Question 1

What is the difference between total utility and marginal utility?

Accepted Answer

Total utility is the total amount of sat

Question 2

The marginal rate of substitution of beef for chicken is the

Accepted Answer

A) number of units of chicken the consumer is prepared to give up to obtain one more unit of beef. 
B) number of units of beef the consumer is prepared to give up as income falls. 
C) number of units of beef the consumer must sacrifice to obtain one more unit of chicken. 
D) rate at which units of beef may be exchanged for units of chicken in the market. 
A) number of units of chicken the consumer is prepared to give up to obtain one more unit of beef. 
B) number of units of beef the consumer is prepared to give up as income falls. 
C) number of units of beef the consumer must sacrifice to obtain one more unit of chicken. 
D) rate at which units of beef may be exchanged for units of chicken in the market.

Question 3

Assume that a consumer purchases a combination of product A and product B such that the MU ₐ /P ₐ = 8 and MU ᵦ /P ᵦ = 6. To maximize utility without spending more money, the consumer should

Accepted Answer

A) purchase less of product A and more of product B. 
B) purchase more of product A and less of product B. 
C) purchase more of both product A and product B. 
D) make no change in purchases of products A and B. 
A) purchase less of product A and more of product B. 
B) purchase more of product A and less of product B. 
C) purchase more of both product A and product B. 
D) make no change in purchases of products A and B.

Question 4

Refer to data. Marginal utility becomes negative beginning with the

Accepted Answer

A) first unit. 
B) second unit. 
C) third unit. 
D) fourth unit. 
A) first unit. 
B) second unit. 
C) third unit. 
D) fourth unit.

Question 5

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 6

Refer to the graph. As the consumer equilibrium point shifts from point a to point b,

Accepted Answer

A) the consumer's purchase of good 2 decreases even though its price stays constant. 
B) the slope of the budget line decreases because the price of good 1 increased. 
C) the marginal utility of good 1 increases and the marginal utility of good 2 decreases. 
D) the consumer's total utility decreases. 
A) the consumer's purchase of good 2 decreases even though its price stays constant. 
B) the slope of the budget line decreases because the price of good 1 increased. 
C) the marginal utility of good 1 increases and the marginal utility of good 2 decreases. 
D) the consumer's total utility decreases.

Question 7

Which of the following is correct?

Accepted Answer

A) Budget lines are linear and upsloping; indifference curves are downsloping and concave to the origin. 
B) Budget lines are linear and downsloping; indifference curves are downsloping and concave to the origin. 
C) Budget lines are linear and downsloping; indifference curves are downsloping and convex to the origin. 
D) Budget lines are downsloping and convex to the origin; indifference curves are linear and downsloping. 
A) Budget lines are linear and upsloping; indifference curves are downsloping and concave to the origin. 
B) Budget lines are linear and downsloping; indifference curves are downsloping and concave to the origin. 
C) Budget lines are linear and downsloping; indifference curves are downsloping and convex to the origin. 
D) Budget lines are downsloping and convex to the origin; indifference curves are linear and downsloping.

Question 8

The ratio of the prices of two products that a consumer could buy with a given fixed income is equivalent to the

Accepted Answer

A) marginal rate of substitution. 
B) slope of the budget line. 
C) income elasticity of demand for the two products. 
D) price elasticity of demand for the two products. 
A) marginal rate of substitution. 
B) slope of the budget line. 
C) income elasticity of demand for the two products. 
D) price elasticity of demand for the two products.

Question 9

A consumer is maximizing her utility with a particular money income when

Accepted Answer

A) the total utility derived from each product consumed is the same. 
B) MU a/ Pₐ = MU b/ Pᵦ = MU c/ Pc = . . . = MU n/ Pₙ . 
C) MU a = MU b = MU c = . . . = MU n. 
D) Pₐ = Pᵦ = Pc = . . . = Pₙ . 
A) the total utility derived from each product consumed is the same. 
B) MU a/ Pₐ = MU b/ Pᵦ = MU c/ Pc = . . . = MU n/ Pₙ . 
C) MU a = MU b = MU c = . . . = MU n. 
D) Pₐ = Pᵦ = Pc = . . . = Pₙ .

Question 10

If two combinations of goods X and Y give a consumer equal satisfaction, then these two combinations must both be on the same

Accepted Answer

A) budget line. 
B) indifference curve. 
C) demand curve. 
D) supply curve. 
A) budget line. 
B) indifference curve. 
C) demand curve. 
D) supply curve.

Question 11

Recently, the price of lentils increased. As a result Lincoln residents noticed that their neighbor, Rasputin, decreased his consumption of lentils and of steak. Rasputin said his utility had declined. Many citizens made donations to the "Rasputin Relief Fund." Rasputin was given a cash grant equal to the amount he claimed to need to regain his initial utility level. Happy and thankful, Rasputin rushed off to the store to make his new purchases-consisting of more steak and slightly less lentils. Each graph above shows two indifference curves for Rasputin, I₁ and I₂, and the two budget constraints, B₁ and B₂, that he faced. Let E₁ represent Rasputin's initial equilibrium, E₂ equal his equilibrium following the increase in the price of lentils, and E₃ his equilibrium after receiving the cash from the relief fund. Which graph above is consistent with Rasputin's claims in the above story?

Accepted Answer

A) graph A 
B) graph B 
C) graph C 
D) graph D 
A) graph A 
B) graph B 
C) graph C 
D) graph D

Question 12

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 13

The table shows the marginal-utility schedules for goods A and B for a hypothetical consumer. The price of good A is $1, and the price of good B is $2. The income of the consumer is $8.   If the price of A decreases, while the price of B and the consumer's income stay the same, we would expect

Accepted Answer

A) MU/P of A to increase, and the consumer will thus buy less of B. 
B) MU/P of A to increase, and the consumer will thus buy less of A. 
C) MU/P of A to decrease, and the consumer will thus buy less of B. 
D) MU/P of A to decrease, and the consumer will thus buy less of A. 
A) MU/P of A to increase, and the consumer will thus buy less of B. 
B) MU/P of A to increase, and the consumer will thus buy less of A. 
C) MU/P of A to decrease, and the consumer will thus buy less of B. 
D) MU/P of A to decrease, and the consumer will thus buy less of A.

Question 14

The table below shows the utility schedule for a consumer of candy bars.   This consumer begins to experience diminishing marginal utility when consuming the

Accepted Answer

A) third candy bar. 
B) fourth candy bar. 
C) sixth candy bar. 
D) seventh candy bar. 
A) third candy bar. 
B) fourth candy bar. 
C) sixth candy bar. 
D) seventh candy bar.

Question 15

If the budget line shifts from BB to bb in the diagram, we can infer that the

Accepted Answer

A) price of Y has increased and the price of X has decreased. 
B) price of Y has decreased and the price of X has increased. 
C) prices of both X and Y have increased. 
D) prices of both X and Y have decreased. 
A) price of Y has increased and the price of X has decreased. 
B) price of Y has decreased and the price of X has increased. 
C) prices of both X and Y have increased. 
D) prices of both X and Y have decreased.

Question 16

Assume that Tonya consumes only two products, pizza and potato chips, out of a given budget. If the price of pizza decreases, then Tonya's consumption of pizza will

Accepted Answer

A) decrease due to the income effect. 
B) decrease due to the substitution effect. 
C) increase due to the income effect. 
D) increase due to the law of diminishing marginal utility. 
A) decrease due to the income effect. 
B) decrease due to the substitution effect. 
C) increase due to the income effect. 
D) increase due to the law of diminishing marginal utility.

Question 17

The table shows the utility schedule for a consumer of candy bars.   Based on the data in the table, you can conclude that the

Accepted Answer

A) marginal utility of the fourth unit is 96. 
B) total utility of 5 units is 88. 
C) total utility of 2 units is 16. 
D) marginal utility of the sixth unit is 5. 
A) marginal utility of the fourth unit is 96. 
B) total utility of 5 units is 88. 
C) total utility of 2 units is 16. 
D) marginal utility of the sixth unit is 5.

Question 18

Sharon purchases two products with a given fixed budget, orange juice and soda. Her marginal utility from orange juice is 60, and her marginal utility from soda is 30. The price of a bottle of orange juice is $2.00, and the price of soda is $1.00. These data suggest that

Accepted Answer

A) Sharon is maximizing her utility from the given fixed budget. 
B) Sharon should buy more orange juice and less soda. 
C) Sharon should buy more soda and less orange juice. 
D) Sharon should buy less orange juice and soda. 
A) Sharon is maximizing her utility from the given fixed budget. 
B) Sharon should buy more orange juice and less soda. 
C) Sharon should buy more soda and less orange juice. 
D) Sharon should buy less orange juice and soda.

Question 19

Refer to the diagram. If the budget line shifts from ab to ac, the

Accepted Answer

A) price of K has increased. 
B) consumer's money income has fallen. 
C) price of K has decreased. 
D) price of J has increased. 
A) price of K has increased. 
B) consumer's money income has fallen. 
C) price of K has decreased. 
D) price of J has increased.

Question 20

If MU a/ Pₐ = 20/$3 = MU b/ Pᵦ = 70/? = MU c/ Pc = 100/?, the prices of products B and C in consumer equilibrium

Accepted Answer

A) cannot be determined from the information given. 
B) are $10.5 and $15, respectively. 
C) are $12 and $20, respectively. 
D) are $15 and $10.5, respectively. 
A) cannot be determined from the information given. 
B) are $10.5 and $15, respectively. 
C) are $12 and $20, respectively. 
D) are $15 and $10.5, respectively.

Exam 7: Utility Maximization

What is the difference between total utility and marginal utility?

The marginal rate of substitution of beef for chicken is the

Assume that a consumer purchases a combination of product A and product B such that the MU ₐ /P ₐ = 8 and MU ᵦ /P ᵦ = 6. To maximize utility without spending more money, the consumer should

Refer to data. Marginal utility becomes negative beginning with the

An indifference curve shows all

Refer to the graph. As the consumer equilibrium point shifts from point a to point b,

Which of the following is correct?

The ratio of the prices of two products that a consumer could buy with a given fixed income is equivalent to the

A consumer is maximizing her utility with a particular money income when

If two combinations of goods X and Y give a consumer equal satisfaction, then these two combinations must both be on the same

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

The table shows the marginal-utility schedules for goods A and B for a hypothetical consumer. The price of good A is $1, and the price of good B is $2. The income of the consumer is $8. If the price of A decreases, while the price of B and the consumer's income stay the same, we would expect

The table below shows the utility schedule for a consumer of candy bars. This consumer begins to experience diminishing marginal utility when consuming the

If the budget line shifts from BB to bb in the diagram, we can infer that the

Assume that Tonya consumes only two products, pizza and potato chips, out of a given budget. If the price of pizza decreases, then Tonya's consumption of pizza will

The table shows the utility schedule for a consumer of candy bars. Based on the data in the table, you can conclude that the

Sharon purchases two products with a given fixed budget, orange juice and soda. Her marginal utility from orange juice is 60, and her marginal utility from soda is 30. The price of a bottle of orange juice is $2.00, and the price of soda is $1.00. These data suggest that

Refer to the diagram. If the budget line shifts from ab to ac, the

If MU a/ Pₐ = 20/$3 = MU b/ Pᵦ = 70/? = MU c/ Pc = 100/?, the prices of products B and C in consumer equilibrium

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

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The Demand for Resources

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Income Inequality, Poverty, and Discrimination

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The Balance of Payments, Exchange Rates, and Trade Deficits

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If MU a/ Pₐ = 20/$3 = MU b/ Pᵦ = 70/? = MU c/ P_c = 100/?, the prices of products B and C in consumer equilibrium