Question 1

If marginal utility is diminishing, total utility must also be declining.

Accepted Answer

A) True 
 B)False

Question 2

If total utility increases as consumption of a good increases, then marginal utility must be increasing also.

Accepted Answer

A) True 
 B)False

Question 3

The price of chicken = $5, while the price of pork = $9.If, after spending her entire budget, the consumer has MU of chicken = 6, while the MU of pork = 12, then the consumer should have bought more chicken and less pork in order to increase her total utility.

Accepted Answer

A) True 
 B)False

Question 4

A consumer has two basic choices: rent a DVD movie for $4.00 and spend 2 hours watching it, or spend $13 for a miniature golf game that takes 1 hour.If the marginal utilities of the movie and the miniature golf game are equal, and the consumer values time at $12 an hour, the rational consumer will most likely

Accepted Answer

A) rent the movie instead of playing miniature golf. 
B) play miniature golf instead of renting the movie. 
C) be indifferent between the movie and the miniature golf game. 
D) not have enough basis for making a utility-maximizing decision. 
A) rent the movie instead of playing miniature golf. 
B) play miniature golf instead of renting the movie. 
C) be indifferent between the movie and the miniature golf game. 
D) not have enough basis for making a utility-maximizing decision.

Question 5

The income effect explains an exception to the law of demand.

Accepted Answer

A) True 
 B)False

Question 6

If the total utility from consuming five units of a product is 245 and the marginal utility of a sixth unit is 5, then the total utility from consuming six units would be

Accepted Answer

A) 240. 
B) 250. 
C) 49. 
D) 1,225. 
A) 240. 
B) 250. 
C) 49. 
D) 1,225.

Question 7

Which of the following statements is correct?

Accepted Answer

A) Both cash and noncash gift-giving cause value losses. 
B) Neither cash nor noncash gift-giving causes value losses. 
C) Noncash gift-giving creates a value loss, but cash gifts do not. 
D) Cash gifts create a value loss, but noncash gifts do not. 
A) Both cash and noncash gift-giving cause value losses. 
B) Neither cash nor noncash gift-giving causes value losses. 
C) Noncash gift-giving creates a value loss, but cash gifts do not. 
D) Cash gifts create a value loss, but noncash gifts do not.

Question 8

Total utility may be determined by

Accepted Answer

A) multiplying the marginal utility of the last unit consumed by the number of units consumed. 
B) summing the marginal utilities of each unit consumed. 
C) multiplying the marginal utility of the last unit consumed by product price. 
D) multiplying the marginal utility of the first unit consumed by the number of units consumed. 
A) multiplying the marginal utility of the last unit consumed by the number of units consumed. 
B) summing the marginal utilities of each unit consumed. 
C) multiplying the marginal utility of the last unit consumed by product price. 
D) multiplying the marginal utility of the first unit consumed by the number of units consumed.

Question 9

The slope of a budget line reflects the

Accepted Answer

A) elasticity of demand for the two products. 
B) price ratio of the two products. 
C) amount of the consumer's income. 
D) utility ratio of the two products. 
A) elasticity of demand for the two products. 
B) price ratio of the two products. 
C) amount of the consumer's income. 
D) utility ratio of the two products.

Question 10

Which of the following is an assumption of the theory of consumer behavior described in this chapter?

Accepted Answer

A) The consumer's income increases as prices of goods increase 
B) Each good that a consumer consumes has a price 
C) The consumer oftentimes is not sure about her preferences 
D) Marginal utility increases as more units of a good is consumed 
A) The consumer's income increases as prices of goods increase 
B) Each good that a consumer consumes has a price 
C) The consumer oftentimes is not sure about her preferences 
D) Marginal utility increases as more units of a good is consumed

Question 11

A downward-sloping demand curve can be derived for a normal product by increasing its price in the consumer-behavior model and noting

Accepted Answer

A) the increase in the utility-maximizing quantity of that product demanded. 
B) the decrease in the utility-maximizing quantity of that product demanded. 
C) a substitution effect that encourages more consumption of that product. 
D) an income effect that encourages more consumption of that product. 
A) the increase in the utility-maximizing quantity of that product demanded. 
B) the decrease in the utility-maximizing quantity of that product demanded. 
C) a substitution effect that encourages more consumption of that product. 
D) an income effect that encourages more consumption of that product.

Question 12

The limited money income of consumers results in a so-called budget constraint.

Accepted Answer

A) True 
 B)False

Question 13

An indifference curve shows all

Accepted Answer

A) possible equilibrium positions on an indifference map. 
B) equilibrium combinations of two products that are obtainable with a given money income. 
C) combinations of two products yielding the same total utility to a consumer. 
D) possible combinations of two products that a consumer can purchase, given her income and the prices of the products. 
A) possible equilibrium positions on an indifference map. 
B) equilibrium combinations of two products that are obtainable with a given money income. 
C) combinations of two products yielding the same total utility to a consumer. 
D) possible combinations of two products that a consumer can purchase, given her income and the prices of the products.

Question 14

If you receive a gift whose market price is $20, but you consider it to be worth only $10, then

Accepted Answer

A) there is a $10, or 50 percent, value gain. 
B) there may or may not be a value loss. 
C) there is a $10, or 50 percent, value loss. 
D) you can be relatively certain the giver was a sibling or other close relative. 
A) there is a $10, or 50 percent, value gain. 
B) there may or may not be a value loss. 
C) there is a $10, or 50 percent, value loss. 
D) you can be relatively certain the giver was a sibling or other close relative.

Question 15

As a consumer moves down a given indifference curve, his or her total utility will diminish.

Accepted Answer

A) True 
 B)False

Question 16

The marginal rate of substitution

Accepted Answer

A) may increase or decrease on a given indifference curve, depending on whether the substitution or the income effect is dominant. 
B) increases as one moves southeast along an indifference curve. 
C) is constant at all points on the budget line. 
D) declines as one moves southeast along an indifference curve. 
A) may increase or decrease on a given indifference curve, depending on whether the substitution or the income effect is dominant. 
B) increases as one moves southeast along an indifference curve. 
C) is constant at all points on the budget line. 
D) declines as one moves southeast along an indifference curve.

Question 17

A decrease in the prices of two products that a consumer buys out of a constant budget would cause the consumer's

Accepted Answer

A) indifference curves to shift outward from the origin. 
B) indifference curves to shift inward to the origin. 
C) budget line to shift outward from the origin. 
D) budget line to shift inward to the origin. 
A) indifference curves to shift outward from the origin. 
B) indifference curves to shift inward to the origin. 
C) budget line to shift outward from the origin. 
D) budget line to shift inward to the origin.

Question 18

Edith is buying products X and Y with her money income.Suppose her budget line shifts rightward (outward).This might be the result of

Accepted Answer

A) the prices of X and Y increasing while her money income remains constant. 
B) her money income decreasing while the prices of X and Y remain constant. 
C) her money income increasing more than increases in the prices of X and Y. 
D) none of these. 
A) the prices of X and Y increasing while her money income remains constant. 
B) her money income decreasing while the prices of X and Y remain constant. 
C) her money income increasing more than increases in the prices of X and Y. 
D) none of these.

Question 19

The marginal utility of the last unit of apples consumed is 12, and the marginal utility of the last unit of bananas consumed is 8.What set of prices for apples and bananas, respectively, would be consistent with consumer equilibrium?

Accepted Answer

A) $4 and $6 
B) $6 and $4 
C) $8 and $12 
D) $16 and $9 
A) $4 and $6 
B) $6 and $4 
C) $8 and $12 
D) $16 and $9

Question 20

Assume initially that the price of X (the quantity of which is measured on the horizontal axis) is $9 and the price of Y (the quantity of which is measured on the vertical axis) is $4.If the price of X now declines to $6, the budget line will

Accepted Answer

A) be unaffected. 
B) shift outward on the vertical axis. 
C) shift inward on the horizontal axis. 
D) shift outward on the horizontal axis. 
A) be unaffected. 
B) shift outward on the vertical axis. 
C) shift inward on the horizontal axis. 
D) shift outward on the horizontal axis.

Exam 7: Utility Maximization

If marginal utility is diminishing, total utility must also be declining.

If total utility increases as consumption of a good increases, then marginal utility must be increasing also.

The price of chicken = $5, while the price of pork = $9.If, after spending her entire budget, the consumer has MU of chicken = 6, while the MU of pork = 12, then the consumer should have bought more chicken and less pork in order to increase her total utility.

The income effect explains an exception to the law of demand.

If the total utility from consuming five units of a product is 245 and the marginal utility of a sixth unit is 5, then the total utility from consuming six units would be

Which of the following statements is correct?

Total utility may be determined by

The slope of a budget line reflects the

Which of the following is an assumption of the theory of consumer behavior described in this chapter?

A downward-sloping demand curve can be derived for a normal product by increasing its price in the consumer-behavior model and noting

The limited money income of consumers results in a so-called budget constraint.

An indifference curve shows all

If you receive a gift whose market price is $20, but you consider it to be worth only $10, then

As a consumer moves down a given indifference curve, his or her total utility will diminish.

The marginal rate of substitution

A decrease in the prices of two products that a consumer buys out of a constant budget would cause the consumer's

Edith is buying products X and Y with her money income.Suppose her budget line shifts rightward (outward).This might be the result of

The marginal utility of the last unit of apples consumed is 12, and the marginal utility of the last unit of bananas consumed is 8.What set of prices for apples and bananas, respectively, would be consistent with consumer equilibrium?

Assume initially that the price of X (the quantity of which is measured on the horizontal axis) is $9 and the price of Y (the quantity of which is measured on the vertical axis) is $4.If the price of X now declines to $6, the budget line will

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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