Question 1

An indifference curve shows combinations of two goods that yield:

Accepted Answer

A) equal prices. 
B) equal money income. 
C) equal satisfaction. 
D) increasing prices. 
A) equal prices. 
B) equal money income. 
C) equal satisfaction. 
D) increasing prices.

Question 2

The increase in quantity demanded due to a price reduction is a result of the _______ and the ________.

Accepted Answer

A) budget effect; income effect 
B) income effect; demand effect 
C) substitution effect; income effect 
D) demand effect; budget effect 
A) budget effect; income effect 
B) income effect; demand effect 
C) substitution effect; income effect 
D) demand effect; budget effect

Question 3

The conceptual measure of the satisfaction a person obtains by consuming a given quantity of a good or service during a given time period is:

Accepted Answer

A) average product. 
B) marginal cost. 
C) marginal revenue. 
D) total utility. 
A) average product. 
B) marginal cost. 
C) marginal revenue. 
D) total utility.

Question 4

The utility-maximization condition for two goods is achieved by equating the:

Accepted Answer

A) prices of both goods. 
B) marginal utilities of both goods. 
C) ratios of total utility to price of both goods. 
D) ratios of marginal utility to price of both goods. 
A) prices of both goods. 
B) marginal utilities of both goods. 
C) ratios of total utility to price of both goods. 
D) ratios of marginal utility to price of both goods.

Question 5

The larger the substitution effect the _______ the absolute value of the price elasticity of demand.

Accepted Answer

A) smaller 
B) greater 
C) greater the change in 
D) less the change in 
A) smaller 
B) greater 
C) greater the change in 
D) less the change in

Question 6

If a good is characterized as a Giffen good it must be an inferior good.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not an explanation as to why the demand curve is negatively sloped?

Accepted Answer

A) the law of diminishing marginal utility 
B) the law of increasing total utility 
C) the substitution effect 
D) the income effect 
A) the law of diminishing marginal utility 
B) the law of increasing total utility 
C) the substitution effect 
D) the income effect

Question 8

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

Accepted Answer

A) have more real income. 
B) purchase fewer substitute goods. 
C) purchase more of the now relatively less expensive good. 
D) purchase more complementary goods. 
A) have more real income. 
B) purchase fewer substitute goods. 
C) purchase more of the now relatively less expensive good. 
D) purchase more complementary goods.

Question 9

Michael Kawamura, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream.He had just achieved the utility-maximizing solution in his consumption of the two goods when the price of peanut butter fell.As he adjusts to this event:

Accepted Answer

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

Question 10

The amount by which an additional unit of a good or service increases a consumer's total utility, all other things unchanged, is:

Accepted Answer

A) marginal utility. 
B) maximum utility. 
C) average utility. 
D) required utility. 
A) marginal utility. 
B) maximum utility. 
C) average utility. 
D) required utility.

Question 11

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $5 to spend and decide to purchase 8 boxes of Cracker Jacks, the maximum quantity of M&Ms that you can purchase is ________ bags.

Accepted Answer

A) 4 
B) 8 
C) 10 
D) 12 
A) 4 
B) 8 
C) 10 
D) 12

Question 12

Each point along an indifference curve represents a different amount of total utility for a consumer.

Accepted Answer

A) True 
 B)False

Question 13

A line representing all the possible combinations of two commodities that a consumer can purchase at a particular time, given the market prices of the commodities and the consumer's income, is a(n):

Accepted Answer

A) budget line. 
B) consumption line. 
C) income consumption curve. 
D) indifference curve. 
A) budget line. 
B) consumption line. 
C) income consumption curve. 
D) indifference curve.

Question 14

Choices that maximize total utility generally produce demand curves that are:

Accepted Answer

A) horizontal. 
B) upward sloping. 
C) downward sloping. 
D) linear. 
A) horizontal. 
B) upward sloping. 
C) downward sloping. 
D) linear.

Question 15

-(Exhibit: Consumer Equilibrium 2)The lowest level of total utility shown in the exhibit is associated with point _______ on curve _______ .

Accepted Answer

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

Question 16

If total utility increases from 10 to 15 for the second unit of a good consumed, the marginal utility of the second unit is 15.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) 125. 
B) 150. 
C) 200. 
D) 350. 
A) 125. 
B) 150. 
C) 200. 
D) 350.

Question 18

If a consumer purchases a combination of commodities x and y such that MUx/Px = 30 and MUy/Py = 40, to maximize utility, the consumers should buy.

Accepted Answer

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

Question 19

If consumer income, preferences, and the prices of all other goods remain constant while the price of X varies, the amount purchased of X is defined by the:

Accepted Answer

A) demand curve. 
B) price-consumption curve. 
C) income-consumption curve. 
D) price line. 
A) demand curve. 
B) price-consumption curve. 
C) income-consumption curve. 
D) price line.

Question 20

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 both goods X and Y is $1 per unit, and you have $4 of income to spend on both goods.To maximize utility, you would consume ______ units of X and _______ units of Y.

Accepted Answer

A) 0; 4 
B) 1; 3 
C) 2; 2 
D) 3; 1 
A) 0; 4 
B) 1; 3 
C) 2; 2 
D) 3; 1

Exam 7: Aggregate Demand and Aggregate Supply

An indifference curve shows combinations of two goods that yield:

The increase in quantity demanded due to a price reduction is a result of the _______ and the ________.

The conceptual measure of the satisfaction a person obtains by consuming a given quantity of a good or service during a given time period is:

The utility-maximization condition for two goods is achieved by equating the:

The larger the substitution effect the _______ the absolute value of the price elasticity of demand.

If a good is characterized as a Giffen good it must be an inferior good.

Which of the following is not an explanation as to why the demand curve is negatively sloped?

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

Michael Kawamura, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream.He had just achieved the utility-maximizing solution in his consumption of the two goods when the price of peanut butter fell.As he adjusts to this event:

The amount by which an additional unit of a good or service increases a consumer's total utility, all other things unchanged, is:

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $5 to spend and decide to purchase 8 boxes of Cracker Jacks, the maximum quantity of M&Ms that you can purchase is ________ bags.

Each point along an indifference curve represents a different amount of total utility for a consumer.

A line representing all the possible combinations of two commodities that a consumer can purchase at a particular time, given the market prices of the commodities and the consumer's income, is a(n):

Choices that maximize total utility generally produce demand curves that are:

-(Exhibit: Consumer Equilibrium 2)The lowest level of total utility shown in the exhibit is associated with point _______ on curve _______ .

If total utility increases from 10 to 15 for the second unit of a good consumed, the marginal utility of the second unit is 15.

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

If a consumer purchases a combination of commodities x and y such that MUx/Px = 30 and MUy/Py = 40, to maximize utility, the consumers should buy.

If consumer income, preferences, and the prices of all other goods remain constant while the price of X varies, the amount purchased of X is defined by the:

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

The increase in quantity demanded due to a price reduction is a result of the _ and the __.

-(Exhibit: Consumer Equilibrium 2)The lowest level of total utility shown in the exhibit is associated with point _ on curve _ .

If a consumer purchases a combination of commodities x and y such that MU_x/P_x = 30 and MU_y/P_y = 40, to maximize utility, the consumers should buy.