumption changes as income changes, with relative prices held constant 
E)  a price- consumption line; consumption changes as money income and relative prices change

Question 5

Marginal utility theory is about

Accepted Answer

A)  proving that demand curves are always downward sloping. 
B)  calculating consumer surplus. 
C)  the total satisfaction resulting from the consumption of some good by the consumer. 
D)  the consumer behaviour that underlies the theory of demand. 
E)  how producers allocate their scarce resources. 
A)  proving that demand curves are always downward sloping. 
B)  calculating consumer surplus. 
C)  the total satisfaction resulting from the consumption of some good by the consumer. 
D)  the consumer behaviour that underlies the theory of demand. 
E)  how producers allocate their scarce resources.

Question 6

FIGURE 6- 8
-Refer to Figure 6- 8. In part (i), the line joining points A, B, and C is known as , which shows how .

Accepted Answer

A)  a price- consumption line; consumption changes as money income and relative prices change 
B)  an indifference map; the value of various combinations of two goods changes. 
C)  an income- consumption line; consumption changes as income changes, with relative prices held constant 
D)  a price- consumption line; consumption changes as relative prices change, with money income constant 
E)  an income- consumption line; consumption changes with changing relative prices and constant income 
A)  a price- consumption line; consumption changes as money income and relative prices change 
B)  an indifference map; the value of various combinations of two goods changes. 
C)  an income- consumption line; consumption changes as income changes, with relative prices held constant 
D)  a price- consumption line; consumption changes as relative prices change, with money income constant 
E)  an income- consumption line; consumption changes with changing relative prices and constant income

Question 7

The marginal rate of substitution measures the tradeoff between the

Accepted Answer

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

Question 8

Suppose a consumer can purchase only two goods, soap and apples. If the price of soap falls and the consumption of apples increases, we can conclude that the increased consumption of apples is due to

Accepted Answer

A)  the income effect only. 
B)  both the income effect and the substitution effect. 
C)  the deflation effect. 
D)  neither the income effect nor the substitution effect. 
E)  the substitution effect only. 
A)  the income effect only. 
B)  both the income effect and the substitution effect. 
C)  the deflation effect. 
D)  neither the income effect nor the substitution effect. 
E)  the substitution effect only.

Question 9

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, 2, & 3. 
A)  1 only 
B)  2 only 
C)  3 only 
D)  2 or 3 
E)  1, 2, & 3.

Question 10

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

Question 11

Marginal utility analysis predicts a downward- sloping demand curve for good X because

Accepted Answer

A)  utility- maximizing consumers equate marginal utility received for each product consumed. 
B)  all demand curves are downward sloping, regardless of the behaviour of consumers. 
C)  as PX falls, the ratio MUX/PX becomes smaller, causing the consumer to purchase more of good X. 
D)  as PX falls, the consumer increases purchases of X such that MUX/PX is equal to MU/P for all other products. 
E)  as PX rises, the consumer increases purchases of X such that MUX/PX is equal to MU/P for all other products. 
A)  utility- maximizing consumers equate marginal utility received for each product consumed. 
B)  all demand curves are downward sloping, regardless of the behaviour of consumers. 
C)  as PX falls, the ratio MUX/PX becomes smaller, causing the consumer to purchase more of good X. 
D)  as PX falls, the consumer increases purchases of X such that MUX/PX is equal to MU/P for all other products. 
E)  as PX rises, the consumer increases purchases of X such that MUX/PX is equal to MU/P for all other products.

Question 12

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 13

The idea that the utility a consumer derives from successive units of a good diminishes as total consumption of the good increases is known as

Accepted Answer

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

Question 14

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

Accepted Answer

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

Question 15

If a consumer is faced with a choice of products A, B, C, ..., and has a given money income, the consumer's utility will be maximized when

Accepted Answer

A)  TUA = TUB = TUC = ... 
B)  MUA = PA; MUB = PB; MUC = PC; ... 
C)  MUA = MUB = MUC = ... 
D)  MUA/PA = MUB/PB = MUC/PC = ... 
E)  PA = PB = PC = ... 
A)  TUA = TUB = TUC = ... 
B)  MUA = PA; MUB = PB; MUC = PC; ... 
C)  MUA = MUB = MUC = ... 
D)  MUA/PA = MUB/PB = MUC/PC = ... 
E)  PA = PB = PC = ...

Question 16

FIGURE 6- 2
-Refer to Figure 6- 2. Suppose that the price of X is $2, the price of Y is $1, the consumer's income is
$10, and the consumer is buying 3 units of good X and 4 units of good Y. What is the total utility the consumer obtains from this combination of X and Y?

Accepted Answer

A)  18. 
B)  30. 
C)  40. 
D)  60. 
E)  72. 
A)  18. 
B)  30. 
C)  40. 
D)  60. 
E)  72.

Question 17

FIGURE 6- 2
-Refer to Figure 6- 2. If the price of X is $2 and the price of Y is $1 and the consumer is buying 4 units of X and 2 units of Y, the consumer's total spending is

Accepted Answer

A)  $6. 
B)  $8. 
C)  $10. 
D)  $12. 
E)  $15. 
A)  $6. 
B)  $8. 
C)  $10. 
D)  $12. 
E)  $15.

Question 18

$\text { Toffee (bars) \quad Cashews (bags) }$
$\begin{array}{|l|l|l|l|l|}
\hline \text { Units } & \begin{array}{l}
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array}{l}
\text { Total } \
\text { Utility }
\end{array} & \text { Marginal } & \text { Total } \
&&& \text { Utility } & \text { Utility } \
\hline 1 & 10 & 10 & 12 & 12 \
\hline 2 & 8 & 18 & 10 & 22 \
\hline 3 & 5 & 23 & 7 & 29 \
\hline 4 & 3 & 26 & 5 & 34 \
\hline 5 & 1 & 27 & 2 & 36 \
\hline 6 & 0 & 27 & 1 & 37 \
\hline 7 & 0 & 27 & 0 & 27 \
\hline
\end{array}$
$\text { TABLE 6- } 1$
-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)  5 toffee bars and 2 bags of cashews. 
C)  3 toffee bars and 4 bags of cashews. 
D)  4 toffee bars and 3 bags of cashews. 
E)  6 toffee bars and 1 bag of cashews. 
A)  2 toffee bars and 5 bags of cashews. 
B)  5 toffee bars and 2 bags of cashews. 
C)  3 toffee bars and 4 bags of cashews. 
D)  4 toffee bars and 3 bags of cashews. 
E)  6 toffee bars and 1 bag of cashews.

Question 19

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

Question 20

Utility

Accepted Answer

A)  can be measured with the appropriate equipment. 
B)  is not real as we cannot measure it directly. 
C)  is very difficult to observe empirically. 
D)  is an objective measure of a good's value. 
E)  measures the common value of a good, independent of the individual. 
A)  can be measured with the appropriate equipment. 
B)  is not real as we cannot measure it directly. 
C)  is very difficult to observe empirically. 
D)  is an objective measure of a good's value. 
E)  measures the common value of a good, independent of the individual.

FIGURE 6- 10 -Refer to Figure 6- 10. Suppose the consumer begins at E1. The income and substitution effects of the reduction in the price of X are represented as follows:

FIGURE 6- 3 -Refer to Figure 6- 3. For both goods, the price falls from P0 to P1. The substitution effect is illustrated by the change in quantity demanded from A to B; the income effect is illustrated by the change in quantity demanded from B to C. Good X is certainly a(n) good.

Marginal utility theory is about

FIGURE 6- 8 -Refer to Figure 6- 8. In part (i), the line joining points A, B, and C is known as , which shows how .

The marginal rate of substitution measures the tradeoff between the

Suppose a consumer can purchase only two goods, soap and apples. If the price of soap falls and the consumption of apples increases, we can conclude that the increased consumption of apples is due to

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.

Marginal utility analysis predicts a downward- sloping demand curve for good X because

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

The idea that the utility a consumer derives from successive units of a good diminishes as total consumption of the good increases is known as

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

If a consumer is faced with a choice of products A, B, C, ..., and has a given money income, the consumer's utility will be maximized when

FIGURE 6- 2 -Refer to Figure 6- 2. Suppose that the price of X is $2, the price of Y is $1, the consumer's income is $10, and the consumer is buying 3 units of good X and 4 units of good Y. What is the total utility the consumer obtains from this combination of X and Y?

FIGURE 6- 2 -Refer to Figure 6- 2. If the price of X is $2 and the price of Y is $1 and the consumer is buying 4 units of X and 2 units of Y, the consumer's total spending 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.

Utility

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

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

Exam 6: Consumer Behaviour

FIGURE 6- 10 -Refer to Figure 6- 10. Suppose the consumer begins at E1. The income and substitution effects of the reduction in the price of X are represented as follows:

FIGURE 6- 3 -Refer to Figure 6- 3. For both goods, the price falls from P0 to P1. The substitution effect is illustrated by the change in quantity demanded from A to B; the income effect is illustrated by the change in quantity demanded from B to C. Good X is certainly a(n) good.

Marginal utility theory is about

FIGURE 6- 8 -Refer to Figure 6- 8. In part (i), the line joining points A, B, and C is known as , which shows how .

The marginal rate of substitution measures the tradeoff between the

Suppose a consumer can purchase only two goods, soap and apples. If the price of soap falls and the consumption of apples increases, we can conclude that the increased consumption of apples is due to

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.

Marginal utility analysis predicts a downward- sloping demand curve for good X because

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

The idea that the utility a consumer derives from successive units of a good diminishes as total consumption of the good increases is known as

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

If a consumer is faced with a choice of products A, B, C, ..., and has a given money income, the consumer's utility will be maximized when

FIGURE 6- 2 -Refer to Figure 6- 2. Suppose that the price of X is $2, the price of Y is $1, the consumer's income is $10, and the consumer is buying 3 units of good X and 4 units of good Y. What is the total utility the consumer obtains from this combination of X and Y?

FIGURE 6- 2 -Refer to Figure 6- 2. If the price of X is $2 and the price of Y is $1 and the consumer is buying 4 units of X and 2 units of Y, the consumer's total spending 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.

Utility

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

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