Question 1

If people generally believe that "you get what you pay for," it is reasonable for them to:

Accepted Answer

A) assume that an expensive item is of higher quality, creating the possibility of an upward-sloping demand curve. 
B) assume that an expensive item is of higher quality, which eliminates the possibility of an upward-sloping demand curve. 
C) make every effort to get complete information about a product before making a purchase to make sure that the purchase is optimal. 
D) assume that a cheaper brand is always a better deal than expensive brands. 
A) assume that an expensive item is of higher quality, creating the possibility of an upward-sloping demand curve. 
B) assume that an expensive item is of higher quality, which eliminates the possibility of an upward-sloping demand curve. 
C) make every effort to get complete information about a product before making a purchase to make sure that the purchase is optimal. 
D) assume that a cheaper brand is always a better deal than expensive brands. A

Question 2

Tom is maximizing utility by buying three packs of bubble gum and four packages of Skittles. Given diminishing marginal utility, if the price of Skittles rises, the principle of rational choice tells us that Tom will buy:

Accepted Answer

A) more Skittles, raising the opportunity cost of not consuming Skittles. 
B) fewer Skittles, raising the opportunity cost of not consuming Skittles. 
C) more Skittles, lowering the opportunity cost of not consuming Skittles. 
D) fewer Skittles, lowering the opportunity cost of not consuming Skittles. 
A) more Skittles, raising the opportunity cost of not consuming Skittles. 
B) fewer Skittles, raising the opportunity cost of not consuming Skittles. 
C) more Skittles, lowering the opportunity cost of not consuming Skittles. 
D) fewer Skittles, lowering the opportunity cost of not consuming Skittles. B

Question 3

Given that price is constant, the lower the marginal utility of a good as more of the good is consumed the:

Accepted Answer

A) less you are willing to buy of it. 
B) more you are willing to buy of it. 
C) fewer substitutes there are. 
D) more substitutes there are. 
A) less you are willing to buy of it. 
B) more you are willing to buy of it. 
C) fewer substitutes there are. 
D) more substitutes there are. A

Question 4

Suppose that when you consume the third piece of chicken, total utility rises from 420 to 520. Marginal utility for the third piece of chicken is:

Accepted Answer

A) 520. 
B) 420. 
C) 140. 
D) 100. 
A) 520. 
B) 420. 
C) 140. 
D) 100.

Question 5

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 6

Define bounded rationality and explain why bounded rationality might be a more realistic assumption for much of human behavior than pure rational choice.

Accepted Answer

Bounded rationality is rationality based

Question 7

Which of the following is an example of conspicuous consumption?

Accepted Answer

A) Purchasing an expensive automobile to impress others 
B) Avoiding cheap computers because low price indicates low quality 
C) Purchasing of hip-hugger pants because pop stars wear them 
D) Purchasing fast food because it is cheap and convenient 
A) Purchasing an expensive automobile to impress others 
B) Avoiding cheap computers because low price indicates low quality 
C) Purchasing of hip-hugger pants because pop stars wear them 
D) Purchasing fast food because it is cheap and convenient

Question 8

Economists account for changes in tastes for a good as:

Accepted Answer

A) movements along the demand curve. 
B) shifts in the demand curve. 
C) not demonstrable on the demand curve. 
D) irrelevant for the demand curve. 
A) movements along the demand curve. 
B) shifts in the demand curve. 
C) not demonstrable on the demand curve. 
D) irrelevant for the demand curve.

Question 9

According to the law of diminishing marginal utility:

Accepted Answer

A) total utility is always falling. 
B) total utility is always rising. 
C) after some point, total utility falls. 
D) after some point, the rate of change in total utility declines. 
A) total utility is always falling. 
B) total utility is always rising. 
C) after some point, total utility falls. 
D) after some point, the rate of change in total utility declines.

Question 10

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 11

If Steve willingly consumes another slice of pizza, you can be sure that his marginal utility is:

Accepted Answer

A) rising. 
B) falling. 
C) positive. 
D) negative. 
A) rising. 
B) falling. 
C) positive. 
D) negative.

Question 12

Use the principle of rational choice to determine which of the following to choose:
(a)reading one chapter of Aristotle's Metaphysics that will take you three hours and give you 300 units of utility,or
(b)reading a chapter of your Chemistry text that takes 2 1/4 hours and gives you 200 units of utility.

Accepted Answer

In each case compute the ratio of MU to

Question 13

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 14

What is the principle of diminishing marginal utility?

Accepted Answer

The principle of diminishing marginal ut

Question 15

If the price of one Weight Watchers frozen dinner is $2 and the price of one dozen jelly doughnuts is $1, which of the following would Kent, a utility-maximizing consumer, buy with his $6? $$ \begin{array} { c } 
 { \text { Jelly Danuts } }  \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad    { \text { Frazen Dinners } } \
\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Dazen } \
\text { Consumed per } \
\text { Day }
\end{array} & \begin{array} { c } 
\text { Tatal utility (Units di } \
\text { utility) }
\end{array} & \begin{array} { c } 
\text { Dinners Consumed } \
\text { per Day }
\end{array} & \begin{array} { c } 
\text { Tatal utility (Units df } \
\text { utility) }
\end{array} \
\hline 0 & 0 & 0 & 0 \
\hline 1 & 12 & 1 & 16 \
\hline 2 & 21 & 2 & 32 \
\hline 3 & 27 & 3 & 46 \
\hline 4 & 30 & 4 & 42 \
\hline 5 & 30 & 5 & 42 \
\hline 6 & 28 & 6 & 36 \
\hline
\end{array}\end{array}$$

Accepted Answer

A) 3 frozen dinners 
B) 2 frozen dinners and 2 dozen jelly doughnuts 
C) 1 frozen dinner and 4 dozen jelly doughnuts 
D) 6 dozen jelly doughnuts 
A) 3 frozen dinners 
B) 2 frozen dinners and 2 dozen jelly doughnuts 
C) 1 frozen dinner and 4 dozen jelly doughnuts 
D) 6 dozen jelly doughnuts

Question 16

You have just spent two hours studying microeconomics and this has made you very hungry.You have $10 to spend on a snack and decide to go to Taco Bell.Putting your newly acquired economics knowledge to use,you have developed the following table to assist with your purchase decision: $$\begin{array} {c}
\quad\quad { \text { Double Decker Tacos } } \quad\quad   { \text { Chicken Burrito Supremes } } \
{ ( \mathrm { P } = \$ 1 ) } \quad\quad\quad\quad\quad\quad\quad\quad   { ( \mathrm { P } = \$ 2 ) } \
\begin{array} { | c | c | c | c | c | c | c | c | } 
\hline \text { Q } & \text { TU } & \text { MU } & \text { MU/P } & \text { Q } & \text { TU } & \text { MU } & \text { MU/P } \
\hline 0 & 0 & & & 0 & 0 & & \
\hline 1 & 20 & & & 1 & 28 & & \
\hline 2 & 34 & & & 2 & 46 & & \
\hline 3 & 44 & & & 3 & 54 & & \
\hline 4 & 48 & & & 4 & 56 & & \
\hline 5 & 48 & & & 5 & 56 & & \
\hline 6 & 42 & & & 6 & 52 & & \
\hline
\end{array}\end{array}$$ (a)Fill in the missing values in the table above.
(b)If you bought 6 tacos and 2 burritos are you maximizing your utility? Explain.

Accepted Answer

(a)The completed table: \[\begin{array}

Question 17

If the average utility of good A is 15 and the average utility of good B is 25, 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 18

To calculate the marginal utility of consuming the Nth product:

Accepted Answer

A) subtract additional satisfaction from consuming the (N - 1)th production from the additional satisfaction from consuming the Nth product. 
B) subtract total satisfaction from consuming N - 1 products from total satisfaction from consuming N products. 
C) divide total satisfaction from consuming all N products by the price of the product. 
D) divide total satisfaction from consuming all N products by N. 
A) subtract additional satisfaction from consuming the (N - 1)th production from the additional satisfaction from consuming the Nth product. 
B) subtract total satisfaction from consuming N - 1 products from total satisfaction from consuming N products. 
C) divide total satisfaction from consuming all N products by the price of the product. 
D) divide total satisfaction from consuming all N products by N.

Question 19

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 20

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.

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

If people generally believe that "you get what you pay for," it is reasonable for them to:

Tom is maximizing utility by buying three packs of bubble gum and four packages of Skittles. Given diminishing marginal utility, if the price of Skittles rises, the principle of rational choice tells us that Tom will buy:

Given that price is constant, the lower the marginal utility of a good as more of the good is consumed the:

Suppose that when you consume the third piece of chicken, total utility rises from 420 to 520. Marginal utility for the third piece of chicken is:

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

Define bounded rationality and explain why bounded rationality might be a more realistic assumption for much of human behavior than pure rational choice.

Which of the following is an example of conspicuous consumption?

Economists account for changes in tastes for a good as:

According to the law of diminishing marginal utility:

Economists focus on self-interest in explaining choices because:

If Steve willingly consumes another slice of pizza, you can be sure that his marginal utility is:

The principle of diminishing marginal utility states that:

What is the principle of diminishing marginal utility?

If the average utility of good A is 15 and the average utility of good B is 25, you should:

To calculate the marginal utility of consuming the Nth product:

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

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

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

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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