Question 1

Economists focus on self-interest in explaining choices because:

Accepted Answer

A)  individuals often are motivated by selflessness. 
B)  economists know people are selfish even if psychologists don't. 
C)  economists do not believe that there is more to making choices than maximizing utility. 
D)  it is a useful way to approach problems. 
A)  individuals often are motivated by selflessness. 
B)  economists know people are selfish even if psychologists don't. 
C)  economists do not believe that there is more to making choices than maximizing utility. 
D)  it is a useful way to approach problems.

Question 2

The underlying psychological foundation of individual choice and economic reasoning is:

Accepted Answer

A)  generosity. 
B)  focal point equilibrium. 
C)  bounded rationality. 
D)  self-interest. 
A)  generosity. 
B)  focal point equilibrium. 
C)  bounded rationality. 
D)  self-interest.

Question 3

Economists have been interested in the following interaction: A person is allowed to split a sum of money between himself and another person. The other person can then accept the split or reject it, in which case neither person gets anything. Economists call this interaction the:

Accepted Answer

A)  ultimatum game. 
B)  prisoner's dilemma. 
C)  game of chicken. 
D)  sucker's payoff. 
A)  ultimatum game. 
B)  prisoner's dilemma. 
C)  game of chicken. 
D)  sucker's payoff.

Question 4

If the price of Alpo increases from $0.50 to $1, Mr. Tightwad, a utility-maximizing consumer, would spend his $4 on which of the following?

Accepted Answer

A)  4 McBurgers 
B)  3 McBurgers and 1 can of Alpo 
C)  2 McBurgers and 2 cans of Alpo 
D)  1 McBurger and 3 cans of Alpo 
A)  4 McBurgers 
B)  3 McBurgers and 1 can of Alpo 
C)  2 McBurgers and 2 cans of Alpo 
D)  1 McBurger and 3 cans of Alpo

Question 5

The following table describes utility for consuming cans of soda. Fill in the blank spaces and answer the following question: At what point does the law of diminishing marginal utility set in? $$\begin{array} { | c | c | c | } 
\hline \text { Cans of Sada } & \text { Total utility } & \text { Marginal utility } \
\hline 1 & 14 & \
\hline 2 & & 12 \
\hline 3 & 36 & \
\hline 4 & 44 & 6 \
\hline 5 & & \
\hline
\end{array}$$

Accepted Answer

A)  Between three and four cans 
B)  Between four and five cans 
C)  Marginal utility diminishes everywhere. 
D)  Marginal utility never diminishes. 
A)  Between three and four cans 
B)  Between four and five cans 
C)  Marginal utility diminishes everywhere. 
D)  Marginal utility never diminishes.

Question 6

Jack Sprat could eat no fat, his wife could eat no lean. And so betwixt them both, they licked the platter clean. Which of the following is true about Jack and his wife?

Accepted Answer

A)  Marginal utility of fat is negative for Jack; marginal utility of lean is negative for his wife. 
B)  Marginal utility of fat is falling for Jack; marginal utility of lean is falling for his wife. 
C)  Marginal utility of lean is negative for Jack; marginal utility of fat is negative for his wife. 
D)  Marginal utility of lean is rising for Jack; marginal utility of fat is rising for his wife. 
A)  Marginal utility of fat is negative for Jack; marginal utility of lean is negative for his wife. 
B)  Marginal utility of fat is falling for Jack; marginal utility of lean is falling for his wife. 
C)  Marginal utility of lean is negative for Jack; marginal utility of fat is negative for his wife. 
D)  Marginal utility of lean is rising for Jack; marginal utility of fat is rising for his wife.

Question 7

Refer to the following table. Fill in the table and answer the following question: What is the marginal utility of the ninth can of soda? $$\begin{array} { | c | c | c | } 
\hline \text { Cans of Sadn } & \text { Tatal utility } & \text { Marginal utility } \
\hline 6 & 54 & \
\hline 7 & & 6 \
\hline 8 & & 0 \
\hline 9 & 54 & \
\hline
\end{array}$$

Accepted Answer

A)  ?6 units of utility 
B)  0 units of utility 
C)  2 units of utility 
D)  54 units of utility 
A)  ?6 units of utility 
B)  0 units of utility 
C)  2 units of utility 
D)  54 units of utility

Question 8

Refer to the following graph. If the price of bagels falls, the budget constraint in the graph will rotate:

Accepted Answer

A)  out and become flatter. 
B)  out and have the same slope. 
C)  in and become flatter. 
D)  in and become steeper. 
A)  out and become flatter. 
B)  out and have the same slope. 
C)  in and become flatter. 
D)  in and become steeper.

Question 9

Refer to the graph shown.   Assuming a consumer has $5 to spend, if a soda costs $0.25 and a chocolate bar costs $0.50, the consumer will optimally choose to consume:

Accepted Answer

A)  at point A. 
B)  at point B. 
C)  0 cans of soda and 10 chocolate bars. 
D)  20 cans of soda and 0 chocolate bars. 
A)  at point A. 
B)  at point B. 
C)  0 cans of soda and 10 chocolate bars. 
D)  20 cans of soda and 0 chocolate bars.

Question 10

The price of a McDonald's dinner is $5; the price of a Burger King dinner is $5. The marginal utility you would get from the next McDonald's dinner is 15; the marginal utility you would get from the next Burger King dinner is 20. You should:

Accepted Answer

A)  consume more McDonald's dinners. 
B)  consume more Burger King dinners. 
C)  not consume either Burger King or McDonald's dinners. 
D)  realize you cannot make a rational decision. 
A)  consume more McDonald's dinners. 
B)  consume more Burger King dinners. 
C)  not consume either Burger King or McDonald's dinners. 
D)  realize you cannot make a rational decision.

Question 11

A Jackson Pollock painting can cost $1.2 million, whereas a poster reproduction of the same painting costs only about $15. The reason is that:

Accepted Answer

A)  the total utility of Jackson Pollock paintings is greater than the total utility of Jackson Pollock posters. 
B)  the marginal utility of Jackson Pollock paintings is greater than the marginal utility of Jackson Pollock posters. 
C)  the opportunity cost of Jackson Pollock paintings is greater than the opportunity cost of Jackson Pollock posters. 
D)  Jackson Pollock paintings have more substitutes than Jackson Pollock posters. 
A)  the total utility of Jackson Pollock paintings is greater than the total utility of Jackson Pollock posters. 
B)  the marginal utility of Jackson Pollock paintings is greater than the marginal utility of Jackson Pollock posters. 
C)  the opportunity cost of Jackson Pollock paintings is greater than the opportunity cost of Jackson Pollock posters. 
D)  Jackson Pollock paintings have more substitutes than Jackson Pollock posters.

Question 12

If the total utility curve is a straight line, the marginal utility curve would be a:

Accepted Answer

A)  downward-sloping line. 
B)  a flat line with a slope of zero. 
C)  an upward-sloping line with a slope of 1. 
D)  a vertical line. 
A)  downward-sloping line. 
B)  a flat line with a slope of zero. 
C)  an upward-sloping line with a slope of 1. 
D)  a vertical line.

Question 13

Given a fixed level of spending, you will maximize utility when the:

Accepted Answer

A)  total satisfaction from both goods is maximized regardless of cost. 
B)  marginal satisfactions are maximized. 
C)  ratios of the total utilities to their prices are equal. 
D)  ratios of the marginal utilities to their prices are equal. 
A)  total satisfaction from both goods is maximized regardless of cost. 
B)  marginal satisfactions are maximized. 
C)  ratios of the total utilities to their prices are equal. 
D)  ratios of the marginal utilities to their prices are equal.

Question 14

The following table lists the utility that Steve receives from consuming oranges at $0.50 apiece. What is the marginal utility of increasing consumption from two to three oranges? $\begin{array}{|c|c|}
\hline \text {Number af aranges}& \text {Total utility}\
\hline 0 & 0 \
\hline 1 & 4 \
\hline 2 & 9\
\hline 3 & 15 \
\hline 4 & 20 \
\hline 5 & 24 \
\hline
\end{array}$

Accepted Answer

A)  3 
B)  6 
C)  5 
D)  12 
A)  3 
B)  6 
C)  5 
D)  12

Question 15

Given a set amount of money, goods A and B both give the same marginal utility at current levels of consumption but good A costs twice as much as good B. You should:

Accepted Answer

A)  consume more of good A and less of good B. 
B)  consume more of good B and less of good A. 
C)  keep consuming the current amounts of both good A and good B. 
D)  realize that you don't have enough information to answer the question. 
A)  consume more of good A and less of good B. 
B)  consume more of good B and less of good A. 
C)  keep consuming the current amounts of both good A and good B. 
D)  realize that you don't have enough information to answer the question.

Question 16

John is maximizing utility by choosing to spend 90 minutes reading a chapter in The Theory of Moral Sentiments, which will give him 450 units of utility, instead of spending 20 minutes reading a chapter of Atlas Shrugged, which will give him 200 units of utility. (Assume marginal utility decreases slowly.)

Accepted Answer

A) True 
 B)False

Question 17

Mike is maximizing utility by working 10 hours a week and studying 10 hours a week. Mike has only 20 hours to devote to either working or studying. If Mike realizes that another hour of studying will improve his grade on an exam, thus raising the utility of another hour of study, Mike will:

Accepted Answer

A)  study less to raise the marginal utility of studying even more. 
B)  work fewer hours, moving him down along his labor supply curve. 
C)  work fewer hours, shifting his labor supply curve to the left. 
D)  substitute work for studying, raising his total utility. 
A)  study less to raise the marginal utility of studying even more. 
B)  work fewer hours, moving him down along his labor supply curve. 
C)  work fewer hours, shifting his labor supply curve to the left. 
D)  substitute work for studying, raising his total utility.

Question 18

Refer to the graph shown. A consumer would be expected to change consumption from point A to point B in response to a(n):

Accepted Answer

A)  increase in the price of soda. 
B)  increase in the price of chocolate bars. 
C)  increase in income. 
D)  decrease in the price of soda. 
A)  increase in the price of soda. 
B)  increase in the price of chocolate bars. 
C)  increase in income. 
D)  decrease in the price of soda.

Question 19

The principle of diminishing marginal utility states that:

Accepted Answer

A)  you don't enjoy consuming more of a good. 
B)  you enjoy consuming more of a good if it is good. 
C)  as you consume more of a good, you enjoy the additional units less than you did the previous units. 
D)  as you consume more of a good, you enjoy the additional units more than you did the initial units. 
A)  you don't enjoy consuming more of a good. 
B)  you enjoy consuming more of a good if it is good. 
C)  as you consume more of a good, you enjoy the additional units less than you did the previous units. 
D)  as you consume more of a good, you enjoy the additional units more than you did the initial units.

Question 20

The principle of diminishing marginal utility states that marginal utility:

Accepted Answer

A)  is negative. 
B)  is positive. 
C)  is always falling. 
D)  falls after some point. 
A)  is negative. 
B)  is positive. 
C)  is always falling. 
D)  falls after some point.

Exam 19: The Logic of Individual Choice: the Foundation of Supply and Demand

Economists focus on self-interest in explaining choices because:

The underlying psychological foundation of individual choice and economic reasoning is:

Economists have been interested in the following interaction: A person is allowed to split a sum of money between himself and another person. The other person can then accept the split or reject it, in which case neither person gets anything. Economists call this interaction the:

If the price of Alpo increases from $0.50 to $1, Mr. Tightwad, a utility-maximizing consumer, would spend his $4 on which of the following?

The following table describes utility for consuming cans of soda. Fill in the blank spaces and answer the following question: At what point does the law of diminishing marginal utility set in? Cans of Sada Total utility Marginal utility 1 14 2 12 3 36 4 44 6 5

Jack Sprat could eat no fat, his wife could eat no lean. And so betwixt them both, they licked the platter clean. Which of the following is true about Jack and his wife?

Refer to the following table. Fill in the table and answer the following question: What is the marginal utility of the ninth can of soda? Cans of Sadn Tatal utility Marginal utility 6 54 7 6 8 0 9 54

Refer to the following graph. If the price of bagels falls, the budget constraint in the graph will rotate:

Refer to the graph shown. Assuming a consumer has $5 to spend, if a soda costs $0.25 and a chocolate bar costs $0.50, the consumer will optimally choose to consume:

The price of a McDonald's dinner is $5; the price of a Burger King dinner is $5. The marginal utility you would get from the next McDonald's dinner is 15; the marginal utility you would get from the next Burger King dinner is 20. You should:

A Jackson Pollock painting can cost $1.2 million, whereas a poster reproduction of the same painting costs only about $15. The reason is that:

If the total utility curve is a straight line, the marginal utility curve would be a:

Given a fixed level of spending, you will maximize utility when the:

The following table lists the utility that Steve receives from consuming oranges at $0.50 apiece. What is the marginal utility of increasing consumption from two to three oranges? Number af aranges Total utility 0 0 1 4 2 9 3 15 4 20 5 24

Given a set amount of money, goods A and B both give the same marginal utility at current levels of consumption but good A costs twice as much as good B. You should:

Mike is maximizing utility by working 10 hours a week and studying 10 hours a week. Mike has only 20 hours to devote to either working or studying. If Mike realizes that another hour of studying will improve his grade on an exam, thus raising the utility of another hour of study, Mike will:

Refer to the graph shown. A consumer would be expected to change consumption from point A to point B in response to a(n):

The principle of diminishing marginal utility states that:

The principle of diminishing marginal utility states that marginal utility:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Filters