Question 1

Which of the following statements is correct?

Accepted Answer

A) Marginal utility is the accumulation or summation of total utility. 
B) Total utility is the accumulation or summation of marginal utility. 
C) Total utility is the product of multiplying price times marginal utility. 
D) Total utility is the change in marginal utility as quantity consumed increases. 
A) Marginal utility is the accumulation or summation of total utility. 
B) Total utility is the accumulation or summation of marginal utility. 
C) Total utility is the product of multiplying price times marginal utility. 
D) Total utility is the change in marginal utility as quantity consumed increases.

Question 2

The table shows the total utility data for products X and Y. Assume that the prices of X and Y are $3 and $4, respectively, and that consumer income is $18.   How many units of the two products will the consumer buy to get maximum utility?

Accepted Answer

A) 1 of X and 4 of Y 
B) 2 of X and 2 of Y 
C) 2 of X and 3 of Y 
D) 3 of X and 4 of Y 
A) 1 of X and 4 of Y 
B) 2 of X and 2 of Y 
C) 2 of X and 3 of Y 
D) 3 of X and 4 of Y

Question 3

Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility)that a consumer would get from successive quantities of products J and K.   If the consumer has money income of $36 and the prices of J and K are $4 and $4 respectively, the consumer will maximize her utility by purchasing

Accepted Answer

A) 2 units of J and 7 units of K. 
B) 6 units of J and 3 units of K. 
C) 5 units of J and 4 units of K. 
D) 4 units of J and 5 units of K. 
A) 2 units of J and 7 units of K. 
B) 6 units of J and 3 units of K. 
C) 5 units of J and 4 units of K. 
D) 4 units of J and 5 units of K.

Question 4

The diamond-water paradox occurs because

Accepted Answer

A) the price of a product is related to its total utility, not its marginal utility. 
B) the price of a product is related to its marginal utility, not its total utility. 
C) water is, in fact, very scarce in certain regions of the world. 
D) diamonds are more useful than water. 
A) the price of a product is related to its total utility, not its marginal utility. 
B) the price of a product is related to its marginal utility, not its total utility. 
C) water is, in fact, very scarce in certain regions of the world. 
D) diamonds are more useful than water.

Question 5

Refer to the diagram, where xy is the relevant budget line and I₁, I₂, and I₃ are indifference curves. The equilibrium position for the consumer is at

Accepted Answer

A) any point on xy. 
B) point M. 
C) point K. 
D) point J. 
A) any point on xy. 
B) point M. 
C) point K. 
D) point J.

Question 6

What is shown by the indifference map for two goods? Which indifference curve would a consumer want to be on?

Accepted Answer

An indifference map is a set of indiffer

Question 7

Refer to the given graph. Suppose you had tastes as described by the indifference curves above. If your income was $100, Pₓ = 20 and Pᵧ = 25, which combination of X and Y would maximize your utility?

Accepted Answer

A) 5X and 0Y 
B) 0X and 4Y 
C) 3X and 1Y 
D) 5X and 4Y 
A) 5X and 0Y 
B) 0X and 4Y 
C) 3X and 1Y 
D) 5X and 4Y

Question 8

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 9

Refer to the graph. What could cause the consumer equilibrium point to shift from point a to point b?

Accepted Answer

A) The consumer's income increased. 
B) The price of good 1 decreased. 
C) The price of good 1 increased. 
D) The consumer's income decreased. 
A) The consumer's income increased. 
B) The price of good 1 decreased. 
C) The price of good 1 increased. 
D) The consumer's income decreased.

Question 10

The shift of the budget line from cd to ab in the figure is consistent with

Accepted Answer

A) decreases in the prices of both M and N. 
B) an increase in the price of M and a decrease in the price of N. 
C) a decrease in money income. 
D) an increase in money income. 
A) decreases in the prices of both M and N. 
B) an increase in the price of M and a decrease in the price of N. 
C) a decrease in money income. 
D) an increase in money income.

Question 11

The theory of consumer behavior assumes that

Accepted Answer

A) consumers behave rationally, attempting to maximize their satisfaction. 
B) consumers have unlimited money incomes. 
C) consumers do not know how much marginal utility they obtain from successive units of various products. 
D) marginal utility is constant. 
A) consumers behave rationally, attempting to maximize their satisfaction. 
B) consumers have unlimited money incomes. 
C) consumers do not know how much marginal utility they obtain from successive units of various products. 
D) marginal utility is constant.

Question 12

The budget line shift from ab to cd in the figure is consistent with

Accepted Answer

A) decreases in the prices of both M and N. 
B) an increase in the price of M and a decrease in the price of N. 
C) a decrease in money income. 
D) an increase in money income and decrease in the price of N. 
A) decreases in the prices of both M and N. 
B) an increase in the price of M and a decrease in the price of N. 
C) a decrease in money income. 
D) an increase in money income and decrease in the price of N.

Question 13

If you purchase a gift worth $12 for your sister, but your sister would be willing to pay only $8 if she bought the item for herself, then the

Accepted Answer

A) total utility of the gift is $20. 
B) total utility of the gift is $4. 
C) marginal utility of the gift is $4. 
D) loss of value in the gift is $4. 
A) total utility of the gift is $20. 
B) total utility of the gift is $4. 
C) marginal utility of the gift is $4. 
D) loss of value in the gift is $4.

Question 14

A parallel shift in a budget line is caused by changes in a consumer's level of satisfaction.

Accepted Answer

A) True 
 B)False

Question 15

If you purchase a gift worth $25 for your sister, but your sister would be willing to pay only $10 if she bought the item for herself, then the

Accepted Answer

A) total utility of the gift is $35. 
B) total utility of the gift is $15. 
C) marginal utility of the gift is $15. 
D) loss of value in the gift is $15. 
A) total utility of the gift is $35. 
B) total utility of the gift is $15. 
C) marginal utility of the gift is $15. 
D) loss of value in the gift is $15.

Question 16

Most economists contend that

Accepted Answer

A) noncash gifts are more efficient than cash gifts. 
B) noncash gifts are less efficient than cash gifts. 
C) noncash and cash gifts are equally efficient. 
D) government can assess consumer preferences better than consumers can themselves. 
A) noncash gifts are more efficient than cash gifts. 
B) noncash gifts are less efficient than cash gifts. 
C) noncash and cash gifts are equally efficient. 
D) government can assess consumer preferences better than consumers can themselves.

Question 17

If MU a/ Pₐ = 100/$35 = MU b/ Pᵦ = 300/? = MU c/ Pc = 400/?, the prices of products B and C in consumer equilibrium

Accepted Answer

A) cannot be determined from the information given. 
B) are $105 and $140, respectively. 
C) are $105 and $175, respectively. 
D) are $100 and $200, respectively. 
A) cannot be determined from the information given. 
B) are $105 and $140, respectively. 
C) are $105 and $175, respectively. 
D) are $100 and $200, respectively.

Question 18

Refer to the data. The value for X is

Accepted Answer

A) 15. 
B) 5. 
C) 55. 
D) 10. 
A) 15. 
B) 5. 
C) 55. 
D) 10.

Question 19

Can marginal utility be negative? Briefly explain.

Accepted Answer

Yes, marginal utility becomes

Question 20

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.

Exam 7: Utility Maximization

Which of the following statements is correct?

The table shows the total utility data for products X and Y. Assume that the prices of X and Y are $3 and $4, respectively, and that consumer income is $18. How many units of the two products will the consumer buy to get maximum utility?

The diamond-water paradox occurs because

Refer to the diagram, where xy is the relevant budget line and I₁, I₂, and I₃ are indifference curves. The equilibrium position for the consumer is at

What is shown by the indifference map for two goods? Which indifference curve would a consumer want to be on?

Refer to the given graph. Suppose you had tastes as described by the indifference curves above. If your income was $100, Pₓ = 20 and Pᵧ = 25, which combination of X and Y would maximize your utility?

Which of the following defines marginal utility?

Refer to the graph. What could cause the consumer equilibrium point to shift from point a to point b?

The shift of the budget line from cd to ab in the figure is consistent with

The theory of consumer behavior assumes that

The budget line shift from ab to cd in the figure is consistent with

If you purchase a gift worth $12 for your sister, but your sister would be willing to pay only $8 if she bought the item for herself, then the

A parallel shift in a budget line is caused by changes in a consumer's level of satisfaction.

If you purchase a gift worth $25 for your sister, but your sister would be willing to pay only $10 if she bought the item for herself, then the

Most economists contend that

If MU a/ Pₐ = 100/$35 = MU b/ Pᵦ = 300/? = MU c/ Pc = 400/?, the prices of products B and C in consumer equilibrium

Refer to the data. The value for X is

Can marginal utility be negative? Briefly explain.

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

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

If MU a/ Pₐ = 100/$35 = MU b/ Pᵦ = 300/? = MU c/ P_c = 400/?, the prices of products B and C in consumer equilibrium