Question 1

Diminishing marginal utility means that

Accepted Answer

A) Ralph will enjoy his second hamburger less than the first one. 
B) the utility from one hamburger is greater than the utility from two hamburgers. 
C) the price of two hamburgers is less than twice the price of one. 
D) the utility from eating two hamburgers will be more than twice the utility from eating the first one. 
E) hamburgers seem smaller as you eat more of them. 
A) Ralph will enjoy his second hamburger less than the first one. 
B) the utility from one hamburger is greater than the utility from two hamburgers. 
C) the price of two hamburgers is less than twice the price of one. 
D) the utility from eating two hamburgers will be more than twice the utility from eating the first one. 
E) hamburgers seem smaller as you eat more of them.

Question 2

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

Question 3

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 4

You are consuming hot dogs and Cokes and believe you are maximizing utility for your entire budget of $12.The price of a hot dog is $2 and the price of a Coke is $2.Suppose the price of hot dogs rises to $4 and the price of a Coke remains at $2.You adjust your consumption of hot dogs and Cokes and believe you are once again receiving maximum total utility from the meal.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 must be equal. 
C) The marginal utility from hot dogs must rise compared to the marginal utility from Cokes. 
D) You are purchasing 2 hot dogs and 2 Cokes. 
E) You are purchasing 1 hot dog and 4 Cokes. 
A) The total utility from hot dogs is maximized. 
B) The marginal utilities from hot dogs and Cokes must be equal. 
C) The marginal utility from hot dogs must rise compared to the marginal utility from Cokes. 
D) You are purchasing 2 hot dogs and 2 Cokes. 
E) You are purchasing 1 hot dog and 4 Cokes.

Question 5

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 6

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 7

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 8

Use the table below to answer the following question.
Table 8.2.4
  
-Refer to Table 8.2.4.Suppose the price of X is $1 and the price of Y is $1.How much of each should you purchase to maximize utility from a total expenditure of $11?

Accepted Answer

A) 3 units of X and 8 units of Y 
B) 4 units of X and 7 units of Y 
C) 5 units of X and 6 units of Y 
D) 6 units of X and 5 units of Y 
E) 7 units of X and 4 units of Y 
A) 3 units of X and 8 units of Y 
B) 4 units of X and 7 units of Y 
C) 5 units of X and 6 units of Y 
D) 6 units of X and 5 units of Y 
E) 7 units of X and 4 units of Y

Question 9

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 10

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 11

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.

Question 12

Use the table below to answer the following question.
Table 8.1.2
  
-Table 8.1.2 gives total utilities for Jim and Sally.Which one of the following statements is true?

Accepted Answer

A) Jim has increasing marginal utility. 
B) For Sally, the marginal utility of the third unit consumed is 6. 
C) If Jim consumes 2 units, his total utility is 34 units. 
D) Jim and Sally receive the same marginal utility from the third unit consumed. 
E) If Sally consumes 2 units, her total utility is 10 units. 
A) Jim has increasing marginal utility. 
B) For Sally, the marginal utility of the third unit consumed is 6. 
C) If Jim consumes 2 units, his total utility is 34 units. 
D) Jim and Sally receive the same marginal utility from the third unit consumed. 
E) If Sally consumes 2 units, her total utility is 10 units.

Question 13

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 14

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 15

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.

Question 16

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 17

The budget line shows the boundary between those combinations of goods and services that

Accepted Answer

A) have positive marginal utility and those that have negative marginal utility. 
B) are available and those that are unavailable. 
C) are desirable and those that are undesirable. 
D) are affordable and those that are unaffordable. 
E) are normal goods and those that are inferior goods. 
A) have positive marginal utility and those that have negative marginal utility. 
B) are available and those that are unavailable. 
C) are desirable and those that are undesirable. 
D) are affordable and those that are unaffordable. 
E) are normal goods and those that are inferior goods.

Question 18

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 19

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 20

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.

Diminishing marginal utility means that

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

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

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

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

Use the table below to answer the following question. Table 8.2.4 -Refer to Table 8.2.4.Suppose the price of X is $1 and the price of Y is $1.How much of each should you purchase to maximize utility from a total expenditure of $11?

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

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

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

Use the table below to answer the following question. Table 8.1.2 -Table 8.1.2 gives total utilities for Jim and Sally.Which one of the following statements is true?

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?

Bounded self-interest

Marginal utility equals

The budget line shows the boundary between those combinations of goods and services that

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

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

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

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

Exam 8: Utility and Demand

Diminishing marginal utility means that

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

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

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

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

Use the table below to answer the following question. Table 8.2.4 -Refer to Table 8.2.4.Suppose the price of X is $1 and the price of Y is $1.How much of each should you purchase to maximize utility from a total expenditure of $11?

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

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

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

Use the table below to answer the following question. Table 8.1.2 -Table 8.1.2 gives total utilities for Jim and Sally.Which one of the following statements is true?

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?

Bounded self-interest

Marginal utility equals

The budget line shows the boundary between those combinations of goods and services that

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

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

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

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