Question 1

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 2

Assume that product Alpha and product Beta are both priced at $1 per unit and that Ellie has $20 to spend on Alpha and Beta. She buys 8 units of Alpha and 12 units of Beta. The marginal utility of Alpha is 40 and the marginal utility of Beta is 20. 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 3

Refer to the table. What is the marginal utility of the sixth unit?

Accepted Answer

A) 42 
B) 102 
C) 252 
D) 226 
A) 42 
B) 102 
C) 252 
D) 226

Question 4

Susie buys two goods: rounds of golf and massages. Suppose that the price of a round of golf is $20 and the price of a massage is $30. In a typical week, Susie will play two rounds of golf, getting 20 utils of satisfaction from the second round. She normally buys three massages each week, with the third giving her 30 utils of satisfaction. If she were to buy a fourth massage in a week, it would give her 20 utils of satisfaction. If the price of massages is reduced to $15, which of the following outcomes might we expect to occur?

Accepted Answer

A) Susie would leave her consumption choices unchanged because of diminishing marginal utility in the consumption of massages. 
B) Susie would buy more massages and fewer rounds of golf, as predicted by the income effect. 
C) Susie would buy more massages and more rounds of golf, as predicted by the substitution effect. 
D) Susie would buy more massages and fewer rounds of golf, as predicted by the substitution effect. 
A) Susie would leave her consumption choices unchanged because of diminishing marginal utility in the consumption of massages. 
B) Susie would buy more massages and fewer rounds of golf, as predicted by the income effect. 
C) Susie would buy more massages and more rounds of golf, as predicted by the substitution effect. 
D) Susie would buy more massages and fewer rounds of golf, as predicted by the substitution effect.

Question 5

If the marginal utility from consuming the fifth unit of a product is 6 and the total utility from all five units is 162, then the total utility from consuming four units must be

Accepted Answer

A) 168. 
B) 27. 
C) 156. 
D) 972. 
A) 168. 
B) 27. 
C) 156. 
D) 972.

Question 6

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 75 utils and the marginal utility of the last bag is 100 utils. The prices of soda and pretzels are $0.5 per bottle and $0.6 per bag, respectively. It can be concluded that

Accepted Answer

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

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The indifference curve in the diagram yields Juan 100 units of utility. If Juan's money income were to increase by 20 percent, the indifference curve would

Accepted Answer

A) shift leftward. 
B) shift rightward. 
C) become steeper. 
D) not be affected. 
A) shift leftward. 
B) shift rightward. 
C) become steeper. 
D) not be affected.

Question 9

Refer to the table. The addition of which unit has the greatest marginal utility?

Accepted Answer

A) fifth 
B) sixth 
C) seventh 
D) eighth 
A) fifth 
B) sixth 
C) seventh 
D) eighth

Question 10

Suppose that Ms. Thomson is currently exhausting her money income by purchasing 10 units of A and 8 units of B at prices of $3 and $4, respectively. The marginal utility of the last units of A and B are 15 and 24, respectively. These data suggest that Ms. Thomson

Accepted Answer

A) has preferences that are at odds with the principle of diminishing marginal utility. 
B) considers A and B to be complementary goods. 
C) should buy more A and less B. 
D) should buy more B and less A. 
A) has preferences that are at odds with the principle of diminishing marginal utility. 
B) considers A and B to be complementary goods. 
C) should buy more A and less B. 
D) should buy more B and less A.

Question 11

Assume the price of product Y (the quantity of which is on the vertical axis)is $15 and the price of product X (the quantity of which is on the horizontal axis)is $3. Also assume that money income is $60. The absolute value of the slope of the resulting budget line is

Accepted Answer

A) 5. 
B) 1/5. 
C) 4. 
D) 20. 
A) 5. 
B) 1/5. 
C) 4. 
D) 20.

Question 12

The marginal rate of substitution measures the

Accepted Answer

A) magnitude of the substitution effect. 
B) total utility received by a consumer when equilibrium is achieved. 
C) extra utility that a consumer derives from successive units of a product. 
D) consumer's willingness to substitute one product for another so that total utility will remain constant. 
A) magnitude of the substitution effect. 
B) total utility received by a consumer when equilibrium is achieved. 
C) extra utility that a consumer derives from successive units of a product. 
D) consumer's willingness to substitute one product for another so that total utility will remain constant.

Question 13

Mr. Samuelson's current rates of purchase are such that the marginal utility of slacks is 18 and the marginal utility of ties for him is 5. If slacks and ties are priced at $12 and $2, respectively, it can be concluded that Mr. Samuelson

Accepted Answer

A) is spending too much on slacks and not enough on ties. 
B) is spending too much on ties and not enough on slacks. 
C) is spending his income in such a way as to maximize his satisfaction. 
D) should buy six times as many ties as he does slacks. 
A) is spending too much on slacks and not enough on ties. 
B) is spending too much on ties and not enough on slacks. 
C) is spending his income in such a way as to maximize his satisfaction. 
D) should buy six times as many ties as he does slacks.

Question 14

What is consumer equilibrium? How is it achieved?

Accepted Answer

When a consumer is in equilibrium, he or

Question 15

How do you identify consumer equilibrium in indifference curve analysis?

Accepted Answer

The consumer is in equilibrium (utility

Question 16

It is possible that as a result of the budget line shifting outward, the consumer will buy less of a product.

Accepted Answer

A) True 
 B)False

Question 17

A consumer has an income of $100, and the price of X is $2, while the price of Y is $4. If the consumer buys 20 units of X, then the maximum quantity of Y that she could also buy is

Accepted Answer

A) 15 
B) 25 
C) 40 
D) 10 
A) 15 
B) 25 
C) 40 
D) 10

Question 18

Refer to the diagram. Cheri's budget line shifts inward from CD to AB. Which statement below is consistent with this shift?

Accepted Answer

A) Both prices double, while her income also doubles. 
B) Both prices increase by 20 percent, while her income increases by 25 percent. 
C) Both prices decrease by 10 percent, while her income falls by 15 percent. 
D) Both prices decrease by 10 percent, while her income falls by 6 percent. 
A) Both prices double, while her income also doubles. 
B) Both prices increase by 20 percent, while her income increases by 25 percent. 
C) Both prices decrease by 10 percent, while her income falls by 15 percent. 
D) Both prices decrease by 10 percent, while her income falls by 6 percent.

Question 19

Assume that a consumer purchases a combination of products Y and Z and that the MU y/ Pᵧ = 22 and MU z/ Pz = 25. To maximize utility, without spending more money, the consumer should

Accepted Answer

A) purchase less of Z and more of Y. 
B) purchase more of Z and less of Y. 
C) purchase more of both Y and Z. 
D) make no change in the quantities Y and Z. 
A) purchase less of Z and more of Y. 
B) purchase more of Z and less of Y. 
C) purchase more of both Y and Z. 
D) make no change in the quantities Y and Z.

Question 20

When a consumer has maximized total utility, he or she cannot increase total utility by reallocating expenditures among different products.

Accepted Answer

A) True 
 B)False

Exam 7: Utility Maximization

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

Assume that product Alpha and product Beta are both priced at $1 per unit and that Ellie has $20 to spend on Alpha and Beta. She buys 8 units of Alpha and 12 units of Beta. The marginal utility of Alpha is 40 and the marginal utility of Beta is 20. This indicates that

Refer to the table. What is the marginal utility of the sixth unit?

If the marginal utility from consuming the fifth unit of a product is 6 and the total utility from all five units is 162, then the total utility from consuming four units must be

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

The indifference curve in the diagram yields Juan 100 units of utility. If Juan's money income were to increase by 20 percent, the indifference curve would

Refer to the table. The addition of which unit has the greatest marginal utility?

Suppose that Ms. Thomson is currently exhausting her money income by purchasing 10 units of A and 8 units of B at prices of $3 and $4, respectively. The marginal utility of the last units of A and B are 15 and 24, respectively. These data suggest that Ms. Thomson

Assume the price of product Y (the quantity of which is on the vertical axis)is $15 and the price of product X (the quantity of which is on the horizontal axis)is $3. Also assume that money income is $60. The absolute value of the slope of the resulting budget line is

The marginal rate of substitution measures the

Mr. Samuelson's current rates of purchase are such that the marginal utility of slacks is 18 and the marginal utility of ties for him is 5. If slacks and ties are priced at $12 and $2, respectively, it can be concluded that Mr. Samuelson

What is consumer equilibrium? How is it achieved?

How do you identify consumer equilibrium in indifference curve analysis?

It is possible that as a result of the budget line shifting outward, the consumer will buy less of a product.

A consumer has an income of $100, and the price of X is $2, while the price of Y is $4. If the consumer buys 20 units of X, then the maximum quantity of Y that she could also buy is

Refer to the diagram. Cheri's budget line shifts inward from CD to AB. Which statement below is consistent with this shift?

Assume that a consumer purchases a combination of products Y and Z and that the MU y/ Pᵧ = 22 and MU z/ Pz = 25. To maximize utility, without spending more money, the consumer should

When a consumer has maximized total utility, he or she cannot increase total utility by reallocating expenditures among different products.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, 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

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Assume that a consumer purchases a combination of products Y and Z and that the MU y/ Pᵧ = 22 and MU z/ P_z = 25. To maximize utility, without spending more money, the consumer should