Question 1

Use the table below to answer the following questions.
Table 8.2.3
  
-Refer to Table 8.2.3. To attain consumer equilibrium, the first $4 of income is used to purchase

Accepted Answer

A) 2 units of good X. 
B) 3 units of good X. 
C) 4 units of good Y. 
D) an amount of X and Y that cannot be determined from the table. 
E) 2 units of good Y and 1 unit of X. 
A) 2 units of good X. 
B) 3 units of good X. 
C) 4 units of good Y. 
D) an amount of X and Y that cannot be determined from the table. 
E) 2 units of good Y and 1 unit of X.

Question 2

The total utility from owning three skirts is equal to

Accepted Answer

A) total income divided by the price of one skirt. 
B) total income divided by the amount spent to buy the three skirts. 
C) the sum of the marginal utility from the first skirt plus the marginal utility from the second skirt plus the marginal utility from the third skirt. 
D) three times the marginal utility from the first skirt. 
E) the total amount spent to buy the three skirts. 
A) total income divided by the price of one skirt. 
B) total income divided by the amount spent to buy the three skirts. 
C) the sum of the marginal utility from the first skirt plus the marginal utility from the second skirt plus the marginal utility from the third skirt. 
D) three times the marginal utility from the first skirt. 
E) the total amount spent to buy the three skirts.

Question 3

Bianca consumes pizza. Marginal utility theory predicts that when the price of pizza increases,

Accepted Answer

A) Bianca's total utility from pizza will increase. 
B) Bianca's marginal utility from pizza will not change. 
C) Bianca's demand curve for pizza will shift leftward. 
D) Bianca will buy less pizza. 
E) Bianca will buy more pizza. 
A) Bianca's total utility from pizza will increase. 
B) Bianca's marginal utility from pizza will not change. 
C) Bianca's demand curve for pizza will shift leftward. 
D) Bianca will buy less pizza. 
E) Bianca will buy more pizza.

Question 4

Sarah can consume either pizzas or hamburgers. The price of a hamburger is $1 and the price of a pizza is $5. Let MUh be the marginal utility of hamburgers and MUp be the marginal utility of pizzas. In consumer equilibrium, what must the ratio MUh/MUp equal?

Accepted Answer

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

Question 5

The change in total utility that results from a one-unit increase in the quantity of a good consumed is

Accepted Answer

A) additional utility. 
B) marginal utility. 
C) average utility. 
D) marginal utility per dollar. 
E) fractional utility. 
A) additional utility. 
B) marginal utility. 
C) average utility. 
D) marginal utility per dollar. 
E) fractional utility.

Question 6

Sergio is maximizing utility in his consumption of beer and bubble gum. If the price of beer is greater than the price of bubble gum, then we know

Accepted Answer

A) Sergio buys more beer than bubble gum. 
B) Sergio buys more bubble gum than beer. 
C) the marginal utility from the last purchased beer is greater than the marginal utility from the last purchased bubble gum. 
D) the marginal utility from the last purchased bubble gum is greater than the marginal utility from the last purchased beer. 
E) the marginal utilities from the last purchased beer and bubble gum are equal. 
A) Sergio buys more beer than bubble gum. 
B) Sergio buys more bubble gum than beer. 
C) the marginal utility from the last purchased beer is greater than the marginal utility from the last purchased bubble gum. 
D) the marginal utility from the last purchased bubble gum is greater than the marginal utility from the last purchased beer. 
E) the marginal utilities from the last purchased beer and bubble gum are equal.

Question 7

Shelley is maximizing utility in her consumption of mansions and Porsches. If the marginal utility of her last purchased mansion is twice the marginal utility of her last purchased Porsche, then we know

Accepted Answer

A) Shelley buys twice as many mansions as Porsches. 
B) Shelley buys twice as many Porsches as mansions. 
C) Shelley buys more Porsches than mansions, but we do not know how many more. 
D) the price of a mansion is twice the price of a Porsche. 
E) the price of a Porsche is twice the price of a mansion. 
A) Shelley buys twice as many mansions as Porsches. 
B) Shelley buys twice as many Porsches as mansions. 
C) Shelley buys more Porsches than mansions, but we do not know how many more. 
D) the price of a mansion is twice the price of a Porsche. 
E) the price of a Porsche is twice the price of a mansion.

Question 8

Marginal utility theory predicts that when a consumer's income decreases, the consumer

Accepted Answer

A) buys fewer normal goods. 
B) buys more normal goods. 
C) buys fewer inferior goods. 
D) buys less of all goods. 
E) buys more of all goods. 
A) buys fewer normal goods. 
B) buys more normal goods. 
C) buys fewer inferior goods. 
D) buys less of all goods. 
E) buys more of all goods.

Question 9

The fact that your fourth slice of pizza does not generate as much satisfaction as your third slice is an example of

Accepted Answer

A) consumer surplus. 
B) diminishing total utility. 
C) diminishing marginal utility. 
D) the paradox of value. 
E) the law of demand. 
A) consumer surplus. 
B) diminishing total utility. 
C) diminishing marginal utility. 
D) the paradox of value. 
E) the law of demand.

Question 10

With a given income and prices of goods, Marcus is in consumer equilibrium when

Accepted Answer

A) he purchases the same amounts of all goods. 
B) his marginal utility from all goods is maximized. 
C) his marginal utility from all goods is equal. 
D) he maximizes total utility. 
E) his total utility per dollar is equal for all goods. 
A) he purchases the same amounts of all goods. 
B) his marginal utility from all goods is maximized. 
C) his marginal utility from all goods is equal. 
D) he maximizes total utility. 
E) his total utility per dollar is equal for all goods.

Question 11

The paradox of value asks why

Accepted Answer

A) bad things happen to good people. 
B) the price of water is low and the price of a diamond is high, but water is essential to life while diamonds are not. 
C) the good die young. 
D) total utility is greater than marginal utility. 
E) the standard of living is higher in North America than in South America. 
A) bad things happen to good people. 
B) the price of water is low and the price of a diamond is high, but water is essential to life while diamonds are not. 
C) the good die young. 
D) total utility is greater than marginal utility. 
E) the standard of living is higher in North America than in South America.

Question 12

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, how long does Devon choose to windsurf and to snorkel?

Accepted Answer

A) 1 hour of windsurfing and 3 hours of snorkeling 
B) 2 hour of windsurfing and 7 hours of snorkeling 
C) 3 hours of windsurfing and 5 hours of snorkeling 
D) 4 hours of windsurfing and 3 hours of snorkeling 
E) 5 hours of windsurfing and 1 hour of snorkeling 
A) 1 hour of windsurfing and 3 hours of snorkeling 
B) 2 hour of windsurfing and 7 hours of snorkeling 
C) 3 hours of windsurfing and 5 hours of snorkeling 
D) 4 hours of windsurfing and 3 hours of snorkeling 
E) 5 hours of windsurfing and 1 hour of snorkeling

Question 13

Samir consumes apples and bananas and is in consumer equilibrium. The marginal utility from his last apple is 10 and the marginal utility from his last banana is 5. If the price of an apple is $0.50, then what is the price of a banana?

Accepted Answer

A) $0.05 
B) $0.10 
C) $0.25 
D) $0.50 
E) $1.00 
A) $0.05 
B) $0.10 
C) $0.25 
D) $0.50 
E) $1.00

Question 14

When Kathryn is at her consumer equilibrium, she is

Accepted Answer

A) consuming the combination of goods that is at the midpoint of her budget line. 
B) consuming a combination of goods that is located inside her budget line. 
C) consuming a combination of goods that is located outside her budget line. 
D) consuming a combination such that the marginal utility from good X divided by the marginal utility from good Y equals the price of good X divided by the price of good Y. 
E) on the midpoint of her demand curve. 
A) consuming the combination of goods that is at the midpoint of her budget line. 
B) consuming a combination of goods that is located inside her budget line. 
C) consuming a combination of goods that is located outside her budget line. 
D) consuming a combination such that the marginal utility from good X divided by the marginal utility from good Y equals the price of good X divided by the price of good Y. 
E) on the midpoint of her demand curve.

Question 15

The relative price of beer to bacon is 2:1. If Bob's current consumption is at a level where MUbeer/MUbacon is 1:2, then to maximize total utility Bob must

Accepted Answer

A) consume more beer and less bacon. 
B) not change his current consumption of beer and bacon. 
C) consume less beer and more bacon. 
D) raise the price of beer. 
E) consume twice as much beer and half as much bacon. 
A) consume more beer and less bacon. 
B) not change his current consumption of beer and bacon. 
C) consume less beer and more bacon. 
D) raise the price of beer. 
E) consume twice as much beer and half as much bacon.

Question 16

Ben spends $50 a year on 2 bunches of flowers and $50 a year on 10,000 litres of tap water. Ben is maximizing utility and his marginal utility from water is 0.5 units per litre. Ben's expenditure on flowers and water illustrates the paradox of value because Ben's marginal utility from flowers is ________ his marginal utility from water, and his total utility from flowers is ________ than his total utility from water.

Accepted Answer

A) greater than; greater 
B) less than; less 
C) greater than; less 
D) less than; greater 
E) the same as; less 
A) greater than; greater 
B) less than; less 
C) greater than; less 
D) less than; greater 
E) the same as; less

Question 17

As a consumer's income decreases, marginal utility theory predicts that

Accepted Answer

A) the price of normal goods falls. 
B) the demand for normal goods decreases. 
C) the demand for all goods decreases. 
D) the demand for normal goods increases. 
E) total utility increases. 
A) the price of normal goods falls. 
B) the demand for normal goods decreases. 
C) the demand for all goods decreases. 
D) the demand for normal goods increases. 
E) total utility increases.

Question 18

Ron starts out in consumer equilibrium, consuming two goods, X and Y. Ron's income rises. At this point, we can definitely conclude that

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. D) MUX/PX < MUY/PY, and then Ron decreases his consumption of X. E) none of the above. 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. D) MUX/PX < MUY/PY, and then Ron decreases his consumption of X. E) none of the above.

Question 19

The first can of Sprite Jack drinks give him 22 units of utility and the second can gives him an additional 12 units of utility. How many units of utility do the two cans of Sprite give Jack?

Accepted Answer

A) 17 
B) 46 
C) 34 
D) 2 
E) 36 
A) 17 
B) 46 
C) 34 
D) 2 
E) 36

Question 20

Bounded self-interest

Accepted Answer

A) is limited by the computing power of the human brain. 
B) prevents us from making a decision that we know, at the time of implementing the decision, we will later regret. 
C) is the tendency for people to value something more highly simply because they own it. 
D) results in sometimes suppressing our own interests to help others. 
E) is the tendency for people to value something more highly simply because a friend owns it. 
A) is limited by the computing power of the human brain. 
B) prevents us from making a decision that we know, at the time of implementing the decision, we will later regret. 
C) is the tendency for people to value something more highly simply because they own it. 
D) results in sometimes suppressing our own interests to help others. 
E) is the tendency for people to value something more highly simply because a friend owns it.

Exam 8: Utility and Demand

Use the table below to answer the following questions. Table 8.2.3 -Refer to Table 8.2.3. To attain consumer equilibrium, the first $4 of income is used to purchase

The total utility from owning three skirts is equal to

Bianca consumes pizza. Marginal utility theory predicts that when the price of pizza increases,

Sarah can consume either pizzas or hamburgers. The price of a hamburger is $1 and the price of a pizza is $5. Let MUh be the marginal utility of hamburgers and MUp be the marginal utility of pizzas. In consumer equilibrium, what must the ratio MUh/MUp equal?

The change in total utility that results from a one-unit increase in the quantity of a good consumed is

Sergio is maximizing utility in his consumption of beer and bubble gum. If the price of beer is greater than the price of bubble gum, then we know

Shelley is maximizing utility in her consumption of mansions and Porsches. If the marginal utility of her last purchased mansion is twice the marginal utility of her last purchased Porsche, then we know

Marginal utility theory predicts that when a consumer's income decreases, the consumer

The fact that your fourth slice of pizza does not generate as much satisfaction as your third slice is an example of

With a given income and prices of goods, Marcus is in consumer equilibrium when

The paradox of value asks why

Samir consumes apples and bananas and is in consumer equilibrium. The marginal utility from his last apple is 10 and the marginal utility from his last banana is 5. If the price of an apple is $0.50, then what is the price of a banana?

When Kathryn is at her consumer equilibrium, she is

The relative price of beer to bacon is 2:1. If Bob's current consumption is at a level where MUbeer/MUbacon is 1:2, then to maximize total utility Bob must

As a consumer's income decreases, marginal utility theory predicts that

Ron starts out in consumer equilibrium, consuming two goods, X and Y. Ron's income rises. At this point, we can definitely conclude that

The first can of Sprite Jack drinks give him 22 units of utility and the second can gives him an additional 12 units of utility. How many units of utility do the two cans of Sprite give Jack?

Bounded self-interest

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