Question 1

According to the marginal utility theory,consumers

Accepted Answer

A) maximize utility and minimize marginal utility. 
B) maximize utility and equalize marginal utility per dollar across all goods. 
C) save part of their income for future consumption. 
D) maximize utility by spending the most on the least expensive good. 
E) maximize utility by spending the least on the least expensive good. 
A) maximize utility and minimize marginal utility. 
B) maximize utility and equalize marginal utility per dollar across all goods. 
C) save part of their income for future consumption. 
D) maximize utility by spending the most on the least expensive good. 
E) maximize utility by spending the least on the least expensive good. B

Question 2

Use the table below to answer the following questions.
Table 8.2.1
Windsurfing equipment rents for $10 per hour, snorkeling equipment for $5 per hour.
  
-Consider Devon's utility from snorkeling and windsurfing in Table 8.2.1.Devon has $55 to spend.What are Devon's choices for time spent on the two activities?

Accepted Answer

A) 1 hour of windsurfing and 9 hours of snorkeling 
B) 2 hours of windsurfing and 7 hours of snorkeling 
C) 3 hours of windsurfing and 5 hours of snorkeling 
D) 4 hours of windsurfing and 3 hours of snorkeling 
E) 5 hours of windsurfing and 1 hour of snorkeling 
A) 1 hour of windsurfing and 9 hours of snorkeling 
B) 2 hours of windsurfing and 7 hours of snorkeling 
C) 3 hours of windsurfing and 5 hours of snorkeling 
D) 4 hours of windsurfing and 3 hours of snorkeling 
E) 5 hours of windsurfing and 1 hour of snorkeling D

Question 3

The three limitations on human rationality that behavioural economics emphasizes are

Accepted Answer

A) bounded rationality, bounded utility, and bounded self-interest. 
B) bounded rationality, bounded will-power, and bounded self-interest. 
C) bounded utility, bounded will-power, and bounded self-interest. 
D) bounded rationality, bounded will-power, and bounded utility. 
E) bounded rationality, bounded surplus, and bounded utility. 
A) bounded rationality, bounded utility, and bounded self-interest. 
B) bounded rationality, bounded will-power, and bounded self-interest. 
C) bounded utility, bounded will-power, and bounded self-interest. 
D) bounded rationality, bounded will-power, and bounded utility. 
E) bounded rationality, bounded surplus, and bounded utility. B

Question 4

Suppose you are consuming hot dogs and Cokes and believe you are receiving maximum total utility from the meal for your entire budget of $12.The price of a hot dog is $2 and the price of a Coke is $2.Which one of the following can you conclude?

Accepted Answer

A) The total utility from hot dogs is maximized. 
B) The marginal utilities from hot dogs and Cokes divided by the quantity of each good must be equal. 
C) The total utilities from hot dogs and Cokes must be equal. 
D) You are purchasing three hot dogs and three Cokes. 
E) The marginal utilities from hot dogs and Cokes must be equal. 
A) The total utility from hot dogs is maximized. 
B) The marginal utilities from hot dogs and Cokes divided by the quantity of each good must be equal. 
C) The total utilities from hot dogs and Cokes must be equal. 
D) You are purchasing three hot dogs and three Cokes. 
E) The marginal utilities from hot dogs and Cokes must be equal.

Question 5

In consumer equilibrium

Accepted Answer

A) total utility is maximized given the consumer's income and the prices of goods. 
B) marginal utility is maximized given the consumer's income and the prices of goods. 
C) marginal utility per dollar is maximized given the consumer's income and the prices of goods. 
D) the marginal utility from each good is equal. 
E) marginal utility per dollar is zero. 
A) total utility is maximized given the consumer's income and the prices of goods. 
B) marginal utility is maximized given the consumer's income and the prices of goods. 
C) marginal utility per dollar is maximized given the consumer's income and the prices of goods. 
D) the marginal utility from each good is equal. 
E) marginal utility per dollar is zero.

Question 6

With respect to water and diamonds,water

Accepted Answer

A) has a higher marginal utility. 
B) has a lower marginal utility. 
C) has a lower total utility. 
D) is cheaper than diamonds because it has a lower total utility. 
E) none of the above. 
A) has a higher marginal utility. 
B) has a lower marginal utility. 
C) has a lower total utility. 
D) is cheaper than diamonds because it has a lower total utility. 
E) none of the above.

Question 7

Other things remaining the same,marginal utility theory implies that a rise in the price of a good

Accepted Answer

A) increases the consumer surplus. 
B) decreases the consumer surplus. 
C) leaves consumer surplus unchanged. 
D) has an effect on consumer surplus that cannot be determined. 
E) decreases consumer surplus by the amount equal to the total utility of all goods consumed before the price rise but not after the price rise. 
A) increases the consumer surplus. 
B) decreases the consumer surplus. 
C) leaves consumer surplus unchanged. 
D) has an effect on consumer surplus that cannot be determined. 
E) decreases consumer surplus by the amount equal to the total utility of all goods consumed before the price rise but not after the price rise.

Question 8

Diminishing marginal utility means that

Accepted Answer

A) Ralph will enjoy his second hamburger less than the first one. 
B) the utility from one hamburger is greater than the utility from two hamburgers. 
C) the price of two hamburgers is less than twice the price of one. 
D) the utility from eating two hamburgers will be more than twice the utility from eating the first one. 
E) hamburgers seem smaller as you eat more of them. 
A) Ralph will enjoy his second hamburger less than the first one. 
B) the utility from one hamburger is greater than the utility from two hamburgers. 
C) the price of two hamburgers is less than twice the price of one. 
D) the utility from eating two hamburgers will be more than twice the utility from eating the first one. 
E) hamburgers seem smaller as you eat more of them.

Question 9

The budget line shows the boundary between those combinations of goods and services that

Accepted Answer

A) have positive marginal utility and those that have negative marginal utility. 
B) are available and those that are unavailable. 
C) are desirable and those that are undesirable. 
D) are affordable and those that are unaffordable. 
E) are normal goods and those that are inferior goods. 
A) have positive marginal utility and those that have negative marginal utility. 
B) are available and those that are unavailable. 
C) are desirable and those that are undesirable. 
D) are affordable and those that are unaffordable. 
E) are normal goods and those that are inferior goods.

Question 10

Utility is

Accepted Answer

A) the value of a good. 
B) the additional satisfaction received from consuming another unit of a good. 
C) the benefit or satisfaction from consuming goods and services. 
D) the practical usefulness of a good. 
E) equal to the price of a good. 
A) the value of a good. 
B) the additional satisfaction received from consuming another unit of a good. 
C) the benefit or satisfaction from consuming goods and services. 
D) the practical usefulness of a good. 
E) equal to the price of a good.

Question 11

Neuroeconomics studies all of the following concepts except

Accepted Answer

A) the prefrontal cortex. 
B) the hippocampus. 
C) the production possibilites frontier. 
D) dopamine. 
E) anxiety and fear. 
A) the prefrontal cortex. 
B) the hippocampus. 
C) the production possibilites frontier. 
D) dopamine. 
E) anxiety and fear.

Question 12

Ron starts out in consumer equilibrium,consuming two goods,X and Y.Ron's income rises.At this point,we can definitely conclude that

Accepted Answer

A) MUX/PX > MUY/PY, and then Ron increases his consumption of X. B) MUX/PX > MUY/PY, and then Ron decreases his consumption of X. C) MUX/PX < MUY/PY, and then Ron increases his consumption of X. D) MUX/PX < MUY/PY, and then Ron decreases his consumption of X. E) none of the above. A) MUX/PX > MUY/PY, and then Ron increases his consumption of X. B) MUX/PX > MUY/PY, and then Ron decreases his consumption of X. C) MUX/PX < MUY/PY, and then Ron increases his consumption of X. D) MUX/PX < MUY/PY, and then Ron decreases his consumption of X. E) none of the above.

Question 13

If Katie purchases two slices of pizza and six breadsticks to maximize her total utility,then

Accepted Answer

A) a slice of pizza costs three times as much as a breadstick. 
B) her marginal utility from the second slice of pizza divided by the price of a slice of pizza is equal to her marginal utility from the sixth breadstick divided by the price of a breadstick. 
C) a breadstick costs three times as much as a slice of pizza. 
D) she spends more on pizza than she spends on breadsticks. 
E) B and D are both correct. 
A) a slice of pizza costs three times as much as a breadstick. 
B) her marginal utility from the second slice of pizza divided by the price of a slice of pizza is equal to her marginal utility from the sixth breadstick divided by the price of a breadstick. 
C) a breadstick costs three times as much as a slice of pizza. 
D) she spends more on pizza than she spends on breadsticks. 
E) B and D are both correct.

Question 14

Which one of the following is not true in consumer equilibrium?

Accepted Answer

A) The total utilities of all goods are equal. 
B) The consumer is maximizing utility, given her income and the prices of goods and services. 
C) The marginal utility per dollar is equal for all goods. 
D) Given prices and her income, the consumer finds that any other choice of goods to consume would lower her utility. 
E) The consumer will not change her choices unless prices or income change. 
A) The total utilities of all goods are equal. 
B) The consumer is maximizing utility, given her income and the prices of goods and services. 
C) The marginal utility per dollar is equal for all goods. 
D) Given prices and her income, the consumer finds that any other choice of goods to consume would lower her utility. 
E) The consumer will not change her choices unless prices or income change.

Question 15

Use the table below to answer the following questions.
Table 8.1.1
  
-Refer to Table 8.1.1.The value of B is

Accepted Answer

A) 30. 
B) 47. 
C) 42. 
D) 18. 
E) 0. 
A) 30. 
B) 47. 
C) 42. 
D) 18. 
E) 0.

Question 16

If Ms.Petersen is maximizing her utility in the consumption of goods A and B,which one of the following statements must be true?

Accepted Answer

A) MUA = MUB 
B) MUA/PA = MUB/PB 
C) MUA/PB = MUB/PA 
D) TUA = TUB 
E) TUA/PA = TUB/PB 
A) MUA = MUB 
B) MUA/PA = MUB/PB 
C) MUA/PB = MUB/PA 
D) TUA = TUB 
E) TUA/PA = TUB/PB

Question 17

Let MUA and MUB stand for the marginal utility of goods A and B,respectively.Let PA and PB stand for the price of goods A and B,respectively.Assume that for a given consumer MUA and MUB are equal to each other,and PA is greater than PB.In this case,the consumer is better off if he consumes

Accepted Answer

A) more of good A and less of good B. 
B) less of good A and more of good B. 
C) equal amount of goods A and B. 
D) good B only. 
E) neither good A nor good B. 
A) more of good A and less of good B. 
B) less of good A and more of good B. 
C) equal amount of goods A and B. 
D) good B only. 
E) neither good A nor good B.

Question 18

The high price of diamonds relative to the price of water reflects the fact that,at typical levels of consumption,

Accepted Answer

A) the total utility of water is relatively low. 
B) the total utility of diamonds is relatively high. 
C) the marginal utility of water is high. 
D) the marginal utility of diamonds is relatively low. 
E) None of the above is true. 
A) the total utility of water is relatively low. 
B) the total utility of diamonds is relatively high. 
C) the marginal utility of water is high. 
D) the marginal utility of diamonds is relatively low. 
E) None of the above is true.

Question 19

If Soula is maximizing her utility,and two goods have the same marginal utility,she

Accepted Answer

A) buys only one. 
B) buys equal quantities of both. 
C) is paying the same price for each good. 
D) receives the same total utility from each good. 
E) none of the above. 
A) buys only one. 
B) buys equal quantities of both. 
C) is paying the same price for each good. 
D) receives the same total utility from each good. 
E) none of the above.

Question 20

Sergio is maximizing utility in his consumption of beer and bubblegum.If the price of beer is greater than the price of bubblegum,then we know

Accepted Answer

A) Sergio buys more beer than bubblegum. 
B) Sergio buys more bubblegum than beer. 
C) the marginal utility from the last purchased beer is greater than the marginal utility from the last purchased bubblegum. 
D) the marginal utility from the last purchased bubblegum is greater than the marginal utility from the last purchased beer. 
E) the marginal utilities from the last purchased beer and bubblegum are equal. 
A) Sergio buys more beer than bubblegum. 
B) Sergio buys more bubblegum than beer. 
C) the marginal utility from the last purchased beer is greater than the marginal utility from the last purchased bubblegum. 
D) the marginal utility from the last purchased bubblegum is greater than the marginal utility from the last purchased beer. 
E) the marginal utilities from the last purchased beer and bubblegum are equal.

Exam 8: Utility and Demand

According to the marginal utility theory,consumers

The three limitations on human rationality that behavioural economics emphasizes are

Suppose you are consuming hot dogs and Cokes and believe you are receiving maximum total utility from the meal for your entire budget of $12.The price of a hot dog is $2 and the price of a Coke is $2.Which one of the following can you conclude?

In consumer equilibrium

With respect to water and diamonds,water

Other things remaining the same,marginal utility theory implies that a rise in the price of a good

Diminishing marginal utility means that

The budget line shows the boundary between those combinations of goods and services that

Utility is

Neuroeconomics studies all of the following concepts except

Ron starts out in consumer equilibrium,consuming two goods,X and Y.Ron's income rises.At this point,we can definitely conclude that

If Katie purchases two slices of pizza and six breadsticks to maximize her total utility,then

Which one of the following is not true in consumer equilibrium?

Use the table below to answer the following questions. Table 8.1.1 -Refer to Table 8.1.1.The value of B is

If Ms.Petersen is maximizing her utility in the consumption of goods A and B,which one of the following statements must be true?

Let MUA and MUB stand for the marginal utility of goods A and B,respectively.Let PA and PB stand for the price of goods A and B,respectively.Assume that for a given consumer MUA and MUB are equal to each other,and PA is greater than PB.In this case,the consumer is better off if he consumes

The high price of diamonds relative to the price of water reflects the fact that,at typical levels of consumption,

If Soula is maximizing her utility,and two goods have the same marginal utility,she

Sergio is maximizing utility in his consumption of beer and bubblegum.If the price of beer is greater than the price of bubblegum,then we know

What Is Economics?

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Elasticity

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Government Actions in Markets

Global Markets in Action

Possibilities, Preferences, and Choices

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Output and Costs

Perfect Competition

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Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

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