Question 1

Indifference curve analysis is based on a mythical unit called a util.

Accepted Answer

A) True 
 B)False

Question 2

If a consumer is maximizing his/her utility for a given income, the:

Accepted Answer

A)  marginal utility for every good purchased would be the same. 
B)  marginal utility per dollar spent for all goods would be the same. 
C)  marginal utility per dollar for all goods would be at a maximum. 
D)  total expenditure on each good would be the same. 
E)  number of units of each good consumed would be the same. 
A)  marginal utility for every good purchased would be the same. 
B)  marginal utility per dollar spent for all goods would be the same. 
C)  marginal utility per dollar for all goods would be at a maximum. 
D)  total expenditure on each good would be the same. 
E)  number of units of each good consumed would be the same.

Question 3

Which of the following is true about marginal utility?

Accepted Answer

A)  Marginal utility is total utility divided by the total quantity consumed. 
B)  Marginal utility is the change in total utility divided by the change in total quantity demanded. 
C)  Marginal utility is the satisfaction that a consumer experiences from all the units of a good or service consumed. 
D)  None of the above are true. 
A)  Marginal utility is total utility divided by the total quantity consumed. 
B)  Marginal utility is the change in total utility divided by the change in total quantity demanded. 
C)  Marginal utility is the satisfaction that a consumer experiences from all the units of a good or service consumed. 
D)  None of the above are true.

Question 4

If total utility from consuming two cups of coffee is 20 utils, and if the total utility from consuming three cups of coffee is 25 utils, then which of the following is the marginal utility of the third cup of coffee?​

Accepted Answer

A)  ​0. 
B)  5.​ 
C)  ​10. 
D)  ​20. 
E)  ​25. 
A)  ​0. 
B)  5.​ 
C)  ​10. 
D)  ​20. 
E)  ​25.

Question 5

Utility is defined as the:

Accepted Answer

A)  sense of pleasure or satisfaction derived from consuming goods and services. 
B)  cost of acquiring goods and services. 
C)  profits consumers earn from consuming goods and services. 
D)  monetary value to consumers of goods and services. 
E)  desire to consume goods and services. 
A)  sense of pleasure or satisfaction derived from consuming goods and services. 
B)  cost of acquiring goods and services. 
C)  profits consumers earn from consuming goods and services. 
D)  monetary value to consumers of goods and services. 
E)  desire to consume goods and services.

Question 6

If Mr. Smith thinks the last dollar spent on shirts yields less satisfaction than the last dollar spent on cola, and Smith is a utility-maximizing consumer, he should:

Accepted Answer

A)  decrease his spending on cola. 
B)  decrease his spending on cola and increase his spending on shirts. 
C)  increase his spending on shirts. 
D)  increase his spending on cola and decrease his spending on shirts. 
A)  decrease his spending on cola. 
B)  decrease his spending on cola and increase his spending on shirts. 
C)  increase his spending on shirts. 
D)  increase his spending on cola and decrease his spending on shirts.

Question 7

Assume the price of pizza decreases. As a result, your real income increases and you increase the quantity of pizza purchased each month. This is an example of the:

Accepted Answer

A)  substitution effect. 
B)  income effect. 
C)  revenue effect. 
D)  consumer price effect. 
A)  substitution effect. 
B)  income effect. 
C)  revenue effect. 
D)  consumer price effect.

Question 8

Consumers tend to maximize:

Accepted Answer

A)  marginal utility. 
B)  marginal utility per dollar. 
C)  total utility. 
D)  money holdings. 
E)  consumer surplus. 
A)  marginal utility. 
B)  marginal utility per dollar. 
C)  total utility. 
D)  money holdings. 
E)  consumer surplus.

Question 9

Consumer equilibrium requires that the marginal utility per dollar spent be the same for all goods.

Accepted Answer

A) True 
 B)False

Question 10

Consumer equilibrium occurs where the budget line is tangent to the:

Accepted Answer

A)  lowest possible indifference curve. 
B)  highest possible indifference curve. 
C)  utility maximizing indifference curve. 
D)  utility equalization indifference curve. 
A)  lowest possible indifference curve. 
B)  highest possible indifference curve. 
C)  utility maximizing indifference curve. 
D)  utility equalization indifference curve.

Question 11

The law of diminishing marginal utility indicates that the marginal utility curve is:

Accepted Answer

A)  downward sloping. 
B)  upward sloping. 
C)  U-shaped. 
D)  flat. 
E)  vertical. 
A)  downward sloping. 
B)  upward sloping. 
C)  U-shaped. 
D)  flat. 
E)  vertical.

Question 12

Assume the price of Advil increases. As a result, you decrease the quantity of Advil purchased each month and purchase more Tylenol. This is an example of the:

Accepted Answer

A)  income effect. 
B)  utility effect. 
C)  consumption effect. 
D)  substitution effect. 
A)  income effect. 
B)  utility effect. 
C)  consumption effect. 
D)  substitution effect.

Question 13

Suppose the law of diminishing marginal utility holds for coffee. As a person drinks more coffee during the day, the total utility he or she receives will:

Accepted Answer

A)  increase faster and faster. 
B)  fall steadily. 
C)  remain constant. 
D)  rise, but at slower and slower rates. 
A)  increase faster and faster. 
B)  fall steadily. 
C)  remain constant. 
D)  rise, but at slower and slower rates.

Question 14

If John's marginal benefit derived from the consumption of another candy bar is greater than the price of the candy bar:

Accepted Answer

A)  John will not purchase any more candy bars. 
B)  John will increase his total satisfaction by purchasing the candy bar. 
C)  the opportunity cost of the candy bar is lower than the price. 
D)  John will decrease his total utility if he purchases the candy bar. 
A)  John will not purchase any more candy bars. 
B)  John will increase his total satisfaction by purchasing the candy bar. 
C)  the opportunity cost of the candy bar is lower than the price. 
D)  John will decrease his total utility if he purchases the candy bar.

Question 15

Assume the price of Nikes decreases. As a result, consumers increase the quantity of Nikes purchased each year and purchase fewer Reeboks. This is an example of the:

Accepted Answer

A)  substitution effect. 
B)  income effect. 
C)  utility effect. 
D)  consumption effect. 
A)  substitution effect. 
B)  income effect. 
C)  utility effect. 
D)  consumption effect.

Question 16

Under which of the following circumstances might a gallon of water be more valuable than a flawless one carat diamond? ​

Accepted Answer

A)  ​At a diamond shop next door to a clean public drinking fountain. 
B)  ​At a diamond shop next door to a typical grocery store selling bottled water. 
C)  ​In any U.S. city with safe, clean drinking water. 
D)  ​In a life raft with 8 passengers who have been adrift on a remote part of the Pacific Ocean for a week with few prospects of an immediate rescue. 
A)  ​At a diamond shop next door to a clean public drinking fountain. 
B)  ​At a diamond shop next door to a typical grocery store selling bottled water. 
C)  ​In any U.S. city with safe, clean drinking water. 
D)  ​In a life raft with 8 passengers who have been adrift on a remote part of the Pacific Ocean for a week with few prospects of an immediate rescue.

Question 17

When the price of a normal good falls, then:

Accepted Answer

A)  both the income and substitution effects combine to cause the quantity demanded to increase. 
B)  the substitution effect will cause people to buy more because the good is relatively less expensive. 
C)  the income effect will cause people to buy more because of the increased purchasing power associated with the lower price. 
D)  all of these. 
A)  both the income and substitution effects combine to cause the quantity demanded to increase. 
B)  the substitution effect will cause people to buy more because the good is relatively less expensive. 
C)  the income effect will cause people to buy more because of the increased purchasing power associated with the lower price. 
D)  all of these.

Question 18

Which of the following statements is true?

Accepted Answer

A)  Total utility is the extra satisfaction from the consumption of a good or service. 
B)  Marginal utility is the amount of satisfaction received from all the units of a good or service consumed. 
C)  The law of diminishing marginal utility states that as more of a good or service is consumed total utility decreases. 
D)  Consumer equilibrium is a combination of goods and services consumed which maximizes total utility from a given budget. 
A)  Total utility is the extra satisfaction from the consumption of a good or service. 
B)  Marginal utility is the amount of satisfaction received from all the units of a good or service consumed. 
C)  The law of diminishing marginal utility states that as more of a good or service is consumed total utility decreases. 
D)  Consumer equilibrium is a combination of goods and services consumed which maximizes total utility from a given budget.

Question 19

Utility theory assumes that marginal utility:

Accepted Answer

A)  increases as an individual consumes more of a product. 
B)  decreases as an individual consumes more of a product. 
C)  is zero as long as the individual derives utility from the product. 
D)  is constant as long as the individual derives utility from the product. 
E)  is constant as long as the individual derives satisfaction from the product. 
A)  increases as an individual consumes more of a product. 
B)  decreases as an individual consumes more of a product. 
C)  is zero as long as the individual derives utility from the product. 
D)  is constant as long as the individual derives utility from the product. 
E)  is constant as long as the individual derives satisfaction from the product.

Question 20

An indifference curve consists of quantity combinations of two goods that yield:

Accepted Answer

A)  equal marginal utilities. 
B)  negative marginal utilities. 
C)  the same price ratios. 
D)  the same total satisfaction. 
A)  equal marginal utilities. 
B)  negative marginal utilities. 
C)  the same price ratios. 
D)  the same total satisfaction.

Indifference curve analysis is based on a mythical unit called a util.

If a consumer is maximizing his/her utility for a given income, the:

Which of the following is true about marginal utility?

If total utility from consuming two cups of coffee is 20 utils, and if the total utility from consuming three cups of coffee is 25 utils, then which of the following is the marginal utility of the third cup of coffee?

Utility is defined as the:

If Mr. Smith thinks the last dollar spent on shirts yields less satisfaction than the last dollar spent on cola, and Smith is a utility-maximizing consumer, he should:

Assume the price of pizza decreases. As a result, your real income increases and you increase the quantity of pizza purchased each month. This is an example of the:

Consumers tend to maximize:

Consumer equilibrium requires that the marginal utility per dollar spent be the same for all goods.

Consumer equilibrium occurs where the budget line is tangent to the:

The law of diminishing marginal utility indicates that the marginal utility curve is:

Assume the price of Advil increases. As a result, you decrease the quantity of Advil purchased each month and purchase more Tylenol. This is an example of the:

Suppose the law of diminishing marginal utility holds for coffee. As a person drinks more coffee during the day, the total utility he or she receives will:

If John's marginal benefit derived from the consumption of another candy bar is greater than the price of the candy bar:

Assume the price of Nikes decreases. As a result, consumers increase the quantity of Nikes purchased each year and purchase fewer Reeboks. This is an example of the:

Under which of the following circumstances might a gallon of water be more valuable than a flawless one carat diamond?

When the price of a normal good falls, then:

Which of the following statements is true?

Utility theory assumes that marginal utility:

An indifference curve consists of quantity combinations of two goods that yield:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

Exam 6: Consumer Choice Theory

Indifference curve analysis is based on a mythical unit called a util.

If a consumer is maximizing his/her utility for a given income, the:

Which of the following is true about marginal utility?

If total utility from consuming two cups of coffee is 20 utils, and if the total utility from consuming three cups of coffee is 25 utils, then which of the following is the marginal utility of the third cup of coffee?​

Utility is defined as the:

If Mr. Smith thinks the last dollar spent on shirts yields less satisfaction than the last dollar spent on cola, and Smith is a utility-maximizing consumer, he should:

Assume the price of pizza decreases. As a result, your real income increases and you increase the quantity of pizza purchased each month. This is an example of the:

Consumers tend to maximize:

Consumer equilibrium requires that the marginal utility per dollar spent be the same for all goods.

Consumer equilibrium occurs where the budget line is tangent to the:

The law of diminishing marginal utility indicates that the marginal utility curve is:

Assume the price of Advil increases. As a result, you decrease the quantity of Advil purchased each month and purchase more Tylenol. This is an example of the:

Suppose the law of diminishing marginal utility holds for coffee. As a person drinks more coffee during the day, the total utility he or she receives will:

If John's marginal benefit derived from the consumption of another candy bar is greater than the price of the candy bar:

Assume the price of Nikes decreases. As a result, consumers increase the quantity of Nikes purchased each year and purchase fewer Reeboks. This is an example of the:

Under which of the following circumstances might a gallon of water be more valuable than a flawless one carat diamond? ​

When the price of a normal good falls, then:

Which of the following statements is true?

Utility theory assumes that marginal utility:

An indifference curve consists of quantity combinations of two goods that yield:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

If total utility from consuming two cups of coffee is 20 utils, and if the total utility from consuming three cups of coffee is 25 utils, then which of the following is the marginal utility of the third cup of coffee?

Under which of the following circumstances might a gallon of water be more valuable than a flawless one carat diamond?