Question 1

Utility is maximized in the consumption of two goods by equating the:

Accepted Answer

A) marginal utility of one good to the price of the other. 
B) ratios of marginal utility to price for both goods. 
C) ratios of total utility to price of both goods. 
D) marginal utilities of both goods. 
A) marginal utility of one good to the price of the other. 
B) ratios of marginal utility to price for both goods. 
C) ratios of total utility to price of both goods. 
D) marginal utilities of both goods.

Question 2

-(Exhibit: Consumer Equilibrium 3)The lowest 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 X or Y. 
A) indifference curve X. 
B) indifference curve Y. 
C) indifference curve Z. 
D) either indifference curve X or Y.

Question 3

The substitution 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 more real income with the same nominal income and will now buy more of the good. 
B) When the price of a good falls, consumers will now substitute this lower priced good for relatively higher priced goods. 
C) The substitution effect is the relative change in the amount of a good consumed when the price of another good changes. 
D) The substitution effect shows how a change in income will affect the quantity of a good purchased. 
A) When the price of a good falls, consumers have more real income with the same nominal income and will now buy more of the good. 
B) When the price of a good falls, consumers will now substitute this lower priced good for relatively higher priced goods. 
C) The substitution effect is the relative change in the amount of a good consumed when the price of another good changes. 
D) The substitution effect shows how a change in income will affect the quantity of a good purchased.

Question 4

The slope of a budget line for a consumer buying two goods is equal to the _______ of the price of the good on the ________ axis divided by the price of the good on the _______ axis.

Accepted Answer

A) positive; vertical; horizontal 
B) negative; horizontal; vertical 
C) positive; horizontal; vertical 
D) negative; vertical; horizontal 
A) positive; vertical; horizontal 
B) negative; horizontal; vertical 
C) positive; horizontal; vertical 
D) negative; vertical; horizontal

Question 5

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, the price of good Y is $1 per unit, and you have $10 of income to spend on both goods.To maximize utility, you would consume _______ units of X and _______ units of Y.

Accepted Answer

A) 3; 4 
B) 4; 3 
C) 4; 6 
D) 5; 5 
A) 3; 4 
B) 4; 3 
C) 4; 6 
D) 5; 5

Question 6

The ability of a good to satisfy a want refers to its:

Accepted Answer

A) utility. 
B) usefulness. 
C) worthiness. 
D) necessity. 
A) utility. 
B) usefulness. 
C) worthiness. 
D) necessity.

Question 7

The marginal utility of a good will eventually fall as more of it is consumed.

Accepted Answer

A) True 
 B)False

Question 8

An inferior good is likely to be a(n)_______ good that people _______ .

Accepted Answer

A) cheap; don't like much 
B) expensive; like a lot 
C) expensive; don't like much 
D) luxury; must have 
A) cheap; don't like much 
B) expensive; like a lot 
C) expensive; don't like much 
D) luxury; must have

Question 9

A consumer's total utility is greater at the upper end of an indifference curve than at the lower end.

Accepted Answer

A) True 
 B)False

Question 10

-(Exhibit: Consumer Equilibrium 3)Assume that you are consuming the combination of goods at point K.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 11

John Smedley, 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 ice cream fell.As he adjusts to this event, he will consume:

Accepted Answer

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

Question 12

The amount by which total utility rises when an additional unit of a good is consumed is called:

Accepted Answer

A) average utility. 
B) the law of diminishing returns. 
C) incremental utility. 
D) marginal utility. 
A) average utility. 
B) the law of diminishing returns. 
C) incremental utility. 
D) marginal utility.

Question 13

If the first four units of a good consumed have marginal utilities of 10, 9, 8, and 7, respectively, this trend is an indication of the:

Accepted Answer

A) law of diminishing marginal utility. 
B) minimization of utility. 
C) law of consumer equilibrium. 
D) law of diminishing consumer surplus. 
A) law of diminishing marginal utility. 
B) minimization of utility. 
C) law of consumer equilibrium. 
D) law of diminishing consumer surplus.

Question 14

The law of diminishing marginal utility indicates that the slope of the marginal utility curve eventually becomes:

Accepted Answer

A) negative. 
B) vertical. 
C) horizontal. 
D) positive. 
A) negative. 
B) vertical. 
C) horizontal. 
D) positive.

Question 15

If a consumer moves upward along an indifference curve, his or her total utility:

Accepted Answer

A) remains constant. 
B) first decreases, then increases. 
C) increases. 
D) first increases, then decreases. 
A) remains constant. 
B) first decreases, then increases. 
C) increases. 
D) first increases, then decreases.

Question 16

Faced with two goods to buy, good 1 and good 2, a utility-maximizing individual will buy according to which of the following statements?

Accepted Answer

A) price of good 1 = price of good 2 
B) MU of good 1 = MU of good 2 
C) price of good 1 divided by MU of good 2 = price of good 2 divided by MU of good 1 
D) MU of good 1 divided by price of good 1 = MU of good 2 divided by price of good 2 
A) price of good 1 = price of good 2 
B) MU of good 1 = MU of good 2 
C) price of good 1 divided by MU of good 2 = price of good 2 divided by MU of good 1 
D) MU of good 1 divided by price of good 1 = MU of good 2 divided by price of good 2

Question 17

Combinations of two goods that yield equal levels of utility are shown on a(n)_______ curve.

Accepted Answer

A) indifference 
B) budget 
C) marginal utility 
D) utility maximizing 
A) indifference 
B) budget 
C) marginal utility 
D) utility maximizing

Question 18

The utility-maximizing condition is achieved by equating the ratio of marginal utility to price for all goods.

Accepted Answer

A) True 
 B)False

Question 19

-(Exhibit: Consumer Equilibrium 3)The highest attainable level of utility, given budget constraint FL, is at point:

Accepted Answer

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

Question 20

In terms of indifference curves, an increase in total utility is represented by a:

Accepted Answer

A) shift to the right to a higher indifference curve. 
B) shift to the left to a lower indifference curve. 
C) movement upward along an indifference curve. 
D) movement downward along an indifference curve. 
A) shift to the right to a higher indifference curve. 
B) shift to the left to a lower indifference curve. 
C) movement upward along an indifference curve. 
D) movement downward along an indifference curve.

Exam 7: Aggregate Demand and Aggregate Supply

Utility is maximized in the consumption of two goods by equating the:

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

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

The slope of a budget line for a consumer buying two goods is equal to the _______ of the price of the good on the ________ axis divided by the price of the good on the _______ axis.

The ability of a good to satisfy a want refers to its:

The marginal utility of a good will eventually fall as more of it is consumed.

An inferior good is likely to be a(n)_______ good that people _______ .

A consumer's total utility is greater at the upper end of an indifference curve than at the lower end.

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

John Smedley, 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 ice cream fell.As he adjusts to this event, he will consume:

The amount by which total utility rises when an additional unit of a good is consumed is called:

If the first four units of a good consumed have marginal utilities of 10, 9, 8, and 7, respectively, this trend is an indication of the:

The law of diminishing marginal utility indicates that the slope of the marginal utility curve eventually becomes:

If a consumer moves upward along an indifference curve, his or her total utility:

Faced with two goods to buy, good 1 and good 2, a utility-maximizing individual will buy according to which of the following statements?

Combinations of two goods that yield equal levels of utility are shown on a(n)_______ curve.

The utility-maximizing condition is achieved by equating the ratio of marginal utility to price for all goods.

-(Exhibit: Consumer Equilibrium 3)The highest attainable level of utility, given budget constraint FL, is at point:

In terms of indifference curves, an increase in total utility is represented by a:

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 slope of a budget line for a consumer buying two goods is equal to the _ of the price of the good on the axis divided by the price of the good on the _ axis.

An inferior good is likely to be a(n)_ good that people _ .