Question 1

When total utility is at a maximum, marginal utility is:

Accepted Answer

A)  zero. 
B)  positive. 
C)  negative. 
D)  one. 
E)  infinite. 
A)  zero. 
B)  positive. 
C)  negative. 
D)  one. 
E)  infinite.

Question 2

The slope of an indifference curve is ____ and a movement along the curve causes the loss in marginal utility (MU) of one good to ____ the marginal utility (MU) gained from another good.

Accepted Answer

A)  zero; maximize 
B)  positive; exceed 
C)  concave; reduce 
D)  negative; equal 
A)  zero; maximize 
B)  positive; exceed 
C)  concave; reduce 
D)  negative; equal

Question 3

When a reduction in the price of a good allows a consumer to purchase more of all goods, this effect is called the:

Accepted Answer

A)  income effect. 
B)  substitution effect. 
C)  elasticity effect. 
D)  monetary effect. 
A)  income effect. 
B)  substitution effect. 
C)  elasticity effect. 
D)  monetary effect.

Question 4

If the price of a good falls, the marginal utility per dollar spent on that good:

Accepted Answer

A)  also falls. 
B)  stays the same. 
C)  rises. 
D)  will rise or fall, depending on the consumer. 
E)  remains unchanged, provided the consumer buys no more of the good. 
A)  also falls. 
B)  stays the same. 
C)  rises. 
D)  will rise or fall, depending on the consumer. 
E)  remains unchanged, provided the consumer buys no more of the good.

Question 5

As one moves down and along a budget line, its slope decreases.

Accepted Answer

A) True 
 B)False

Question 6

If a consumer is indifferent between 5 units of A and 8 units of B, then the consumer would:

Accepted Answer

A)  also be indifferent between 4 units of A and 9 units of B. 
B)  also be indifferent between 8 units of A and 5 units of B. 
C)  prefer 6 units of A and 8 units of B. 
D)  give up 1 unit of A if he/she could acquire 2 units of B. 
E)  not trade product A in exchange for any units of product B. 
A)  also be indifferent between 4 units of A and 9 units of B. 
B)  also be indifferent between 8 units of A and 5 units of B. 
C)  prefer 6 units of A and 8 units of B. 
D)  give up 1 unit of A if he/she could acquire 2 units of B. 
E)  not trade product A in exchange for any units of product B.

Question 7

The law of diminishing marginal utility implies that the marginal utility of my tenth pistachio nut is less than the marginal utility of my third pistachio nut, other things constant.

Accepted Answer

A) True 
 B)False

Question 8

According to the substitution effect, a decrease in the price of a product leads to an increase in the quantity demanded because buyers:

Accepted Answer

A)  purchase more complementary goods. 
B)  purchase more substitute goods. 
C)  purchase fewer substitute goods. 
D)  have more real income. 
A)  purchase more complementary goods. 
B)  purchase more substitute goods. 
C)  purchase fewer substitute goods. 
D)  have more real income.

Question 9

Tina's marginal utility of her first piece of cake is 15, while Jerry's marginal utility of his first piece of cake is 24. An economist would conclude that:

Accepted Answer

A)  Tina likes cake more than Jerry likes cake. 
B)  Jerry likes cake more than Tina likes cake. 
C)  Tina likes cake less than Jerry likes cake. 
D)  Jerry likes cake less than Tina likes cake. 
E)  we can't make a comparison to see who values cake more. 
A)  Tina likes cake more than Jerry likes cake. 
B)  Jerry likes cake more than Tina likes cake. 
C)  Tina likes cake less than Jerry likes cake. 
D)  Jerry likes cake less than Tina likes cake. 
E)  we can't make a comparison to see who values cake more.

Question 10

The demand curve is downward-sloping because of the law of ____.

Accepted Answer

A)  diminishing marginal utility 
B)  diminishing consumer equilibrium 
C)  consumer equilibrium 
D)  diminishing utility maximization 
A)  diminishing marginal utility 
B)  diminishing consumer equilibrium 
C)  consumer equilibrium 
D)  diminishing utility maximization

Question 11

Marginal utility is defined as:

Accepted Answer

A)  the extra satisfaction the consumer receives from an extra $1 of income. 
B)  the total level of satisfaction a consumer receives upon the consumption of a certain number of goods. 
C)  the number of hours a consumer would be willing to work to receive a certain product. 
D)  the extra satisfaction a person derives from consuming an additional unit of a good. 
E)  a comparison of the utility a good provides with the price of that good. 
A)  the extra satisfaction the consumer receives from an extra $1 of income. 
B)  the total level of satisfaction a consumer receives upon the consumption of a certain number of goods. 
C)  the number of hours a consumer would be willing to work to receive a certain product. 
D)  the extra satisfaction a person derives from consuming an additional unit of a good. 
E)  a comparison of the utility a good provides with the price of that good.

Question 12

The absolute value of the slope of an indifference curve is called the:

Accepted Answer

A)  marginal rate of transformation. 
B)  transitivity slope. 
C)  indifference rate of preference. 
D)  marginal rate of substitution. 
A)  marginal rate of transformation. 
B)  transitivity slope. 
C)  indifference rate of preference. 
D)  marginal rate of substitution.

Question 13

When the price of a good falls, consumers buy more of the good because it is cheaper relative to competing goods. This statement describes the:

Accepted Answer

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

Question 14

If I buy 3 cups of coffee, paying $1 for each cup, and I would have been willing to pay up to $3 for the first cup, up to $2 for the second cup, and up to $1 for the third cup, then my consumer surplus is:

Accepted Answer

A)  $6. 
B)  $5. 
C)  $3. 
D)  $2. 
E)  $1. 
A)  $6. 
B)  $5. 
C)  $3. 
D)  $2. 
E)  $1.

Question 15

The slope of the budget line is equal to the ratio of:

Accepted Answer

A)  marginal utilities. 
B)  money income to the price of the good on the horizontal axis. 
C)  money income to the price of the good on the vertical axis. 
D)  price of the good on the horizontal axis to the price of the good on the vertical axis. 
A)  marginal utilities. 
B)  money income to the price of the good on the horizontal axis. 
C)  money income to the price of the good on the vertical axis. 
D)  price of the good on the horizontal axis to the price of the good on the vertical axis.

Question 16

Suppose a consumer wants to obtain the highest possible satisfaction from goods purchased on a fixed budget. Which of the following must be equal for all goods?

Accepted Answer

A)  Total utility. 
B)  Marginal utility. 
C)  Average utility. 
D)  Marginal utility per dollar. 
A)  Total utility. 
B)  Marginal utility. 
C)  Average utility. 
D)  Marginal utility per dollar.

Question 17

Which of the following statements is true about the total utility provided by a good?

Accepted Answer

A) Total utility can never be negative. B) Total utility is maximized when marginal utility is maximized. C) Total utility continues to increase as more of the good is consumed. D) Total utility is maximized when marginal utility is zero (for total utility > 0). E) Total utility is maximized when marginal utility is zero (for total utility < 0). A) Total utility can never be negative. B) Total utility is maximized when marginal utility is maximized. C) Total utility continues to increase as more of the good is consumed. D) Total utility is maximized when marginal utility is zero (for total utility > 0). E) Total utility is maximized when marginal utility is zero (for total utility < 0).

Question 18

Typically, marginal utility is higher when a person consumes less of a good.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 6-2 Total utility for hamburgers, fries, and Cokes $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { T otal Utility } \
\text { from Hamburgers }
\end{array} & \begin{array} { c } 
\text { Total Utility } \
\text { from Fries }
\end{array} & \begin{array} { l } 
\text { Total Utility } \
\text { from Cokes }
\end{array} \
\hline 1 \text { hamburger (100 utils) } & 1 \text { order of fries (30 utils) } & 1 \text { Coke (40 utils) } \
2 \text { hamburgers (180 utils) } & 2 \text { orders of fries } ( 50 \mathrm { utils } ) & 2 \text { Cokes } ( 60 \mathrm { util } \mathrm { s } ) \
3 \text { hamburgers (240 utils) } & 3 \text { orders of fries } 60 \mathrm { utils } ) & 3 \text { Cokes } ( 70 \mathrm { utils } ) \
\hline
\end{array}$$
-In Exhibit 6-2, assume that the price of hamburgers is $2 each, fries cost 50 cents each, and Cokes cost $1 each. Suppose the consumer has $6 to spend on hamburgers, fries, and Cokes. In the consumer equilibrium, what is the marginal utility per dollar for each of the three goods?

Accepted Answer

A)  20 utils per dollar. 
B)  40 utils per dollar. 
C)  90 utils per dollar. 
D)  270 utils per dollar. 
A)  20 utils per dollar. 
B)  40 utils per dollar. 
C)  90 utils per dollar. 
D)  270 utils per dollar.

Question 20

According to the income effect, lower prices give people more purchasing power with which to increase the quantity demanded of goods.

Accepted Answer

A) True 
 B)False

When total utility is at a maximum, marginal utility is:

The slope of an indifference curve is and a movement along the curve causes the loss in marginal utility (MU) of one good to the marginal utility (MU) gained from another good.

When a reduction in the price of a good allows a consumer to purchase more of all goods, this effect is called the:

If the price of a good falls, the marginal utility per dollar spent on that good:

As one moves down and along a budget line, its slope decreases.

If a consumer is indifferent between 5 units of A and 8 units of B, then the consumer would:

The law of diminishing marginal utility implies that the marginal utility of my tenth pistachio nut is less than the marginal utility of my third pistachio nut, other things constant.

According to the substitution effect, a decrease in the price of a product leads to an increase in the quantity demanded because buyers:

Tina's marginal utility of her first piece of cake is 15, while Jerry's marginal utility of his first piece of cake is 24. An economist would conclude that:

The demand curve is downward-sloping because of the law of ____.

Marginal utility is defined as:

The absolute value of the slope of an indifference curve is called the:

When the price of a good falls, consumers buy more of the good because it is cheaper relative to competing goods. This statement describes the:

If I buy 3 cups of coffee, paying $1 for each cup, and I would have been willing to pay up to $3 for the first cup, up to $2 for the second cup, and up to $1 for the third cup, then my consumer surplus is:

The slope of the budget line is equal to the ratio of:

Suppose a consumer wants to obtain the highest possible satisfaction from goods purchased on a fixed budget. Which of the following must be equal for all goods?

Which of the following statements is true about the total utility provided by a good?

Typically, marginal utility is higher when a person consumes less of a good.

According to the income effect, lower prices give people more purchasing power with which to increase the quantity demanded of goods.

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

When total utility is at a maximum, marginal utility is:

The slope of an indifference curve is ____ and a movement along the curve causes the loss in marginal utility (MU) of one good to ____ the marginal utility (MU) gained from another good.

When a reduction in the price of a good allows a consumer to purchase more of all goods, this effect is called the:

If the price of a good falls, the marginal utility per dollar spent on that good:

As one moves down and along a budget line, its slope decreases.

If a consumer is indifferent between 5 units of A and 8 units of B, then the consumer would:

The law of diminishing marginal utility implies that the marginal utility of my tenth pistachio nut is less than the marginal utility of my third pistachio nut, other things constant.

According to the substitution effect, a decrease in the price of a product leads to an increase in the quantity demanded because buyers:

Tina's marginal utility of her first piece of cake is 15, while Jerry's marginal utility of his first piece of cake is 24. An economist would conclude that:

The demand curve is downward-sloping because of the law of ____.

Marginal utility is defined as:

The absolute value of the slope of an indifference curve is called the:

When the price of a good falls, consumers buy more of the good because it is cheaper relative to competing goods. This statement describes the:

If I buy 3 cups of coffee, paying $1 for each cup, and I would have been willing to pay up to $3 for the first cup, up to $2 for the second cup, and up to $1 for the third cup, then my consumer surplus is:

The slope of the budget line is equal to the ratio of:

Suppose a consumer wants to obtain the highest possible satisfaction from goods purchased on a fixed budget. Which of the following must be equal for all goods?

Which of the following statements is true about the total utility provided by a good?

Typically, marginal utility is higher when a person consumes less of a good.

According to the income effect, lower prices give people more purchasing power with which to increase the quantity demanded of goods.

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

The slope of an indifference curve is and a movement along the curve causes the loss in marginal utility (MU) of one good to the marginal utility (MU) gained from another good.