Question 1

Suppose a budget line is drawn with X on the horizontal axis and Y on the vertical axis.A decrease in the price of X will cause:

Accepted Answer

A) an increase in the vertical intercept and no change in the horizontal intercept. 
B) a decrease in the vertical intercept and no change in the horizontal intercept. 
C) an increase in the horizontal intercept and no change in the vertical intercept. 
D) a decrease in the horizontal intercept and no change in the vertical intercept. 
E) a parallel,rightward shift of the budget line. 
A) an increase in the vertical intercept and no change in the horizontal intercept. 
B) a decrease in the vertical intercept and no change in the horizontal intercept. 
C) an increase in the horizontal intercept and no change in the vertical intercept. 
D) a decrease in the horizontal intercept and no change in the vertical intercept. 
E) a parallel,rightward shift of the budget line. C

Question 2

The table given below records the total utility derived from the consumption of avocados. Table 6.2
 
-Refer to Table 6.2.The law of diminishing marginal utility holds _____.

Accepted Answer

A) for any number of avocados 
B) up to five avocados 
C) only for one or two avocados 
D) only after five avocados are consumed 
E) for the first three avocados 
A) for any number of avocados 
B) up to five avocados 
C) only for one or two avocados 
D) only after five avocados are consumed 
E) for the first three avocados A

Question 3

The additional satisfaction that a consumer receives from one more unit of a good or service is known as _____.

Accepted Answer

A) marginal utility 
B) total utility 
C) disutility 
D) profit 
E) the law of diminishing marginal utility 
A) marginal utility 
B) total utility 
C) disutility 
D) profit 
E) the law of diminishing marginal utility A

Question 4

If a dinner guest was serious when she said that she could never get enough of your cooking,you would conclude that the marginal utility of your cooking for her was _____.

Accepted Answer

A) negative 
B) decreasing 
C) increasing at an increasing rate 
D) positive 
E) less than total utility 
A) negative 
B) decreasing 
C) increasing at an increasing rate 
D) positive 
E) less than total utility

Question 5

The demand curve for a product slopes downward and to the right because:

Accepted Answer

A) total utility decreases as more of the product is consumed. 
B) total utility derived from both,the product and its substitutes is the same. 
C) marginal utility of the product diminishes as more of the product is consumed. 
D) there are no substitutes for the product. 
E) when the price falls,the income effect causes consumers to buy less of the product. 
A) total utility decreases as more of the product is consumed. 
B) total utility derived from both,the product and its substitutes is the same. 
C) marginal utility of the product diminishes as more of the product is consumed. 
D) there are no substitutes for the product. 
E) when the price falls,the income effect causes consumers to buy less of the product.

Question 6

Other things equal,if there is a price increase of a good measured on the vertical axis,the budget constraint will shift outward.

Accepted Answer

A) True 
 B)False

Question 7

_____ is the change in total utility that occurs because one more unit of the good is consumed or acquired.

Accepted Answer

A) Total utility 
B) Marginal utility 
C) Disutility 
D) Diminishing marginal utility 
E) Expected utility 
A) Total utility 
B) Marginal utility 
C) Disutility 
D) Diminishing marginal utility 
E) Expected utility

Question 8

The table given below records the total utility derived from the consumption of avocados. Table 6.2
 
-According to Table 6.2,marginal utility is positive _____.

Accepted Answer

A) for any number of avocados 
B) for up to five avocados 
C) for one or two avocados 
D) only after five avocados are consumed 
E) for the first four avocados 
A) for any number of avocados 
B) for up to five avocados 
C) for one or two avocados 
D) only after five avocados are consumed 
E) for the first four avocados

Question 9

_____ is the understanding that perfect information is not likely to be available,and that as a result people make decisions that in hindsight look irrational,but in reality are the rational results of a brain that is economizing.

Accepted Answer

A) Reasoning 
B) Parametric determinism 
C) Rational ignorance 
D) Bounded rationality 
E) Dynamic inconsistency 
A) Reasoning 
B) Parametric determinism 
C) Rational ignorance 
D) Bounded rationality 
E) Dynamic inconsistency

Question 10

Neuroeconomics suggests that the frontal lobe carries out most decision making and strategic thinking takes place in the prefrontal cortex.

Accepted Answer

A) True 
 B)False

Question 11

Following a decrease in the price of a good or service,an individual will purchase more of the now less expensive good and less of other more expensive goods.This is known as the _____ effect.

Accepted Answer

A) income 
B) endowment 
C) substitution 
D) price 
E) scale 
A) income 
B) endowment 
C) substitution 
D) price 
E) scale

Question 12

When total utility is at a maximum,marginal utility is:

Accepted Answer

A) increasing. 
B) at a minimum. 
C) equal to zero. 
D) decreasing. 
E) at a maximum. 
A) increasing. 
B) at a minimum. 
C) equal to zero. 
D) decreasing. 
E) at a maximum.

Question 13

In economic theory,the idea of the equimarginal principle,or consumer equilibrium,means:

Accepted Answer

A) consumers appear to be similar in their buying habits,which explains why prices are almost always in equilibrium. 
B) to maximize utility,consumers allocate all of their incomes among goods so as to equate the total utility of all units of goods purchased. 
C) to maximize utility,consumers must allocate their scarce incomes among only the cheapest products available. 
D) to maximize utility,consumers must allocate their scarce incomes among goods so as to equate the marginal utilities per dollar of expenditure on the last unit of each good purchased. 
E) the marginal utilities among luxury goods are always equal among certain high income earners. 
A) consumers appear to be similar in their buying habits,which explains why prices are almost always in equilibrium. 
B) to maximize utility,consumers allocate all of their incomes among goods so as to equate the total utility of all units of goods purchased. 
C) to maximize utility,consumers must allocate their scarce incomes among only the cheapest products available. 
D) to maximize utility,consumers must allocate their scarce incomes among goods so as to equate the marginal utilities per dollar of expenditure on the last unit of each good purchased. 
E) the marginal utilities among luxury goods are always equal among certain high income earners.

Question 14

Assume MUX = 30 utils,MUY = 15 utils,PX = $2 and PY = $0.50.This consumer:

Accepted Answer

A) should buy less of X and less of Y. 
B) is in equilibrium. 
C) should buy more of X and less of Y. 
D) should buy less of X and more of Y. 
E) should buy more of X and more of Y. 
A) should buy less of X and less of Y. 
B) is in equilibrium. 
C) should buy more of X and less of Y. 
D) should buy less of X and more of Y. 
E) should buy more of X and more of Y.

Question 15

Total utility is maximized when _____.

Accepted Answer

A) marginal utility is maximized 
B) marginal utility is the same for all goods consumed 
C) marginal utility per dollar expenditure is maximized 
D) marginal utility per dollar expenditure is the same for all goods consumed 
E) any change in purchasing from good A to good B reduces marginal satisfaction 
A) marginal utility is maximized 
B) marginal utility is the same for all goods consumed 
C) marginal utility per dollar expenditure is maximized 
D) marginal utility per dollar expenditure is the same for all goods consumed 
E) any change in purchasing from good A to good B reduces marginal satisfaction

Question 16

As the price of a good declines,a utility-maximizing consumer will respond by purchasing more of that good.

Accepted Answer

A) True 
 B)False

Question 17

Individuals behave so as to maximize their utility.

Accepted Answer

A) True 
 B)False

Question 18

When a good becomes more expensive,it yields less satisfaction per dollar,so consumers buy less of it and more of other goods.This is called the _____ effect.

Accepted Answer

A) substitution 
B) income 
C) replacement 
D) augmentation 
E) disbursement 
A) substitution 
B) income 
C) replacement 
D) augmentation 
E) disbursement

Question 19

In order to have a meaningful measure of marginal utility,we must define the time period during which consumption is occurring.

Accepted Answer

A) True 
 B)False

Question 20

If a consumer is buying three goods A,B and C,then she will be in equilibrium when total utility from each good is equal.

Accepted Answer

A) True 
 B)False

Exam 6: Consumer Choice

Suppose a budget line is drawn with X on the horizontal axis and Y on the vertical axis.A decrease in the price of X will cause:

The table given below records the total utility derived from the consumption of avocados. Table 6.2 -Refer to Table 6.2.The law of diminishing marginal utility holds _____.

The additional satisfaction that a consumer receives from one more unit of a good or service is known as _____.

If a dinner guest was serious when she said that she could never get enough of your cooking,you would conclude that the marginal utility of your cooking for her was _____.

The demand curve for a product slopes downward and to the right because:

Other things equal,if there is a price increase of a good measured on the vertical axis,the budget constraint will shift outward.

_____ is the change in total utility that occurs because one more unit of the good is consumed or acquired.

The table given below records the total utility derived from the consumption of avocados. Table 6.2 -According to Table 6.2,marginal utility is positive _____.

_____ is the understanding that perfect information is not likely to be available,and that as a result people make decisions that in hindsight look irrational,but in reality are the rational results of a brain that is economizing.

Neuroeconomics suggests that the frontal lobe carries out most decision making and strategic thinking takes place in the prefrontal cortex.

Following a decrease in the price of a good or service,an individual will purchase more of the now less expensive good and less of other more expensive goods.This is known as the _____ effect.

When total utility is at a maximum,marginal utility is:

In economic theory,the idea of the equimarginal principle,or consumer equilibrium,means:

Assume MUX = 30 utils,MUY = 15 utils,PX = $2 and PY = $0.50.This consumer:

Total utility is maximized when _____.

As the price of a good declines,a utility-maximizing consumer will respond by purchasing more of that good.

Individuals behave so as to maximize their utility.

When a good becomes more expensive,it yields less satisfaction per dollar,so consumers buy less of it and more of other goods.This is called the _____ effect.

In order to have a meaningful measure of marginal utility,we must define the time period during which consumption is occurring.

If a consumer is buying three goods A,B and C,then she will be in equilibrium when total utility from each good is equal.

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

Assume MU_X = 30 utils,MU_Y = 15 utils,P_X = $2 and P_Y = $0.50.This consumer: