Question 1

When total utility is at a maximum, marginal utility is zero.

Accepted Answer

A) True 
 B)False

Question 2

Mary says, "You would have to pay me $50 to attend that pro wrestling event." For Mary, the marginal utility of the event is

Accepted Answer

A)  zero. 
B)  positive, but declines rapidly. 
C)  negative. 
D)  positive, but less than the ticket price. 
A)  zero. 
B)  positive, but declines rapidly. 
C)  negative. 
D)  positive, but less than the ticket price.

Question 3

The theory of consumer behavior assumes that consumers attempt to maximize

Accepted Answer

A)  the difference between total and marginal utility. 
B)  total utility. 
C)  average utility. 
D)  marginal utility. 
A)  the difference between total and marginal utility. 
B)  total utility. 
C)  average utility. 
D)  marginal utility.

Question 4

The budget line shows all the combinations of two products that the consumer can buy, given money income and product prices.

Accepted Answer

A) True 
 B)False

Question 5

If the price of a good increases, the substitution effect will

Accepted Answer

A)  always tend to make the quantity decrease, while the income effect could go either way. 
B)  always tend to make the quantity increase, while the income effect could go either way. 
C)  go either way, but the income effect will always make the quantity increase. 
D)  go either way, but the income effect will always make the quantity decrease. 
A)  always tend to make the quantity decrease, while the income effect could go either way. 
B)  always tend to make the quantity increase, while the income effect could go either way. 
C)  go either way, but the income effect will always make the quantity increase. 
D)  go either way, but the income effect will always make the quantity decrease.

Question 6

The table shows an indifference schedule for several combinations of X and Y.   In moving from combination b to c, the consumer

Accepted Answer

A)  gets 1 unit of X for 1 unit of Y. 
B)  gets 2 units of X for 2 units of Y. 
C)  gets 3 units of X for 1 unit of Y. 
D)  gives up 4 units of X for 1 unit of Y. 
A)  gets 1 unit of X for 1 unit of Y. 
B)  gets 2 units of X for 2 units of Y. 
C)  gets 3 units of X for 1 unit of Y. 
D)  gives up 4 units of X for 1 unit of Y.

Question 7

Assume that a consumer purchases a combination of products Y and Z and that the MUy/Py = 25 and MUz/Pz = 20. To maximize utility, without spending more money, the consumer should

Accepted Answer

A)  purchase less of Y and more of Z. 
B)  purchase more of Y and less of Z. 
C)  purchase more of both Y and Z. 
D)  make no change in the quantities Y and Z. 
A)  purchase less of Y and more of Z. 
B)  purchase more of Y and less of Z. 
C)  purchase more of both Y and Z. 
D)  make no change in the quantities Y and Z.

Question 8

It is possible for a consumer's indifference curves to intersect.

Accepted Answer

A) True 
 B)False

Question 9

The marginal rate of substitution of beef for chicken is the

Accepted Answer

A)  number of units of chicken the consumer is prepared to give up to obtain one more unit of beef. 
B)  number of units of beef the consumer is prepared to give up as income falls. 
C)  number of units of beef the consumer must sacrifice to obtain one more unit of chicken. 
D)  rate at which units of beef may be exchanged for units of chicken in the market. 
A)  number of units of chicken the consumer is prepared to give up to obtain one more unit of beef. 
B)  number of units of beef the consumer is prepared to give up as income falls. 
C)  number of units of beef the consumer must sacrifice to obtain one more unit of chicken. 
D)  rate at which units of beef may be exchanged for units of chicken in the market.

Question 10

The indifference curve in the diagram yields Juan 100 units of utility. If Juan's money income were to increase by 20 percent, the indifference curve would

Accepted Answer

A)  shift leftward. 
B)  shift rightward. 
C)  become steeper. 
D)  not be affected. 
A)  shift leftward. 
B)  shift rightward. 
C)  become steeper. 
D)  not be affected.

Question 11

Refer to the diagram, in which the downsloping lines are budget lines and I1, I2, and I3 comprise an indifference map. The combinations of products M and N indicated by points 1, 3, and 5 are such that

Accepted Answer

A)  all three imply the same level of utility. 
B)  1 and 5 imply a higher level of utility than does 3. 
C)  3 implies a higher level of utility than does 1 or 5. 
D)  the person is indifferent among the three combinations. 
A)  all three imply the same level of utility. 
B)  1 and 5 imply a higher level of utility than does 3. 
C)  3 implies a higher level of utility than does 1 or 5. 
D)  the person is indifferent among the three combinations.

Question 12

Refer to the diagram. The budget line shift that moves the consumer's equilibrium from point A to point B suggests

Accepted Answer

A)  an increase in the demand for product X. 
B)  a decrease in the demand for product X. 
C)  no change in the demand for product X. 
D)  that X is an inferior good. 
A)  an increase in the demand for product X. 
B)  a decrease in the demand for product X. 
C)  no change in the demand for product X. 
D)  that X is an inferior good.

Question 13

Answer the question based on the table below showing the marginal utility schedules for product X and product Y for a hypothetical consumer. The price of product X is $4, and the price of product Y is $2. The income of the consumer is $20.
  When the consumer purchases the utility-maximizing combination of product X and product Y, total utility will be

Accepted Answer

A)  72. 
B)  84. 
C)  136. 
D)  156. 
A)  72. 
B)  84. 
C)  136. 
D)  156.

Question 14

If the price of a good increases, it will tend to make the MU to P ratio for the good rise and the good becomes more attractive to the buyer.

Accepted Answer

A) True 
 B)False

Question 15

In drawing a particular budget line, money income and the prices of the two products are fixed.

Accepted Answer

A) True 
 B)False

Question 16

Assume a diagram in which a budget line is imposed on an indifference map. A consumer will maximize her utility

Accepted Answer

A)  at any point where the budget line and an indifference curve intersect. 
B)  at either point where the budget line intersects the horizontal and vertical axes. 
C)  where the budget line is tangent to an indifference curve. 
D)  where the ratio of the two product prices equals the reciprocal of the consumer's income. 
A)  at any point where the budget line and an indifference curve intersect. 
B)  at either point where the budget line intersects the horizontal and vertical axes. 
C)  where the budget line is tangent to an indifference curve. 
D)  where the ratio of the two product prices equals the reciprocal of the consumer's income.

Question 17

If total utility has reached a maximum level, and assuming that diminishing marginal utility already applies, then what will happen as the consumer consumes additional units of the product?

Accepted Answer

A)  Marginal utility of the additional units will be greater than zero. 
B)  Total utility will turn negative. 
C)  Marginal utility of the additional units will turn negative. 
D)  Total utility will increase at a diminishing rate. 
A)  Marginal utility of the additional units will be greater than zero. 
B)  Total utility will turn negative. 
C)  Marginal utility of the additional units will turn negative. 
D)  Total utility will increase at a diminishing rate.

Question 18

As a consumer moves from one point to another along an indifference curve, which of the following is assumed to stay constant?

Accepted Answer

A)  income or budget 
B)  prices of the two goods 
C)  total satisfaction from the two goods 
D)  marginal utility of the two goods 
A)  income or budget 
B)  prices of the two goods 
C)  total satisfaction from the two goods 
D)  marginal utility of the two goods

Question 19

Refer to the diagram. The budget line shift that moves the consumer's equilibrium position from point A to point B suggests

Accepted Answer

A)  an increase in the quantity of Y demanded. 
B)  a decrease in the quantity of Y demanded. 
C)  a leftward shift in the demand curve for Y. 
D)  a rightward shift in the demand curve for Y. 
A)  an increase in the quantity of Y demanded. 
B)  a decrease in the quantity of Y demanded. 
C)  a leftward shift in the demand curve for Y. 
D)  a rightward shift in the demand curve for Y.

Question 20

The substitution effect suggests that when consumers judge product quality by price, they will substitute high-priced products for low-priced products.

Accepted Answer

A) True 
 B)False

Exam 7: Utility Maximization

When total utility is at a maximum, marginal utility is zero.

Mary says, "You would have to pay me $50 to attend that pro wrestling event." For Mary, the marginal utility of the event is

The theory of consumer behavior assumes that consumers attempt to maximize

The budget line shows all the combinations of two products that the consumer can buy, given money income and product prices.

If the price of a good increases, the substitution effect will

The table shows an indifference schedule for several combinations of X and Y. In moving from combination b to c, the consumer

Assume that a consumer purchases a combination of products Y and Z and that the MUy/Py = 25 and MUz/Pz = 20. To maximize utility, without spending more money, the consumer should

It is possible for a consumer's indifference curves to intersect.

The marginal rate of substitution of beef for chicken is the

The indifference curve in the diagram yields Juan 100 units of utility. If Juan's money income were to increase by 20 percent, the indifference curve would

Refer to the diagram, in which the downsloping lines are budget lines and I1, I2, and I3 comprise an indifference map. The combinations of products M and N indicated by points 1, 3, and 5 are such that

Refer to the diagram. The budget line shift that moves the consumer's equilibrium from point A to point B suggests

If the price of a good increases, it will tend to make the MU to P ratio for the good rise and the good becomes more attractive to the buyer.

In drawing a particular budget line, money income and the prices of the two products are fixed.

Assume a diagram in which a budget line is imposed on an indifference map. A consumer will maximize her utility

If total utility has reached a maximum level, and assuming that diminishing marginal utility already applies, then what will happen as the consumer consumes additional units of the product?

As a consumer moves from one point to another along an indifference curve, which of the following is assumed to stay constant?

Refer to the diagram. The budget line shift that moves the consumer's equilibrium position from point A to point B suggests

The substitution effect suggests that when consumers judge product quality by price, they will substitute high-priced products for low-priced products.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Assume that a consumer purchases a combination of products Y and Z and that the MUy/P_y= 25 and MUz/P_z= 20. To maximize utility, without spending more money, the consumer should

Refer to the diagram, in which the downsloping lines are budget lines and I₁, I₂, and I₃comprise an indifference map. The combinations of products M and N indicated by points 1, 3, and 5 are such that