Question 1

A decrease in the prices of two products that a consumer buys out of a constant budget would cause the consumer's

Accepted Answer

A)  indifference curves to shift outward from the origin. 
B)  indifference curves to shift inward to the origin. 
C)  budget line to shift outward from the origin. 
D)  budget line to shift inward to the origin. 
A)  indifference curves to shift outward from the origin. 
B)  indifference curves to shift inward to the origin. 
C)  budget line to shift outward from the origin. 
D)  budget line to shift inward to the origin.

Question 2

A downward-sloping demand curve can be derived for a normal product by increasing its price in the consumer-behavior model and noting

Accepted Answer

A)  the increase in the utility-maximizing quantity of that product demanded. 
B)  the decrease in the utility-maximizing quantity of that product demanded. 
C)  a substitution effect that encourages more consumption of that product. 
D)  an income effect that encourages more consumption of that product. 
A)  the increase in the utility-maximizing quantity of that product demanded. 
B)  the decrease in the utility-maximizing quantity of that product demanded. 
C)  a substitution effect that encourages more consumption of that product. 
D)  an income effect that encourages more consumption of that product.

Question 3

"Consumer equilibrium" refers to the situation when the consumer is getting

Accepted Answer

A)  the highest total utility out of spending a given budget on various goods. 
B)  the highest marginal utility out of spending a given budget on various goods. 
C)  equal marginal utility values from each product consumed. 
D)  equal total utility values from each product consumed. 
A)  the highest total utility out of spending a given budget on various goods. 
B)  the highest marginal utility out of spending a given budget on various goods. 
C)  equal marginal utility values from each product consumed. 
D)  equal total utility values from each product consumed.

Question 4

Understanding the water and diamond paradox is valuable because it explains why

Accepted Answer

A)  diamonds have many substitutes. 
B)  water is more important than diamonds. 
C)  the prices of products are not necessarily measures of the products' usefulness. 
D)  consumer spending on diamonds has increased, while spending on water has decreased. 
A)  diamonds have many substitutes. 
B)  water is more important than diamonds. 
C)  the prices of products are not necessarily measures of the products' usefulness. 
D)  consumer spending on diamonds has increased, while spending on water has decreased.

Question 5

The law of diminishing marginal utility states that

Accepted Answer

A)  total utility is maximized when consumers obtain the same amount of utility per unit of each product consumed. 
B)  beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer. 
C)  price must be lowered to induce firms to supply more of a product. 
D)  it will take larger and larger amounts of resources beyond some point to produce successive units of a product. 
A)  total utility is maximized when consumers obtain the same amount of utility per unit of each product consumed. 
B)  beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer. 
C)  price must be lowered to induce firms to supply more of a product. 
D)  it will take larger and larger amounts of resources beyond some point to produce successive units of a product.

Question 6

The budget line shift from ab to cd in the figure is consistent with

Accepted Answer

A)  decreases in the prices of both M and N. 
B)  an increase in the price of M and a decrease in the price of N. 
C)  a decrease in money income. 
D)  an increase in money income and decrease in the price of N. 
A)  decreases in the prices of both M and N. 
B)  an increase in the price of M and a decrease in the price of N. 
C)  a decrease in money income. 
D)  an increase in money income and decrease in the price of N.

Question 7

Which of the following statements about utility is true?

Accepted Answer

A)  It is the same as usefulness. 
B)  Total utility diminishes as soon as additional units of a good are consumed. 
C)  Utility is objectively determined, meaning a good should provide the same satisfaction to whomever consumes it. 
D)  Utility is difficult to measure quantitatively. 
A)  It is the same as usefulness. 
B)  Total utility diminishes as soon as additional units of a good are consumed. 
C)  Utility is objectively determined, meaning a good should provide the same satisfaction to whomever consumes it. 
D)  Utility is difficult to measure quantitatively.

Question 8

In spending all his income on beer and pizza, Fred finds that the marginal utility of the last pizza he consumed is 8, and the marginal utility of the last bottle of beer is 4. The price of a bottle of beer is $1.50. If Fred has maximized his utility, the price of pizza must be

Accepted Answer

A)  $0.75. 
B)  $1.00. 
C)  $3.00. 
D)  $4.50. 
A)  $0.75. 
B)  $1.00. 
C)  $3.00. 
D)  $4.50.

Question 9

A budget line shows the

Accepted Answer

A)  alternative combinations of two goods that a consumer can purchase with a given money income. 
B)  alternative combinations of two goods that will yield the same level of total utility to a consumer. 
C)  quantities of a particular good that a consumer will buy at various prices. 
D)  ratio of money income to product price. 
A)  alternative combinations of two goods that a consumer can purchase with a given money income. 
B)  alternative combinations of two goods that will yield the same level of total utility to a consumer. 
C)  quantities of a particular good that a consumer will buy at various prices. 
D)  ratio of money income to product price.

Question 10

Suppose that a consumer who spends her budget on X and Y is initially at equilibrium. If the price of X increases, then the MU/P of X will

Accepted Answer

A)  decrease and the consumer will respond by buying more Y and less X. 
B)  decrease and the consumer will respond by buying more X and less Y. 
C)  increase and the consumer will respond by buying more Y and less X. 
D)  increase and the consumer will respond by buying more X and less Y. 
A)  decrease and the consumer will respond by buying more Y and less X. 
B)  decrease and the consumer will respond by buying more X and less Y. 
C)  increase and the consumer will respond by buying more Y and less X. 
D)  increase and the consumer will respond by buying more X and less Y.

Question 11

A graph that shows the maximum combinations of two goods which a consumer can purchase with a given money income is

Accepted Answer

A)  the production possibilities curve. 
B)  an indifference curve. 
C)  a demand curve. 
D)  a budget line. 
A)  the production possibilities curve. 
B)  an indifference curve. 
C)  a demand curve. 
D)  a budget line.

Question 12

The table below shows the utility schedule for a consumer of candy bars.   Marginal utility becomes negative with the consumption of the

Accepted Answer

A)  Negative marginal utility is not shown in the table; marginal utility remains positive throughout. 
B)  fifth candy bar. 
C)  sixth candy bar. 
D)  seventh candy bar. 
A)  Negative marginal utility is not shown in the table; marginal utility remains positive throughout. 
B)  fifth candy bar. 
C)  sixth candy bar. 
D)  seventh candy bar.

Question 13

The goal of a rational consumer is to maximize

Accepted Answer

A)  the quantities of all goods consumed. 
B)  the MU/P of all goods consumed. 
C)  marginal utility of all goods consumed. 
D)  total utility from all goods consumed. 
A)  the quantities of all goods consumed. 
B)  the MU/P of all goods consumed. 
C)  marginal utility of all goods consumed. 
D)  total utility from all goods consumed.

Question 14

If MUa/Pa = 100/$35 = MUb/Pb = 300/? = MUc/Pc = 400/?, the prices of products B and C in consumer equilibrium

Accepted Answer

A)  cannot be determined from the information given. 
B)  are $105 and $140, respectively. 
C)  are $105 and $175, respectively. 
D)  are $100 and $200, respectively. 
A)  cannot be determined from the information given. 
B)  are $105 and $140, respectively. 
C)  are $105 and $175, respectively. 
D)  are $100 and $200, respectively.

Question 15

The table shows the total utility data for products X and Y. Assume that the prices of X and Y are $3 and $4, respectively, and that consumer income is $18.   Which of the following price-quantity schedules would represent the demand for X in the $2 and $3 price range?

Accepted Answer

A)  option A 
B)  option B 
C)  option C 
D)  option D 
A)  option A 
B)  option B 
C)  option C 
D)  option D

Question 16

A consumer has two basic choices: rent a DVD movie for $4.00 and spend 2 hours watching it, or spend $13 for a miniature golf game that takes 1 hour. If the marginal utilities of the movie and the miniature golf game are equal, and the consumer values time at $12 an hour, the rational consumer will most likely

Accepted Answer

A)  rent the movie instead of playing miniature golf. 
B)  play miniature golf instead of renting the movie. 
C)  be indifferent between the movie and the miniature golf game. 
D)  not have enough basis for making a utility-maximizing decision. 
A)  rent the movie instead of playing miniature golf. 
B)  play miniature golf instead of renting the movie. 
C)  be indifferent between the movie and the miniature golf game. 
D)  not have enough basis for making a utility-maximizing decision.

Question 17

The marginal utility of leisure time appears to

Accepted Answer

A)  bethe same even for people with widely different incomes. 
B)  beexempt from the law of diminishing marginal utility. 
C)  increase as the quantity of available leisure time decreases. 
D)  equal zero for successful business executives. 
A)  bethe same even for people with widely different incomes. 
B)  beexempt from the law of diminishing marginal utility. 
C)  increase as the quantity of available leisure time decreases. 
D)  equal zero for successful business executives.

Question 18

Marginal utility is the accumulation of the total utility from successive units of a good or service consumed.

Accepted Answer

A) True 
 B)False

Question 19

If total utility increases as consumption of a good increases, then marginal utility must be increasing also.

Accepted Answer

A) True 
 B)False

Question 20

The table shows the utility schedule for a consumer of candy bars.   The consumption of which bar yields the greatest marginal utility?

Accepted Answer

A)  third 
B)  fourth 
C)  sixth 
D)  second 
A)  third 
B)  fourth 
C)  sixth 
D)  second

Exam 7: Utility Maximization

A decrease in the prices of two products that a consumer buys out of a constant budget would cause the consumer's

A downward-sloping demand curve can be derived for a normal product by increasing its price in the consumer-behavior model and noting

"Consumer equilibrium" refers to the situation when the consumer is getting

Understanding the water and diamond paradox is valuable because it explains why

The law of diminishing marginal utility states that

The budget line shift from ab to cd in the figure is consistent with

Which of the following statements about utility is true?

In spending all his income on beer and pizza, Fred finds that the marginal utility of the last pizza he consumed is 8, and the marginal utility of the last bottle of beer is 4. The price of a bottle of beer is $1.50. If Fred has maximized his utility, the price of pizza must be

A budget line shows the

Suppose that a consumer who spends her budget on X and Y is initially at equilibrium. If the price of X increases, then the MU/P of X will

A graph that shows the maximum combinations of two goods which a consumer can purchase with a given money income is

The table below shows the utility schedule for a consumer of candy bars. Marginal utility becomes negative with the consumption of the

The goal of a rational consumer is to maximize

If MUa/Pa = 100/$35 = MUb/Pb = 300/? = MUc/Pc = 400/?, the prices of products B and C in consumer equilibrium

The table shows the total utility data for products X and Y. Assume that the prices of X and Y are $3 and $4, respectively, and that consumer income is $18. Which of the following price-quantity schedules would represent the demand for X in the $2 and $3 price range?

The marginal utility of leisure time appears to

Marginal utility is the accumulation of the total utility from successive units of a good or service consumed.

If total utility increases as consumption of a good increases, then marginal utility must be increasing also.

The table shows the utility schedule for a consumer of candy bars. The consumption of which bar yields the greatest marginal utility?

Limits, Alternatives, and Choices

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Market Failures: Public Goods and Externalities

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Elasticity

Behavioral Economics

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Pure Competition in the Short Run

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The Demand for Resources

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If MU_a/P_a= 100/$35 = MU_b/P_b= 300/? = MU_c/P_c= 400/?, the prices of products B and C in consumer equilibrium