Question 1

When an economist talks about utility, she is talking about

Accepted Answer

A) a company that provides electricity, water, gas, etc. 
B) the satisfaction, in terms of price, that a producer receives from selling his product. 
C) the satisfaction that results from the consumption of a good. 
D) the amount of one good that a person is willing to give up in order to get a unit of another good. 
E) the satisfaction that results from the consumption of a good minus the price that must be paid to get the good. 
A) a company that provides electricity, water, gas, etc. 
B) the satisfaction, in terms of price, that a producer receives from selling his product. 
C) the satisfaction that results from the consumption of a good. 
D) the amount of one good that a person is willing to give up in order to get a unit of another good. 
E) the satisfaction that results from the consumption of a good minus the price that must be paid to get the good.

Question 2

The law of diminishing marginal utility

Accepted Answer

A) allows us to make interpersonal utility comparisons. 
B) tells us that an additional dollar is worth less to a millionaire than to a poor person. 
C) tells us the worth of an additional dollar of income. 
D) tells us that an additional dollar of income is worth less than the preceding dollar of income. 
A) allows us to make interpersonal utility comparisons. 
B) tells us that an additional dollar is worth less to a millionaire than to a poor person. 
C) tells us the worth of an additional dollar of income. 
D) tells us that an additional dollar of income is worth less than the preceding dollar of income.

Question 3

We take one dollar from a millionaire and give it to a pauper. Assuming a diminishing marginal utility of money,

Accepted Answer

A) total utility in the economy must rise. 
B) total utility in the economy must fall. 
C) total utility in the economy must remain the same. 
D) we cannot say whether or not total utility changes. 
A) total utility in the economy must rise. 
B) total utility in the economy must fall. 
C) total utility in the economy must remain the same. 
D) we cannot say whether or not total utility changes.

Question 4

No matter what the price of a given item of food, a person will eat the same amount of that food. This situation is __________ with the concept of __________.

Accepted Answer

A) consistent; consumer equilibrium 
B) not consistent; consumer equilibrium 
C) consistent; maximizing total utility 
D) consistent; consumers' surplus 
A) consistent; consumer equilibrium 
B) not consistent; consumer equilibrium 
C) consistent; maximizing total utility 
D) consistent; consumers' surplus

Question 5

Economists David Zizzo and Andrew Oswald found that the majority of their study participants made themselves worse off in order to make someone else worse off.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is true?

Accepted Answer

A) If a consumer is in equilibrium, it does not necessarily follow that he or she is also achieving the greatest total utility. 
B) If a consumer is in equilibrium, it necessarily follows that he or she is also achieving the greatest total utility. 
C) If a consumer is attaining the greatest marginal utility, then it necessarily follows that he or she is also achieving the greatest total utility. 
D) If a consumer is attaining the greatest total utility, then it necessarily follows that he or she is also achieving the greatest marginal utility. 
A) If a consumer is in equilibrium, it does not necessarily follow that he or she is also achieving the greatest total utility. 
B) If a consumer is in equilibrium, it necessarily follows that he or she is also achieving the greatest total utility. 
C) If a consumer is attaining the greatest marginal utility, then it necessarily follows that he or she is also achieving the greatest total utility. 
D) If a consumer is attaining the greatest total utility, then it necessarily follows that he or she is also achieving the greatest marginal utility.

Question 7

Exhibit 20-2   Refer to Exhibit 20-2. Total utility for the first three oranges is

Accepted Answer

A) 12 utils. 
B) 62 utils. 
C) 49 utils. 
D) 15 utils. 
E) 42 utils. 
A) 12 utils. 
B) 62 utils. 
C) 49 utils. 
D) 15 utils. 
E) 42 utils.

Question 8

Exhibit 20-2   Refer to Exhibit 20-2. Total utility for the first two oranges is

Accepted Answer

A) 16 utils. 
B) 20 utils. 
C) 40 utils. 
D) 36 utils. 
E) cannot be determined 
A) 16 utils. 
B) 20 utils. 
C) 40 utils. 
D) 36 utils. 
E) cannot be determined

Question 9

The absolute value of the slope of the budget constraint is also known as the marginal rate of substitution.

Accepted Answer

A) True 
 B)False

Question 10

Consider two options: (A)you receive a guaranteed payment of $100; (B)a coin is tossed and if heads comes up, you win nothing; if tails comes up, you win $200. The expected payoff for option B is:

Accepted Answer

A) $200 
B) $100 
C) $300 
D) $75 
E) There is not enough information to answer the question. 
A) $200 
B) $100 
C) $300 
D) $75 
E) There is not enough information to answer the question.

Question 11

Economist David Friedman pointed out that

Accepted Answer

A) the endowment effect is not limited to humans. 
B) the law of diminishing marginal utility does not hold for money. 
C) the diamond-water paradox would not exist if water was scarce and diamonds were plentiful. 
D) the government should provide the necessities of life for free. 
A) the endowment effect is not limited to humans. 
B) the law of diminishing marginal utility does not hold for money. 
C) the diamond-water paradox would not exist if water was scarce and diamonds were plentiful. 
D) the government should provide the necessities of life for free.

Question 12

Exhibit 20-7 ​
 
Refer to Exhibit 20-7. Which of the following graphs represents a budget constraint of a consumer whose income is $120?

Accepted Answer

A) (1) 
B) (2) 
C) (3) 
D) (1)and (2) 
E) This cannot be determined from the information provided. 
A) (1) 
B) (2) 
C) (3) 
D) (1)and (2) 
E) This cannot be determined from the information provided.

Question 13

Which of the following statements is true with respect to utility theory?

Accepted Answer

A) The less you have of any one good, the less you would be willing to pay for one more unit of it. 
B) The less you have of any one good, the more you would be willing to pay for one more unit of it. 
C) The amount you have of any one good does not influence the price you would be willing to pay for it, but it does affect the marginal utility received from consuming a particular unit. 
D) The higher the marginal utility received from consuming good X, the lower the marginal utility received from consuming good Y. 
A) The less you have of any one good, the less you would be willing to pay for one more unit of it. 
B) The less you have of any one good, the more you would be willing to pay for one more unit of it. 
C) The amount you have of any one good does not influence the price you would be willing to pay for it, but it does affect the marginal utility received from consuming a particular unit. 
D) The higher the marginal utility received from consuming good X, the lower the marginal utility received from consuming good Y.

Question 14

Marginal utility analysis can be used to illustrate the law of demand.

Accepted Answer

A) True 
 B)False

Question 15

Suppose you just finished your third plateful of Thanksgiving dinner and it yielded zero units of additional satisfaction. Should you go back for more?

Accepted Answer

A) Why not? Since the third plateful gave you zero units, the fourth can't give you any less than zero. 
B) No way. You could get negative utility from the fourth plateful. 
C) Yes or no. It won't make any difference because your total utility is at its peak. 
D) Yes. If you received zero units of satisfaction from the third, then obviously the law of diminishing marginal utility is not working in this case. 
A) Why not? Since the third plateful gave you zero units, the fourth can't give you any less than zero. 
B) No way. You could get negative utility from the fourth plateful. 
C) Yes or no. It won't make any difference because your total utility is at its peak. 
D) Yes. If you received zero units of satisfaction from the third, then obviously the law of diminishing marginal utility is not working in this case.

Question 16

The diamond-water paradox holds that often things that have high __________ have a __________ price and things that have a low __________ have a __________ price.

Accepted Answer

A) value in exchange; high; value in use; low 
B) value in use; low; value in use; high 
C) absolute price; low relative; relative price; low absolute 
D) relative price; low absolute; relative price; high absolute 
E) exchange value; high; exchange value; low 
A) value in exchange; high; value in use; low 
B) value in use; low; value in use; high 
C) absolute price; low relative; relative price; low absolute 
D) relative price; low absolute; relative price; high absolute 
E) exchange value; high; exchange value; low

Question 17

Consumer equilibrium occurs at the point where the slope of the budget constraint is equal to the slope of the indifference curve.

Accepted Answer

A) True 
 B)False

Question 18

As presented in the textbookbook, research on neuroeconomics has shown that when individuals are presented with present-future choices the

Accepted Answer

A) analytic system (which weights the future heavily)seems to win out over the limbic system (which weights the present heavily). 
B) limbic system (which weights the present heavily)seems to win out over the analytic system (which weights the future heavily). 
C) limbic system and the analytic system are equally weighted, making the individuals indifferent to the choices presented. 
D) limbic system (which weights the future heavily)seems to win out over the analytic system (which weights the present heavily). 
A) analytic system (which weights the future heavily)seems to win out over the limbic system (which weights the present heavily). 
B) limbic system (which weights the present heavily)seems to win out over the analytic system (which weights the future heavily). 
C) limbic system and the analytic system are equally weighted, making the individuals indifferent to the choices presented. 
D) limbic system (which weights the future heavily)seems to win out over the analytic system (which weights the present heavily).

Question 19

If a person is receiving greater marginal utility per dollar from consuming one good than another, it follows that he or she is

Accepted Answer

A) maximizing disutility. 
B) not maximizing utility. 
C) maximizing utility. 
D) There is not enough information to answer the question. 
A) maximizing disutility. 
B) not maximizing utility. 
C) maximizing utility. 
D) There is not enough information to answer the question.

Question 20

Exhibit 20-8 ​
 
Refer to Exhibit 20-8. A move of the budget constraint from 1 to 2 is caused by a

Accepted Answer

A) rise in the price of good X. 
B) fall in the price of good X. 
C) rise in the price of good Y. 
D) fall in income. 
A) rise in the price of good X. 
B) fall in the price of good X. 
C) rise in the price of good Y. 
D) fall in income.

Exam 7: Consumer Choice: Maximizing Utility and Behavioral Economics

When an economist talks about utility, she is talking about

The law of diminishing marginal utility

We take one dollar from a millionaire and give it to a pauper. Assuming a diminishing marginal utility of money,

No matter what the price of a given item of food, a person will eat the same amount of that food. This situation is __________ with the concept of __________.

Economists David Zizzo and Andrew Oswald found that the majority of their study participants made themselves worse off in order to make someone else worse off.

Which of the following statements is true?

Exhibit 20-2 Refer to Exhibit 20-2. Total utility for the first three oranges is

Exhibit 20-2 Refer to Exhibit 20-2. Total utility for the first two oranges is

The absolute value of the slope of the budget constraint is also known as the marginal rate of substitution.

Consider two options: (A)you receive a guaranteed payment of $100; (B)a coin is tossed and if heads comes up, you win nothing; if tails comes up, you win $200. The expected payoff for option B is:

Economist David Friedman pointed out that

Exhibit 20-7 ​ Refer to Exhibit 20-7. Which of the following graphs represents a budget constraint of a consumer whose income is $120?

Which of the following statements is true with respect to utility theory?

Marginal utility analysis can be used to illustrate the law of demand.

Suppose you just finished your third plateful of Thanksgiving dinner and it yielded zero units of additional satisfaction. Should you go back for more?

The diamond-water paradox holds that often things that have high __________ have a __________ price and things that have a low __________ have a __________ price.

Consumer equilibrium occurs at the point where the slope of the budget constraint is equal to the slope of the indifference curve.

As presented in the textbookbook, research on neuroeconomics has shown that when individuals are presented with present-future choices the

If a person is receiving greater marginal utility per dollar from consuming one good than another, it follows that he or she is

Exhibit 20-8 ​ Refer to Exhibit 20-8. A move of the budget constraint from 1 to 2 is caused by a

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

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No matter what the price of a given item of food, a person will eat the same amount of that food. This situation is with the concept of .

Exhibit 20-7 Refer to Exhibit 20-7. Which of the following graphs represents a budget constraint of a consumer whose income is $120?

The diamond-water paradox holds that often things that have high have a price and things that have a low have a price.

Exhibit 20-8 Refer to Exhibit 20-8. A move of the budget constraint from 1 to 2 is caused by a