Question 1

An indifference map shows _____.

Accepted Answer

A) all combinations of two goods that a consumer can afford to purchase 
B) all combinations of two goods that provide the same level of utility 
C) a set of indifference curves for a representative consumer 
D) all combinations of price and quantity that provide the same level of utility 
E) the combination of goods that a consumer can afford to buy 
A) all combinations of two goods that a consumer can afford to purchase 
B) all combinations of two goods that provide the same level of utility 
C) a set of indifference curves for a representative consumer 
D) all combinations of price and quantity that provide the same level of utility 
E) the combination of goods that a consumer can afford to buy

Question 2

In effect,people feel that driving is safer than flying and also prefer to do so because of _____.

Accepted Answer

A) anchoring 
B) overconfidence 
C) status quo 
D) loss aversion 
E) familiarity 
A) anchoring 
B) overconfidence 
C) status quo 
D) loss aversion 
E) familiarity

Question 3

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 negative _____.

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) only after the first avocado is consumed 
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) only after the first avocado is consumed

Question 4

In utility analysis,it is assumed that marginal utility diminishes as consumption of a product decreases.

Accepted Answer

A) True 
 B)False

Question 5

As long as the marginal utilities per dollar obtained from the last unit of all products consumed are the same,_____.

Accepted Answer

A) the consumer is in equilibrium and will not reallocate income 
B) the consumer is not in equilibrium and will reallocate income 
C) the consumer is most likely operating a budget deficit 
D) the consumer is not maximizing utility 
E) the government will recognize this as an intolerable disequilibrium and will most likely intervene by imposing a tax and reallocate the consumer's income 
A) the consumer is in equilibrium and will not reallocate income 
B) the consumer is not in equilibrium and will reallocate income 
C) the consumer is most likely operating a budget deficit 
D) the consumer is not maximizing utility 
E) the government will recognize this as an intolerable disequilibrium and will most likely intervene by imposing a tax and reallocate the consumer's income

Question 6

A price change triggers the income effect but not the substitution effect.

Accepted Answer

A) True 
 B)False

Question 7

In the theory of utility,it is assumed that marginal utility:

Accepted Answer

A) increases as consumption of a product increases. 
B) is always zero irrespective of any increase or decrease in consumption. 
C) remains constant when consumption of a product increases. 
D) diminishes as consumption of a product increases. 
E) remains constant when consumption of a product decreases. 
A) increases as consumption of a product increases. 
B) is always zero irrespective of any increase or decrease in consumption. 
C) remains constant when consumption of a product increases. 
D) diminishes as consumption of a product increases. 
E) remains constant when consumption of a product decreases.

Question 8

As you move along an indifference curve,your total utility increases or decreases depending on whether it's an upward or downward movement.

Accepted Answer

A) True 
 B)False

Question 9

To decide which of two goods is the better buy,a consumer should compare the products' _____.

Accepted Answer

A) marginal utilities 
B) total utilities 
C) marginal utilities per dollar 
D) total utilities per dollar 
E) disutility 
A) marginal utilities 
B) total utilities 
C) marginal utilities per dollar 
D) total utilities per dollar 
E) disutility

Question 10

If cherries cost twice as much as dates,and the last cherry consumed provides twice as much utility as the last date consumed,the consumer is maximizing utility.

Accepted Answer

A) True 
 B)False

Question 11

Because incomes are limited,purchasing one thing means not being able to purchase other things.This indicates that:

Accepted Answer

A) marginal utility diminishes. 
B) marginal utility is constant. 
C) people will allocate their income among goods so as to achieve the most satisfaction. 
D) people will allocate their income among goods so that the marginal utilities of all goods is equal. 
E) people will allocate their income among goods so that the marginal utilities of all goods is zero. 
A) marginal utility diminishes. 
B) marginal utility is constant. 
C) people will allocate their income among goods so as to achieve the most satisfaction. 
D) people will allocate their income among goods so that the marginal utilities of all goods is equal. 
E) people will allocate their income among goods so that the marginal utilities of all goods is zero.

Question 12

When attempting to explain why a consumer purchases a Ford automobile instead of a Honda automobile or a Compaq computer instead of an IBM computer,an economist would assert:

Accepted Answer

A) that the consumer is making a decision based on what gives him maximum utility. 
B) that everyone knows Hondas are superior to Fords; the consumer cannot possibly be maximizing his utility. 
C) that everyone knows IBM computers are superior to Compaq computers; the consumer may be maximizing his utility at the margin,but is not maximizing total utility. 
D) that there is no standard explanation for consumer choices because consumers have varied tastes and preferences. 
E) that since rationality is bounded by lack of information,a consumer purchases goods based on convenience than on utility maximization. 
A) that the consumer is making a decision based on what gives him maximum utility. 
B) that everyone knows Hondas are superior to Fords; the consumer cannot possibly be maximizing his utility. 
C) that everyone knows IBM computers are superior to Compaq computers; the consumer may be maximizing his utility at the margin,but is not maximizing total utility. 
D) that there is no standard explanation for consumer choices because consumers have varied tastes and preferences. 
E) that since rationality is bounded by lack of information,a consumer purchases goods based on convenience than on utility maximization.

Question 13

Which one of the following is based on the idea that marginal utility of income diminishes as income increases?

Accepted Answer

A) Progressive taxation 
B) Capital controls 
C) Minimum wages 
D) Price controls 
E) Employee compensation regulations 
A) Progressive taxation 
B) Capital controls 
C) Minimum wages 
D) Price controls 
E) Employee compensation regulations

Question 14

Suppose that apples and bananas both cost the same,but the marginal utility of bananas is twice as high as that for apples.This implies the consumer should purchase more apples and fewer bananas in order to maximize utility.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements concerning income and substitution effects is nottrue?

Accepted Answer

A) Income and substitution effects cause the demand curve to slope downward. 
B) When the price of a good falls,real purchasing power increases and consumers can purchase more of all goods. 
C) The substitution effect describes the situation where more of a good whose price has fallen is purchased and less of all other goods is purchased. 
D) A price decrease of one good cannot cause the income effect. 
E) Income and substitution effects are related to diminishing marginal utility and consumer equilibrium. 
A) Income and substitution effects cause the demand curve to slope downward. 
B) When the price of a good falls,real purchasing power increases and consumers can purchase more of all goods. 
C) The substitution effect describes the situation where more of a good whose price has fallen is purchased and less of all other goods is purchased. 
D) A price decrease of one good cannot cause the income effect. 
E) Income and substitution effects are related to diminishing marginal utility and consumer equilibrium.

Question 16

An "all you can eat" restaurant illustrates the economic principle:

Accepted Answer

A) of consumers' inability to maximize their total utility. 
B) that economic theory clearly breaks down under certain circumstances. 
C) that marginal utility is always positive. 
D) that consumers will stop eating when marginal utility is zero. 
E) that consumers will stop eating when total utility is zero. 
A) of consumers' inability to maximize their total utility. 
B) that economic theory clearly breaks down under certain circumstances. 
C) that marginal utility is always positive. 
D) that consumers will stop eating when marginal utility is zero. 
E) that consumers will stop eating when total utility is zero.

Question 17

Jason is trying to decide whether to buy a bagel or a muffin for breakfast.The bagel costs $.50 and has a marginal utility of 5.The muffin costs $1 and has a marginal utility of 20.Which should he buy,and why?

Accepted Answer

A) The muffin,because it has a higher marginal utility 
B) The muffin,because it has a lower marginal utility per dollar 
C) The bagel,because it costs less 
D) The bagel,because it has a higher marginal utility per dollar 
E) The muffin,because it has a higher marginal utility per dollar 
A) The muffin,because it has a higher marginal utility 
B) The muffin,because it has a lower marginal utility per dollar 
C) The bagel,because it costs less 
D) The bagel,because it has a higher marginal utility per dollar 
E) The muffin,because it has a higher marginal utility per dollar

Question 18

If a consumer is buying only goods A and B,then he or she will be in equilibrium only when MUa = MUb.

Accepted Answer

A) True 
 B)False

Question 19

If the marginal utility of a product is diminishing relative to the marginal utility of other products,then _____.

Accepted Answer

A) the consumer is in equilibrium 
B) the consumer has been purchasing relatively less of the product 
C) the consumer has been purchasing relatively more of the product 
D) the price of this product must have increased 
E) the price of the product must have decreased 
A) the consumer is in equilibrium 
B) the consumer has been purchasing relatively less of the product 
C) the consumer has been purchasing relatively more of the product 
D) the price of this product must have increased 
E) the price of the product must have decreased

Question 20

The study of decision making that assumes people are rational in a broad sense,even if they do not have complete and perfect information is called _____.

Accepted Answer

A) rational economics 
B) reasonable economics 
C) understandable economics 
D) behavioral economics 
E) optimal economics 
A) rational economics 
B) reasonable economics 
C) understandable economics 
D) behavioral economics 
E) optimal economics

Exam 6: Consumer Choice

An indifference map shows _____.

In effect,people feel that driving is safer than flying and also prefer to do so because of _____.

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 negative _____.

In utility analysis,it is assumed that marginal utility diminishes as consumption of a product decreases.

As long as the marginal utilities per dollar obtained from the last unit of all products consumed are the same,_____.

A price change triggers the income effect but not the substitution effect.

In the theory of utility,it is assumed that marginal utility:

As you move along an indifference curve,your total utility increases or decreases depending on whether it's an upward or downward movement.

To decide which of two goods is the better buy,a consumer should compare the products' _____.

If cherries cost twice as much as dates,and the last cherry consumed provides twice as much utility as the last date consumed,the consumer is maximizing utility.

Because incomes are limited,purchasing one thing means not being able to purchase other things.This indicates that:

When attempting to explain why a consumer purchases a Ford automobile instead of a Honda automobile or a Compaq computer instead of an IBM computer,an economist would assert:

Which one of the following is based on the idea that marginal utility of income diminishes as income increases?

Suppose that apples and bananas both cost the same,but the marginal utility of bananas is twice as high as that for apples.This implies the consumer should purchase more apples and fewer bananas in order to maximize utility.

Which of the following statements concerning income and substitution effects is nottrue?

An "all you can eat" restaurant illustrates the economic principle:

Jason is trying to decide whether to buy a bagel or a muffin for breakfast.The bagel costs $.50 and has a marginal utility of 5.The muffin costs $1 and has a marginal utility of 20.Which should he buy,and why?

If a consumer is buying only goods A and B,then he or she will be in equilibrium only when MUa = MUb.

If the marginal utility of a product is diminishing relative to the marginal utility of other products,then _____.

The study of decision making that assumes people are rational in a broad sense,even if they do not have complete and perfect information is called _____.

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

If a consumer is buying only goods A and B,then he or she will be in equilibrium only when MU_a = MU_b.