Question 1

Geneva is not at her consumer equilibrium for movies and music downloads. Why?

Accepted Answer

A) Her average utility from movies does not equal her average utility from music downloads. 
B) Her total utility from movies does not equal her total utility from music downloads. 
C) Her marginal utility from the last movie she attended does not equal her marginal utility from the last music download she downloaded. 
D) Her average utility from movies does not equal her total utility from music downloads. 
E) Her marginal utility per dollar from the last movie she attended does not equal her marginal utility per dollar from her last music download. 
A) Her average utility from movies does not equal her average utility from music downloads. 
B) Her total utility from movies does not equal her total utility from music downloads. 
C) Her marginal utility from the last movie she attended does not equal her marginal utility from the last music download she downloaded. 
D) Her average utility from movies does not equal her total utility from music downloads. 
E) Her marginal utility per dollar from the last movie she attended does not equal her marginal utility per dollar from her last music download. E

Question 2

Which one of the following statements is true?

Accepted Answer

A) Since consumers of a good consume this good until the price equals the value of the last unit, they clearly get no benefit from consuming this good. 
B) Consumers choosing between goods X and Y will set MUX = MUY. 
C) The value of a good to a consumer is measured by the price. 
D) Consumer surplus on a unit of a good will never be zero. 
E) If the marginal utility per dollar of good X is less than the marginal utility per dollar of good Y, then the consumer should shift some spending from X to Y. 
A) Since consumers of a good consume this good until the price equals the value of the last unit, they clearly get no benefit from consuming this good. 
B) Consumers choosing between goods X and Y will set MUX = MUY. 
C) The value of a good to a consumer is measured by the price. 
D) Consumer surplus on a unit of a good will never be zero. 
E) If the marginal utility per dollar of good X is less than the marginal utility per dollar of good Y, then the consumer should shift some spending from X to Y. E

Question 3

Billy likes chocolate bars and popcorn. Chocolate bars sell for $1.50 each and popcorn sells for $3 a bag. Currently he is in consumer equilibrium with marginal utility per dollar on popcorn equal to 100. What is the marginal utility per dollar on chocolate bars?

Accepted Answer

A) 50 
B) 100 
C) 200 
D) 25 
E) 0.5 
A) 50 
B) 100 
C) 200 
D) 25 
E) 0.5 B

Question 4

Use the table below to answer the following questions.
Table 8.1.1
  
-Refer to Table 8.1.1. The value of C is

Accepted Answer

A) 0. 
B) 13. 
C) 17. 
D) 50. 
E) 3. 
A) 0. 
B) 13. 
C) 17. 
D) 50. 
E) 3.

Question 5

Which one of the following is not an assumption of marginal utility theory?

Accepted Answer

A) People derive utility from their consumption. 
B) More consumption yields more total utility. 
C) Utility can be measured. 
D) Marginal utility diminishes with more consumption. 
E) Consumers maximize total utility. 
A) People derive utility from their consumption. 
B) More consumption yields more total utility. 
C) Utility can be measured. 
D) Marginal utility diminishes with more consumption. 
E) Consumers maximize total utility.

Question 6

Use the table below to answer the following questions.
Windsurfing equipment rents for $10 per hour and snorkeling equipment rents for $5 per hour.
Table 8.2.1
  
-Consider Devon's total utility from snorkeling and windsurfing in Table 8.2.1. Suppose Devon's total income is $35. If the price of windsurfing rises to $20 per hour, what is Devon's elasticity of demand for windsurfing?

Accepted Answer

A) 1.0 
B) 0.67 
C) 1.5 
D) 10 
E) 1.33 
A) 1.0 
B) 0.67 
C) 1.5 
D) 10 
E) 1.33

Question 7

The value of a good relates to

Accepted Answer

A) total utility, while price relates to consumer surplus. 
B) consumer surplus, while price relates to total utility. 
C) marginal utility, while price relates to consumer surplus. 
D) marginal utility, while price relates to total utility. 
E) total utility, while price relates to marginal utility. 
A) total utility, while price relates to consumer surplus. 
B) consumer surplus, while price relates to total utility. 
C) marginal utility, while price relates to consumer surplus. 
D) marginal utility, while price relates to total utility. 
E) total utility, while price relates to marginal utility.

Question 8

Cindy has $70 a month to spend, and she can spend as much time as she likes playing golf and tennis. The price of an hour of golf is $10, and the price of an hour of tennis is $5. If Cindy equalizes the marginal utility per hour from golf and from tennis, she

Accepted Answer

A) can increase her total utility by spending less time golfing and more time playing tennis. 
B) can increase her total utility by spending more time golfing and less time playing tennis. 
C) maximizes her total utility. 
D) can increase her total utility only if the price of golf decreases. 
E) cannot increase her total utility. 
A) can increase her total utility by spending less time golfing and more time playing tennis. 
B) can increase her total utility by spending more time golfing and less time playing tennis. 
C) maximizes her total utility. 
D) can increase her total utility only if the price of golf decreases. 
E) cannot increase her total utility.

Question 9

Use the table below to answer the following questions.
Windsurfing equipment rents for $10 per hour and snorkeling equipment rents for $5 per hour.
Table 8.2.1
  
-Consider Devon's total utility from snorkeling and windsurfing in Table 8.2.1. Suppose that Devon's total income rises from $35 to $55, ceteris paribus. Given that Devon changes his choice of windsurfing and snorkeling, what is his income elasticity for windsurfing?

Accepted Answer

A) zero 
B) 28.6 
C) 44.4 
D) 0.64 
E) 1.55 
A) zero 
B) 28.6 
C) 44.4 
D) 0.64 
E) 1.55

Question 10

Max has $35 a day to spend, and he can spend as much time as he likes on his leisure pursuits. Windsurfing equipment rents for $10 an hour, and snorkeling equipment rents for $5 an hour. If Max equalizes the marginal utility per hour from windsurfing and from snorkeling, he

Accepted Answer

A) maximizes his total utility. 
B) can increase his total utility by spending less time windsurfing and more time snorkeling. 
C) can increase his total utility only if the price of windsurfing equipment rentals decreases. 
D) can increase his total utility by spending more time windsurfing and less time snorkeling. 
E) maximizes his marginal utility per dollar. 
A) maximizes his total utility. 
B) can increase his total utility by spending less time windsurfing and more time snorkeling. 
C) can increase his total utility only if the price of windsurfing equipment rentals decreases. 
D) can increase his total utility by spending more time windsurfing and less time snorkeling. 
E) maximizes his marginal utility per dollar.

Question 11

Lucy buys only magazines and CDs. Both are normal goods. Lucy's income decreases, but the prices of magazines and CDs do not change. Marginal utility theory predicts that

Accepted Answer

A) Lucy buys more magazines and more CDs. 
B) Lucy buys fewer magazines and fewer CDs. 
C) Lucy's demand curve for magazines shifts leftward. 
D) Lucy's demand curve for CDs shifts leftward. 
E) B, C, and D are correct. 
A) Lucy buys more magazines and more CDs. 
B) Lucy buys fewer magazines and fewer CDs. 
C) Lucy's demand curve for magazines shifts leftward. 
D) Lucy's demand curve for CDs shifts leftward. 
E) B, C, and D are correct.

Question 12

Which of the following barriers to rational choices are studied by behavioural economics?

Accepted Answer

A) bounded rationality 
B) bounded willpower 
C) bounded self-interest 
D) the endowment effect 
E) all of the above 
A) bounded rationality 
B) bounded willpower 
C) bounded self-interest 
D) the endowment effect 
E) all of the above

Question 13

Use the table below to answer the following questions.
Table 8.2.2
  
-Refer to Table 8.2.2. Henry is maximizing his utility by consuming 3 bags of popcorn and 3 bottles of pop. What is the ratio of the price of popcorn to the price of pop?

Accepted Answer

A) 1/2 
B) 1 
C) 3/4 
D) 4/3 
E) 6/5 
A) 1/2 
B) 1 
C) 3/4 
D) 4/3 
E) 6/5

Question 14

The paradox of value

Accepted Answer

A) is that values are the same for different people. 
B) is that economists can calculate marginal utility, even though utility is unmeasurable. 
C) is resolved by an appeal to the law of diminishing total utility. 
D) remains unresolved by economists. 
E) is resolved by an appeal to the difference between marginal utility and total utility. 
A) is that values are the same for different people. 
B) is that economists can calculate marginal utility, even though utility is unmeasurable. 
C) is resolved by an appeal to the law of diminishing total utility. 
D) remains unresolved by economists. 
E) is resolved by an appeal to the difference between marginal utility and total utility.

Question 15

If the price of a good increases, everything else remaining the same, then the consumer's total utility

Accepted Answer

A) decreases. 
B) increases. 
C) decreases if the good has no substitutes and remains the same if the good has at least one substitute. 
D) increases if the good has no substitutes and remains the same if the good has at least one substitute. 
E) remains the same. 
A) decreases. 
B) increases. 
C) decreases if the good has no substitutes and remains the same if the good has at least one substitute. 
D) increases if the good has no substitutes and remains the same if the good has at least one substitute. 
E) remains the same.

Question 16

Total utility is always

Accepted Answer

A) greater than marginal utility. 
B) less than marginal utility. 
C) decreasing when marginal utility is decreasing. 
D) decreasing when marginal utility is increasing. 
E) increasing when marginal utility is positive. 
A) greater than marginal utility. 
B) less than marginal utility. 
C) decreasing when marginal utility is decreasing. 
D) decreasing when marginal utility is increasing. 
E) increasing when marginal utility is positive.

Question 17

Harold can consume apples and oranges. He likes them equally well and currently is in consumer equilibrium. Then the price of oranges rises, while his income remains the same. What will happen to his consumption?

Accepted Answer

A) Consumption of oranges increases; consumption of apples decreases. 
B) Consumption of oranges increases; consumption of apples increases. 
C) Consumption of oranges decreases; consumption of apples decreases. 
D) Consumption of oranges decreases; consumption of apples increases. 
E) Consumption of oranges decreases; consumption of apples could either increase or decrease. 
A) Consumption of oranges increases; consumption of apples decreases. 
B) Consumption of oranges increases; consumption of apples increases. 
C) Consumption of oranges decreases; consumption of apples decreases. 
D) Consumption of oranges decreases; consumption of apples increases. 
E) Consumption of oranges decreases; consumption of apples could either increase or decrease.

Question 18

Danny has $12 to spend on two goods: pies and pop. The price of a pie is $4, and the price of a can of pop is $2. To maximize his utility, Danny buys

Accepted Answer

A) 2 pies and 2 cans of pop. 
B) 3 pies and no pop. 
C) the combination that gives him the same marginal utility per dollar on pies as on pop. 
D) 6 cans of pop and no pie. 
E) the combination that gives him the same total utility from pies as from pop. 
A) 2 pies and 2 cans of pop. 
B) 3 pies and no pop. 
C) the combination that gives him the same marginal utility per dollar on pies as on pop. 
D) 6 cans of pop and no pie. 
E) the combination that gives him the same total utility from pies as from pop.

Question 19

Use the table below to answer the following questions.
Table 8.2.1
  
-Refer to Table 8.2.1. Consider Sam's utility from sailing and skiing. If the price of sailing is $10 per hour and the price of skiing is $20 per hour, Sam will choose to spend

Accepted Answer

A) all his time sailing. 
B) all his time skiing. 
C) more time sailing than skiing. 
D) more time skiing than sailing. 
E) the same amount of time sailing and skiing, since they give the same amount of utility. 
A) all his time sailing. 
B) all his time skiing. 
C) more time sailing than skiing. 
D) more time skiing than sailing. 
E) the same amount of time sailing and skiing, since they give the same amount of utility.

Question 20

As more of a good is consumed, its

Accepted Answer

A) marginal utility increases. 
B) marginal utility decreases. 
C) marginal utility remains unchanged. 
D) total utility decreases. 
E) total utility increases at an increasing rate. 
A) marginal utility increases. 
B) marginal utility decreases. 
C) marginal utility remains unchanged. 
D) total utility decreases. 
E) total utility increases at an increasing rate.

Exam 8: Utility and Demand

Geneva is not at her consumer equilibrium for movies and music downloads. Why?

Which one of the following statements is true?

Billy likes chocolate bars and popcorn. Chocolate bars sell for $1.50 each and popcorn sells for $3 a bag. Currently he is in consumer equilibrium with marginal utility per dollar on popcorn equal to 100. What is the marginal utility per dollar on chocolate bars?

Use the table below to answer the following questions. Table 8.1.1 -Refer to Table 8.1.1. The value of C is

Which one of the following is not an assumption of marginal utility theory?

The value of a good relates to

Cindy has $70 a month to spend, and she can spend as much time as she likes playing golf and tennis. The price of an hour of golf is $10, and the price of an hour of tennis is $5. If Cindy equalizes the marginal utility per hour from golf and from tennis, she

Max has $35 a day to spend, and he can spend as much time as he likes on his leisure pursuits. Windsurfing equipment rents for $10 an hour, and snorkeling equipment rents for $5 an hour. If Max equalizes the marginal utility per hour from windsurfing and from snorkeling, he

Lucy buys only magazines and CDs. Both are normal goods. Lucy's income decreases, but the prices of magazines and CDs do not change. Marginal utility theory predicts that

Which of the following barriers to rational choices are studied by behavioural economics?

Use the table below to answer the following questions. Table 8.2.2 -Refer to Table 8.2.2. Henry is maximizing his utility by consuming 3 bags of popcorn and 3 bottles of pop. What is the ratio of the price of popcorn to the price of pop?

The paradox of value

If the price of a good increases, everything else remaining the same, then the consumer's total utility

Total utility is always

Harold can consume apples and oranges. He likes them equally well and currently is in consumer equilibrium. Then the price of oranges rises, while his income remains the same. What will happen to his consumption?

Danny has $12 to spend on two goods: pies and pop. The price of a pie is $4, and the price of a can of pop is $2. To maximize his utility, Danny buys

Use the table below to answer the following questions. Table 8.2.1 -Refer to Table 8.2.1. Consider Sam's utility from sailing and skiing. If the price of sailing is $10 per hour and the price of skiing is $20 per hour, Sam will choose to spend

As more of a good is consumed, its

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Governments Actions in Markets

Global Markets in Action

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Macro Only: International Trade Policy

Filters