Question 1

Algebraically, the budget constraint for two goods would be PxQx + PyQy is:

Accepted Answer

A) equal to B. 
B) less than B. 
C) greater than B. 
D) less than or equal to B. 
A) equal to B. 
B) less than B. 
C) greater than B. 
D) less than or equal to B.

Question 2

As a consumer moves upward along an indifference curve, giving up some of X (on the horizontal axis)to get more of Y (on the vertical axis), his or her marginal rate of substitution of X for Y:

Accepted Answer

A) becomes infinite. 
B) goes from negative to positive. 
C) increases. 
D) decreases. 
A) becomes infinite. 
B) goes from negative to positive. 
C) increases. 
D) decreases.

Question 3

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 is $1 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 X and more of Y. 
B) more of both X and Y. 
C) less of both X and Y. 
D) more of X and less of Y. 
A) less of X and more of Y. 
B) more of both X and Y. 
C) less of both X and Y. 
D) more of X and less of Y.

Question 4

Which of the following statements is true regarding utility?

Accepted Answer

A) Utility can be measured. 
B) Utility cannot be measured. 
C) Utility, at the margin, eventually increases as more of a good is consumed. 
D) A and C are true. 
A) Utility can be measured. 
B) Utility cannot be measured. 
C) Utility, at the margin, eventually increases as more of a good is consumed. 
D) A and C are true.

Question 5

-(Exhibit: Consumer Equilibrium 2)Given the exhibit, which of the following is (are)true?

Accepted Answer

A) To increase utility beyond that received at point I requires a change in the preferences of the consumer. 
B) Point J could be attained with an increase in the consumer's budget. 
C) An increase in the prices of good X and good Y would allow the consumer to attain point J. 
D) Both A and B are true. 
A) To increase utility beyond that received at point I requires a change in the preferences of the consumer. 
B) Point J could be attained with an increase in the consumer's budget. 
C) An increase in the prices of good X and good Y would allow the consumer to attain point J. 
D) Both A and B are true.

Question 6

If, for a particular consumer, the marginal utility of ties is greater than the marginal utility of shirts, this consumer should:

Accepted Answer

A) buy more ties and fewer shirts. 
B) buy more shirts and fewer ties. 
C) buy the same amount of each. 
D) not do anything until more information is available. 
A) buy more ties and fewer shirts. 
B) buy more shirts and fewer ties. 
C) buy the same amount of each. 
D) not do anything until more information is available.

Question 7

If there is an increase in the price of good Z and the quantity demanded of Z goes down, a possible explanation for this is:

Accepted Answer

A) Z is a normal good. 
B) the substitution effect. 
C) Z is a Giffen good. 
D) both A and B are correct. 
A) Z is a normal good. 
B) the substitution effect. 
C) Z is a Giffen good. 
D) both A and B are correct.

Question 8

Following an income-compensated price change, you decide to increase the quantity of pizza purchased each month when the price decreases and therefore purchase fewer hamburgers.This is an indication of the:

Accepted Answer

A) output effect. 
B) income effect. 
C) marginal effect. 
D) substitution effect. 
A) output effect. 
B) income effect. 
C) marginal effect. 
D) substitution effect.

Question 9

If a consumer purchases a combination of commodities a and b such that MUa/Pa = 100
And MUb/Pb = 80, to maximize utility, the consumer should buy:

Accepted Answer

A) less of both a and b. 
B) more of a and less of b. 
C) less of a and more of b. 
D) more of both a and b. 
A) less of both a and b. 
B) more of a and less of b. 
C) less of a and more of b. 
D) more of both a and b.

Question 10

Total utility is maximized when marginal utility per additional dollar spent is the same for all goods.

Accepted Answer

A) True 
 B)False

Question 11

The Case in Point on P.O.W.camps stated that in situations where trade among the prisoners was allowed, in equilibrium the marginal rate of substitution between coffee and tea:

Accepted Answer

A) was equal to the same price ratio for both French and British prisoners. 
B) for French prisoners was lower than for British prisoners. 
C) for French prisoners was higher than for British prisoners. 
D) for British prisoners was 1, while the French prisoners preferred not to engage in exchange. 
A) was equal to the same price ratio for both French and British prisoners. 
B) for French prisoners was lower than for British prisoners. 
C) for French prisoners was higher than for British prisoners. 
D) for British prisoners was 1, while the French prisoners preferred not to engage in exchange.

Question 12

When the income effect moves in the same direction as the _______ effect, a greater income effect contributes to a _______ price elasticity of demand.

Accepted Answer

A) substitution; greater 
B) substitution; smaller 
C) demand; greater 
D) budget; smaller 
A) substitution; greater 
B) substitution; smaller 
C) demand; greater 
D) budget; smaller

Question 13

Assume that the total utilities corresponding to the first five units of a product consumed are 14, 20, 25, 29, and 32, respectively.The marginal utility of the third unit is:

Accepted Answer

A) 5. 
B) 6. 
C) 20. 
D) 25. 
A) 5. 
B) 6. 
C) 20. 
D) 25.

Question 14

If the price of a good rises, the resulting decrease in the quantity purchased will increase the marginal utility of the good.

Accepted Answer

A) True 
 B)False

Question 15

A consumer is in equilibrium along the portion of an indifference curve that lies below a budget line.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is (are)true?

Accepted Answer

A) A budget constraint limits what a poor consumer can spend, but there is no similar constraint on rich people. 
B) Utility maximization requires seeking the greatest utility from a given budget. 
C) In consumer choice theory, we assume all goods and services are normal. 
D) All of the above are true. 
A) A budget constraint limits what a poor consumer can spend, but there is no similar constraint on rich people. 
B) Utility maximization requires seeking the greatest utility from a given budget. 
C) In consumer choice theory, we assume all goods and services are normal. 
D) All of the above are true.

Question 17

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 he will consume:

Accepted Answer

A) more peanut butter and less ice cream. 
B) less peanut butter and less ice cream. 
C) more peanut butter and more ice cream. 
D) less peanut butter and more ice cream. 
A) more peanut butter and less ice cream. 
B) less peanut butter and less ice cream. 
C) more peanut butter and more ice cream. 
D) less peanut butter and more ice cream.

Question 18

-(Exhibit: Consumer Equilibrium 3)The highest level of utility shown in the exhibit is associated with:

Accepted Answer

A) indifference curve X. 
B) indifference curve Y. 
C) indifference curve Z. 
D) either indifference curve Y or Z. 
A) indifference curve X. 
B) indifference curve Y. 
C) indifference curve Z. 
D) either indifference curve Y or Z.

Question 19

A consumer's downward-sloping demand curve for a good reflects the fact that the marginal utility of the good increases as more of it is consumed.

Accepted Answer

A) True 
 B)False

Question 20

The maximum amount of one good a consumer would be willing to give up in order to obtain an additional unit of another is called the:

Accepted Answer

A) marginal rate of substitution. 
B) marginal rate of utility exchange. 
C) average rate of substitution. 
D) marginal rate of exchange. 
A) marginal rate of substitution. 
B) marginal rate of utility exchange. 
C) average rate of substitution. 
D) marginal rate of exchange.

Exam 7: Aggregate Demand and Aggregate Supply

Algebraically, the budget constraint for two goods would be PxQx + PyQy is:

As a consumer moves upward along an indifference curve, giving up some of X (on the horizontal axis)to get more of Y (on the vertical axis), his or her marginal rate of substitution of X for Y:

Which of the following statements is true regarding utility?

-(Exhibit: Consumer Equilibrium 2)Given the exhibit, which of the following is (are)true?

If, for a particular consumer, the marginal utility of ties is greater than the marginal utility of shirts, this consumer should:

If there is an increase in the price of good Z and the quantity demanded of Z goes down, a possible explanation for this is:

Following an income-compensated price change, you decide to increase the quantity of pizza purchased each month when the price decreases and therefore purchase fewer hamburgers.This is an indication of the:

If a consumer purchases a combination of commodities a and b such that MUa/Pa = 100 And MUb/Pb = 80, to maximize utility, the consumer should buy:

Total utility is maximized when marginal utility per additional dollar spent is the same for all goods.

The Case in Point on P.O.W.camps stated that in situations where trade among the prisoners was allowed, in equilibrium the marginal rate of substitution between coffee and tea:

When the income effect moves in the same direction as the _______ effect, a greater income effect contributes to a _______ price elasticity of demand.

Assume that the total utilities corresponding to the first five units of a product consumed are 14, 20, 25, 29, and 32, respectively.The marginal utility of the third unit is:

If the price of a good rises, the resulting decrease in the quantity purchased will increase the marginal utility of the good.

A consumer is in equilibrium along the portion of an indifference curve that lies below a budget line.

Which of the following is (are)true?

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 he will consume:

-(Exhibit: Consumer Equilibrium 3)The highest level of utility shown in the exhibit is associated with:

A consumer's downward-sloping demand curve for a good reflects the fact that the marginal utility of the good increases as more of it is consumed.

The maximum amount of one good a consumer would be willing to give up in order to obtain an additional unit of another is called 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

Algebraically, the budget constraint for two goods would be P_xQ_x + P_yQ_y is:

If a consumer purchases a combination of commodities a and b such that MU_a/P_a = 100 And MU_b/P_b = 80, to maximize utility, the consumer should buy:

When the income effect moves in the same direction as the _ effect, a greater income effect contributes to a _ price elasticity of demand.