Question 1

If the price of product X rises, then the resulting decline in the amount purchased will

Accepted Answer

A) necessarily increase the consumer's total utility from his total purchases. 
B) increase the marginal utility of the last unit consumed of this good. 
C) increase the total utility from purchases of this good. 
D) reduce the marginal utility of the last unit consumed of this good. 
A) necessarily increase the consumer's total utility from his total purchases. 
B) increase the marginal utility of the last unit consumed of this good. 
C) increase the total utility from purchases of this good. 
D) reduce the marginal utility of the last unit consumed of this good.

Question 2

A consumer with a fixed income will maximize utility when each good is purchased in amounts such that the

Accepted Answer

A) total utility is the same for each good. 
B) marginal utility of each good is maximized. 
C) marginal utility per dollar spent is the same for all goods. 
D) marginal utility per dollar spent is maximized for each good. 
A) total utility is the same for each good. 
B) marginal utility of each good is maximized. 
C) marginal utility per dollar spent is the same for all goods. 
D) marginal utility per dollar spent is maximized for each good.

Question 3

Indifference curve analysis

Accepted Answer

A) presumes, as does utility analysis, that satisfaction is numerically measurable. 
B) presumes, unlike utility analysis, that satisfaction is numerically measurable. 
C) presumes only that the consumer can say one combination of two goods yields more or less utility than some other combination. 
D) is in conflict with the idea of a downsloping demand curve. 
A) presumes, as does utility analysis, that satisfaction is numerically measurable. 
B) presumes, unlike utility analysis, that satisfaction is numerically measurable. 
C) presumes only that the consumer can say one combination of two goods yields more or less utility than some other combination. 
D) is in conflict with the idea of a downsloping demand curve.

Question 4

The substitution effect

Accepted Answer

A) is generally so weak that its effect cannot be predicted. 
B) for an increase in the relative price of a good is sometimes positive but sometimes negative. 
C) measures the change in the quantity demanded of a good from a change in its relative price. 
D) measures the change in the quantity of a good demanded brought about by a change in real income associated with a change in the price of the good. 
A) is generally so weak that its effect cannot be predicted. 
B) for an increase in the relative price of a good is sometimes positive but sometimes negative. 
C) measures the change in the quantity demanded of a good from a change in its relative price. 
D) measures the change in the quantity of a good demanded brought about by a change in real income associated with a change in the price of the good.

Question 5

Assume the price of product Y (the quantity of which is plotted on the vertical axis) is initially $15 and the price of X (the quantity of which is plotted on the horizontal axis) is initially $3.Assume money income is initially $60.If the prices of Y and X now increase to $30 and $6, respectively, and money income increases to $120, then the budget line will

Accepted Answer

A) shift rightward and become steeper. 
B) shift rightward and become flatter. 
C) shift rightward, but its slope will not change. 
D) be unchanged. 
A) shift rightward and become steeper. 
B) shift rightward and become flatter. 
C) shift rightward, but its slope will not change. 
D) be unchanged.

Question 6

Which of the following defines marginal utility?

Accepted Answer

A) the change in total utility divided by the price of a product 
B) the maximum amount of satisfaction from consuming a product 
C) the total satisfaction derived from a certain amount of the product 
D) the additional satisfaction from consuming one more unit of a product 
A) the change in total utility divided by the price of a product 
B) the maximum amount of satisfaction from consuming a product 
C) the total satisfaction derived from a certain amount of the product 
D) the additional satisfaction from consuming one more unit of a product

Question 7

The reason the substitution effect works to encourage a consumer to buy less of a product when its price increases is that

Accepted Answer

A) the real income of the consumer has been increased. 
B) the real income of the consumer has been decreased. 
C) the product is now relatively more expensive than it was before. 
D) other products are now relatively more expensive than they were before. 
A) the real income of the consumer has been increased. 
B) the real income of the consumer has been decreased. 
C) the product is now relatively more expensive than it was before. 
D) other products are now relatively more expensive than they were before.

Question 8

To the average consumer, the marginal utility of a second copy of today's newspaper is

Accepted Answer

A) constant. 
B) increasing. 
C) close to zero. 
D) close to one. 
A) constant. 
B) increasing. 
C) close to zero. 
D) close to one.

Question 9

When total utility reaches a maximum, then marginal utility is

Accepted Answer

A) increasing. 
B) decreasing. 
C) at a minimum. 
D) equal to zero. 
A) increasing. 
B) decreasing. 
C) at a minimum. 
D) equal to zero.

Question 10

When the price of a product falls for a normal 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, and the income effect will encourage them to purchase more. 
D) substitution effect will encourage consumers to purchase more of the product, and 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, and the income effect will encourage them to purchase more. 
D) substitution effect will encourage consumers to purchase more of the product, and the income effect will encourage them to purchase less.

Question 11

Mrs.Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the marginal utility of the last bag is 30 utils.The prices of soda and pretzels are $0.60 per bottle and $0.40 per bag, respectively.It can be concluded that

Accepted Answer

A) the two commodities are substitute goods. 
B) Mrs.Arnold should spend more on pretzels and less on soda. 
C) Mrs.Arnold should spend more on soda and less on pretzels. 
D) Mrs.Arnold is buying soda and pretzels in the utility-maximizing amounts. 
A) the two commodities are substitute goods. 
B) Mrs.Arnold should spend more on pretzels and less on soda. 
C) Mrs.Arnold should spend more on soda and less on pretzels. 
D) Mrs.Arnold is buying soda and pretzels in the utility-maximizing amounts.

Question 12

The satisfaction or pleasure one gets from consuming a good or service is called

Accepted Answer

A) price. 
B) utility. 
C) income. 
D) profits. 
A) price. 
B) utility. 
C) income. 
D) profits.

Question 13

In drawing a particular budget line, money income and the prices of the two products are fixed.

Accepted Answer

A) True 
 B)False

Question 14

Diminishing marginal utility explains why

Accepted Answer

A) the income effect exceeds the substitution effect. 
B) the substitution effect exceeds the income effect. 
C) supply curves are upsloping. 
D) demand curves are downsloping. 
A) the income effect exceeds the substitution effect. 
B) the substitution effect exceeds the income effect. 
C) supply curves are upsloping. 
D) demand curves are downsloping.

Question 15

Children who dislike Brussels sprouts exemplify the notion that the marginal utility of Brussels sprouts is

Accepted Answer

A) zero. 
B) negative. 
C) positive, but decreasing. 
D) less than the total utility. 
A) zero. 
B) negative. 
C) positive, but decreasing. 
D) less than the total utility.

Question 16

You can drive from Kansas City to St.Louis in five hours.You can fly between the cities in two hours.The price of an airline ticket is $150.The cost of driving between the cities is $50.About what hourly wage would make the "full" cost of driving equal the "full" cost of flying, where "full" cost includes the value of time?

Accepted Answer

A) $17 
B) $21 
C) $29 
D) $33 
A) $17 
B) $21 
C) $29 
D) $33

Question 17

According to economists, gift registries, returning gifts for cash refunds, and "recycling gifts"

Accepted Answer

A) are inefficient because the time spent in these activities is never worth the benefit recipients receive from doing them. 
B) are equally efficient because the recipient gets exactly what he wants. 
C) are more efficient than if givers simply gave cash gifts. 
D) increase the efficiency of gift-giving because they allow the recipient to consume goods that provide greater utility and transfer away those goods that are less satisfying. 
A) are inefficient because the time spent in these activities is never worth the benefit recipients receive from doing them. 
B) are equally efficient because the recipient gets exactly what he wants. 
C) are more efficient than if givers simply gave cash gifts. 
D) increase the efficiency of gift-giving because they allow the recipient to consume goods that provide greater utility and transfer away those goods that are less satisfying.

Question 18

The consumer will select that point on the budget line which puts him or her on the highest attainable indifference curve.

Accepted Answer

A) True 
 B)False

Question 19

The marginal utility of leisure time appears to

Accepted Answer

A) bethe same even for people with widely different incomes. 
B) beexempt from the law of diminishing marginal utility. 
C) increase as the quantity of available leisure time decreases. 
D) equal zero for successful business executives. 
A) bethe same even for people with widely different incomes. 
B) beexempt from the law of diminishing marginal utility. 
C) increase as the quantity of available leisure time decreases. 
D) equal zero for successful business executives.

Question 20

When a consumer shifts purchases from product X to product Y, the marginal utility of

Accepted Answer

A) X falls and the marginal utility of Y rises. 
B) X rises and the marginal utility of Y falls. 
C) both X and Y rises. 
D) both X and Y falls. 
A) X falls and the marginal utility of Y rises. 
B) X rises and the marginal utility of Y falls. 
C) both X and Y rises. 
D) both X and Y falls.

Exam 7: Utility Maximization

If the price of product X rises, then the resulting decline in the amount purchased will

A consumer with a fixed income will maximize utility when each good is purchased in amounts such that the

Indifference curve analysis

The substitution effect

Which of the following defines marginal utility?

The reason the substitution effect works to encourage a consumer to buy less of a product when its price increases is that

To the average consumer, the marginal utility of a second copy of today's newspaper is

When total utility reaches a maximum, then marginal utility is

When the price of a product falls for a normal good, the

The satisfaction or pleasure one gets from consuming a good or service is called

In drawing a particular budget line, money income and the prices of the two products are fixed.

Diminishing marginal utility explains why

Children who dislike Brussels sprouts exemplify the notion that the marginal utility of Brussels sprouts is

According to economists, gift registries, returning gifts for cash refunds, and "recycling gifts"

The consumer will select that point on the budget line which puts him or her on the highest attainable indifference curve.

The marginal utility of leisure time appears to

When a consumer shifts purchases from product X to product Y, the marginal utility of

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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