Question 1

Exhibit 6A-3 Consumer equilibrium
​  
-Given the budget line and indifference curves shown in Exhibit 6A-3, at point Z:

Accepted Answer

A)  Px exceeds Py. 
B)  MUx = MUy. 
C)  MRS = Px / Py. 
D)  MRS = Py / Px. 
A)  Px exceeds Py. 
B)  MUx = MUy. 
C)  MRS = Px / Py. 
D)  MRS = Py / Px.

Question 2

Utility is:

Accepted Answer

A)  easily measured, because all people derive the same utility from consumption. 
B)  easily measured, because it is an objective concept. 
C)  easily measured, because it is a subjective concept. 
D)  hard to measure, because it is a subjective concept. 
E)  hard to measure, because it is an objective concept. 
A)  easily measured, because all people derive the same utility from consumption. 
B)  easily measured, because it is an objective concept. 
C)  easily measured, because it is a subjective concept. 
D)  hard to measure, because it is a subjective concept. 
E)  hard to measure, because it is an objective concept.

Question 3

If a consumer is spending all of his/her income in a manner where MUa / Pa = MUb / Pb, then the consumer:

Accepted Answer

A)  should increase the consumption of A and decrease the consumption of B. 
B)  is maximizing his/her utility. 
C)  should increase the consumption of B and decrease the consumption of A. 
D)  should increase the consumption of both A and B. 
E)  should decrease the purchases of both A and B. 
A)  should increase the consumption of A and decrease the consumption of B. 
B)  is maximizing his/her utility. 
C)  should increase the consumption of B and decrease the consumption of A. 
D)  should increase the consumption of both A and B. 
E)  should decrease the purchases of both A and B.

Question 4

Exhibit 6-3 Marginal utility data for goods X and Y $$\begin{array} { | c | c | c | c | } 
\hline \text { Units of good X } & \begin{array} { c } 
\text { Marginal utility of } \
\text { good X }
\end{array} & \text { Units of good Y } & \begin{array} { c } 
\text { Marginal utility of } \
\operatorname { good~Y }
\end{array} \
\hline 1 & 20 & 1 & 14 \
2 & 16 & 2 & 12 \
3 & 12 & 3 & 10 \
4 & 8 & 4 & 8 \
5 & 4 & 5 & 6 \
\hline
\end{array}$$
-As shown in Exhibit 6-3, assume that the price of both goods is $1 per unit. To maximize total utility without a budget, you should consume:

Accepted Answer

A)  neither X nor Y. 
B)  more of X and less of Y. 
C)  less of X and more of Y. 
D)  more of both X and Y. 
E)  less of both X and Y. 
A)  neither X nor Y. 
B)  more of X and less of Y. 
C)  less of X and more of Y. 
D)  more of both X and Y. 
E)  less of both X and Y.

Question 5

Exhibit 6-8 Bea's total utility of 3-minute telephone calls $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { 3-Minute Calls }
\end{array} & \begin{array} { c } 
\text { Total Utility of } \
\text { Telephone Calls }
\end{array} \
\hline 0 & 0 \
1 & 15 \
2 & 28 \
3 & 38 \
4 & 45 \
5 & 50 \
6 & 48 \
\hline
\end{array}$$
-Refer to Exhibit 6-8. Bea's marginal utility of her second telephone call is:

Accepted Answer

A)  28. 
B)  15. 
C)  13. 
D)  10. 
E)  1. 
A)  28. 
B)  15. 
C)  13. 
D)  10. 
E)  1.

Question 6

Given the budget lines and indifference curves shown in Exhibit 6A-7, if the budget line shifts, then the equilibrium points X and Y:

Accepted Answer

A)  are equal in total utility. 
B)  result from a decrease in the consumer's budget. 
C)  result from a decrease in the price of good Y. 
D)  are two points along a downward sloping demand curve for good X. 
A)  are equal in total utility. 
B)  result from a decrease in the consumer's budget. 
C)  result from a decrease in the price of good Y. 
D)  are two points along a downward sloping demand curve for good X.

Question 7

Marginal utility can be measured by the change in:

Accepted Answer

A)  total utility / the change in quantity. 
B)  income / the change in utility. 
C)  quantity / the change in income. 
D)  price / the change in utility. 
E)  income / the change in price. 
A)  total utility / the change in quantity. 
B)  income / the change in utility. 
C)  quantity / the change in income. 
D)  price / the change in utility. 
E)  income / the change in price.

Question 8

Indifference curve slopes upward from left to right because consumers always prefer more of a good to less.

Accepted Answer

A) True 
 B)False

Question 9

At the point where total utility is at its peak, marginal utility is:

Accepted Answer

A)  zero. 
B)  positive. 
C)  negative. 
D)  positive, but declining. 
E)  positive, but increasing. 
A)  zero. 
B)  positive. 
C)  negative. 
D)  positive, but declining. 
E)  positive, but increasing.

Question 10

Exhibit 6-6 Marginal utility for data for clothes and amusement $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Clothes } & \text { Amusement } \
\hline 1 & 15 & 20 \
2 & 13 & 18 \
3 & 10 & 15 \
4 & 8 & 12 \
5 & 6 & 10 \
\hline
\end{array}$$
-Refer to Exhibit 6-6. Your budget is $50. The price of amusement goods is $10. If the price of clothes falls to $4, which of the following statements is true?

Accepted Answer

A)  The marginal-utility-to-price ratio for clothes will decrease. 
B)  The marginal-utility-to-price ratio for clothes will increase. 
C)  The quantity demanded of clothes will decrease. 
D)  Both b and c are true. 
E)  The quantity demanded for amusement goods will remain constant. 
A)  The marginal-utility-to-price ratio for clothes will decrease. 
B)  The marginal-utility-to-price ratio for clothes will increase. 
C)  The quantity demanded of clothes will decrease. 
D)  Both b and c are true. 
E)  The quantity demanded for amusement goods will remain constant.

Question 11

Consumer equilibrium occurs at:

Accepted Answer

A)  any point of intersection between the budget line and an indifference curve. 
B)  a point of tangency between the budget line and an indifference curve. 
C)  the point where the slope of the indifference curve equals the ratio of the quantities. 
D)  a point where the budget line cuts the curve from below. 
A)  any point of intersection between the budget line and an indifference curve. 
B)  a point of tangency between the budget line and an indifference curve. 
C)  the point where the slope of the indifference curve equals the ratio of the quantities. 
D)  a point where the budget line cuts the curve from below.

Question 12

Which of the following is the best example of the substitution effect?

Accepted Answer

A)  Joe buys fewer apples and more oranges as the result of an increase in the price of apples. 
B)  Joe buys more apples when his income increases. 
C)  Joe buys an apple slicer when the price of apples decreases. 
D)  Joe buys less sugar as the result of an increase in price of apples. 
A)  Joe buys fewer apples and more oranges as the result of an increase in the price of apples. 
B)  Joe buys more apples when his income increases. 
C)  Joe buys an apple slicer when the price of apples decreases. 
D)  Joe buys less sugar as the result of an increase in price of apples.

Question 13

Exhibit 6-3 Marginal utility data for goods X and Y $$\begin{array} { | c | c | c | c | } 
\hline \text { Units of good X } & \begin{array} { c } 
\text { Marginal utility of } \
\text { good X }
\end{array} & \text { Units of good Y } & \begin{array} { c } 
\text { Marginal utility of } \
\operatorname { good~Y }
\end{array} \
\hline 1 & 20 & 1 & 14 \
2 & 16 & 2 & 12 \
3 & 12 & 3 & 10 \
4 & 8 & 4 & 8 \
5 & 4 & 5 & 6 \
\hline
\end{array}$$
-According to the utility model of consumer demand, 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 14

JoAnn considers cola and plain sparkling water to be good substitutes. Suppose the price of sugar, a key ingredient used to produce cola, falls. According to the income effect, which of the following is most likely to occur?

Accepted Answer

A)  JoAnn will purchase less cola and more sparkling water. 
B)  JoAnn will purchase more cola and less sparkling water. 
C)  JoAnn will purchase more of most goods due to her higher real income. 
D)  JoAnn's demand curve will decrease (shift in), causing her to purchase less cola. 
A)  JoAnn will purchase less cola and more sparkling water. 
B)  JoAnn will purchase more cola and less sparkling water. 
C)  JoAnn will purchase more of most goods due to her higher real income. 
D)  JoAnn's demand curve will decrease (shift in), causing her to purchase less cola.

Question 15

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

Accepted Answer

A)  income effect. 
B)  consumer price effect. 
C)  revenue effect. 
D)  substitution effect. 
E)  all of these. 
A)  income effect. 
B)  consumer price effect. 
C)  revenue effect. 
D)  substitution effect. 
E)  all of these.

Question 16

Use the idea of interpersonal comparisons of utility to argue for a progressive income tax system where people in higher income brackets are charged higher tax rates on their extra income.

Accepted Answer

Since the marginal utility of money dimi

Question 17

Exhibit 6-6 Marginal utility for data for clothes and amusement $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Clothes } & \text { Amusement } \
\hline 1 & 15 & 20 \
2 & 13 & 18 \
3 & 10 & 15 \
4 & 8 & 12 \
5 & 6 & 10 \
\hline
\end{array}$$
-Refer to Exhibit 6-6. Clothes and amusements are priced at $10 each. The marginal utility per dollar for the first unit of amusement is:

Accepted Answer

A)  0.5. 
B)  1.5. 
C)  2.0. 
D)  5.0. 
E)  20.0. 
A)  0.5. 
B)  1.5. 
C)  2.0. 
D)  5.0. 
E)  20.0.

Question 18

Which of the following is true, according to the law of diminishing marginal utility?

Accepted Answer

A)  The marginal utility of Diane's second Coke is greater than the marginal utility of her third pretzel, other things constant. 
B)  The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third pretzel, other things constant. 
C)  The marginal utility of Diane's second Coke is greater than the marginal utility of her third Coke, other things constant. 
D)  The total utility of two Cokes is greater than the total utility of three Cokes, other things constant. 
E)  The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third Coke, other things constant. 
A)  The marginal utility of Diane's second Coke is greater than the marginal utility of her third pretzel, other things constant. 
B)  The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third pretzel, other things constant. 
C)  The marginal utility of Diane's second Coke is greater than the marginal utility of her third Coke, other things constant. 
D)  The total utility of two Cokes is greater than the total utility of three Cokes, other things constant. 
E)  The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third Coke, other things constant.

Question 19

If total utility is falling, marginal utility is:

Accepted Answer

A)  positive. 
B)  negative 
C)  positive, but declining. 
D)  either positive or negative. 
E)  zero. 
A)  positive. 
B)  negative 
C)  positive, but declining. 
D)  either positive or negative. 
E)  zero.

Question 20

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. Which of the following meals gives the consumer the most utility?

Accepted Answer

A)  3 hamburgers, no fries, and no Cokes. 
B)  2 hamburgers, no fries, and 2 Cokes. 
C)  2 hamburgers, 2 orders of fries and 1 Coke. 
D)  1 hamburger, 2 orders of fries, and 3 Cokes. 
A)  3 hamburgers, no fries, and no Cokes. 
B)  2 hamburgers, no fries, and 2 Cokes. 
C)  2 hamburgers, 2 orders of fries and 1 Coke. 
D)  1 hamburger, 2 orders of fries, and 3 Cokes.

Exhibit 6A-3 Consumer equilibrium -Given the budget line and indifference curves shown in Exhibit 6A-3, at point Z:

Utility is:

If a consumer is spending all of his/her income in a manner where MU_a / P_a = MU_b / P_b, then the consumer:

Exhibit 6-8 Bea's total utility of 3-minute telephone calls Quantity of 3-Minute Calls Total Utility of Telephone Calls 0 0 1 15 2 28 3 38 4 45 5 50 6 48 -Refer to Exhibit 6-8. Bea's marginal utility of her second telephone call is:

Given the budget lines and indifference curves shown in Exhibit 6A-7, if the budget line shifts, then the equilibrium points X and Y:

Marginal utility can be measured by the change in:

Indifference curve slopes upward from left to right because consumers always prefer more of a good to less.

At the point where total utility is at its peak, marginal utility is:

Exhibit 6-6 Marginal utility for data for clothes and amusement Quantity Clothes Amusement 1 15 20 2 13 18 3 10 15 4 8 12 5 6 10 -Refer to Exhibit 6-6. Your budget is $50. The price of amusement goods is $10. If the price of clothes falls to $4, which of the following statements is true?

Consumer equilibrium occurs at:

Which of the following is the best example of the substitution effect?

JoAnn considers cola and plain sparkling water to be good substitutes. Suppose the price of sugar, a key ingredient used to produce cola, falls. According to the income effect, which of the following is most likely to occur?

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

Use the idea of interpersonal comparisons of utility to argue for a progressive income tax system where people in higher income brackets are charged higher tax rates on their extra income.

Exhibit 6-6 Marginal utility for data for clothes and amusement Quantity Clothes Amusement 1 15 20 2 13 18 3 10 15 4 8 12 5 6 10 -Refer to Exhibit 6-6. Clothes and amusements are priced at $10 each. The marginal utility per dollar for the first unit of amusement is:

Which of the following is true, according to the law of diminishing marginal utility?

If total utility is falling, marginal utility is:

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

Exhibit 6A-3 Consumer equilibrium ​ -Given the budget line and indifference curves shown in Exhibit 6A-3, at point Z:

Utility is:

If a consumer is spending all of his/her income in a manner where MUa / Pa = MUb / Pb, then the consumer:

Exhibit 6-8 Bea's total utility of 3-minute telephone calls Quantity of 3-Minute Calls Total Utility of Telephone Calls 0 0 1 15 2 28 3 38 4 45 5 50 6 48 -Refer to Exhibit 6-8. Bea's marginal utility of her second telephone call is:

Given the budget lines and indifference curves shown in Exhibit 6A-7, if the budget line shifts, then the equilibrium points X and Y:

Marginal utility can be measured by the change in:

Indifference curve slopes upward from left to right because consumers always prefer more of a good to less.

At the point where total utility is at its peak, marginal utility is:

Exhibit 6-6 Marginal utility for data for clothes and amusement Quantity Clothes Amusement 1 15 20 2 13 18 3 10 15 4 8 12 5 6 10 -Refer to Exhibit 6-6. Your budget is $50. The price of amusement goods is $10. If the price of clothes falls to $4, which of the following statements is true?

Consumer equilibrium occurs at:

Which of the following is the best example of the substitution effect?

JoAnn considers cola and plain sparkling water to be good substitutes. Suppose the price of sugar, a key ingredient used to produce cola, falls. According to the income effect, which of the following is most likely to occur?

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

Use the idea of interpersonal comparisons of utility to argue for a progressive income tax system where people in higher income brackets are charged higher tax rates on their extra income.

Exhibit 6-6 Marginal utility for data for clothes and amusement Quantity Clothes Amusement 1 15 20 2 13 18 3 10 15 4 8 12 5 6 10 -Refer to Exhibit 6-6. Clothes and amusements are priced at $10 each. The marginal utility per dollar for the first unit of amusement is:

Which of the following is true, according to the law of diminishing marginal utility?

If total utility is falling, marginal utility is:

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

Exhibit 6A-3 Consumer equilibrium -Given the budget line and indifference curves shown in Exhibit 6A-3, at point Z:

If a consumer is spending all of his/her income in a manner where MU_a / P_a = MU_b / P_b, then the consumer: