Question 1

Points along an indifference curve represent bundles of goods that:

Accepted Answer

A)  cost the same amount to buy. 
B)  consumers don't like very much. 
C)  decline in marginal utility. 
D)  deliver equal utility. 
E)  cannot be compared. 
A)  cost the same amount to buy. 
B)  consumers don't like very much. 
C)  decline in marginal utility. 
D)  deliver equal utility. 
E)  cannot be compared.

Question 2

Jamie is considering the purchase of a new car for $20,000.Her income is $60,000,and her alternative is "all other things," which sell for $1 each.If all other things are plotted on the vertical axis and her marginal rate of substitution is ,then she will buy car(s).

Accepted Answer

A)  15,000; 0 
B)  15,000; 1 
C)  15,000; 2 
D)  15,000; 3 
E)  1/15,000; 3 
A)  15,000; 0 
B)  15,000; 1 
C)  15,000; 2 
D)  15,000; 3 
E)  1/15,000; 3

Question 3

A consumer buys 12 units of entertainment,measured on the horizontal axis,and 84 units of "all other things." The consumer's income elasticity of demand is equal to 1 for both goods.If income increases by 10%,then the consumer's marginal rate of substitution at the utility-maximizing market bundle will:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  be equal to 1. 
D)  remain constant. 
E)  There is insufficient information to answer the question. 
A)  increase. 
B)  decrease. 
C)  be equal to 1. 
D)  remain constant. 
E)  There is insufficient information to answer the question.

Question 4

Consumer surplus is defined as:

Accepted Answer

A)  the quantities of a good or service that bring equal utility to the consumer. 
B)  the quantity of a good or service that is utility maximizing for the consumer. 
C)  the difference between what a consumer is willing to pay and what he or she actually pays for a good or service. 
D)  the difference between the market price and the marginal cost of producing a good or service. 
E)  none of the above. 
A)  the quantities of a good or service that bring equal utility to the consumer. 
B)  the quantity of a good or service that is utility maximizing for the consumer. 
C)  the difference between what a consumer is willing to pay and what he or she actually pays for a good or service. 
D)  the difference between the market price and the marginal cost of producing a good or service. 
E)  none of the above.

Question 5

Fred loves tomatoes.He makes soups,sauces,and stews with them; stuffs them; roasts them; and grills them.Fred has discovered a farmer's market where the price of a bushel of tomatoes depends on how many bushels are purchased.The first bushel is $15; the second,$12; the third,$10; and four or more,$9 each.Fred has $82 to spend on tomatoes and on "all other things" during the coming week.All other things sell for $1 per unit.Assume that all other things are measured on the vertical axis.What is Fred's marginal rate of substitution if he chooses to buy 5 bushels of tomatoes?

Accepted Answer

A)  -9. 
B)  0.10. 
C)  12. 
D)  1/15. 
E)  1/9. 
A)  -9. 
B)  0.10. 
C)  12. 
D)  1/15. 
E)  1/9.

Question 6

Tom spends all his monthly income on pretzels and potato chips.Currently,he is maximizing his utility; the marginal utility of pretzels is 150,and the marginal utility of potato chips is 125.If pretzels cost $6 per box,how much do potato chips cost?

Accepted Answer

A)  $2. 
B)  $3. 
C)  $4. 
D)  $5. 
E)  $6. 
A)  $2. 
B)  $3. 
C)  $4. 
D)  $5. 
E)  $6.

Question 7

The consumer's optimal consumption of X and Y is characterized by:

Accepted Answer

A)  (MUX)(MUY) = PXPY . 
B)  MUX = PX. 
C)  MUX / MUY = PY / PX . 
D)  MUX / PY = MUX / PX . 
E)  MUX / MUY = PX / PY . 
A)  (MUX)(MUY) = PXPY . 
B)  MUX = PX. 
C)  MUX / MUY = PY / PX . 
D)  MUX / PY = MUX / PX . 
E)  MUX / MUY = PX / PY .

Question 8

Consider the following indifference map.The price of Y is $5.Two points on a demand curve for good X are:

Accepted Answer

A)  (8, $5) and (10, $5). 
B)  (3, $10) and (5, $20). 
C)  (3, $20) and (8, $5). 
D)  (3, $20) and (5, $10). 
E)  none of the above. 
A)  (8, $5) and (10, $5). 
B)  (3, $10) and (5, $20). 
C)  (3, $20) and (8, $5). 
D)  (3, $20) and (5, $10). 
E)  none of the above.

Question 9

Indifference curves describe:

Accepted Answer

A)  various consumer income levels. 
B)  alternative market prices for goods and services. 
C)  the quantities of a good or service that people are willing and able to buy at alternative prices. 
D)  producer production levels at alternative market prices. 
E)  consumer preferences. 
A)  various consumer income levels. 
B)  alternative market prices for goods and services. 
C)  the quantities of a good or service that people are willing and able to buy at alternative prices. 
D)  producer production levels at alternative market prices. 
E)  consumer preferences.

Question 10

Suppose Al is currently consuming four movies and four concerts per month.If his utility function is given by U = 15M0.5C,where M represents the number of movies seen and C represents the number of concerts attended,what is Al's total utility equal to?

Accepted Answer

A)  15. 
B)  30. 
C)  120. 
D)  240. 
E)  960. 
A)  15. 
B)  30. 
C)  120. 
D)  240. 
E)  960.

Question 11

Consider the indifference map below.This map represents Larry's preferences over two goods,oranges and grapefruits.Larry:

Accepted Answer

A)  does not like oranges and will not eat them. 
B)  gets greater utility from additional grapefruits, but not from additional oranges. 
C)  prefers oranges to grapefruits. 
D)  will always choose to consume equal amounts of oranges and grapefruits. 
E)  will always choose to consume a combination of oranges and grapefruits. 
A)  does not like oranges and will not eat them. 
B)  gets greater utility from additional grapefruits, but not from additional oranges. 
C)  prefers oranges to grapefruits. 
D)  will always choose to consume equal amounts of oranges and grapefruits. 
E)  will always choose to consume a combination of oranges and grapefruits.

Question 12

Don consumes bagels and cream cheese.He likes to place 2 ounces of cream cheese on each bagel,no more,no less.In this case,Don's indifference curves for bagels and cream cheese will be:

Accepted Answer

A)  straight lines with slopes equal to -2. 
B)  L-shaped, or right angles. 
C)  upward-sloping. 
D)  horizontal lines. 
E)  vertical lines. 
A)  straight lines with slopes equal to -2. 
B)  L-shaped, or right angles. 
C)  upward-sloping. 
D)  horizontal lines. 
E)  vertical lines.

Points along an indifference curve represent bundles of goods that:

Jamie is considering the purchase of a new car for $20,000.Her income is $60,000,and her alternative is "all other things," which sell for $1 each.If all other things are plotted on the vertical axis and her marginal rate of substitution is ,then she will buy car(s).

Consumer surplus is defined as:

Tom spends all his monthly income on pretzels and potato chips.Currently,he is maximizing his utility; the marginal utility of pretzels is 150,and the marginal utility of potato chips is 125.If pretzels cost $6 per box,how much do potato chips cost?

The consumer's optimal consumption of X and Y is characterized by:

Consider the following indifference map.The price of Y is $5.Two points on a demand curve for good X are:

Indifference curves describe:

Suppose Al is currently consuming four movies and four concerts per month.If his utility function is given by U = 15M^0.5C,where M represents the number of movies seen and C represents the number of concerts attended,what is Al's total utility equal to?

Consider the indifference map below.This map represents Larry's preferences over two goods,oranges and grapefruits.Larry:

Don consumes bagels and cream cheese.He likes to place 2 ounces of cream cheese on each bagel,no more,no less.In this case,Don's indifference curves for bagels and cream cheese will be:

Introduction

Demand Theory

Estimating Demand Functions

Production Theory

The Analysis of Costs

Perfect Competition

Monopoly and Monopolistic Competition

Managerial Use of Price Discrimination

Bundling and Intrafirm Pricing

Oligopoly

Game Theory

Auctions

Risk Analysis

Principalagent Issues and Managerial Compensation

Adverse Selection

Government and Business

Optimization Techniques

Appendix Problems

Filters

Exam 3: Consumer Behavior and Rational Choice

Points along an indifference curve represent bundles of goods that:

Jamie is considering the purchase of a new car for $20,000.Her income is $60,000,and her alternative is "all other things," which sell for $1 each.If all other things are plotted on the vertical axis and her marginal rate of substitution is ,then she will buy car(s).

Consumer surplus is defined as:

Tom spends all his monthly income on pretzels and potato chips.Currently,he is maximizing his utility; the marginal utility of pretzels is 150,and the marginal utility of potato chips is 125.If pretzels cost $6 per box,how much do potato chips cost?

The consumer's optimal consumption of X and Y is characterized by:

Consider the following indifference map.The price of Y is $5.Two points on a demand curve for good X are:

Indifference curves describe:

Suppose Al is currently consuming four movies and four concerts per month.If his utility function is given by U = 15M0.5C,where M represents the number of movies seen and C represents the number of concerts attended,what is Al's total utility equal to?

Consider the indifference map below.This map represents Larry's preferences over two goods,oranges and grapefruits.Larry:

Don consumes bagels and cream cheese.He likes to place 2 ounces of cream cheese on each bagel,no more,no less.In this case,Don's indifference curves for bagels and cream cheese will be:

Introduction

Demand Theory

Estimating Demand Functions

Production Theory

The Analysis of Costs

Perfect Competition

Monopoly and Monopolistic Competition

Managerial Use of Price Discrimination

Bundling and Intrafirm Pricing

Oligopoly

Game Theory

Auctions

Risk Analysis

Principalagent Issues and Managerial Compensation

Adverse Selection

Government and Business

Optimization Techniques

Appendix Problems

Filters

Suppose Al is currently consuming four movies and four concerts per month.If his utility function is given by U = 15M^0.5C,where M represents the number of movies seen and C represents the number of concerts attended,what is Al's total utility equal to?