Question 1

Economists identify the satisfaction a person derives from the consumption of goods and services as:

Accepted Answer

A) happiness. 
B) usefulness. 
C) utility. 
D) pleasure. 
A) happiness. 
B) usefulness. 
C) utility. 
D) pleasure. C

Question 2

Given the consumer's income, a decrease in the prices of both commodities X and Y will shift the budget line for those goods to the right.

Accepted Answer

A) True 
 B)False  True

Question 3

-(Exhibit: Consumer Equilibrium 3)Assume that you are consuming the combination of goods at point K.Given budget constraint FL, utility can be increased by moving to point:

Accepted Answer

A) F. 
B) G. 
C) H. 
D) I. 
A) F. 
B) G. 
C) H. 
D) I. D

Question 4

If the price of apples falls and the price of oranges remains constant:

Accepted Answer

A) apples are now relatively cheaper. 
B) the fall in the price of apples made consumers richer. 
C) the fall in the price of apples, ceteris paribus, makes the marginal utility of apples divided by their price exceed the marginal utility of oranges divided by their price. 
D) all of the above statements are true. 
A) apples are now relatively cheaper. 
B) the fall in the price of apples made consumers richer. 
C) the fall in the price of apples, ceteris paribus, makes the marginal utility of apples divided by their price exceed the marginal utility of oranges divided by their price. 
D) all of the above statements are true.

Question 5

Sally Garcia devotes all of her income to the consumption of two goods, apples and Reese's Peanut Butter Cups.She has just discovered that at her current level of consumption the marginal utility of an apple is 6 and the marginal utility of a Reese's Peanut Butter Cup is 8.Suppose the price of an apple is $0.10, while the price of a Reese's Peanut Butter Cup is $0.25.To maximize her total utility, assuming that the goods are divisible, she would:

Accepted Answer

A) consume more Reese's Butter Cups and fewer apples. 
B) consume less of both goods. 
C) consume more apples and fewer Reese's Butter Cups. 
D) there is not enough information to justify a change in her current level of consumption. 
A) consume more Reese's Butter Cups and fewer apples. 
B) consume less of both goods. 
C) consume more apples and fewer Reese's Butter Cups. 
D) there is not enough information to justify a change in her current level of consumption.

Question 6

Which of the following statements is false?

Accepted Answer

A) The income effect of normal goods counters the substitution effect so the demand curve is upsloping. 
B) The income effect and the substitution effect reinforce each other when there are price changes for a normal good. 
C) The income effect represents the decrease in quantity demanded caused by the implicit change in income due to a fall in the price of an inferior good but not for a normal good. 
D) The substitution effect represents the change in quantity demanded solely due to a change in the relative price of a good. 
A) The income effect of normal goods counters the substitution effect so the demand curve is upsloping. 
B) The income effect and the substitution effect reinforce each other when there are price changes for a normal good. 
C) The income effect represents the decrease in quantity demanded caused by the implicit change in income due to a fall in the price of an inferior good but not for a normal good. 
D) The substitution effect represents the change in quantity demanded solely due to a change in the relative price of a good.

Question 7

John Smedley, a careful maximizer of utility, consumes only two goods, peanut butter and broccoli.He had just achieved the utility-maximizing solution in his consumption of the two goods when the price of broccoli rose.As he adjusts to this event:

Accepted Answer

A) the marginal utility of peanut butter and of broccoli will rise. 
B) the marginal utility of peanut butter and of broccoli will fall. 
C) the marginal utility of peanut butter will fall, and the marginal utility of broccoli will rise. 
D) the marginal utility of peanut butter will rise, and the marginal utility of broccoli will fall. 
A) the marginal utility of peanut butter and of broccoli will rise. 
B) the marginal utility of peanut butter and of broccoli will fall. 
C) the marginal utility of peanut butter will fall, and the marginal utility of broccoli will rise. 
D) the marginal utility of peanut butter will rise, and the marginal utility of broccoli will fall.

Question 8

If a consumer purchases a combination of commodities x and y such that MUx/Px = 50 and MUy/Py = 40, to maximize utility, the consumers should buy.

Accepted Answer

A) more of x and less of y. 
B) more of both x and y. 
C) less of x and more of y. 
D) less of both x and y. 
A) more of x and less of y. 
B) more of both x and y. 
C) less of x and more of y. 
D) less of both x and y.

Question 9

When there is a difference between the MUx/Px and the MUy/Py, we expect that a consumer will:

Accepted Answer

A) continue to purchase the quantities generating this outcome. 
B) buy more of good x. 
C) buy more of good y. 
D) change the quantities of good x and y in their current purchase basket. 
A) continue to purchase the quantities generating this outcome. 
B) buy more of good x. 
C) buy more of good y. 
D) change the quantities of good x and y in their current purchase basket.

Question 10

Marginal utility is zero at the quantity at which total utility reaches its maximum.

Accepted Answer

A) True 
 B)False

Question 11

It is through a consumer's reaction to different _______ that we can trace the consumer's ________ curve for a good.

Accepted Answer

A) prices; supply 
B) prices; total utility 
C) budgets; demand 
D) prices; demand 
A) prices; supply 
B) prices; total utility 
C) budgets; demand 
D) prices; demand

Question 12

If a consumer purchases a combination of commodities x and y such that MUx/Px = 20 and MUy/Py = 5, to maximize utility, the consumers should buy.

Accepted Answer

A) more of x and less of y. 
B) less of x and less of y. 
C) more of both x and y. 
D) less of both x and y. 
A) more of x and less of y. 
B) less of x and less of y. 
C) more of both x and y. 
D) less of both x and y.

Question 13

Demand for a normal good _______ with _______ in income.

Accepted Answer

A) rises; decreases 
B) falls; increases 
C) rises; increases 
D) stays the same; increases 
A) rises; decreases 
B) falls; increases 
C) rises; increases 
D) stays the same; increases

Question 14

The change in consumption of a good resulting from the implicit change in income because of a price change is called the _______ effect of a price change.

Accepted Answer

A) substitution 
B) demand 
C) price 
D) income 
A) substitution 
B) demand 
C) price 
D) income

Question 15

Consumers will maximize utility whenever the total benefits of consumption of the good exceed the total cost of the good.

Accepted Answer

A) True 
 B)False

Question 16

The marginal utility of a good must be increased by anything that increases total utility.

Accepted Answer

A) True 
 B)False

Question 17

When the price of a normal good falls, the substitution effect contributes to a(n)_______ in the quantity demanded and the income effect _______ the substitution effect.

Accepted Answer

A) decrease; reinforces 
B) increase; reinforces 
C) increase; opposes 
D) decrease; opposes 
A) decrease; reinforces 
B) increase; reinforces 
C) increase; opposes 
D) decrease; opposes

Question 18

Assume that the marginal utilities for the first three units of a good consumed are 200, 150, and 125, respectively.The total utility when 2 units are consumed is:

Accepted Answer

A) 150. 
B) 200. 
C) 350. 
D) 475. 
A) 150. 
B) 200. 
C) 350. 
D) 475.

Question 19

Sally Garcia devotes all of her income to the consumption of two goods, apples and Reese's Peanut Butter Cups.She has just discovered that at her current level of consumption the marginal utility of an apple is 6 and the marginal utility of a Reese's Peanut Butter Cup is 8.Suppose the price of an apple is $0.20, while the price of a Reese's Peanut Butter Cup is $0.25.To maximize her total utility, assuming that the goods are divisible, she would:

Accepted Answer

A) consume more Reese's Butter Cups and fewer apples. 
B) consume less of both goods. 
C) consume more apples and fewer Reese's Butter Cups. 
D) there is not enough information to justify a change in her current level of consumption. 
A) consume more Reese's Butter Cups and fewer apples. 
B) consume less of both goods. 
C) consume more apples and fewer Reese's Butter Cups. 
D) there is not enough information to justify a change in her current level of consumption.

Question 20

As you consume more of good A relative to another good B, the _______ of good A eventually decreases.

Accepted Answer

A) total utility 
B) usefulness 
C) marginal utility 
D) demand 
A) total utility 
B) usefulness 
C) marginal utility 
D) demand

Exam 7: Aggregate Demand and Aggregate Supply

Economists identify the satisfaction a person derives from the consumption of goods and services as:

Given the consumer's income, a decrease in the prices of both commodities X and Y will shift the budget line for those goods to the right.

-(Exhibit: Consumer Equilibrium 3)Assume that you are consuming the combination of goods at point K.Given budget constraint FL, utility can be increased by moving to point:

If the price of apples falls and the price of oranges remains constant:

Which of the following statements is false?

John Smedley, a careful maximizer of utility, consumes only two goods, peanut butter and broccoli.He had just achieved the utility-maximizing solution in his consumption of the two goods when the price of broccoli rose.As he adjusts to this event:

If a consumer purchases a combination of commodities x and y such that MUx/Px = 50 and MUy/Py = 40, to maximize utility, the consumers should buy.

When there is a difference between the MUx/Px and the MUy/Py, we expect that a consumer will:

Marginal utility is zero at the quantity at which total utility reaches its maximum.

It is through a consumer's reaction to different _______ that we can trace the consumer's ________ curve for a good.

If a consumer purchases a combination of commodities x and y such that MUx/Px = 20 and MUy/Py = 5, to maximize utility, the consumers should buy.

Demand for a normal good _______ with _______ in income.

The change in consumption of a good resulting from the implicit change in income because of a price change is called the _______ effect of a price change.

Consumers will maximize utility whenever the total benefits of consumption of the good exceed the total cost of the good.

The marginal utility of a good must be increased by anything that increases total utility.

When the price of a normal good falls, the substitution effect contributes to a(n)_______ in the quantity demanded and the income effect _______ the substitution effect.

Assume that the marginal utilities for the first three units of a good consumed are 200, 150, and 125, respectively.The total utility when 2 units are consumed is:

As you consume more of good A relative to another good B, the _______ of good A eventually decreases.

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Economic Growth

The Nature and Creation of Money

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Inflation and Unemployment

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Macroeconomics: the Big Picture

Measuring Total Income and Output

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Macro Inflation and Unemployment

Macro a Brief History of Macroeconomic Thought and Policy

Economic Development

Socialist Economies in Transition

Filters

If a consumer purchases a combination of commodities x and y such that MU_x/P_x = 50 and MU_y/P_y = 40, to maximize utility, the consumers should buy.

When there is a difference between the MU_x/P_x and the MU_y/P_y, we expect that a consumer will:

It is through a consumer's reaction to different _ that we can trace the consumer's __ curve for a good.

If a consumer purchases a combination of commodities x and y such that MU_x/P_x = 20 and MU_y/P_y = 5, to maximize utility, the consumers should buy.

Demand for a normal good _ with _ in income.

When the price of a normal good falls, the substitution effect contributes to a(n)_ in the quantity demanded and the income effect _ the substitution effect.