Question 1

The marginal utility curve is downward sloping.

Accepted Answer

A) True 
 B)False

Question 2

If the price of a product rises, consumers buy less of the good because the:

Accepted Answer

A)  MU/P of the good falls below the MU/P of other goods. 
B)  MU/P of the good rises above the MU/P of other goods. 
C)  marginal utility of the good diminishes. 
D)  total utility of the good diminishes. 
E)  marginal utility of the good rises. 
A)  MU/P of the good falls below the MU/P of other goods. 
B)  MU/P of the good rises above the MU/P of other goods. 
C)  marginal utility of the good diminishes. 
D)  total utility of the good diminishes. 
E)  marginal utility of the good rises.

Question 3

The term utility refers to the:

Accepted Answer

A)  usefulness of a good in relation to its scarcity. 
B)  necessity of a good. 
C)  price of a good. 
D)  number of goods a consumer has. 
E)  pleasure or satisfaction a consumer receives upon consuming a good. 
A)  usefulness of a good in relation to its scarcity. 
B)  necessity of a good. 
C)  price of a good. 
D)  number of goods a consumer has. 
E)  pleasure or satisfaction a consumer receives upon consuming a good.

Question 4

The substitution effect is the concept that changes in consumption of a good result from changes in the relative price of a competing good.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 6A-6 Consumer equilibrium
​  
-As shown in Exhibit 6A-6, movement from consumer equilibrium at point Y to point X is caused by a(n):

Accepted Answer

A)  increase in the price of good X. 
B)  decrease in the price of good X. 
C)  increase in the price of good Y. 
D)  decrease in the price of good Y. 
A)  increase in the price of good X. 
B)  decrease in the price of good X. 
C)  increase in the price of good Y. 
D)  decrease in the price of good Y.

Question 6

A utility-maximizing consumer is currently spending all of his/her income on two products, A and B. The MU of the last unit of A consumed is 50, the price of A is $25, and the price of B is $10. The MU of the last unit of B consumed is:

Accepted Answer

A)  50. 
B)  5. 
C)  2. 
D)  20. 
E)  cannot determine from this limited information 
A)  50. 
B)  5. 
C)  2. 
D)  20. 
E)  cannot determine from this limited information

Question 7

As more Big Macs are consumed each day, the marginal utility that a person gets from each additional Big Mac:

Accepted Answer

A)  rises at a steady rate. 
B)  decreases. 
C)  remains constant. 
D)  accelerates. 
A)  rises at a steady rate. 
B)  decreases. 
C)  remains constant. 
D)  accelerates.

Question 8

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. If you had a budget of $50, which of the following combinations of goods would you buy?

Accepted Answer

A)  4 units of clothes and 1 unit of amusement. 
B)  3 units of clothes and 2 units of amusement. 
C)  2 units of clothes and 3 units of amusement. 
D)  1 unit of clothes and 4 units of amusement. 
E)  5 units of clothes and 5 units of amusement. 
A)  4 units of clothes and 1 unit of amusement. 
B)  3 units of clothes and 2 units of amusement. 
C)  2 units of clothes and 3 units of amusement. 
D)  1 unit of clothes and 4 units of amusement. 
E)  5 units of clothes and 5 units of amusement.

Question 9

Consumers should continue to rearrange their consumption of two goods until:

Accepted Answer

A)  the prices of the two goods are equal for the last dollar spent on each good. 
B)  marginal utility is the same for each good for the last dollar spent on each good. 
C)  the marginal utility per dollar's worth of the two goods is the same for the last dollar spent on each good. 
D)  the same amount of each is purchased. 
A)  the prices of the two goods are equal for the last dollar spent on each good. 
B)  marginal utility is the same for each good for the last dollar spent on each good. 
C)  the marginal utility per dollar's worth of the two goods is the same for the last dollar spent on each good. 
D)  the same amount of each is purchased.

Question 10

Exhibit 6-7 Marginal utility for sandwiches and sodas $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Sandwiches } & \text { Sodas } \
\hline 1 & 10 & 5 \
2 & 8 & 4 \
3 & 6 & 3 \
4 & 3 & 1 \
5 & - 1 & 0 \
\hline
\end{array}$$
-Refer to Exhibit 6-7. If price of a sandwich is $1, the price of a soda is $1, and income is $5, Marian should buy ____ sandwiches and ____ sodas.

Accepted Answer

A)  five; zero 
B)  four; one 
C)  three; two 
D)  two; two 
E)  one; four 
A)  five; zero 
B)  four; one 
C)  three; two 
D)  two; two 
E)  one; four

Question 11

At the unique point of consumer equilibrium, the:

Accepted Answer

A)  distance between indifference curves is maximum. 
B)  distance between the budget line and the indifference curve is maximum. 
C)  marginal utility ratio of the two goods is equal. 
D)  marginal rate of substitution (MRS) equals the slope of the budget line. 
A)  distance between indifference curves is maximum. 
B)  distance between the budget line and the indifference curve is maximum. 
C)  marginal utility ratio of the two goods is equal. 
D)  marginal rate of substitution (MRS) equals the slope of the budget line.

Question 12

Diminishing marginal utility means that as you consume more of a good, other things constant, the:

Accepted Answer

A)  total satisfaction you obtain from consuming this good falls. 
B)  total amount produced falls. 
C)  marginal product falls. 
D)  additional satisfaction you obtain from each additional unit of the good falls. 
E)  total satisfaction you obtain from each extra good becomes constant. 
A)  total satisfaction you obtain from consuming this good falls. 
B)  total amount produced falls. 
C)  marginal product falls. 
D)  additional satisfaction you obtain from each additional unit of the good falls. 
E)  total satisfaction you obtain from each extra good becomes constant.

Question 13

In the context of consumer choice theory, utility means:

Accepted Answer

A)  usefulness. 
B)  satisfaction. 
C)  practicality. 
D)  boring. 
E)  action. 
A)  usefulness. 
B)  satisfaction. 
C)  practicality. 
D)  boring. 
E)  action.

Question 14

When the price of a good falls, consumers may increase the quantity consumed because they have greater total purchasing power. This statement describes the:

Accepted Answer

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

Question 15

Each point along an indifference curve represents the same level of total utility for a consumer.

Accepted Answer

A) True 
 B)False

Question 16

The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that:

Accepted Answer

A)  gasoline is an economic good but water is not. 
B)  the marginal utility of gasoline is greater than the marginal utility of a gallon of water. 
C)  the average utility of a gallon of gasoline is greater than the average utility of a gallon of water. 
D)  the total utility of gasoline exceeds the total utility of water. 
A)  gasoline is an economic good but water is not. 
B)  the marginal utility of gasoline is greater than the marginal utility of a gallon of water. 
C)  the average utility of a gallon of gasoline is greater than the average utility of a gallon of water. 
D)  the total utility of gasoline exceeds the total utility of water.

Question 17

Exhibit 6A-4 Consumer equilibrium
​  
-Given the budget line and indifference curves shown in Exhibit 6A-4, point E is:

Accepted Answer

A)  consumer equilibrium. 
B)  unattainable. 
C)  on the highest attainable indifference curve. 
D)  a point that yields less total utility than other point in the exhibit. 
A)  consumer equilibrium. 
B)  unattainable. 
C)  on the highest attainable indifference curve. 
D)  a point that yields less total utility than other point in the exhibit.

Question 18

When Pepsi becomes more expensive relative to other beverages, people will purchase less Pepsi. This observation is known as the:

Accepted Answer

A)  diamond-water paradox. 
B)  law of diminishing marginal utility. 
C)  substitution effect. 
D)  income effect. 
A)  diamond-water paradox. 
B)  law of diminishing marginal utility. 
C)  substitution effect. 
D)  income effect.

Question 19

The equation for a budget line for goods X and Y, with Px being the price of X, Py being the price of Y, and B being the budget, can be written as:

Accepted Answer

A)  PxX + PyY = B. 
B)  PxX + PyY = 1 / B. 
C)  PxX = B + PyY. 
D)  PxX / PyY = 1 − B. 
A)  PxX + PyY = B. 
B)  PxX + PyY = 1 / B. 
C)  PxX = B + PyY. 
D)  PxX / PyY = 1 − B.

Question 20

Movement along an indifference curve causes the loss in marginal utility (MU) of one good to ____ the marginal utility (MU) gained from another good.

Accepted Answer

A)  exceed 
B)  reduce 
C)  equal 
D)  maximize 
A)  exceed 
B)  reduce 
C)  equal 
D)  maximize

The marginal utility curve is downward sloping.

If the price of a product rises, consumers buy less of the good because the:

The term utility refers to the:

The substitution effect is the concept that changes in consumption of a good result from changes in the relative price of a competing good.

Exhibit 6A-6 Consumer equilibrium -As shown in Exhibit 6A-6, movement from consumer equilibrium at point Y to point X is caused by a(n):

A utility-maximizing consumer is currently spending all of his/her income on two products, A and B. The MU of the last unit of A consumed is 50, the price of A is $25, and the price of B is $10. The MU of the last unit of B consumed is:

As more Big Macs are consumed each day, the marginal utility that a person gets from each additional Big Mac:

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. If you had a budget of $50, which of the following combinations of goods would you buy?

Consumers should continue to rearrange their consumption of two goods until:

Exhibit 6-7 Marginal utility for sandwiches and sodas Quantity Sandwiches Sodas 1 10 5 2 8 4 3 6 3 4 3 1 5 -1 0 -Refer to Exhibit 6-7. If price of a sandwich is $1, the price of a soda is $1, and income is $5, Marian should buy sandwiches and sodas.

At the unique point of consumer equilibrium, the:

Diminishing marginal utility means that as you consume more of a good, other things constant, the:

In the context of consumer choice theory, utility means:

When the price of a good falls, consumers may increase the quantity consumed because they have greater total purchasing power. This statement describes the:

Each point along an indifference curve represents the same level of total utility for a consumer.

The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that:

Exhibit 6A-4 Consumer equilibrium -Given the budget line and indifference curves shown in Exhibit 6A-4, point E is:

When Pepsi becomes more expensive relative to other beverages, people will purchase less Pepsi. This observation is known as the:

The equation for a budget line for goods X and Y, with P_x being the price of X, P_y being the price of Y, and B being the budget, can be written as:

Movement along an indifference curve causes the loss in marginal utility (MU) of one good to ____ the marginal utility (MU) gained from another good.

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

The marginal utility curve is downward sloping.

If the price of a product rises, consumers buy less of the good because the:

The term utility refers to the:

The substitution effect is the concept that changes in consumption of a good result from changes in the relative price of a competing good.

Exhibit 6A-6 Consumer equilibrium ​ -As shown in Exhibit 6A-6, movement from consumer equilibrium at point Y to point X is caused by a(n):

A utility-maximizing consumer is currently spending all of his/her income on two products, A and B. The MU of the last unit of A consumed is 50, the price of A is $25, and the price of B is $10. The MU of the last unit of B consumed is:

As more Big Macs are consumed each day, the marginal utility that a person gets from each additional Big Mac:

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. If you had a budget of $50, which of the following combinations of goods would you buy?

Consumers should continue to rearrange their consumption of two goods until:

Exhibit 6-7 Marginal utility for sandwiches and sodas Quantity Sandwiches Sodas 1 10 5 2 8 4 3 6 3 4 3 1 5 -1 0 -Refer to Exhibit 6-7. If price of a sandwich is $1, the price of a soda is $1, and income is $5, Marian should buy ____ sandwiches and ____ sodas.

At the unique point of consumer equilibrium, the:

Diminishing marginal utility means that as you consume more of a good, other things constant, the:

In the context of consumer choice theory, utility means:

When the price of a good falls, consumers may increase the quantity consumed because they have greater total purchasing power. This statement describes the:

Each point along an indifference curve represents the same level of total utility for a consumer.

The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that:

Exhibit 6A-4 Consumer equilibrium ​ -Given the budget line and indifference curves shown in Exhibit 6A-4, point E is:

When Pepsi becomes more expensive relative to other beverages, people will purchase less Pepsi. This observation is known as the:

The equation for a budget line for goods X and Y, with Px being the price of X, Py being the price of Y, and B being the budget, can be written as:

Movement along an indifference curve causes the loss in marginal utility (MU) of one good to ____ the marginal utility (MU) gained from another good.

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-6 Consumer equilibrium -As shown in Exhibit 6A-6, movement from consumer equilibrium at point Y to point X is caused by a(n):

Exhibit 6-7 Marginal utility for sandwiches and sodas Quantity Sandwiches Sodas 1 10 5 2 8 4 3 6 3 4 3 1 5 -1 0 -Refer to Exhibit 6-7. If price of a sandwich is $1, the price of a soda is $1, and income is $5, Marian should buy sandwiches and sodas.

Exhibit 6A-4 Consumer equilibrium -Given the budget line and indifference curves shown in Exhibit 6A-4, point E is:

The equation for a budget line for goods X and Y, with P_x being the price of X, P_y being the price of Y, and B being the budget, can be written as: