Question 1

Ron starts out in consumer equilibrium, consuming two goods, X and Y. The price of X rises. Immediately after the rise in price

Accepted Answer

A) MUX/PX > MUY/PY, and then Ron increases his consumption of X. 
B) MUX/PX > MUY/PY, and then Ron decreases his consumption of X. 
C) MUX/PX  MUY/PY, and then Ron increases his consumption of X and Y. 
A) MUX/PX > MUY/PY, and then Ron increases his consumption of X. 
B) MUX/PX > MUY/PY, and then Ron decreases his consumption of X. 
C) MUX/PX  MUY/PY, and then Ron increases his consumption of X and Y.

Question 2

Harold can consume either pens or milkshakes. The price of a pen is $1, and the price of a milkshake is $1. Harold figures that when his income is spent, his marginal utility from pens will be 10 and his marginal utility from milkshakes will be 8. Harold is better off

Accepted Answer

A) by consuming more pens and fewer milkshakes. 
B) by consuming more pens and more milkshakes. 
C) by consuming fewer pens and fewer milkshakes. 
D) by consuming fewer pens and more milkshakes. 
E) only if he makes more income. 
A) by consuming more pens and fewer milkshakes. 
B) by consuming more pens and more milkshakes. 
C) by consuming fewer pens and fewer milkshakes. 
D) by consuming fewer pens and more milkshakes. 
E) only if he makes more income.

Question 3

Beverly is currently in consumer equilibrium. An increase in her income

Accepted Answer

A) increases her total utility. 
B) decreases her total utility. 
C) increases her marginal utility from all goods. 
D) decreases her marginal utility from all goods. 
E) increases her consumption of all goods. 
A) increases her total utility. 
B) decreases her total utility. 
C) increases her marginal utility from all goods. 
D) decreases her marginal utility from all goods. 
E) increases her consumption of all goods.

Question 4

If Soula is maximizing her utility and consuming two goods that have the same marginal utility, she

Accepted Answer

A) buys only one. 
B) buys equal quantities of both. 
C) is paying the same price for each good. 
D) receives the same total utility from each good. 
E) none of the above 
A) buys only one. 
B) buys equal quantities of both. 
C) is paying the same price for each good. 
D) receives the same total utility from each good. 
E) none of the above

Question 5

When total utility is increasing, marginal utility

Accepted Answer

A) is negative. 
B) must be between zero and one. 
C) is either increasing or decreasing. 
D) is either positive or negative. 
E) is also increasing. 
A) is negative. 
B) must be between zero and one. 
C) is either increasing or decreasing. 
D) is either positive or negative. 
E) is also increasing.

Question 6

According to the principle of diminishing marginal utility, as consumption of a good increases, total utility

Accepted Answer

A) decreases and then eventually increases. 
B) decreases at an increasing rate. 
C) decreases at a decreasing rate. 
D) increases at an increasing rate. 
E) increases at a decreasing rate. 
A) decreases and then eventually increases. 
B) decreases at an increasing rate. 
C) decreases at a decreasing rate. 
D) increases at an increasing rate. 
E) increases at a decreasing rate.

Question 7

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

Accepted Answer

A) 30. 
B) 47. 
C) 42. 
D) 18. 
E) 0. 
A) 30. 
B) 47. 
C) 42. 
D) 18. 
E) 0.

Question 8

Chuck and Barry have identical total utility schedules but Chuck has a much higher income. If each is maximizing his total utility, then

Accepted Answer

A) they will have equal total utilities. 
B) Chuck will have lower total utility than Barry. 
C) Chuck will have lower marginal utility than Barry for each normal good consumed. 
D) Chuck will have higher marginal utility than Barry for each normal good consumed. 
E) they will have equal marginal utilities for each normal good consumed. 
A) they will have equal total utilities. 
B) Chuck will have lower total utility than Barry. 
C) Chuck will have lower marginal utility than Barry for each normal good consumed. 
D) Chuck will have higher marginal utility than Barry for each normal good consumed. 
E) they will have equal marginal utilities for each normal good consumed.

Question 9

Marginal utility equals

Accepted Answer

A) total utility divided by price. 
B) total utility divided by the total number of units consumed. 
C) the slope of the total utility curve. 
D) the inverse of total utility. 
E) the area below the demand curve but above market price. 
A) total utility divided by price. 
B) total utility divided by the total number of units consumed. 
C) the slope of the total utility curve. 
D) the inverse of total utility. 
E) the area below the demand curve but above market price.

Question 10

Marginal utility theory predicts that a rise in the price of a banana results in

Accepted Answer

A) the demand curve for bananas shifting rightward. 
B) the demand curve for bananas shifting leftward. 
C) a movement upward along the demand curve for bananas. 
D) a movement downward along the demand curve for bananas. 
E) the demand curve for bananas shifting rightward and the supply curve for bananas shifting rightward. 
A) the demand curve for bananas shifting rightward. 
B) the demand curve for bananas shifting leftward. 
C) a movement upward along the demand curve for bananas. 
D) a movement downward along the demand curve for bananas. 
E) the demand curve for bananas shifting rightward and the supply curve for bananas shifting rightward.

Question 11

Ron starts out in consumer equilibrium, consuming two goods, X and Y. The price of Y rises. Immediately after the rise in price

Accepted Answer

A) MUX/PX > MUY/PY, and then Ron increases his consumption of Y. 
B) MUX/PX > MUY/PY, and then Ron decreases his consumption of Y. 
C) MUX/PX  MUY/PY, and then Ron increases his consumption of X and Y. 
A) MUX/PX > MUY/PY, and then Ron increases his consumption of Y. 
B) MUX/PX > MUY/PY, and then Ron decreases his consumption of Y. 
C) MUX/PX  MUY/PY, and then Ron increases his consumption of X and Y.

Question 12

Marginal utility theory assumes that when Kelly decreases the number of hockey games that she attends each week from 3 to 2, her

Accepted Answer

A) total utility increases. 
B) income increases. 
C) marginal utility increases. 
D) total utility is maximized. 
E) marginal utility is maximized. 
A) total utility increases. 
B) income increases. 
C) marginal utility increases. 
D) total utility is maximized. 
E) marginal utility is maximized.

Question 13

A budget line is drawn with

Accepted Answer

A) quantity of one good on the vertical axis and the quantity of the second good on the horizontal axis. 
B) price of one good on the vertical axis and the price of the second good on the horizontal axis. 
C) quantity of one good on the vertical axis and its price on the horizontal axis. 
D) quantity of one good on the horizontal axis and its price on the vertical axis. 
E) quantity of one good on the horizontal axis and its total utility on the vertical axis. 
A) quantity of one good on the vertical axis and the quantity of the second good on the horizontal axis. 
B) price of one good on the vertical axis and the price of the second good on the horizontal axis. 
C) quantity of one good on the vertical axis and its price on the horizontal axis. 
D) quantity of one good on the horizontal axis and its price on the vertical axis. 
E) quantity of one good on the horizontal axis and its total utility on the vertical axis.

Question 14

The first can of Coke gives 15 units of utility to Witney, while the second can of Coke increases her total utility to 23. What is the marginal utility of the second can of Coke?

Accepted Answer

A) 24 units 
B) 8 units 
C) 38 units 
D) 11.5 units 
E) 7.5 units 
A) 24 units 
B) 8 units 
C) 38 units 
D) 11.5 units 
E) 7.5 units

Question 15

Use the table below to answer the following questions.
Table 8.2.3
  
-Refer to Table 8.2.3. If income is $13, then utility is maximized when consumption is

Accepted Answer

A) 6 units of X and 1 unit of Y. 
B) 5 units of X and 3 units of Y. 
C) 4 units of X and 5 units of Y. 
D) 3 units of X and 7 units of Y. 
E) 2 units of X and 9 units of Y. 
A) 6 units of X and 1 unit of Y. 
B) 5 units of X and 3 units of Y. 
C) 4 units of X and 5 units of Y. 
D) 3 units of X and 7 units of Y. 
E) 2 units of X and 9 units of Y.

Question 16

Gene plays another hour of computer games rather than study for the hour even though he knows that the next day when he takes his test he will regret his decision. Gene is showing

Accepted Answer

A) the endowment effect. 
B) bounded rationality. 
C) bounded self-interest. 
D) bounded willpower. 
E) bad judgment. 
A) the endowment effect. 
B) bounded rationality. 
C) bounded self-interest. 
D) bounded willpower. 
E) bad judgment.

Question 17

Billy Jean loves to read and she has decided that she will buy all of her books at the bookstore at the outlet mall. One day she is in Chapters and sees a book from the Globe and Mail Best Sellers list that she wants to read and she decides to buy it. Buying the book means that she will not be able to take her Mom out for coffee this week. Billy Jean's decision is an example of

Accepted Answer

A) bounded economics. 
B) bounded self-interest. 
C) bounded willpower. 
D) bounded rationality. 
E) bounded anomalies. 
A) bounded economics. 
B) bounded self-interest. 
C) bounded willpower. 
D) bounded rationality. 
E) bounded anomalies.

Question 18

If Katie purchases two slices of pizza and six breadsticks to maximize her total utility, then

Accepted Answer

A) a slice of pizza costs three times as much as a breadstick. 
B) her marginal utility from the second slice of pizza divided by the price of a slice of pizza is equal to her marginal utility from the sixth breadstick divided by the price of a breadstick. 
C) a breadstick costs three times as much as a slice of pizza. 
D) she spends more on pizza than she spends on breadsticks. 
E) her marginal utility from the second slice of pizza equals her marginal utility from the sixth breadstick. 
A) a slice of pizza costs three times as much as a breadstick. 
B) her marginal utility from the second slice of pizza divided by the price of a slice of pizza is equal to her marginal utility from the sixth breadstick divided by the price of a breadstick. 
C) a breadstick costs three times as much as a slice of pizza. 
D) she spends more on pizza than she spends on breadsticks. 
E) her marginal utility from the second slice of pizza equals her marginal utility from the sixth breadstick.

Question 19

Suppose you are consuming hot dogs and Cokes and believe you are receiving maximum total utility from the meal for your entire budget of $12. The price of a hot dog is $2 and the price of a Coke is $2. Which one of the following can you conclude?

Accepted Answer

A) The total utility from hot dogs is maximized. 
B) The marginal utilities from hot dogs and Cokes divided by the quantity of each good must be equal. 
C) The total utilities from hot dogs and Cokes must be equal. 
D) You are purchasing three hot dogs and three Cokes. 
E) The marginal utilities from hot dogs and Cokes must be equal. 
A) The total utility from hot dogs is maximized. 
B) The marginal utilities from hot dogs and Cokes divided by the quantity of each good must be equal. 
C) The total utilities from hot dogs and Cokes must be equal. 
D) You are purchasing three hot dogs and three Cokes. 
E) The marginal utilities from hot dogs and Cokes must be equal.

Question 20

If Sean thinks that the choice between going to Olive Garden or Red Lobster is simply too confusing, a behavioural economist will explain that Sean is showing

Accepted Answer

A) the endowment effect. 
B) bounded rationality. 
C) bounded self-interest. 
D) bounded willpower. 
E) irrational behaviour. 
A) the endowment effect. 
B) bounded rationality. 
C) bounded self-interest. 
D) bounded willpower. 
E) irrational behaviour.

Exam 8: Utility and Demand

Ron starts out in consumer equilibrium, consuming two goods, X and Y. The price of X rises. Immediately after the rise in price

Harold can consume either pens or milkshakes. The price of a pen is $1, and the price of a milkshake is $1. Harold figures that when his income is spent, his marginal utility from pens will be 10 and his marginal utility from milkshakes will be 8. Harold is better off

Beverly is currently in consumer equilibrium. An increase in her income

If Soula is maximizing her utility and consuming two goods that have the same marginal utility, she

When total utility is increasing, marginal utility

According to the principle of diminishing marginal utility, as consumption of a good increases, total utility

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

Chuck and Barry have identical total utility schedules but Chuck has a much higher income. If each is maximizing his total utility, then

Marginal utility equals

Marginal utility theory predicts that a rise in the price of a banana results in

Ron starts out in consumer equilibrium, consuming two goods, X and Y. The price of Y rises. Immediately after the rise in price

Marginal utility theory assumes that when Kelly decreases the number of hockey games that she attends each week from 3 to 2, her

A budget line is drawn with

The first can of Coke gives 15 units of utility to Witney, while the second can of Coke increases her total utility to 23. What is the marginal utility of the second can of Coke?

Use the table below to answer the following questions. Table 8.2.3 -Refer to Table 8.2.3. If income is $13, then utility is maximized when consumption is

Gene plays another hour of computer games rather than study for the hour even though he knows that the next day when he takes his test he will regret his decision. Gene is showing

If Katie purchases two slices of pizza and six breadsticks to maximize her total utility, then

Suppose you are consuming hot dogs and Cokes and believe you are receiving maximum total utility from the meal for your entire budget of $12. The price of a hot dog is $2 and the price of a Coke is $2. Which one of the following can you conclude?

If Sean thinks that the choice between going to Olive Garden or Red Lobster is simply too confusing, a behavioural economist will explain that Sean is showing

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

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