Question 1

The increase in demand for iPad tablet computers can be explained by

Accepted Answer

A) an increase in the technology used to produce iPads, making the supply of iPads increase. 
B) an increase in the price of laptop computers, making their MU/P decrease. 
C) the enhanced versatility and storage capacity of iPads, making their MU/P increase. 
D) an increase in the income of buyers, making the demand for iPads increase. 
A) an increase in the technology used to produce iPads, making the supply of iPads increase. 
B) an increase in the price of laptop computers, making their MU/P decrease. 
C) the enhanced versatility and storage capacity of iPads, making their MU/P increase. 
D) an increase in the income of buyers, making the demand for iPads increase.

Question 2

When total utility is at a maximum, marginal utility is zero.

Accepted Answer

A) True 
 B)False

Question 3

Assume you are spending your full budget and purchasing such amounts of X and Y that the marginal utility from the last units consumed is 40 and 20 utils, respectively.Assume (a) the prices of X and Y are $8 and $4 respectively; (b) it takes 3 hours to consume a unit of X and 1 hour to consume a unit of Y; and (c) your time is worth $2 per hour.You

Accepted Answer

A) should substitute X for Y until the marginal utility per hour is the same for both products. 
B) are consuming X and Y in the optimal amounts. 
C) should consume less of Y and more of X. 
D) should consume less of X and more of Y. 
A) should substitute X for Y until the marginal utility per hour is the same for both products. 
B) are consuming X and Y in the optimal amounts. 
C) should consume less of Y and more of X. 
D) should consume less of X and more of Y.

Question 4

Many people buy no more than one iPad because

Accepted Answer

A) there's always a shortage of iPads. 
B) the MU/P of a second iPad is quite low for many people. 
C) the price of iPads has increased significantly. 
D) iPads have quickly become obsolete. 
A) there's always a shortage of iPads. 
B) the MU/P of a second iPad is quite low for many people. 
C) the price of iPads has increased significantly. 
D) iPads have quickly become obsolete.

Question 5

A consumer's demand curve for a product is downsloping because

Accepted Answer

A) total utility falls below marginal utility as more of a product is consumed. 
B) marginal utility diminishes as more of a product is consumed. 
C) time becomes less valuable as more of a product is consumed. 
D) the income and substitution effects precisely offset each other. 
A) total utility falls below marginal utility as more of a product is consumed. 
B) marginal utility diminishes as more of a product is consumed. 
C) time becomes less valuable as more of a product is consumed. 
D) the income and substitution effects precisely offset each other.

Question 6

When the price of a product rises for an inferior good, the

Accepted Answer

A) income and substitution effects will encourage consumers to purchase more of the product. 
B) income and substitution effects will encourage consumers to purchase less of the product. 
C) substitution effect will encourage consumers to purchase less of the product, but the income effect will encourage them to purchase more. 
D) substitution effect will encourage consumers to purchase more of the product, but the income effect will encourage them to purchase less. 
A) income and substitution effects will encourage consumers to purchase more of the product. 
B) income and substitution effects will encourage consumers to purchase less of the product. 
C) substitution effect will encourage consumers to purchase less of the product, but the income effect will encourage them to purchase more. 
D) substitution effect will encourage consumers to purchase more of the product, but the income effect will encourage them to purchase less.

Question 7

Which of the following best expresses the law of diminishing marginal utility?

Accepted Answer

A) The more of a product consumed, the smaller is the total utility from the product. 
B) The less of a product consumed, the greater is the marginal utility of the product. 
C) The more of a product consumed, the greater is the total utility from the product. 
D) The less of a product consumed, the smaller is marginal utility of the product. 
A) The more of a product consumed, the smaller is the total utility from the product. 
B) The less of a product consumed, the greater is the marginal utility of the product. 
C) The more of a product consumed, the greater is the total utility from the product. 
D) The less of a product consumed, the smaller is marginal utility of the product.

Question 8

An increase in the price of a product normally enables a consumer to reach a higher indifference curve.

Accepted Answer

A) True 
 B)False

Question 9

This indicates that

Accepted Answer

A) Ellie should make no change in consumption. 
B) given another dollar, Ellie should buy an additional unit of Beta. 
C) in order to maximize utility, Ellie should buy more of Beta and less of Alpha. 
D) in order to maximize utility, Ellie should buy more of Alpha and less of Beta. 
A) Ellie should make no change in consumption. 
B) given another dollar, Ellie should buy an additional unit of Beta. 
C) in order to maximize utility, Ellie should buy more of Beta and less of Alpha. 
D) in order to maximize utility, Ellie should buy more of Alpha and less of Beta.

Question 10

When a consumer shifts purchases from X to Y, the marginal utility of X falls and the marginal utility of Y rises.

Accepted Answer

A) True 
 B)False

Question 11

The substitution effect of a price decrease for a good causes an increase in the consumption of the good, regardless of whether the good is normal or inferior.

Accepted Answer

A) True 
 B)False

Question 12

With diminishing marginal utility, if a consumer reduces her consumption of a good, then her marginal utility from that good would increase.

Accepted Answer

A) True 
 B)False

Question 13

If total utility has reached a maximum level, and assuming that diminishing marginal utility already applies, then what will happen as the consumer consumes additional units of the product?

Accepted Answer

A) Marginal utility of the additional units will be greater than zero. 
B) Total utility will turn negative. 
C) Marginal utility of the additional units will turn negative. 
D) Total utility will increase at a diminishing rate. 
A) Marginal utility of the additional units will be greater than zero. 
B) Total utility will turn negative. 
C) Marginal utility of the additional units will turn negative. 
D) Total utility will increase at a diminishing rate.

Question 14

A graph that shows the maximum combinations of two goods which a consumer can purchase with a given money income is

Accepted Answer

A) the production possibilities curve. 
B) an indifference curve. 
C) a demand curve. 
D) a budget line. 
A) the production possibilities curve. 
B) an indifference curve. 
C) a demand curve. 
D) a budget line.

Question 15

(Last Word) All of the following would reduce property crime by increasing its "price," except

Accepted Answer

A) imposing greater penalties for those who are caught and convicted. 
B) using more sophisticated security systems. 
C) enhancing the legitimate earnings of potential criminals. 
D) cutting out the middlemen ("fences") by selling stolen goods via Internet auction sites. 
A) imposing greater penalties for those who are caught and convicted. 
B) using more sophisticated security systems. 
C) enhancing the legitimate earnings of potential criminals. 
D) cutting out the middlemen ("fences") by selling stolen goods via Internet auction sites.

Question 16

"Consumer equilibrium" refers to the situation when the consumer is getting

Accepted Answer

A) the highest total utility out of spending a given budget on various goods. 
B) the highest marginal utility out of spending a given budget on various goods. 
C) equal marginal utility values from each product consumed. 
D) equal total utility values from each product consumed. 
A) the highest total utility out of spending a given budget on various goods. 
B) the highest marginal utility out of spending a given budget on various goods. 
C) equal marginal utility values from each product consumed. 
D) equal total utility values from each product consumed.

Question 17

If a product has a diminishing, but positive, marginal utility, then

Accepted Answer

A) total utility decreases at an increasing rate. 
B) total utility will become negative. 
C) total utility increases at a diminishing rate. 
D) total utility decreases at a diminishing rate. 
A) total utility decreases at an increasing rate. 
B) total utility will become negative. 
C) total utility increases at a diminishing rate. 
D) total utility decreases at a diminishing rate.

Question 18

An increase in the productivity of labor over time will

Accepted Answer

A) decrease the value of time. 
B) increase the value of time. 
C) decrease the demand for labor-saving devices. 
D) decrease the demand for consumer goods and services. 
A) decrease the value of time. 
B) increase the value of time. 
C) decrease the demand for labor-saving devices. 
D) decrease the demand for consumer goods and services.

Question 19

Which of the following has been a significant factor in the ability of iPads to compete effectively against laptop and desktop computers?

Accepted Answer

A) iPads are often superior to laptop and desktop computers in their ability to create content. 
B) A scarcity of production capacity has curtailed the manufacture of laptop and desktop computers. 
C) Many consumers perceive that iPads are superior to laptops and desktop computers for the consumption of digital media. 
D) The prices of laptops and desktop computers have increased dramatically. 
A) iPads are often superior to laptop and desktop computers in their ability to create content. 
B) A scarcity of production capacity has curtailed the manufacture of laptop and desktop computers. 
C) Many consumers perceive that iPads are superior to laptops and desktop computers for the consumption of digital media. 
D) The prices of laptops and desktop computers have increased dramatically.

Question 20

Marginal utility can be

Accepted Answer

A) positive, but not negative. 
B) positive or negative, but not zero. 
C) positive, negative, or zero. 
D) decreasing, but not negative. 
A) positive, but not negative. 
B) positive or negative, but not zero. 
C) positive, negative, or zero. 
D) decreasing, but not negative.

Exam 7: Utility Maximization

The increase in demand for iPad tablet computers can be explained by

When total utility is at a maximum, marginal utility is zero.

Many people buy no more than one iPad because

A consumer's demand curve for a product is downsloping because

When the price of a product rises for an inferior good, the

Which of the following best expresses the law of diminishing marginal utility?

An increase in the price of a product normally enables a consumer to reach a higher indifference curve.

This indicates that

When a consumer shifts purchases from X to Y, the marginal utility of X falls and the marginal utility of Y rises.

The substitution effect of a price decrease for a good causes an increase in the consumption of the good, regardless of whether the good is normal or inferior.

With diminishing marginal utility, if a consumer reduces her consumption of a good, then her marginal utility from that good would increase.

If total utility has reached a maximum level, and assuming that diminishing marginal utility already applies, then what will happen as the consumer consumes additional units of the product?

A graph that shows the maximum combinations of two goods which a consumer can purchase with a given money income is

(Last Word) All of the following would reduce property crime by increasing its "price," except

"Consumer equilibrium" refers to the situation when the consumer is getting

If a product has a diminishing, but positive, marginal utility, then

An increase in the productivity of labor over time will

Which of the following has been a significant factor in the ability of iPads to compete effectively against laptop and desktop computers?

Marginal utility can be

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

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The Balance of Payments, Exchange Rates, and Trade Deficits

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