Question 1

​If marginal utility is a positive number:

Accepted Answer

A) ​the more you purchase, the more total utility you get 
B) ​the more you purchase, the less total utility you get 
C) ​utility is not affected by more purchases 
D) ​none of these is correct 
A) ​the more you purchase, the more total utility you get 
B) ​the more you purchase, the less total utility you get 
C) ​utility is not affected by more purchases 
D) ​none of these is correct A

Question 2

All decisions involve opportunity cost.

Accepted Answer

A) True 
 B)False  True

Question 3

The consumer maximizes his total utility (measured in money terms) when, at his chosen quantity of every good he buys, marginal utility

Accepted Answer

A) equals zero. 
B) divided by price equals zero. 
C) equals price. 
D) equals total utility. 
A) equals zero. 
B) divided by price equals zero. 
C) equals price. 
D) equals total utility. C

Question 4

All inferior goods have upward-sloping demand curves.

Accepted Answer

A) True 
 B)False

Question 5

An optimal purchase is one that maximizes total utility.

Accepted Answer

A) True 
 B)False

Question 6

Figure 5-3  
-In Figure 5-3, a decline in price from 3 to 1 will increase market quantity demanded by

Accepted Answer

A) 30. 
B) 40. 
C) 50. 
D) 60. 
A) 30. 
B) 40. 
C) 50. 
D) 60.

Question 7

The theory of consumer choice is based on the hypothesis that each consumer wants to

Accepted Answer

A) maximize her total utility. 
B) maximize her marginal utility. 
C) minimize the rate at which her marginal utility diminishes. 
D) minimize the percentage of her consumption diverted to inferior goods. 
A) maximize her total utility. 
B) maximize her marginal utility. 
C) minimize the rate at which her marginal utility diminishes. 
D) minimize the percentage of her consumption diverted to inferior goods.

Question 8

If the marginal net utility of beer is negative, the consumer should buy more beer in order to increase the total utility.

Accepted Answer

A) True 
 B)False

Question 9

Figure 5-13  
-When the price of a good changes but the price of the only other good bought by a consumer stays constant, his

Accepted Answer

A) budget line shifts. 
B) indifference curves shift. 
C) budget line changes slope. 
D) indifference curves change slope. 
A) budget line shifts. 
B) indifference curves shift. 
C) budget line changes slope. 
D) indifference curves change slope.

Question 10

Figure 5-10  
-In the indifference curve pictured in Figure 5-10, which of the following is clearly true?

Accepted Answer

A) B is preferred to D. 
B) B is preferred to C. 
C) A is preferred to B. 
D) C is preferred to D. 
A) B is preferred to D. 
B) B is preferred to C. 
C) A is preferred to B. 
D) C is preferred to D.

Question 11

According to the "law" of demand, we would expect

Accepted Answer

A) the demand curve to be negatively sloped. 
B) the demand curve to be positively sloped. 
C) the total quantity demanded by the market to move in the same direction as price. 
D) marginal utility to increase as quantity demanded increases. 
A) the demand curve to be negatively sloped. 
B) the demand curve to be positively sloped. 
C) the total quantity demanded by the market to move in the same direction as price. 
D) marginal utility to increase as quantity demanded increases.

Question 12

Gwen's decision to buy a new television instead of a bicycle for the same price

Accepted Answer

A) means that opportunity cost is zero since both cost the same amount. 
B) would not have involved trade-off and opportunity cost if Gwen had decided to put the money in a bank CD instead. 
C) would not imply a trade-off because of scarcity if Gwen were a multimillionaire. 
D) means that the opportunity cost to Gwen is the bicycle that she has given up. 
A) means that opportunity cost is zero since both cost the same amount. 
B) would not have involved trade-off and opportunity cost if Gwen had decided to put the money in a bank CD instead. 
C) would not imply a trade-off because of scarcity if Gwen were a multimillionaire. 
D) means that the opportunity cost to Gwen is the bicycle that she has given up.

Question 13

Marginal utility has a negative slope.This is because of the

Accepted Answer

A) optimal purchase rule. 
B) law of increasing costs. 
C) law of diminishing marginal utility. 
D) marginal rate of substitution. 
A) optimal purchase rule. 
B) law of increasing costs. 
C) law of diminishing marginal utility. 
D) marginal rate of substitution.

Question 14

What is a budget line? What does its slope indicate?

Accepted Answer

The budget line for a household graphica

Question 15

Figure 5-17  
-In Figure 5-17, which of the marked points would an economist use to help him construct a single demand curve for X?

Accepted Answer

A) A and B 
B) C and D 
C) A and C 
D) A and D 
A) A and B 
B) C and D 
C) A and C 
D) A and D

Question 16

Adam Smith's diamond-water puzzle

Accepted Answer

A) can be resolved by distinguishing between marginal and total utility. 
B) occurs because diamonds have no utility. 
C) occurs because scarcity increases total utility. 
D) will likely never be resolved with existing economic tools. 
A) can be resolved by distinguishing between marginal and total utility. 
B) occurs because diamonds have no utility. 
C) occurs because scarcity increases total utility. 
D) will likely never be resolved with existing economic tools.

Question 17

Which of the following factors is always present in consumer decision making?

Accepted Answer

A) taxes 
B) high prices 
C) scarcity 
D) changing consumer tastes 
E) cost-of-living adjustments to income 
A) taxes 
B) high prices 
C) scarcity 
D) changing consumer tastes 
E) cost-of-living adjustments to income

Question 18

Economic theory has traditionally focused on optimality in decision-making.​

Accepted Answer

A) True 
 B)False

Question 19

Figure 5-13  
-In Figure 5-13, the slope of the budget line (dropping all minus signs) equals

Accepted Answer

A) price of good X/price of good Y. 
B) price of good Y/price of good X. 
C) the minimum number of units of good Y the consumer would have to receive to make him willing to give up one unit of good X. 
D) the minimum number of units of good X the consumer would have to receive to make him willing to give up one unit of good Y. 
A) price of good X/price of good Y. 
B) price of good Y/price of good X. 
C) the minimum number of units of good Y the consumer would have to receive to make him willing to give up one unit of good X. 
D) the minimum number of units of good X the consumer would have to receive to make him willing to give up one unit of good Y.

Question 20

Figure 5-9  
-In Figure 5-9, the consumer's marginal rate of substitution at his optimum choice of X and Y is

Accepted Answer

A) −1. 
B) 16. 
C) 8. 
D) −8. 
A) −1. 
B) 16. 
C) 8. 
D) −8.

Exam 5: Consumer Choice Individual and Market Demand

​If marginal utility is a positive number:

All decisions involve opportunity cost.

The consumer maximizes his total utility (measured in money terms) when, at his chosen quantity of every good he buys, marginal utility

All inferior goods have upward-sloping demand curves.

An optimal purchase is one that maximizes total utility.

Figure 5-3 -In Figure 5-3, a decline in price from 3 to 1 will increase market quantity demanded by

The theory of consumer choice is based on the hypothesis that each consumer wants to

If the marginal net utility of beer is negative, the consumer should buy more beer in order to increase the total utility.

Figure 5-13 -When the price of a good changes but the price of the only other good bought by a consumer stays constant, his

Figure 5-10 -In the indifference curve pictured in Figure 5-10, which of the following is clearly true?

According to the "law" of demand, we would expect

Gwen's decision to buy a new television instead of a bicycle for the same price

Marginal utility has a negative slope.This is because of the

What is a budget line? What does its slope indicate?

Figure 5-17 -In Figure 5-17, which of the marked points would an economist use to help him construct a single demand curve for X?

Adam Smith's diamond-water puzzle

Which of the following factors is always present in consumer decision making?

Economic theory has traditionally focused on optimality in decision-making.​

Figure 5-13 -In Figure 5-13, the slope of the budget line (dropping all minus signs) equals

Figure 5-9 -In Figure 5-9, the consumer's marginal rate of substitution at his optimum choice of X and Y is

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand an Initial Look

Demand and Elasticity

Production Inputs and Cost Building Blocks for Supply Analysis

Output Price and Profit the Importance of Marginal Analysis

Securities Business Finance and the Economy the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power Regulation and Antitrust

The Case for Free Markets the Price System

The Shortcomings of Free Markets

Externalities the Environment and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship the Human Inputs

Poverty Inequality and Discrimination

Is Us Economic Leadership Threatened

International Trade and Comparative Advantage

Filters

If marginal utility is a positive number:

Economic theory has traditionally focused on optimality in decision-making.