Question 1

The marginal rate of substitution increases as the consumer moves from left to right along a given indifference curve.

Accepted Answer

A) True 
 B)False

Question 2

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 $1 per unit and the price of good Y is $2 per unit, and you consume 4 units of good X and 2 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 3

-(Exhibit: Consumer Equilibrium 2)Given the exhibit and the budget constraint, the maximization of consumer utility would occur at point _______ with the consumption of _______ of X and _______ of Y.

Accepted Answer

A) J; OS; OP 
B) I; OS;OP 
C) J; ON;OF 
D) I; ON;OM 
A) J; OS; OP 
B) I; OS;OP 
C) J; ON;OF 
D) I; ON;OM

Question 4

A Giffen good is one in which the _______ curve is _______ sloped.

Accepted Answer

A) supply; negatively 
B) demand; negatively 
C) supply; positively 
D) demand; positively 
A) supply; negatively 
B) demand; negatively 
C) supply; positively 
D) demand; positively

Question 5

In terms of indifference curves, a demand curve is generated by changes in:

Accepted Answer

A) income. 
B) utility. 
C) the price of one good. 
D) the price of both goods simultaneously. 
A) income. 
B) utility. 
C) the price of one good. 
D) the price of both goods simultaneously.

Question 6

Along an indifference curve, the combination of 10 units of X and 1 unit of Y represents a larger total utility than the combination of 5 units of X and 5 units of Y.

Accepted Answer

A) True 
 B)False

Question 7

Marginal utility is negative when total utility is increasing.

Accepted Answer

A) True 
 B)False

Question 8

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 $10 to spend on both goods, the maximum quantity of M&Ms that you can purchase is ________ bags.

Accepted Answer

A) 5 
B) 10 
C) 20 
D) 40 
A) 5 
B) 10 
C) 20 
D) 40

Question 9

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.To maximize her total utility, she would:

Accepted Answer

A) consume more of both goods. 
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 of both goods. 
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 10

The utility of a good is determined by how much _______ a particular consumer obtains from it.

Accepted Answer

A) satisfaction 
B) usefulness 
C) cost 
D) need fulfillment 
A) satisfaction 
B) usefulness 
C) cost 
D) need fulfillment

Question 11

If income falls, normal goods will experience an increase in consumption.

Accepted Answer

A) True 
 B)False

Question 12

The slope of a(n)_______ curve shows the rate at which two goods can be exchanged _______ the consumer's ________ .

Accepted Answer

A) marginal utility; which increases; marginal utility 
B) indifference; without affecting; total utility 
C) iso-utility; without affecting; budget 
D) indifference; without affecting; budget 
A) marginal utility; which increases; marginal utility 
B) indifference; without affecting; total utility 
C) iso-utility; without affecting; budget 
D) indifference; without affecting; budget

Question 13

A budget line is based on a given level of income and variable prices.

Accepted Answer

A) True 
 B)False

Question 14

Marginal utility is best computed as the:

Accepted Answer

A) change in total utility from an additional unit consumed. 
B) total utility divided by the total quantity consumed. 
C) change in total utility divided by the total quantity consumed. 
D) total utility divided by the change in quantity consumed. 
A) change in total utility from an additional unit consumed. 
B) total utility divided by the total quantity consumed. 
C) change in total utility divided by the total quantity consumed. 
D) total utility divided by the change in quantity consumed.

Question 15

Consumer equilibrium is achieved at the point of tangency between the budget line and the highest attainable indifference curve.

Accepted Answer

A) True 
 B)False

Question 16

Assume that as the price of cauliflower falls the income effect causes consumers to buy less cauliflower.We can conclude that cauliflower is:

Accepted Answer

A) an inferior good. 
B) nasty tasting. 
C) a normal good. 
D) expensive. 
A) an inferior good. 
B) nasty tasting. 
C) a normal good. 
D) expensive.

Question 17

Which of the following statements is (are)true?

Accepted Answer

A) As a consumer consumes more and more of a good or service, its marginal utility eventually falls. 
B) Utility is a quality inherent in the good or service itself. 
C) Marginal utility is the change in total utility resulting from consuming one more or one less unit of a good. 
D) Both A and C are true. 
A) As a consumer consumes more and more of a good or service, its marginal utility eventually falls. 
B) Utility is a quality inherent in the good or service itself. 
C) Marginal utility is the change in total utility resulting from consuming one more or one less unit of a good. 
D) Both A and C are true.

Question 18

When MUx/Px > MUy/Py, the buyer should decrease the quantity of X purchased.

Accepted Answer

A) True 
 B)False

Question 19

The quantity demanded of handheld calculators, a normal good, will _______ with a price _______ .

Accepted Answer

A) increase; increase 
B) decrease; decrease 
C) decrease; increase 
D) increase; change 
A) increase; increase 
B) decrease; decrease 
C) decrease; increase 
D) increase; change

Question 20

The income effect of a price change is described by which of the following statements?

Accepted Answer

A) When the price of a good falls, consumers have an implicit increase in income and can now buy more of the good. 
B) When the price of a good falls, consumers will now substitute this lower priced good for more higher priced goods. 
C) The income effect is the relative change in the amount of a good consumed when the price of another good changes. 
D) The income effect shows how a change in income at a given price will affect the quantity of a good purchased. 
A) When the price of a good falls, consumers have an implicit increase in income and can now buy more of the good. 
B) When the price of a good falls, consumers will now substitute this lower priced good for more higher priced goods. 
C) The income effect is the relative change in the amount of a good consumed when the price of another good changes. 
D) The income effect shows how a change in income at a given price will affect the quantity of a good purchased.

Exam 7: Aggregate Demand and Aggregate Supply

The marginal rate of substitution increases as the consumer moves from left to right along a given indifference curve.

-(Exhibit: Consumer Equilibrium 2)Given the exhibit and the budget constraint, the maximization of consumer utility would occur at point _______ with the consumption of _______ of X and _______ of Y.

A Giffen good is one in which the _______ curve is _______ sloped.

In terms of indifference curves, a demand curve is generated by changes in:

Along an indifference curve, the combination of 10 units of X and 1 unit of Y represents a larger total utility than the combination of 5 units of X and 5 units of Y.

Marginal utility is negative when total utility is increasing.

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 $10 to spend on both goods, the maximum quantity of M&Ms that you can purchase is ________ bags.

The utility of a good is determined by how much _______ a particular consumer obtains from it.

If income falls, normal goods will experience an increase in consumption.

The slope of a(n)_______ curve shows the rate at which two goods can be exchanged _______ the consumer's ________ .

A budget line is based on a given level of income and variable prices.

Marginal utility is best computed as the:

Consumer equilibrium is achieved at the point of tangency between the budget line and the highest attainable indifference curve.

Assume that as the price of cauliflower falls the income effect causes consumers to buy less cauliflower.We can conclude that cauliflower is:

Which of the following statements is (are)true?

When MUx/Px > MUy/Py, the buyer should decrease the quantity of X purchased.

The quantity demanded of handheld calculators, a normal good, will _______ with a price _______ .

The income effect of a price change is described by which of the following statements?

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 exhibit and the budget constraint, the maximization of consumer utility would occur at point ___ with the consumption of _ of X and _____ of Y.

A Giffen good is one in which the _ curve is _ sloped.

The slope of a(n)___ curve shows the rate at which two goods can be exchanged _ the consumer's ______ .

When MU_x/P_x > MU_y/P_y, the buyer should decrease the quantity of X purchased.

The quantity demanded of handheld calculators, a normal good, will _ with a price _ .