Question 1

Utility is most closely related to the term:

Accepted Answer

A) usefulness. 
B) satisfaction. 
C) requirement. 
D) necessity. 
A) usefulness. 
B) satisfaction. 
C) requirement. 
D) necessity.

Question 2

-(Exhibit: Consumer Equilibrium 2)Given the budget constraint, a level of total utility not attainable is at point:

Accepted Answer

A) G. 
B) K. 
C) I. 
D) J. 
A) G. 
B) K. 
C) I. 
D) J.

Question 3

If you are willing to give up 5 units of good Y (on the vertical axis)for 5 units of good X (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:

Accepted Answer

A) 0.5. 
B) 1. 
C) 2. 
D) 5. 
A) 0.5. 
B) 1. 
C) 2. 
D) 5.

Question 4

The law of diminishing marginal utility:

Accepted Answer

A) is the tendency of total utility to increase until an individual's budget is no longer constrained. 
B) refers to the tendency of marginal utility to decline beyond some level of consumption during a period. 
C) indicates that, if a good is inferior, less of it will be purchased when income falls during a period. 
D) assumes all goods are normal. 
A) is the tendency of total utility to increase until an individual's budget is no longer constrained. 
B) refers to the tendency of marginal utility to decline beyond some level of consumption during a period. 
C) indicates that, if a good is inferior, less of it will be purchased when income falls during a period. 
D) assumes all goods are normal.

Question 5

In generating a demand curve using indifference curve analysis, it is assumed that:

Accepted Answer

A) only preferences vary. 
B) money income remains constant. 
C) prices remain constant. 
D) the level of utility remains constant. 
A) only preferences vary. 
B) money income remains constant. 
C) prices remain constant. 
D) the level of utility remains constant.

Question 6

Marginal utility of a good eventually decreases as the level of consumption increases.

Accepted Answer

A) True 
 B)False

Question 7

Consumer Equilbrium 1
 $$\begin{array} {  c c c c } 
\begin{array} { c } 
\text { Units } \
\text { of } \
\text { GoodX }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Utility } \
\text { of GoodX }
\end{array} & \begin{array} { c } 
\text { Units of } \
\text { Good Y }
\end{array} & \begin{array} { c } 
\text { Marginal Utility } \
\text { of Good Y }
\end{array} \
\hline 1 & 20 & 1 & 12 \
2 & 16 & 2 & 10 \
3 & 12 & 3 & 8 \
4 & 8 & 4 & 6 \
5 & 4 & 5 & 4 \
6 & 0 & 6 & 2
\end{array}$$
-(Exhibit: Consumer Equilibrium 1)Assume that the price of good X is $2 per unit and the price of good Y is $1 per unit, and you consume 3 units of good X and 3 units of good Y.To maximize utility, assuming that the goods are divisible, you would consume:

Accepted Answer

A) less of both X and Y. 
B) more of both X and Y. 
C) less of X and more of Y. 
D) more of X and less of Y. 
A) less of both X and Y. 
B) more of both X and Y. 
C) less of X and more of Y. 
D) more of X and less of Y.

Question 8

For a consumer to be in equilibrium, the marginal utilities of all goods must be equal.

Accepted Answer

A) True 
 B)False

Question 9

The law of diminishing marginal utility exists for the first three units of a good if they have marginal utilities, respectively, of:

Accepted Answer

A) 8, 9, 10. 
B) 9, 8, 10. 
C) 9, 10, 8. 
D) 10, 9, 8. 
A) 8, 9, 10. 
B) 9, 8, 10. 
C) 9, 10, 8. 
D) 10, 9, 8.

Question 10

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

Accepted Answer

A) H. 
B) I. 
C) J. 
D) K. 
A) H. 
B) I. 
C) J. 
D) K.

Question 11

If a consumer is buying two goods and a decrease in the price of one good results in the consumer buying more of both goods:

Accepted Answer

A) the income effect resulted in increasing the amounts of both goods purchased. 
B) the demand curves for the two goods shifted to the right. 
C) the substitution effect was extremely strong, but the income effect was zero. 
D) none of the above statements are true. 
A) the income effect resulted in increasing the amounts of both goods purchased. 
B) the demand curves for the two goods shifted to the right. 
C) the substitution effect was extremely strong, but the income effect was zero. 
D) none of the above statements are true.

Question 12

The textbook states that the law of demand:

Accepted Answer

A) is nonsense. 
B) is difficult to verify. 
C) is confirmed by our real-world experience. 
D) is not valid in theory. 
A) is nonsense. 
B) is difficult to verify. 
C) is confirmed by our real-world experience. 
D) is not valid in theory.

Question 13

When supply and demand are in equilibrium, the price of a good is:

Accepted Answer

A) greater than the marginal utility of the good. 
B) equal to the marginal utility of the good. 
C) less than the marginal utility of the good. 
D) not necessarily any of the above. 
A) greater than the marginal utility of the good. 
B) equal to the marginal utility of the good. 
C) less than the marginal utility of the good. 
D) not necessarily any of the above.

Question 14

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) increasing cost. 
C) utility minimization. 
D) diminishing consumer surplus. 
A) diminishing marginal utility. 
B) increasing cost. 
C) utility minimization. 
D) diminishing consumer surplus.

Question 15

-(Exhibit: Consumer Equilibrium 2)Given the indifference curves in the exhibit, the highest level of total utility theoretically attainable is associated with point _______ on indifference curve _______ .

Accepted Answer

A) H; C 
B) I; B 
C) G; B 
D) J; A 
A) H; C 
B) I; B 
C) G; B 
D) J; A

Question 16

Assume that a person is consuming the utility-maximizing quantities of pork and chicken.We can conclude that:

Accepted Answer

A) the price of pork equals the price of chicken. 
B) the marginal utility of pork equals the marginal utility of chicken. 
C) the ratio of the marginal utility to price is the same for pork and for chicken. 
D) both A and B are true. 
A) the price of pork equals the price of chicken. 
B) the marginal utility of pork equals the marginal utility of chicken. 
C) the ratio of the marginal utility to price is the same for pork and for chicken. 
D) both A and B are true.

Question 17

-(Exhibit: Consumer Equilibrium 3)Assume that you are consuming the combination of goods at point G.Given budget constraint FL, utility can:

Accepted Answer

A) be increased by consuming more of good A and less of good B. 
B) be increased by consuming less of good A and more of good B. 
C) be increased by consuming more of both goods. 
D) not be increased. 
A) be increased by consuming more of good A and less of good B. 
B) be increased by consuming less of good A and more of good B. 
C) be increased by consuming more of both goods. 
D) not be increased.

Question 18

Utility is maximized when:

Accepted Answer

A) the marginal utility of every good consumed times its price is everywhere equal. 
B) total outlays equal a varying budget and when the ratios of marginal utilities to prices are equal for all goods and services. 
C) total outlays equal a given budget and the ratios of marginal utilities to prices are equal for all goods and services. 
D) A and C occur. 
A) the marginal utility of every good consumed times its price is everywhere equal. 
B) total outlays equal a varying budget and when the ratios of marginal utilities to prices are equal for all goods and services. 
C) total outlays equal a given budget and the ratios of marginal utilities to prices are equal for all goods and services. 
D) A and C occur.

Question 19

Negatively sloped demand curves can be explained by the law of diminishing marginal utility.

Accepted Answer

A) True 
 B)False

Question 20

In the case of inferior goods, the substitution effect and the income effect:

Accepted Answer

A) move in opposite directions. 
B) move in the same direction. 
C) cancel each other out in every case. 
D) will in all cases cause demand to be upsloping. 
A) move in opposite directions. 
B) move in the same direction. 
C) cancel each other out in every case. 
D) will in all cases cause demand to be upsloping.

Exam 7: Aggregate Demand and Aggregate Supply

Utility is most closely related to the term:

-(Exhibit: Consumer Equilibrium 2)Given the budget constraint, a level of total utility not attainable is at point:

If you are willing to give up 5 units of good Y (on the vertical axis)for 5 units of good X (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:

The law of diminishing marginal utility:

In generating a demand curve using indifference curve analysis, it is assumed that:

Marginal utility of a good eventually decreases as the level of consumption increases.

For a consumer to be in equilibrium, the marginal utilities of all goods must be equal.

The law of diminishing marginal utility exists for the first three units of a good if they have marginal utilities, respectively, of:

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

If a consumer is buying two goods and a decrease in the price of one good results in the consumer buying more of both goods:

The textbook states that the law of demand:

When supply and demand are in equilibrium, the price of a good is:

According to the utility model of consumer demand, the demand curve is downward sloping because of the law of:

-(Exhibit: Consumer Equilibrium 2)Given the indifference curves in the exhibit, the highest level of total utility theoretically attainable is associated with point _______ on indifference curve _______ .

Assume that a person is consuming the utility-maximizing quantities of pork and chicken.We can conclude that:

-(Exhibit: Consumer Equilibrium 3)Assume that you are consuming the combination of goods at point G.Given budget constraint FL, utility can:

Utility is maximized when:

Negatively sloped demand curves can be explained by the law of diminishing marginal utility.

In the case of inferior goods, the substitution effect and the income effect:

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

-(Exhibit: Consumer Equilibrium 2)Given the indifference curves in the exhibit, the highest level of total utility theoretically attainable is associated with point _ on indifference curve _ .