Question 1

The concept of marginal utility:

Accepted Answer

A) explains why individuals find it difficult to maximize their total utility. 
B) is the change in total utility that comes from consuming one additional unit of a good or service. 
C) can only be applied to situations in which individuals can choose among several goods or services. 
D) All of these are true. 
A) explains why individuals find it difficult to maximize their total utility. 
B) is the change in total utility that comes from consuming one additional unit of a good or service. 
C) can only be applied to situations in which individuals can choose among several goods or services. 
D) All of these are true. B

Question 2

Reciprocity means:

Accepted Answer

A) responding to another's actions with a similar action. 
B) deriving utility from an action that will cause another's utility to increase. 
C) doing good things for people and asking nothing in return. 
D) deriving utility from the action of a stranger. 
A) responding to another's actions with a similar action. 
B) deriving utility from an action that will cause another's utility to increase. 
C) doing good things for people and asking nothing in return. 
D) deriving utility from the action of a stranger. A

Question 3

When economists observe someone make a choice,they assume the individual chooses:

Accepted Answer

A) what gives him the most utility. 
B) what gives him the least utility. 
C) what creates the most utility for society. 
D) what is the most efficient choice. 
A) what gives him the most utility. 
B) what gives him the least utility. 
C) what creates the most utility for society. 
D) what is the most efficient choice. A

Question 4

Utility is:

Accepted Answer

A) difficult to measure because it is very subjective. 
B) as easy to measure as price signals in the economy. 
C) as difficult to measure as an individual's income level. 
D) None of these statements is true. 
A) difficult to measure because it is very subjective. 
B) as easy to measure as price signals in the economy. 
C) as difficult to measure as an individual's income level. 
D) None of these statements is true.

Question 5

Ethan enjoys buying books and going to the movies.He has income of $150 to spend on these two goods each month.The price of a book is $15 and the price of going to the movies is also $15.He currently consumes four books and six movies a month.If the price of a book increases to $20,then:

Accepted Answer

A) the substitution and income effects would both predict Ethan would consume more of both goods. 
B) the substitution and income effects would both predict Ethan would consume less of both goods. 
C) the substitution effect would predict Ethan would consume more books and less movies,and the income effect would predict he would consume less of both. 
D) the substitution effect would predict Ethan would consume less books and more movies and the income effect would predict he would consume less of both. 
A) the substitution and income effects would both predict Ethan would consume more of both goods. 
B) the substitution and income effects would both predict Ethan would consume less of both goods. 
C) the substitution effect would predict Ethan would consume more books and less movies,and the income effect would predict he would consume less of both. 
D) the substitution effect would predict Ethan would consume less books and more movies and the income effect would predict he would consume less of both.

Question 6

This graph shows three different budget constraints: A,B,andC.
 
If Larry has budget constraint B in the graph shown,what is his opportunity cost of one gallon of milk?

Accepted Answer

A) It is the amount of soda he can't buy if he uses the money to buy a gallon of milk. 
B) It is the amount of soda he could buy with the dollars it takes to buy one gallon of milk. 
C) It is less than one case of soda. 
D) All of these are true. 
A) It is the amount of soda he can't buy if he uses the money to buy a gallon of milk. 
B) It is the amount of soda he could buy with the dollars it takes to buy one gallon of milk. 
C) It is less than one case of soda. 
D) All of these are true.

Question 7

When the price of one good changes,and all others stay the same:

Accepted Answer

A) the change in relative prices is reflected in a change in the slope of the budget constraint. 
B) the change in relative prices can be thought of as a change in the opportunity costs of each good. 
C) the change in relative prices is reflected in a change in the marginal utility per dollar spent on each good. 
D) All of these statements are true. 
A) the change in relative prices is reflected in a change in the slope of the budget constraint. 
B) the change in relative prices can be thought of as a change in the opportunity costs of each good. 
C) the change in relative prices is reflected in a change in the marginal utility per dollar spent on each good. 
D) All of these statements are true.

Question 8

Ben is asked to rate the utility he would get from reading different types of publications for the next hour.If he read a graphic novel he would get utility of 5.If he read a biography,he would get utility of 4,and if he read his economics textbook,he would get utility of 9.An economist would predict that Ben will spend his next hour reading:

Accepted Answer

A) a graphic novel. 
B) a biography. 
C) his economics textbook. 
D) It is impossible to predict how Ben will spend his time. 
A) a graphic novel. 
B) a biography. 
C) his economics textbook. 
D) It is impossible to predict how Ben will spend his time.

Question 9

Zachary plays the piano for a half hour and gains utility of 7.He then watches TV for a half hour,then goes back to playing the piano again.Using the concept of utility to explain his choices,we can say:

Accepted Answer

A) the utility gained from watching TV was greater than playing the piano for a second half hour. 
B) Zachary revealed his preference for TV over a second half hour of playing piano. 
C) Zachary enjoys playing the piano for a half hour more than watching TV for a half hour. 
D) All of these are true. 
A) the utility gained from watching TV was greater than playing the piano for a second half hour. 
B) Zachary revealed his preference for TV over a second half hour of playing piano. 
C) Zachary enjoys playing the piano for a half hour more than watching TV for a half hour. 
D) All of these are true.

Question 10

If Bella eats one piece of pie,she gains a utility of 10.If she continues,a second piece yields a marginal utility of 8,a third will bring marginal utility of 2,and a fourth piece of pie will yield a marginal utility of -2.We can say:

Accepted Answer

A) Bella's total utility from eating four pieces of pie would be 22. 
B) Bella's total utility will decrease if she eats the third piece of pie. 
C) Bella's total utility will be maximized if she eats three pieces. 
D) Bella's total utility decreases after the first piece of pie. 
A) Bella's total utility from eating four pieces of pie would be 22. 
B) Bella's total utility will decrease if she eats the third piece of pie. 
C) Bella's total utility will be maximized if she eats three pieces. 
D) Bella's total utility decreases after the first piece of pie.

Question 11

When a person's income decreases,the slope of the individual's budget constraint stays the same because:

Accepted Answer

A) everything is relatively more expensive now. 
B) everything is relatively less expensive now. 
C) the relative prices of the goods haven't changed. 
D) the prices of the goods change in the same proportion. 
A) everything is relatively more expensive now. 
B) everything is relatively less expensive now. 
C) the relative prices of the goods haven't changed. 
D) the prices of the goods change in the same proportion.

Question 12

When a person's income increases:

Accepted Answer

A) the individual's budget constraint shifts straight out,maintaining the same slope. 
B) the individual's budget constraint shifts straight in,maintaining the same slope. 
C) the individual's budget constraint rotates out and becomes flatter. 
D) the individual's budget constraint rotates in and becomes steeper. 
A) the individual's budget constraint shifts straight out,maintaining the same slope. 
B) the individual's budget constraint shifts straight in,maintaining the same slope. 
C) the individual's budget constraint rotates out and becomes flatter. 
D) the individual's budget constraint rotates in and becomes steeper.

Question 13

Revealed preference is:

Accepted Answer

A) the idea that people's preferences can be determined by observing their choices and behavior. 
B) the notion that people reveal the utility they get by reporting it on a numerical scale. 
C) the method that psychologists,anthropologists,and economists use to measure utility. 
D) All of these are true. 
A) the idea that people's preferences can be determined by observing their choices and behavior. 
B) the notion that people reveal the utility they get by reporting it on a numerical scale. 
C) the method that psychologists,anthropologists,and economists use to measure utility. 
D) All of these are true.

Question 14

Nick has $300 a month to spend on detailing his sports car or buying bottles of good wine.It costs $100 to have his car detailed and $50 for a bottle of wine.He currently buys four bottles of wine and has his car detailed once a month.If the price of detailing his car decreased to $75,Nick's budget constraint:

Accepted Answer

A) would shift straight outward,because he is relatively wealthier. 
B) would rotate and change slope because relative prices have changed. 
C) would shift straight inward because he is relatively wealthier. 
D) One cannot determine what would happen without knowing Nick's marginal utility of each good. 
A) would shift straight outward,because he is relatively wealthier. 
B) would rotate and change slope because relative prices have changed. 
C) would shift straight inward because he is relatively wealthier. 
D) One cannot determine what would happen without knowing Nick's marginal utility of each good.

Question 15

A budget constraint:

Accepted Answer

A) is the same across all individuals with the same income constraints. 
B) is different for each individual with the same income constraints. 
C) is the same across all individuals with the same tastes and preferences. 
D) is different for each individual with the same tastes and preferences. 
A) is the same across all individuals with the same income constraints. 
B) is different for each individual with the same income constraints. 
C) is the same across all individuals with the same tastes and preferences. 
D) is different for each individual with the same tastes and preferences.

Question 16

Kimberly decides to go back to college full time at the age of 30,and finds herself with a much lower income than she was earning before.Now that she has less income,she finds herself eating less steak and more pasta than ever before.We can conclude:

Accepted Answer

A) steak and pasta are both normal goods,because they are both food she eats regardless of her income. 
B) steak and pasta are both inferior goods,because they are both food she eats regardless of her income. 
C) pasta is an inferior good because her demand increased when her income went down. 
D) Both b and c are true. 
A) steak and pasta are both normal goods,because they are both food she eats regardless of her income. 
B) steak and pasta are both inferior goods,because they are both food she eats regardless of her income. 
C) pasta is an inferior good because her demand increased when her income went down. 
D) Both b and c are true.

Question 17

Max is shopping for a new winter jacket.The salesperson explains that two coats have identical features-the Columbia jacket that costs $120,and the Burton jacket that costs $300.Max buys the Burton jacket.Burton jackets may be a good example of:

Accepted Answer

A) a normal good. 
B) an inferior good. 
C) a Veblen good. 
D) a Giffen good. 
A) a normal good. 
B) an inferior good. 
C) a Veblen good. 
D) a Giffen good.

Question 18

Revealed preference is:

Accepted Answer

A) widely accepted and used by economists,psychologists,and anthropologists. 
B) unique to economics and somewhat controversial. 
C) unique to economics,but accepted by all social sciences. 
D) used by many economists,psychologists,and anthropologists,yet remains somewhat controversial. 
A) widely accepted and used by economists,psychologists,and anthropologists. 
B) unique to economics and somewhat controversial. 
C) unique to economics,but accepted by all social sciences. 
D) used by many economists,psychologists,and anthropologists,yet remains somewhat controversial.

Question 19

Veblen goods:

Accepted Answer

A) are an excellent example of the individual nature of utility. 
B) seem to contradict the individual measure of utility. 
C) are goods that people buy more of when their income decreases. 
D) None of these is true. 
A) are an excellent example of the individual nature of utility. 
B) seem to contradict the individual measure of utility. 
C) are goods that people buy more of when their income decreases. 
D) None of these is true.

Question 20

You decide to donate $5 to Jerry's Kids at the grocery store checkout,and get to sign your name to a shamrock and hang it in their window.This is an example of the economic concept of:

Accepted Answer

A) marginal utility. 
B) altruism. 
C) reciprocity. 
D) selfishness. 
A) marginal utility. 
B) altruism. 
C) reciprocity. 
D) selfishness.

Exam 7: Consumer Behavior

The concept of marginal utility:

Reciprocity means:

When economists observe someone make a choice,they assume the individual chooses:

Utility is:

Ethan enjoys buying books and going to the movies.He has income of $150 to spend on these two goods each month.The price of a book is $15 and the price of going to the movies is also $15.He currently consumes four books and six movies a month.If the price of a book increases to $20,then:

This graph shows three different budget constraints: A,B,andC. If Larry has budget constraint B in the graph shown,what is his opportunity cost of one gallon of milk?

When the price of one good changes,and all others stay the same:

Zachary plays the piano for a half hour and gains utility of 7.He then watches TV for a half hour,then goes back to playing the piano again.Using the concept of utility to explain his choices,we can say:

If Bella eats one piece of pie,she gains a utility of 10.If she continues,a second piece yields a marginal utility of 8,a third will bring marginal utility of 2,and a fourth piece of pie will yield a marginal utility of -2.We can say:

When a person's income decreases,the slope of the individual's budget constraint stays the same because:

When a person's income increases:

Revealed preference is:

A budget constraint:

Kimberly decides to go back to college full time at the age of 30,and finds herself with a much lower income than she was earning before.Now that she has less income,she finds herself eating less steak and more pasta than ever before.We can conclude:

Max is shopping for a new winter jacket.The salesperson explains that two coats have identical features-the Columbia jacket that costs $120,and the Burton jacket that costs $300.Max buys the Burton jacket.Burton jackets may be a good example of:

Revealed preference is:

Veblen goods:

You decide to donate $5 to Jerry's Kids at the grocery store checkout,and get to sign your name to a shamrock and hang it in their window.This is an example of the economic concept of:

Economics and Life

Specialization and Exchange

Markets

Elasticity

Efficiency

Government Intervention

Behavioral Economics: A Closer Look at Decision Making

Game Theory and Strategic Thinking

Information

Time and Uncertainty

The Costs of Production

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

The Factors of Production

International Trade

Externalities

Public Goods and Common Resources

Taxation and the Public Budget

Poverty, Inequality, and Discrimination

Political Choices

Public Policy and Choice Architecture

Measuring the Wealth of Nations

The Cost of Living

Economic Growth

Unemployment and the Demand for Labor

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Basics of Finance

Money and the Monetary System

Inflation

Financial Crisis

Open-Market Macroeconomics

Development Economics

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