Question 1

In consumer equilibrium,

Accepted Answer

A) total utility is maximized given the consumer's income and the prices of goods. 
B) marginal utility is maximized given the consumer's income and the prices of goods. 
C) marginal utility per dollar is maximized given the consumer's income and the prices of goods. 
D) the marginal utility from each good is equal. 
E) marginal utility per dollar is zero. 
A) total utility is maximized given the consumer's income and the prices of goods. 
B) marginal utility is maximized given the consumer's income and the prices of goods. 
C) marginal utility per dollar is maximized given the consumer's income and the prices of goods. 
D) the marginal utility from each good is equal. 
E) marginal utility per dollar is zero.

Question 2

With respect to water and diamonds, water

Accepted Answer

A) has a higher marginal utility. 
B) has a lower marginal utility. 
C) has a lower total utility. 
D) is cheaper than diamonds because it has a lower total utility. 
E) has zero marginal utility. 
A) has a higher marginal utility. 
B) has a lower marginal utility. 
C) has a lower total utility. 
D) is cheaper than diamonds because it has a lower total utility. 
E) has zero marginal utility.

Question 3

If Ms. Petersen is maximizing her utility in the consumption of goods A and B, which one of the following statements must be true?

Accepted Answer

A) MUA = MUB 
B) MUA/PA = MUB/PB 
C) MUA/PB = MUB/PA 
D) TUA = TUB 
E) TUA/PA = TUB/PB 
A) MUA = MUB 
B) MUA/PA = MUB/PB 
C) MUA/PB = MUB/PA 
D) TUA = TUB 
E) TUA/PA = TUB/PB

Question 4

If income falls, then in the new consumer equilibrium

Accepted Answer

A) the marginal utility from normal goods increases. 
B) the marginal utility from normal goods decreases. 
C) the marginal utility from inferior goods increases. 
D) total utility from normal goods increases. 
E) total utility from inferior goods decreases. 
A) the marginal utility from normal goods increases. 
B) the marginal utility from normal goods decreases. 
C) the marginal utility from inferior goods increases. 
D) total utility from normal goods increases. 
E) total utility from inferior goods decreases.

Question 5

The high price of diamonds relative to the price of water reflects the fact that, at typical levels of consumption,

Accepted Answer

A) the total utility of water is relatively low. 
B) the total utility of diamonds is relatively high. 
C) the marginal utility of water is high. 
D) the marginal utility of diamonds is relatively low. 
E) the marginal utility of diamonds is greater than the marginal utility of water. 
A) the total utility of water is relatively low. 
B) the total utility of diamonds is relatively high. 
C) the marginal utility of water is high. 
D) the marginal utility of diamonds is relatively low. 
E) the marginal utility of diamonds is greater than the marginal utility of water.

Question 6

Lucky buys hats for $20, but Lucky will not sell one of her hats for less than $35. Lucky is

Accepted Answer

A) displaying the endowment effect. 
B) making decisions using her prefrontal cortex. 
C) exhibiting bounded self-interest. 
D) showing unbounded willpower. 
E) a behavioural economist. 
A) displaying the endowment effect. 
B) making decisions using her prefrontal cortex. 
C) exhibiting bounded self-interest. 
D) showing unbounded willpower. 
E) a behavioural economist.

Question 7

Let MUA and MUB stand for the marginal utility of goods A and B, respectively. Let PA and PB stand for the price of goods A and B, respectively. Which statement must hold for consumer equilibrium?

Accepted Answer

A) MUA = MUB 
B) MUA = MUB and PA = PB 
C) MUA/MUB = PB/PA 
D) MUA/MUB = PA/PB 
E) MUAPA = MUBPB 
A) MUA = MUB 
B) MUA = MUB and PA = PB 
C) MUA/MUB = PB/PA 
D) MUA/MUB = PA/PB 
E) MUAPA = MUBPB

Question 8

Martha and Sarah have the same preferences, face the same prices, and have the same income. Sarah's utility is measured in units while Martha's is measured in units squared. Select the best response.

Accepted Answer

A) Martha and Sarah will choose to consume the same set of goods. 
B) Martha's and Sarah's marginal utility per dollar will be equal. 
C) Martha's and Sarah's marginal utilities will be equal. 
D) Martha and Sarah will have equal total utility. 
E) Martha and Sarah will not choose to consume the same set of goods. 
A) Martha and Sarah will choose to consume the same set of goods. 
B) Martha's and Sarah's marginal utility per dollar will be equal. 
C) Martha's and Sarah's marginal utilities will be equal. 
D) Martha and Sarah will have equal total utility. 
E) Martha and Sarah will not choose to consume the same set of goods.

Question 9

Suppose a consumer spends all his income. His marginal utility per dollar on X is 4 and marginal utility per dollar on Y is 2. We know that

Accepted Answer

A) utility can be increased by increasing the consumption of X and decreasing the consumption of Y. 
B) utility can be increased by decreasing the consumption of X and increasing the consumption of Y. 
C) the price of Y must be eight times the price of X. 
D) utility is maximized. 
E) the price of Y must be one-third the price of X. 
A) utility can be increased by increasing the consumption of X and decreasing the consumption of Y. 
B) utility can be increased by decreasing the consumption of X and increasing the consumption of Y. 
C) the price of Y must be eight times the price of X. 
D) utility is maximized. 
E) the price of Y must be one-third the price of X.

Question 10

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
  
-Devon enjoys windsurfing and snorkeling. His total utility from each activity is summarized in Table 8.2.1. Devon has $35 to spend. How long will Devon choose to windsurf and to snorkel?

Accepted Answer

A) 1 hour windsurfing and 5 hours snorkeling 
B) 2 hours windsurfing and 3 hours snorkeling 
C) 3 hours windsurfing and 1 hour snorkeling 
D) 4 hours windsurfing and no hours snorkeling 
E) 2 hour windsurfing and 4 hours snorkeling 
A) 1 hour windsurfing and 5 hours snorkeling 
B) 2 hours windsurfing and 3 hours snorkeling 
C) 3 hours windsurfing and 1 hour snorkeling 
D) 4 hours windsurfing and no hours snorkeling 
E) 2 hour windsurfing and 4 hours snorkeling

Question 11

Let MUA and MUB stand for the marginal utility of goods A and B, respectively. Let PA and PB stand for the price of goods A and B, respectively. Assume that for a given consumer MUA and MUB are equal to each other, and PA is greater than PB. In this case, the consumer is better off if he consumes

Accepted Answer

A) more of good A and less of good B. 
B) less of good A and more of good B. 
C) equal amount of goods A and B. 
D) good B only. 
E) neither good A nor good B. 
A) more of good A and less of good B. 
B) less of good A and more of good B. 
C) equal amount of goods A and B. 
D) good B only. 
E) neither good A nor good B.

Question 12

If income rises, then in the new consumer equilibrium

Accepted Answer

A) the marginal utility from normal goods increases. 
B) the marginal utility from normal goods decreases. 
C) the marginal utility from inferior goods increases. 
D) total utility from inferior goods increases. 
E) both B and C 
A) the marginal utility from normal goods increases. 
B) the marginal utility from normal goods decreases. 
C) the marginal utility from inferior goods increases. 
D) total utility from inferior goods increases. 
E) both B and C

Question 13

If a consumer's income increases and if all goods are normal goods,

Accepted Answer

A) the quantity bought of each good decreases. 
B) the quantity bought of some normal goods increases and of other normal goods decreases, but we can't make an accurate prediction. 
C) some goods become inferior because it isn't possible to buy all goods. 
D) the quantity bought of each good increases. 
E) the supply of all goods increases and the marginal utility from all goods decreases. 
A) the quantity bought of each good decreases. 
B) the quantity bought of some normal goods increases and of other normal goods decreases, but we can't make an accurate prediction. 
C) some goods become inferior because it isn't possible to buy all goods. 
D) the quantity bought of each good increases. 
E) the supply of all goods increases and the marginal utility from all goods decreases.

Question 14

If the price of a good falls, then in the new consumer equilibrium

Accepted Answer

A) the marginal utility from consuming the good will be higher than before. 
B) the quantity of the good consumed decreases. 
C) the quantity of substitutes consumed increases. 
D) the marginal utility from substitutes will be lower than before the fall in price. 
E) none of the above 
A) the marginal utility from consuming the good will be higher than before. 
B) the quantity of the good consumed decreases. 
C) the quantity of substitutes consumed increases. 
D) the marginal utility from substitutes will be lower than before the fall in price. 
E) none of the above

Question 15

Other things remaining the same, marginal utility theory implies that a rise in the price of a good

Accepted Answer

A) increases the consumer surplus. 
B) decreases the consumer surplus. 
C) leaves consumer surplus unchanged. 
D) has an effect on consumer surplus that cannot be determined. 
E) decreases consumer surplus by the amount equal to the total utility of all goods consumed before the price rise but not after the price rise. 
A) increases the consumer surplus. 
B) decreases the consumer surplus. 
C) leaves consumer surplus unchanged. 
D) has an effect on consumer surplus that cannot be determined. 
E) decreases consumer surplus by the amount equal to the total utility of all goods consumed before the price rise but not after the price rise.

Question 16

Which of the following is not a prediction of marginal utility theory?

Accepted Answer

A) Other things remaining the same, the higher the price of a good, the smaller the quantity demanded. 
B) Other things remaining the same, the lower the price of a good, the greater the quantity demanded. 
C) Other things remaining the same, the lower the price of a good, the smaller is the consumption of substitutes for that good. 
D) The law of demand. 
E) Diminishing marginal utility. 
A) Other things remaining the same, the higher the price of a good, the smaller the quantity demanded. 
B) Other things remaining the same, the lower the price of a good, the greater the quantity demanded. 
C) Other things remaining the same, the lower the price of a good, the smaller is the consumption of substitutes for that good. 
D) The law of demand. 
E) Diminishing marginal utility.

Question 17

Which of the following statements is true?

Accepted Answer

A) Marginal utility theory predicts that an increase in a consumer's income increases consumption of all goods. 
B) It is possible to derive the law of demand - that a higher price decreases the quantity demanded - using marginal utility theory. 
C) Marginal utility theory makes no prediction about a consumer's responses to hikes in the prices of the goods and services he or she consumes. 
D) Marginal utility theory predicts that all goods are normal goods and that all goods are substitutes for each other. 
E) It is possible to derive the law of demand - that a higher price decreases demand - using marginal utility theory. 
A) Marginal utility theory predicts that an increase in a consumer's income increases consumption of all goods. 
B) It is possible to derive the law of demand - that a higher price decreases the quantity demanded - using marginal utility theory. 
C) Marginal utility theory makes no prediction about a consumer's responses to hikes in the prices of the goods and services he or she consumes. 
D) Marginal utility theory predicts that all goods are normal goods and that all goods are substitutes for each other. 
E) It is possible to derive the law of demand - that a higher price decreases demand - using marginal utility theory.

Question 18

According to a behavioural economist, a person who is unwilling to sell the last kilogram of rice he purchased for the same price that he paid for it is displaying

Accepted Answer

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

Question 19

Marginal utility theory derives

Accepted Answer

A) an upward-sloping demand curve. 
B) a downward-sloping demand curve. 
C) an upward-sloping supply curve. 
D) a downward-sloping supply curve. 
E) a vertical supply curve. 
A) an upward-sloping demand curve. 
B) a downward-sloping demand curve. 
C) an upward-sloping supply curve. 
D) a downward-sloping supply curve. 
E) a vertical supply curve.

Question 20

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 cross elasticity of demand of snorkeling with respect to the price of 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

Exam 8: Utility and Demand

In consumer equilibrium,

With respect to water and diamonds, water

If Ms. Petersen is maximizing her utility in the consumption of goods A and B, which one of the following statements must be true?

If income falls, then in the new consumer equilibrium

The high price of diamonds relative to the price of water reflects the fact that, at typical levels of consumption,

Lucky buys hats for $20, but Lucky will not sell one of her hats for less than $35. Lucky is

Let MUA and MUB stand for the marginal utility of goods A and B, respectively. Let PA and PB stand for the price of goods A and B, respectively. Which statement must hold for consumer equilibrium?

Martha and Sarah have the same preferences, face the same prices, and have the same income. Sarah's utility is measured in units while Martha's is measured in units squared. Select the best response.

Suppose a consumer spends all his income. His marginal utility per dollar on X is 4 and marginal utility per dollar on Y is 2. We know that

Let MUA and MUB stand for the marginal utility of goods A and B, respectively. Let PA and PB stand for the price of goods A and B, respectively. Assume that for a given consumer MUA and MUB are equal to each other, and PA is greater than PB. In this case, the consumer is better off if he consumes

If income rises, then in the new consumer equilibrium

If a consumer's income increases and if all goods are normal goods,

If the price of a good falls, then in the new consumer equilibrium

Other things remaining the same, marginal utility theory implies that a rise in the price of a good

Which of the following is not a prediction of marginal utility theory?

Which of the following statements is true?

According to a behavioural economist, a person who is unwilling to sell the last kilogram of rice he purchased for the same price that he paid for it is displaying

Marginal utility theory derives

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