Question 1

What is the total utility of five cans of soda? $$\begin{array} { | c | c | c | } 
\hline \text { Cans of Sada } & \text { Total utility } & \text { Marginal utility } \
\hline 1 & 14 & \
\hline 2 & & 12 \
\hline 3 & 36 & \
\hline 4 & 44 & 6 \
\hline 5 & & \
\hline
\end{array}$$

Accepted Answer

A)  6 
B)  8 
C)  50 
D)  44 
A)  6 
B)  8 
C)  50 
D)  44

Question 2

Faced with a hundred pounds of strawberries, the rational individual will eat:

Accepted Answer

A)  all of the strawberries. 
B)  strawberries until the satisfaction from the last strawberry is maximized. 
C)  strawberries until the satisfaction from eating strawberries is maximized. 
D)  strawberries until the satisfaction from eating the last strawberry begins to fall. 
A)  all of the strawberries. 
B)  strawberries until the satisfaction from the last strawberry is maximized. 
C)  strawberries until the satisfaction from eating strawberries is maximized. 
D)  strawberries until the satisfaction from eating the last strawberry begins to fall.

Question 3

Refer to the following table. At this level of consumption of goods A and B, the consumer: $$\begin{array} { | l | c | c | } 
\hline & \text { Gand A } & \text { Gand B } \
\hline \text { Marpinal utility } & 100 & 500 \
\hline \text { Price } & \mathbf { \$ 2 0 } & \$ 50 \
\hline
\end{array}$$

Accepted Answer

A)  is maximizing satisfaction for the given expenditure. 
B)  could increase total satisfaction for a given expenditure by increasing the consumption of A and decreasing that of B. 
C)  could increase total satisfaction for a given expenditure by increasing the consumption of B and decreasing that of A. 
D)  should consume only A. 
A)  is maximizing satisfaction for the given expenditure. 
B)  could increase total satisfaction for a given expenditure by increasing the consumption of A and decreasing that of B. 
C)  could increase total satisfaction for a given expenditure by increasing the consumption of B and decreasing that of A. 
D)  should consume only A.

Question 4

According to Thorstein Veblen, a successful businessman would be most likely to demonstrate his worth to others by:

Accepted Answer

A)  anonymously giving financial support to worthwhile charitable organizations. 
B)  purchasing tasteful pieces of art and enjoying them only in private. 
C)  avoiding vulgar displays of wealth such as mansions and expensive cars. 
D)  buying expensive jewels for his trophy wife and showing her off at parties. 
A)  anonymously giving financial support to worthwhile charitable organizations. 
B)  purchasing tasteful pieces of art and enjoying them only in private. 
C)  avoiding vulgar displays of wealth such as mansions and expensive cars. 
D)  buying expensive jewels for his trophy wife and showing her off at parties.

Question 5

Refer to the graphs shown.   If income is $60 and the price of Y is $3, a decrease in the price of X from $3 to $2 would cause a movement:

Accepted Answer

A)  from point A to point B. 
B)  from point C to point B. 
C)  along the demand curve from point D to point E. 
D)  along the demand curve from point E to point F. 
A)  from point A to point B. 
B)  from point C to point B. 
C)  along the demand curve from point D to point E. 
D)  along the demand curve from point E to point F.

Question 6

Refer to the graphs shown, which show indifference curve analysis with the associated demand curves.   An increase in the price of Y most likely would cause a rational consumer to move from point:

Accepted Answer

A)  C to point B. 
B)  F to point D. 
C)  B to point A. 
D)  H to point I. 
A)  C to point B. 
B)  F to point D. 
C)  B to point A. 
D)  H to point I.

Question 7

Joseph Gallo poured two glasses of wine from the same bottle but put a more expensive price tag on one glass than on the other. He let people test both and asked which they wanted; most wanted the more expensive glass, not knowing that both had come from the same bottle. This kind of experiment tells us that:

Accepted Answer

A)  preferences are given and are not shaped by society. 
B)  decision making is costless. 
C)  people probably want to drink wine for the sense of indulgence it gives them rather than for the taste. 
D)  people never make rational choices. 
A)  preferences are given and are not shaped by society. 
B)  decision making is costless. 
C)  people probably want to drink wine for the sense of indulgence it gives them rather than for the taste. 
D)  people never make rational choices.

Question 8

Suppose Jane has chosen a combination of two goods, A and B, such that MU/P of good A is 10 (MUA/PA = 10), and the MU/P of good B is 10 (MUB/PB = 10). To increase utility with the same amount of money, Jane should:

Accepted Answer

A)  increase the number of B consumed. 
B)  increase the number of A consumed. 
C)  increase the number of A and B consumed. 
D)  do nothing; she cannot increase utility with the same amount of money. 
A)  increase the number of B consumed. 
B)  increase the number of A consumed. 
C)  increase the number of A and B consumed. 
D)  do nothing; she cannot increase utility with the same amount of money.

Question 9

According to the law of diminishing marginal utility, after some point:

Accepted Answer

A)  the more we buy of something, the more it costs. 
B)  the more we consume of something, the less each additional unit adds to our satisfaction. 
C)  people should spend all of their income on one good. 
D)  the more we consume of something, the smaller the total satisfaction received from that good. 
A)  the more we buy of something, the more it costs. 
B)  the more we consume of something, the less each additional unit adds to our satisfaction. 
C)  people should spend all of their income on one good. 
D)  the more we consume of something, the smaller the total satisfaction received from that good.

Question 10

The faster marginal utility declines the:

Accepted Answer

A)  greater the elasticity of demand. 
B)  smaller the elasticity of demand. 
C)  smaller the opportunity cost of the good. 
D)  larger the opportunity cost of the good. 
A)  greater the elasticity of demand. 
B)  smaller the elasticity of demand. 
C)  smaller the opportunity cost of the good. 
D)  larger the opportunity cost of the good.

Question 11

The theory of bounded rationality is consistent with which of the following?

Accepted Answer

A)  None of our decisions are rational. 
B)  Our rationality depends on rules of thumb such as "you get what you pay for." 
C)  It is irrational to follow principles such as "follow the leader." 
D)  It always pays to be irrational. 
A)  None of our decisions are rational. 
B)  Our rationality depends on rules of thumb such as "you get what you pay for." 
C)  It is irrational to follow principles such as "follow the leader." 
D)  It always pays to be irrational.

Question 12

The following table lists the utility that Gwen receives from consuming bananas at $0.25 apiece. What is the total utility of consuming three bananas? $\begin{array}{|c|c|}
\hline \text {Number of bananas}& \text {Total utility}\
\hline 0 & 0 \
\hline 1 & 10 \
\hline 2 & 22 \
\hline 3 & 32 \
\hline 4 & 40 \
\hline 5 & 46 \
\hline
\end{array}$

Accepted Answer

A)  46 
B)  30 
C)  8 
D)  2 
A)  46 
B)  30 
C)  8 
D)  2

Question 13

Suppose Paul has chosen a combination of two goods, A and B, such that the marginal utility per dollar spent for good A (MUA/PA) is .6 and the marginal utility per dollar spent for good B (MUB/PB) is 1. To increase utility with the same amount of money, Paul should:

Accepted Answer

A)  increase the number of B consumed and decrease the number of A consumed. 
B)  increase the number of A consumed and decrease the number of B consumed. 
C)  increase the number of both A and B consumed. 
D)  do nothing; he cannot increase total utility. 
A)  increase the number of B consumed and decrease the number of A consumed. 
B)  increase the number of A consumed and decrease the number of B consumed. 
C)  increase the number of both A and B consumed. 
D)  do nothing; he cannot increase total utility.

Question 14

The total satisfaction one gets from one's consumption of a product is called:

Accepted Answer

A)  marginal utility. 
B)  a unit of utility. 
C)  total utility. 
D)  minimum utility. 
A)  marginal utility. 
B)  a unit of utility. 
C)  total utility. 
D)  minimum utility.

Question 15

When companies supersized luxury consumer products to cater to the superwealthy who wanted to rise above the pack, this made use of the concept of:

Accepted Answer

A)  conspicuous consumption. 
B)  focal point equilibrium. 
C)  bounded rationality. 
D)  rules of thumb. 
A)  conspicuous consumption. 
B)  focal point equilibrium. 
C)  bounded rationality. 
D)  rules of thumb.

Question 16

Refer to the graphs shown, which show indifference curve analysis with the associated demand curves.   The best explanation for a movement from point D to point F is:

Accepted Answer

A)  an outward rotation of the budget constraint along the x-axis, allowing the consumer to move from point A to point B. 
B)  a parallel shift of the budget constraint, allowing the consumer to move from point A to point C. 
C)  an inward rotation of the budget constraint along the x-axis, forcing the consumer to move from point B to point A. 
D)  an outward rotation of the budget constraint along the y-axis, allowing the consumer to move from point B to point C. 
A)  an outward rotation of the budget constraint along the x-axis, allowing the consumer to move from point A to point B. 
B)  a parallel shift of the budget constraint, allowing the consumer to move from point A to point C. 
C)  an inward rotation of the budget constraint along the x-axis, forcing the consumer to move from point B to point A. 
D)  an outward rotation of the budget constraint along the y-axis, allowing the consumer to move from point B to point C.

Question 17

Steve is currently maximizing utility by consuming three fried eggs and four strips of bacon. From this you can conclude that the:

Accepted Answer

A)  marginal utility of the third fried egg equals the marginal utility of the fourth strip of bacon. 
B)  total utility of the three eggs equals the total utility of the four strips of bacon. 
C)  opportunity cost of not consuming the third fried egg equals the opportunity cost of not consuming the fourth strip of bacon. 
D)  price of eggs and bacon are the same. 
A)  marginal utility of the third fried egg equals the marginal utility of the fourth strip of bacon. 
B)  total utility of the three eggs equals the total utility of the four strips of bacon. 
C)  opportunity cost of not consuming the third fried egg equals the opportunity cost of not consuming the fourth strip of bacon. 
D)  price of eggs and bacon are the same.

Question 18

Refer to the graph shown. Given this budget constraint, if bagels cost $1.80 each, croissants must cost:

Accepted Answer

A)  $0.90 each. 
B)  $1.80 each. 
C)  $3.60 each. 
D)  It is impossible to know from the information given. 
A)  $0.90 each. 
B)  $1.80 each. 
C)  $3.60 each. 
D)  It is impossible to know from the information given.

Question 19

An assumption of economists' standard theory of choice is that:

Accepted Answer

A)  individuals maximize marginal utility. 
B)  preferences are given and are not shaped by society. 
C)  it is costly for a consumer to make optimal choices. 
D)  individuals use rules of thumb to make decisions. 
A)  individuals maximize marginal utility. 
B)  preferences are given and are not shaped by society. 
C)  it is costly for a consumer to make optimal choices. 
D)  individuals use rules of thumb to make decisions.

Question 20

John is maximizing utility when consuming two goods: French fries and hot dogs. If the marginal utility from the last box of fries John consumed is 60 and the marginal utility of the last hot dog John consumed is 120 and hot dogs cost $1.00 apiece, a box of fries must cost $0.50.

Accepted Answer

A) True 
 B)False

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

What is the total utility of five cans of soda? Cans of Sada Total utility Marginal utility 1 14 2 12 3 36 4 44 6 5

Faced with a hundred pounds of strawberries, the rational individual will eat:

Refer to the following table. At this level of consumption of goods A and B, the consumer: Gand A Gand B Marpinal utility 100 500 Price \ 50

According to Thorstein Veblen, a successful businessman would be most likely to demonstrate his worth to others by:

Refer to the graphs shown. If income is $60 and the price of Y is $3, a decrease in the price of X from $3 to $2 would cause a movement:

Refer to the graphs shown, which show indifference curve analysis with the associated demand curves. An increase in the price of Y most likely would cause a rational consumer to move from point:

Suppose Jane has chosen a combination of two goods, A and B, such that MU/P of good A is 10 (MUA/PA = 10), and the MU/P of good B is 10 (MUB/PB = 10). To increase utility with the same amount of money, Jane should:

According to the law of diminishing marginal utility, after some point:

The faster marginal utility declines the:

The theory of bounded rationality is consistent with which of the following?

The following table lists the utility that Gwen receives from consuming bananas at $0.25 apiece. What is the total utility of consuming three bananas? Number of bananas Total utility 0 0 1 10 2 22 3 32 4 40 5 46

Suppose Paul has chosen a combination of two goods, A and B, such that the marginal utility per dollar spent for good A (MUA/PA) is .6 and the marginal utility per dollar spent for good B (MUB/PB) is 1. To increase utility with the same amount of money, Paul should:

The total satisfaction one gets from one's consumption of a product is called:

When companies supersized luxury consumer products to cater to the superwealthy who wanted to rise above the pack, this made use of the concept of:

Refer to the graphs shown, which show indifference curve analysis with the associated demand curves. The best explanation for a movement from point D to point F is:

Steve is currently maximizing utility by consuming three fried eggs and four strips of bacon. From this you can conclude that the:

Refer to the graph shown. Given this budget constraint, if bagels cost $1.80 each, croissants must cost:

An assumption of economists' standard theory of choice is that:

John is maximizing utility when consuming two goods: French fries and hot dogs. If the marginal utility from the last box of fries John consumed is 60 and the marginal utility of the last hot dog John consumed is 120 and hot dogs cost $1.00 apiece, a box of fries must cost $0.50.

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

Suppose Jane has chosen a combination of two goods, A and B, such that MU/P of good A is 10 (MU_A/P_A = 10), and the MU/P of good B is 10 (MU_B/P_B = 10). To increase utility with the same amount of money, Jane should:

Suppose Paul has chosen a combination of two goods, A and B, such that the marginal utility per dollar spent for good A (MU_A/P_A) is .6 and the marginal utility per dollar spent for good B (MU_B/P_B) is 1. To increase utility with the same amount of money, Paul should: