Question 1

Which of the following describes "utility"?

Accepted Answer

A) how consumers rank different goods and services.    
B) how useful is a good or service.  
C) how many different things a good or service can do.  
D) when consumers use goods or services. 
E) none of the above. 
A) how consumers rank different goods and services.    
B) how useful is a good or service.  
C) how many different things a good or service can do.  
D) when consumers use goods or services. 
E) none of the above.

Question 2

Use the following to answer questions :
Table 5-1  
-Refer to Table 5-1.Suppose X costs $8 per unit and Y costs $5 per unit.What quantities of X and Y will the consumer buy if she has $31 to spend?

Accepted Answer

A) X = 3, Y = 4 
B) X = 4, Y = 5 
C) X = 2, Y = 3 
D) X = 1, Y = 2 
E) None of the above 
A) X = 3, Y = 4 
B) X = 4, Y = 5 
C) X = 2, Y = 3 
D) X = 1, Y = 2 
E) None of the above

Question 3

An increase in the price of a substitute good may or may not cause total spending on a particular good to climb, depending upon the price elasticities of supply and demand of the good in question.

Accepted Answer

A) True 
 B)False

Question 4

If two goods, such as tea and coffee, may be considered perfect substitutes, their price-quantity relations may be depicted by which panel in the figure below?

Accepted Answer

A) a. 
B) b. 
C) c. 
D) d. 
E) e. 
A) a. 
B) b. 
C) c. 
D) d. 
E) e.

Question 5

The price of good X falls.The income-effect of this price change:

Accepted Answer

A) will usually cause X purchases to increase. 
B) will usually cause X purchases to decrease. 
C) may cause X purchases either to increase or decrease, there being no "usually" consequence. 
D) by definition, neither increases nor decreases X purchases. 
E) will not apply, since income-effects refer to changes in spendable income, not to price changes. 
A) will usually cause X purchases to increase. 
B) will usually cause X purchases to decrease. 
C) may cause X purchases either to increase or decrease, there being no "usually" consequence. 
D) by definition, neither increases nor decreases X purchases. 
E) will not apply, since income-effects refer to changes in spendable income, not to price changes.

Question 6

A condition for consumer equilibrium is that the total utility derived from good A is equal to the total utility derived from good B.

Accepted Answer

A) True 
 B)False

Question 7

The rise in the price of butter will lead to:

Accepted Answer

A) a fall in the demand curve for butter. 
B) a rightward shift in the demand curve for butter's substitute. 
C) a leftward shift in the demand curve for butter's substitute. 
D) an increase in the marginal utility of the last unit consumed of butter's substitute. 
E) none of the above. 
A) a fall in the demand curve for butter. 
B) a rightward shift in the demand curve for butter's substitute. 
C) a leftward shift in the demand curve for butter's substitute. 
D) an increase in the marginal utility of the last unit consumed of butter's substitute. 
E) none of the above.

Question 8

The gap between total utility and total market value benefits the buyer, for she receives more utility than she pays for.

Accepted Answer

A) True 
 B)False

Question 9

As you increase the consumption of X, total and marginal utility tend to increase.

Accepted Answer

A) True 
 B)False

Question 10

In equilibrium for the consumer, the marginal utility of good A must equal the marginal utility of good B.

Accepted Answer

A) True 
 B)False

Question 11

The maximum-satisfaction rule for spending consumer income is: equalize the marginal utilities of the last unit purchased of every commodity.

Accepted Answer

A) True 
 B)False

Question 12

In an economically efficient society, pure water should sell for more than diamonds.

Accepted Answer

A) True 
 B)False

Question 13

Suppose Mary is currently spending all her income on cookies and milk.The marginal utility of cookies is 15, the price of cookies is $5, the marginal utility of milk is 10, and the price of milk is $1.To increase her total utility, Mary should:

Accepted Answer

A) buy more cookies and less milk. 
B) buy more milk and fewer cookies. 
C) buy more of both goods. 
D) buy less of both goods. 
E) do nothing.She is currently maximizing utility with her limited budget. 
A) buy more cookies and less milk. 
B) buy more milk and fewer cookies. 
C) buy more of both goods. 
D) buy less of both goods. 
E) do nothing.She is currently maximizing utility with her limited budget.

Question 14

Diamonds cost more than water, so diamonds must be worth more to us than water.

Accepted Answer

A) True 
 B)False

Question 15

To be in equilibrium (i.e., to maximize satisfaction), the consumer must:

Accepted Answer

A) purchase no inferior goods. 
B) equalize the marginal utilities of the last unit purchased of every commodity. 
C) be sure that the prices of all commodities purchased are proportional to their total utilities. 
D) be sure that the price of each good is equal to the marginal utility of money. 
E) allocate income so that the last penny spent on any good generates the same increment of utility as the last penny spent on any other good. 
A) purchase no inferior goods. 
B) equalize the marginal utilities of the last unit purchased of every commodity. 
C) be sure that the prices of all commodities purchased are proportional to their total utilities. 
D) be sure that the price of each good is equal to the marginal utility of money. 
E) allocate income so that the last penny spent on any good generates the same increment of utility as the last penny spent on any other good.

Question 16

If prices go up, your real income goes down.

Accepted Answer

A) True 
 B)False

Question 17

The paradox of value notes that:

Accepted Answer

A) there is no rational explanation why people should set a high value on objects such as diamonds, which have little real usefulness. 
B) the price obtained from selling any commodity may bear little relationship to the cost of producing it. 
C) supply and demand curves do very little to explain how value (or price)is determined. 
D) no one consumer has any control over the price (or value)of a commodity, but consumers collectively do have such control. 
E) there is no consistent relationship between the total utility obtained from any commodity and the price charged for it. 
A) there is no rational explanation why people should set a high value on objects such as diamonds, which have little real usefulness. 
B) the price obtained from selling any commodity may bear little relationship to the cost of producing it. 
C) supply and demand curves do very little to explain how value (or price)is determined. 
D) no one consumer has any control over the price (or value)of a commodity, but consumers collectively do have such control. 
E) there is no consistent relationship between the total utility obtained from any commodity and the price charged for it.

Question 18

If two goods, such as tea and lemon, may be considered perfect complements, their price-quantity relations may be depicted by which panel of the figure below?

Accepted Answer

A) a. 
B) b. 
C) c. 
D) d. 
E) e. 
A) a. 
B) b. 
C) c. 
D) d. 
E) e.

Question 19

In the figure below, the decline in consumer surplus resulting from an increase in price from $5 to $10 is given by the area:

Accepted Answer

A) FGH 
B) CEH 
C) FGDC 
D) CEGF 
E) DEG 
A) FGH 
B) CEH 
C) FGDC 
D) CEGF 
E) DEG

Question 20

A consumer spends all of her income on two goods, coffee and doughnuts.She purchases coffee at 25 cents a unit with a total utility of 800 and a marginal utility of 12.Doughnuts are purchase at 75 cents a unit with a total utility of 200 and a marginal utility of 24.In order to reach consumer equilibrium, she should consume:

Accepted Answer

A) less doughnuts and more coffee. 
B) more doughnuts but the same amount of coffee. 
C) more coffee but the same amount of doughnuts. 
D) more doughnuts and less coffee. 
E) the same amount of coffee and doughnuts. 
A) less doughnuts and more coffee. 
B) more doughnuts but the same amount of coffee. 
C) more coffee but the same amount of doughnuts. 
D) more doughnuts and less coffee. 
E) the same amount of coffee and doughnuts.

Which of the following describes "utility"?

Use the following to answer questions : Table 5-1 -Refer to Table 5-1.Suppose X costs $8 per unit and Y costs $5 per unit.What quantities of X and Y will the consumer buy if she has $31 to spend?

An increase in the price of a substitute good may or may not cause total spending on a particular good to climb, depending upon the price elasticities of supply and demand of the good in question.

If two goods, such as tea and coffee, may be considered perfect substitutes, their price-quantity relations may be depicted by which panel in the figure below?

The price of good X falls.The income-effect of this price change:

A condition for consumer equilibrium is that the total utility derived from good A is equal to the total utility derived from good B.

The rise in the price of butter will lead to:

The gap between total utility and total market value benefits the buyer, for she receives more utility than she pays for.

As you increase the consumption of X, total and marginal utility tend to increase.

In equilibrium for the consumer, the marginal utility of good A must equal the marginal utility of good B.

The maximum-satisfaction rule for spending consumer income is: equalize the marginal utilities of the last unit purchased of every commodity.

In an economically efficient society, pure water should sell for more than diamonds.

Suppose Mary is currently spending all her income on cookies and milk.The marginal utility of cookies is 15, the price of cookies is $5, the marginal utility of milk is 10, and the price of milk is $1.To increase her total utility, Mary should:

Diamonds cost more than water, so diamonds must be worth more to us than water.

To be in equilibrium (i.e., to maximize satisfaction), the consumer must:

If prices go up, your real income goes down.

The paradox of value notes that:

If two goods, such as tea and lemon, may be considered perfect complements, their price-quantity relations may be depicted by which panel of the figure below?

In the figure below, the decline in consumer surplus resulting from an increase in price from $5 to $10 is given by the area:

The Central Concepts of Economics

The Modern Mixed Economy

Basic Elements of Supply and Demand Part

Supply and Demand: Elasticity and Applications

Production and Business Organization

Analysis of Costs

Analysis of Perfectly Competitive Markets

Imperfect Competition and Monopoly

Competition Among the Few

Economics of Uncertainty

The Labor Market

Land, Natural Resources, and the Environment

Capital, Interest, and Profits Part Four: Applications of Economic Principles

Government Taxation and Expenditure

Efficiency Vsequality: The Big Trade-Off

International Trade

Overview of Macroeconomics

Geometrical Analysis of Consumer Equilibrium

Production Cost Theory and Decisions of the Firm

Filters

Exam 5: Demand and Consumer Behavior

Which of the following describes "utility"?

Use the following to answer questions : Table 5-1 -Refer to Table 5-1.Suppose X costs $8 per unit and Y costs $5 per unit.What quantities of X and Y will the consumer buy if she has $31 to spend?

An increase in the price of a substitute good may or may not cause total spending on a particular good to climb, depending upon the price elasticities of supply and demand of the good in question.

If two goods, such as tea and coffee, may be considered perfect substitutes, their price-quantity relations may be depicted by which panel in the figure below?

The price of good X falls.The income-effect of this price change:

A condition for consumer equilibrium is that the total utility derived from good A is equal to the total utility derived from good B.

The rise in the price of butter will lead to:

The gap between total utility and total market value benefits the buyer, for she receives more utility than she pays for.

As you increase the consumption of X, total and marginal utility tend to increase.

In equilibrium for the consumer, the marginal utility of good A must equal the marginal utility of good B.

The maximum-satisfaction rule for spending consumer income is: equalize the marginal utilities of the last unit purchased of every commodity.

In an economically efficient society, pure water should sell for more than diamonds.

Suppose Mary is currently spending all her income on cookies and milk.The marginal utility of cookies is 15, the price of cookies is $5, the marginal utility of milk is 10, and the price of milk is $1.To increase her total utility, Mary should:

Diamonds cost more than water, so diamonds must be worth more to us than water.

To be in equilibrium (i.e., to maximize satisfaction), the consumer must:

If prices go up, your real income goes down.

The paradox of value notes that:

If two goods, such as tea and lemon, may be considered perfect complements, their price-quantity relations may be depicted by which panel of the figure below?

In the figure below, the decline in consumer surplus resulting from an increase in price from $5 to $10 is given by the area:

The Central Concepts of Economics

The Modern Mixed Economy

Basic Elements of Supply and Demand Part

Supply and Demand: Elasticity and Applications

Production and Business Organization

Analysis of Costs

Analysis of Perfectly Competitive Markets

Imperfect Competition and Monopoly

Competition Among the Few

Economics of Uncertainty

The Labor Market

Land, Natural Resources, and the Environment

Capital, Interest, and Profits Part Four: Applications of Economic Principles

Government Taxation and Expenditure

Efficiency Vsequality: The Big Trade-Off

International Trade

Overview of Macroeconomics

Geometrical Analysis of Consumer Equilibrium

Production Cost Theory and Decisions of the Firm

Filters