Question 1

The paradox of value as it applies to diamonds and water can be explained by

Accepted Answer

A) distinguishing between utility and price. 
B) water having a high level of marginal utility relative to diamonds. 
C) water having a low price relative to diamonds. 
D) the fact that utility can't be measured. 
E) distinguishing between total utility and marginal utility. 
A) distinguishing between utility and price. 
B) water having a high level of marginal utility relative to diamonds. 
C) water having a low price relative to diamonds. 
D) the fact that utility can't be measured. 
E) distinguishing between total utility and marginal utility. E

Question 2

A consumer maximizes his utility by purchasing 2 units of good X at $5 per unit and 3 units of good Y at $7 per unit.What is the ratio of the marginal utility from X to the marginal utility from Y?

Accepted Answer

A) 5/7 
B) 7/5 
C) 2/3 
D) 3/2 
E) 10/21 
A) 5/7 
B) 7/5 
C) 2/3 
D) 3/2 
E) 10/21 A

Question 3

The three limitations on human rationality that behavioural economics emphasizes are

Accepted Answer

A) bounded rationality, bounded utility, and bounded self-interest. 
B) bounded rationality, bounded willpower, and bounded self-interest. 
C) bounded utility, bounded willpower, and bounded self-interest. 
D) bounded rationality, bounded willpower, and bounded utility. 
E) bounded rationality, bounded surplus, and bounded utility. 
A) bounded rationality, bounded utility, and bounded self-interest. 
B) bounded rationality, bounded willpower, and bounded self-interest. 
C) bounded utility, bounded willpower, and bounded self-interest. 
D) bounded rationality, bounded willpower, and bounded utility. 
E) bounded rationality, bounded surplus, and bounded utility. B

Question 4

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.

Question 5

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 6

Use the information below to answer the following questions.
Fact 8.4.1 Eating Away the Innings in Baseball's Cheap Seats
Baseball and gluttony, two of America's favourite pastimes, are merging with Major League Baseball stadiums offering all-you-can-eat seats. Some fans try to "set personal records" during their first game, but by the third time in such seats they eat normally.
Source: USA Today, March 6, 2008
-Refer to Fact 8.4.1.The idea of ________ is consistent with the information in the news clip.

Accepted Answer

A) the endowment effect 
B) bounded self-interest 
C) bounded rationality 
D) bounded willpower 
E) bounded social interest 
A) the endowment effect 
B) bounded self-interest 
C) bounded rationality 
D) bounded willpower 
E) bounded social interest

Question 7

Behavioural economics

Accepted Answer

A) studies the activity of the human brain when a person makes an economic decision. 
B) studies psychology by using the economist's toolbox. 
C) studies the ways in which limits on the human brain's ability to compute and implement rational decisions influences economic behaviour. 
D) was used extensively in the development of marginal utility theory. 
E) all of the above 
A) studies the activity of the human brain when a person makes an economic decision. 
B) studies psychology by using the economist's toolbox. 
C) studies the ways in which limits on the human brain's ability to compute and implement rational decisions influences economic behaviour. 
D) was used extensively in the development of marginal utility theory. 
E) all of the above

Question 8

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 9

Utility is

Accepted Answer

A) the value of a good. 
B) the additional satisfaction received from consuming another unit of a good. 
C) the benefit or satisfaction from consuming goods and services. 
D) the practical usefulness of a good. 
E) equal to the price of a good. 
A) the value of a good. 
B) the additional satisfaction received from consuming another unit of a good. 
C) the benefit or satisfaction from consuming goods and services. 
D) the practical usefulness of a good. 
E) equal to the price of a good.

Question 10

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 11

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 12

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 13

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 14

A behavioural economist will explain Tom's donation to charity by saying that Tom is displaying

Accepted Answer

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

Question 15

The budget line

Accepted Answer

A) shows the limits to a household's consumption choices. 
B) shows the household's total utility. 
C) is downward sloping because it illustrates decreasing marginal utility. 
D) shows how a household's consumption choices change as income changes. 
E) shifts outward as total utility increases. 
A) shows the limits to a household's consumption choices. 
B) shows the household's total utility. 
C) is downward sloping because it illustrates decreasing marginal utility. 
D) shows how a household's consumption choices change as income changes. 
E) shifts outward as total utility increases.

Question 16

John and Sally have identical preferences except Sally's utility units are exactly 10 times that of John's.Both have the same income and face the same prices.Choose the best response.

Accepted Answer

A) John consumes 10 times the amount that Sally consumes. 
B) John receives 1/10 the satisfaction that Sally receives. 
C) Both will consume the same amount of all goods. 
D) John and Sally will have equal total utility. 
E) John and Sally will have equal marginal utility. 
A) John consumes 10 times the amount that Sally consumes. 
B) John receives 1/10 the satisfaction that Sally receives. 
C) Both will consume the same amount of all goods. 
D) John and Sally will have equal total utility. 
E) John and Sally will have equal marginal utility.

Question 17

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 18

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 19

Behavioural economics and neuroeconomics seek to achieve

Accepted Answer

A) the reason why we do not always make rational economic decisions. 
B) a method of using willpower and self-interest to gain utility maximization. 
C) a theory in which consumers are always utility-maximizers. 
D) a new method for the human brain to work out rational choice. 
E) the rational concepts that support the law of demand and the law of supply. 
A) the reason why we do not always make rational economic decisions. 
B) a method of using willpower and self-interest to gain utility maximization. 
C) a theory in which consumers are always utility-maximizers. 
D) a new method for the human brain to work out rational choice. 
E) the rational concepts that support the law of demand and the law of supply.

Question 20

If a consumer spends all his income and his marginal utility per dollar is equal for all goods, then

Accepted Answer

A) marginal utility is maximized. 
B) total utility is maximized. 
C) he cannot be better off even with more income. 
D) the proportion of income spent on each good must be equal. 
E) the number of units bought of each good must be equal. 
A) marginal utility is maximized. 
B) total utility is maximized. 
C) he cannot be better off even with more income. 
D) the proportion of income spent on each good must be equal. 
E) the number of units bought of each good must be equal.

The paradox of value as it applies to diamonds and water can be explained by

A consumer maximizes his utility by purchasing 2 units of good X at $5 per unit and 3 units of good Y at $7 per unit.What is the ratio of the marginal utility from X to the marginal utility from Y?

The three limitations on human rationality that behavioural economics emphasizes are

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

Which of the following statements is true?

Behavioural economics

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

Utility is

If income falls, then in the new consumer equilibrium

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

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

A behavioural economist will explain Tom's donation to charity by saying that Tom is displaying

The budget line

John and Sally have identical preferences except Sally's utility units are exactly 10 times that of John's.Both have the same income and face the same prices.Choose the best response.

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

Behavioural economics and neuroeconomics seek to achieve

If a consumer spends all his income and his marginal utility per dollar is equal for all goods, then

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government 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

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Exam 8: Utility and Demand

The paradox of value as it applies to diamonds and water can be explained by

A consumer maximizes his utility by purchasing 2 units of good X at $5 per unit and 3 units of good Y at $7 per unit.What is the ratio of the marginal utility from X to the marginal utility from Y?

The three limitations on human rationality that behavioural economics emphasizes are

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

Which of the following statements is true?

Behavioural economics

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

Utility is

If income falls, then in the new consumer equilibrium

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

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

A behavioural economist will explain Tom's donation to charity by saying that Tom is displaying

The budget line

John and Sally have identical preferences except Sally's utility units are exactly 10 times that of John's.Both have the same income and face the same prices.Choose the best response.

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

Behavioural economics and neuroeconomics seek to achieve

If a consumer spends all his income and his marginal utility per dollar is equal for all goods, then

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government 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

Filters