Question 1

The quantity demanded of handheld calculators, a normal good, will _______ with a price _______ .

Accepted Answer

A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; change 
A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  increase; change C

Question 2

Which of the following statements is (are) true?

Accepted Answer

A)  As a consumer consumes more and more of a good or service, its marginal utility eventually falls. 
B)  Utility is a quality inherent in the good or service itself. 
C)  Marginal utility is the change in total utility resulting from consuming one more or one less unit of a good. 
D)  Both A and C are true. 
A)  As a consumer consumes more and more of a good or service, its marginal utility eventually falls. 
B)  Utility is a quality inherent in the good or service itself. 
C)  Marginal utility is the change in total utility resulting from consuming one more or one less unit of a good. 
D)  Both A and C are true. D

Question 3

In the early 1970s, the handheld calculator came out on the market.Before that time, the desktop calculator was an important item for those who had to make calculations.Use the theory of consumer maximizing behavior to explain what happened in the desktop calculator market and the handheld calculator market since then.

Accepted Answer

The theory of consumer maximizing behavior suggests that individuals aim to get the most value for their money by purchasing goods and services that offer the greatest utility relative to their cost. When the handheld calculator was introduced in the early 1970s, it represented a significant technological advancement over the desktop calculator, primarily in terms of size, portability, and eventually, cost.

Initially, the desktop calculator was an essential tool for businesses, scientists, engineers, and students who needed to perform complex calculations. These calculators were relatively large, expensive, and not easily portable. However, they were the best available technology for calculation-intensive tasks.

With the advent of the handheld calculator, consumers were presented with a new option that offered several advantages:

1. Portability: Handheld calculators could easily be carried around, making them convenient for use in various settings, from classrooms to business meetings.

2. Affordability: As technology advanced and production costs decreased, handheld calculators became more affordable for the average consumer. This price reduction increased their accessibility and appeal.

3. Functionality: Early handheld calculators may have had fewer features than their desktop counterparts, but over time, they became more sophisticated, incorporating many of the functions previously only available on desktop models.

4. Ease of Use: Handheld calculators were designed to be user-friendly, with intuitive interfaces that made them easier to use than some of the more complex desktop calculators.

According to the theory of consumer maximizing behavior, as handheld calculators improved and became more cost-effective, consumers would naturally gravitate towards them. This shift in consumer preference would lead to a decrease in demand for desktop calculators. Manufacturers would respond to this change by focusing more on the production and development of handheld models, further innovating in that space to capture the market.

Over time, the market for desktop calculators would shrink as handheld calculators dominated the market. This would be reflected in reduced production, fewer models available, and potentially higher prices for the remaining desktop calculators due to lower economies of scale.

In the long run, the desktop calculator market would likely become a niche market, catering to specific professional needs that require more robust computing power or specialized functions that handheld calculators do not provide. Meanwhile, the handheld calculator market would expand, with manufacturers competing on features, design, and price, continually seeking to meet the evolving needs and preferences of consumers.

In summary, the introduction of the handheld calculator led to a shift in consumer behavior, with preferences moving away from the less convenient and often more expensive desktop calculators to the more portable, affordable, and user-friendly handheld devices. This shift was driven by the desire of consumers to maximize their utility, which in turn reshaped the calculator market over the subsequent decades.

Question 4

Economists identify the satisfaction a person derives from the consumption of goods and services as:

Accepted Answer

A)  happiness. 
B)  usefulness. 
C)  utility. 
D)  pleasure. 
A)  happiness. 
B)  usefulness. 
C)  utility. 
D)  pleasure.

Question 5

Combinations of two goods that yield equal levels of utility are shown on a(n) _______ curve.

Accepted Answer

A)  indifference 
B)  budget 
C)  marginal utility 
D)  utility maximizing 
A)  indifference 
B)  budget 
C)  marginal utility 
D)  utility maximizing

Question 6

Utility maximization _______ the law of demand.

Accepted Answer

A)  has no relation to 
B)  underlies 
C)  is OK in theory, but does not support in fact, 
D)  is generally inconsistent with 
A)  has no relation to 
B)  underlies 
C)  is OK in theory, but does not support in fact, 
D)  is generally inconsistent with

Question 7

The change in consumption of a good resulting from the implicit change in income because of a price change is called the _______ effect of a price change.

Accepted Answer

A)  substitution 
B)  demand 
C)  price 
D)  income 
A)  substitution 
B)  demand 
C)  price 
D)  income

Question 8

Use the following to answer question(s): Consumer Equilibrium 2
  
-(Exhibit: Consumer Equilibrium 2) Given the exhibit and the budget constraint, the maximization of consumer utility would occur at point _______ with the consumption of _______ of X and _______ of Y.

Accepted Answer

A)  J; OS; OP 
B)  I; OS;OP 
C)  J; ON;OF 
D)  I; ON;OM 
A)  J; OS; OP 
B)  I; OS;OP 
C)  J; ON;OF 
D)  I; ON;OM

Question 9

Following an income-compensated price change, you decide to decrease the quantity of ice cream purchased each month when the price increases and purchase more frozen yogurt instead.This is an indication of the:

Accepted Answer

A)  substitution effect. 
B)  utility effect. 
C)  income effect. 
D)  consumption effect. 
A)  substitution effect. 
B)  utility effect. 
C)  income effect. 
D)  consumption effect.

Question 10

John Smedley, a careful maximizer of utility, consumes only two goods, peanut butter and broccoli.He had just achieved the utility maximizing solution in his consumption of the two goods when the price of broccoli rose.As he adjusts to this event, he will consume:

Accepted Answer

A)  more peanut butter and less broccoli. 
B)  less peanut butter and less broccoli. 
C)  more peanut butter and more broccoli. 
D)  less peanut butter and more broccoli. 
A)  more peanut butter and less broccoli. 
B)  less peanut butter and less broccoli. 
C)  more peanut butter and more broccoli. 
D)  less peanut butter and more broccoli.

Question 11

Faced with two goods to buy, good 1 and good 2, a utility-maximizing individual will buy according to which of the following statements?

Accepted Answer

A)  price of good 1 = price of good 2 
B)  MU of good 1 = MU of good 2 
C)  price of good 1 divided by MU of good 2 = price of good 2 divided by MU of good 1 
D)  MU of good 1 divided by price of good 1 = MU of good 2 divided by price of good 2 
A)  price of good 1 = price of good 2 
B)  MU of good 1 = MU of good 2 
C)  price of good 1 divided by MU of good 2 = price of good 2 divided by MU of good 1 
D)  MU of good 1 divided by price of good 1 = MU of good 2 divided by price of good 2

Question 12

If the price of a good rises, the resulting decrease in the quantity purchased will increase the marginal utility of the good.

Accepted Answer

A) True 
 B)False

Question 13

It is through a consumer's reaction to different _______ that we can trace the consumer's ________ curve for a good.

Accepted Answer

A)  prices; supply 
B)  prices; total utility 
C)  budgets; demand 
D)  prices; demand 
A)  prices; supply 
B)  prices; total utility 
C)  budgets; demand 
D)  prices; demand

Question 14

The total utility of a good is equal to the marginal utility of the last unit consumed.

Accepted Answer

A) True 
 B)False

Question 15

A demand curve is generated from indifference curves by changing:

Accepted Answer

A)  the price of both goods simultaneously. 
B)  the price of one good. 
C)  income. 
D)  utility. 
A)  the price of both goods simultaneously. 
B)  the price of one good. 
C)  income. 
D)  utility.

Question 16

Define total and marginal utility.Explain the relationship between them.If marginal utility is positive, negative, or zero, and is "going in a particular direction," what is the magnitude of total utility and what direction is it going? Explain carefully.

Accepted Answer

Total utility refers to the total satisf

Question 17

In the case of inferior goods, the substitution effect and the income effect:

Accepted Answer

A)  move in opposite directions. 
B)  move in the same direction. 
C)  cancel each other out in every case. 
D)  will in all cases cause demand to be upsloping. 
A)  move in opposite directions. 
B)  move in the same direction. 
C)  cancel each other out in every case. 
D)  will in all cases cause demand to be upsloping.

Question 18

An inferior good is likely to be a(n) _______ good that people _______ .

Accepted Answer

A)  cheap; don't like much 
B)  expensive; like a lot 
C)  expensive; don't like much 
D)  luxury; must have 
A)  cheap; don't like much 
B)  expensive; like a lot 
C)  expensive; don't like much 
D)  luxury; must have

Question 19

The maximum amount of one good a consumer would be willing to give up in order to obtain an additional unit of another is called the:

Accepted Answer

A)  marginal rate of substitution. 
B)  marginal rate of utility exchange. 
C)  average rate of substitution. 
D)  marginal rate of exchange. 
A)  marginal rate of substitution. 
B)  marginal rate of utility exchange. 
C)  average rate of substitution. 
D)  marginal rate of exchange.

Question 20

The income effect refers to:

Accepted Answer

A)  changes in income because of changes in business investment. 
B)  changes in money or nominal income because of changes in wages. 
C)  a change in the quantity demanded of a good because of an implicit change in the buyer's income caused by a change in the price of a good or service. 
D)  a change in the quantity demanded of a good because of a change in the buyer's money income. 
A)  changes in income because of changes in business investment. 
B)  changes in money or nominal income because of changes in wages. 
C)  a change in the quantity demanded of a good because of an implicit change in the buyer's income caused by a change in the price of a good or service. 
D)  a change in the quantity demanded of a good because of a change in the buyer's money income.

The quantity demanded of handheld calculators, a normal good, will _ with a price _ .

Which of the following statements is (are) true?

Economists identify the satisfaction a person derives from the consumption of goods and services as:

Combinations of two goods that yield equal levels of utility are shown on a(n) _______ curve.

Utility maximization _______ the law of demand.

The change in consumption of a good resulting from the implicit change in income because of a price change is called the _______ effect of a price change.

Use the following to answer question(s): Consumer Equilibrium 2 -(Exhibit: Consumer Equilibrium 2) Given the exhibit and the budget constraint, the maximization of consumer utility would occur at point ___ with the consumption of _ of X and _____ of Y.

Following an income-compensated price change, you decide to decrease the quantity of ice cream purchased each month when the price increases and purchase more frozen yogurt instead.This is an indication of the:

John Smedley, a careful maximizer of utility, consumes only two goods, peanut butter and broccoli.He had just achieved the utility maximizing solution in his consumption of the two goods when the price of broccoli rose.As he adjusts to this event, he will consume:

Faced with two goods to buy, good 1 and good 2, a utility-maximizing individual will buy according to which of the following statements?

If the price of a good rises, the resulting decrease in the quantity purchased will increase the marginal utility of the good.

It is through a consumer's reaction to different _ that we can trace the consumer's __ curve for a good.

The total utility of a good is equal to the marginal utility of the last unit consumed.

A demand curve is generated from indifference curves by changing:

Define total and marginal utility.Explain the relationship between them.If marginal utility is positive, negative, or zero, and is "going in a particular direction," what is the magnitude of total utility and what direction is it going? Explain carefully.

In the case of inferior goods, the substitution effect and the income effect:

An inferior good is likely to be a(n) _ good that people _ .

The maximum amount of one good a consumer would be willing to give up in order to obtain an additional unit of another is called the:

The income effect refers to:

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

Markets, Maximizers, and Efficiency

Production and Cost

Competitive Markets for Goods and Services

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

Exam 7: The Analysis of Consumer Choice

The quantity demanded of handheld calculators, a normal good, will _______ with a price _______ .

Which of the following statements is (are) true?

Economists identify the satisfaction a person derives from the consumption of goods and services as:

Combinations of two goods that yield equal levels of utility are shown on a(n) _______ curve.

Utility maximization _______ the law of demand.

The change in consumption of a good resulting from the implicit change in income because of a price change is called the _______ effect of a price change.

Use the following to answer question(s): Consumer Equilibrium 2 -(Exhibit: Consumer Equilibrium 2) Given the exhibit and the budget constraint, the maximization of consumer utility would occur at point _______ with the consumption of _______ of X and _______ of Y.

Following an income-compensated price change, you decide to decrease the quantity of ice cream purchased each month when the price increases and purchase more frozen yogurt instead.This is an indication of the:

John Smedley, a careful maximizer of utility, consumes only two goods, peanut butter and broccoli.He had just achieved the utility maximizing solution in his consumption of the two goods when the price of broccoli rose.As he adjusts to this event, he will consume:

Faced with two goods to buy, good 1 and good 2, a utility-maximizing individual will buy according to which of the following statements?

If the price of a good rises, the resulting decrease in the quantity purchased will increase the marginal utility of the good.

It is through a consumer's reaction to different _______ that we can trace the consumer's ________ curve for a good.

The total utility of a good is equal to the marginal utility of the last unit consumed.

A demand curve is generated from indifference curves by changing:

Define total and marginal utility.Explain the relationship between them.If marginal utility is positive, negative, or zero, and is "going in a particular direction," what is the magnitude of total utility and what direction is it going? Explain carefully.

In the case of inferior goods, the substitution effect and the income effect:

An inferior good is likely to be a(n) _______ good that people _______ .

The maximum amount of one good a consumer would be willing to give up in order to obtain an additional unit of another is called the:

The income effect refers to:

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

Markets, Maximizers, and Efficiency

Production and Cost

Competitive Markets for Goods and Services

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

The quantity demanded of handheld calculators, a normal good, will _ with a price _ .

Use the following to answer question(s): Consumer Equilibrium 2 -(Exhibit: Consumer Equilibrium 2) Given the exhibit and the budget constraint, the maximization of consumer utility would occur at point ___ with the consumption of _ of X and _____ of Y.

It is through a consumer's reaction to different _ that we can trace the consumer's __ curve for a good.

An inferior good is likely to be a(n) _ good that people _ .