Question 1

The increase in quantity demanded due to a price reduction is a result of the _______ and the ________.

Accepted Answer

A)  budget effect; income effect 
B)  income effect; demand effect 
C)  substitution effect; income effect 
D)  demand effect; budget effect 
A)  budget effect; income effect 
B)  income effect; demand effect 
C)  substitution effect; income effect 
D)  demand effect; budget effect

Question 2

Market demand curves are found by:

Accepted Answer

A)  determining the quantities demanded by all buyers at each price. 
B)  adding the individual supply curves at each price. 
C)  recording the quantities supplied in the market at each price. 
D)  doing all of the above. 
A)  determining the quantities demanded by all buyers at each price. 
B)  adding the individual supply curves at each price. 
C)  recording the quantities supplied in the market at each price. 
D)  doing all of the above.

Question 3

If two combinations of two goods yield the same level of satisfaction, then they are:

Accepted Answer

A)  on the same price line. 
B)  on the same budget constraint. 
C)  on the same indifference curve. 
D)  on different indifference curves. 
A)  on the same price line. 
B)  on the same budget constraint. 
C)  on the same indifference curve. 
D)  on different indifference curves.

Question 4

A consumer's total utility is greater at the upper end of an indifference curve than at the lower end.

Accepted Answer

A) True 
 B)False

Question 5

When the price of a normal good increases, the substitution effect will:

Accepted Answer

A)  result in the quantity demanded going down so much that the income effect is unable to increase demand. 
B)  work with the income effect to exert pressure on the quantity demanded to fall. 
C)  work with the income effect to exert pressure on the quantity demanded to increase. 
D)  work in a direction opposite the income effect. 
A)  result in the quantity demanded going down so much that the income effect is unable to increase demand. 
B)  work with the income effect to exert pressure on the quantity demanded to fall. 
C)  work with the income effect to exert pressure on the quantity demanded to increase. 
D)  work in a direction opposite the income effect.

Question 6

Use the following to answer question(s): Consumer Equilibrium 3
  
-(Exhibit: Consumer Equilibrium 3) The highest level of utility shown in the exhibit is associated with:

Accepted Answer

A)  indifference curve X. 
B)  indifference curve Y. 
C)  indifference curve Z. 
D)  either indifference curve Y or Z. 
A)  indifference curve X. 
B)  indifference curve Y. 
C)  indifference curve Z. 
D)  either indifference curve Y or Z.

Question 7

Marginal utility of a good eventually decreases as the level of consumption increases.

Accepted Answer

A) True 
 B)False

Question 8

The larger the substitution effect the _______ the absolute value of the price elasticity of demand.

Accepted Answer

A)  smaller 
B)  greater 
C)  greater the change in 
D)  less the change in 
A)  smaller 
B)  greater 
C)  greater the change in 
D)  less the change in

Question 9

If the combination of two goods is a point of tangency between the budget line and an indifference curve, then:

Accepted Answer

A)  consumer equilibrium has been achieved. 
B)  some available income has not been spent. 
C)  utility can be decreased by consuming more of both goods. 
D)  utility can be increased by consuming more of one good and less of the other. 
A)  consumer equilibrium has been achieved. 
B)  some available income has not been spent. 
C)  utility can be decreased by consuming more of both goods. 
D)  utility can be increased by consuming more of one good and less of the other.

Question 10

Sally Garcia devotes all of her income to the consumption of two goods, apples and Reese's Peanut Butter Cups.She has just discovered that at her current level of consumption the marginal utility of an apple is 6 and the marginal utility of a Reese's Peanut Butter Cup is 8.To maximize her total utility, she would:

Accepted Answer

A)  consume more of both goods. 
B)  consume less of both goods. 
C)  consume more apples and fewer Reese's Butter Cups. 
D)  there is not enough information to justify a change in her current level of consumption. 
A)  consume more of both goods. 
B)  consume less of both goods. 
C)  consume more apples and fewer Reese's Butter Cups. 
D)  there is not enough information to justify a change in her current level of consumption.

Question 11

Which of the following is true?

Accepted Answer

A)  The law of diminishing marginal utility is seldom verified in economic analysis. 
B)  The law of diminishing marginal utility is never verified in economic analysis. 
C)  The law of diminishing marginal utility has been proven to be true in economic analysis. 
D)  The law of diminishing marginal utility has never been proven true, but it is verified by economists as consistent with the analysis of real-world demand. 
A)  The law of diminishing marginal utility is seldom verified in economic analysis. 
B)  The law of diminishing marginal utility is never verified in economic analysis. 
C)  The law of diminishing marginal utility has been proven to be true in economic analysis. 
D)  The law of diminishing marginal utility has never been proven true, but it is verified by economists as consistent with the analysis of real-world demand.

Question 12

Total utility is at a maximum when marginal utility is zero.

Accepted Answer

A) True 
 B)False

Question 13

You decide to decrease the quantity of ice cream purchased each month when the price increases in part because the higher price causes an implicit reduction in your income.This is an indication of the:

Accepted Answer

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

Question 14

A change in the ability to purchase a good because its price has increased is most closely related to the:

Accepted Answer

A)  output effect. 
B)  income effect. 
C)  nominal effect. 
D)  substitution effect. 
A)  output effect. 
B)  income effect. 
C)  nominal effect. 
D)  substitution effect.

Question 15

If there is an increase in the price of good Z and the quantity demanded of Z goes down, a possible explanation for this is:

Accepted Answer

A)  Z is a normal good. 
B)  the substitution effect. 
C)  Z is a Giffen good. 
D)  both A and B are correct. 
A)  Z is a normal good. 
B)  the substitution effect. 
C)  Z is a Giffen good. 
D)  both A and B are correct.

Question 16

The marginal utility of a good will eventually fall as more of it is consumed.

Accepted Answer

A) True 
 B)False

Question 17

If you are willing to give up 5 units of good Y (on the vertical axis) for 5 units of good X (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:

Accepted Answer

A)  0.5. 
B)  1. 
C)  2. 
D)  5. 
A)  0.5. 
B)  1. 
C)  2. 
D)  5.

Question 18

Use the following to answer question(s):  
-(Exhibit: Utility) The marginal utility for the sixth unit is:

Accepted Answer

A)  -5. 
B)  0. 
C)  5. 
D)  -10. 
A)  -5. 
B)  0. 
C)  5. 
D)  -10.

Question 19

Use the following for questions 23-27.
Exhibit: Total Utility and Marginal Utility from Consumption of Good A
  
-(Exhibit: Total Utility and Marginal Utility from Consumption of Good A. If 4 units of good A are consumed, the total utility received is _______ and the marginal utility of the 4th unit is _______ .

Accepted Answer

A)  26; 5 
B)  14; 2 
C)  12; 3 
D)  None of the above is correct. 
A)  26; 5 
B)  14; 2 
C)  12; 3 
D)  None of the above is correct.

Question 20

Marginal utility is at a maximum when it is zero.

Accepted Answer

A) True 
 B)False

The increase in quantity demanded due to a price reduction is a result of the _ and the __.

Market demand curves are found by:

If two combinations of two goods yield the same level of satisfaction, then they are:

A consumer's total utility is greater at the upper end of an indifference curve than at the lower end.

When the price of a normal good increases, the substitution effect will:

Use the following to answer question(s): Consumer Equilibrium 3 -(Exhibit: Consumer Equilibrium 3) The highest level of utility shown in the exhibit is associated with:

Marginal utility of a good eventually decreases as the level of consumption increases.

The larger the substitution effect the _______ the absolute value of the price elasticity of demand.

If the combination of two goods is a point of tangency between the budget line and an indifference curve, then:

Which of the following is true?

Total utility is at a maximum when marginal utility is zero.

You decide to decrease the quantity of ice cream purchased each month when the price increases in part because the higher price causes an implicit reduction in your income.This is an indication of the:

A change in the ability to purchase a good because its price has increased is most closely related to the:

If there is an increase in the price of good Z and the quantity demanded of Z goes down, a possible explanation for this is:

The marginal utility of a good will eventually fall as more of it is consumed.

If you are willing to give up 5 units of good Y (on the vertical axis) for 5 units of good X (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:

Use the following to answer question(s): -(Exhibit: Utility) The marginal utility for the sixth unit is:

Use the following for questions 23-27. Exhibit: Total Utility and Marginal Utility from Consumption of Good A -(Exhibit: Total Utility and Marginal Utility from Consumption of Good A. If 4 units of good A are consumed, the total utility received is _ and the marginal utility of the 4th unit is _ .

Marginal utility is at a maximum when it is zero.

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 increase in quantity demanded due to a price reduction is a result of the _______ and the ________.

Market demand curves are found by:

If two combinations of two goods yield the same level of satisfaction, then they are:

A consumer's total utility is greater at the upper end of an indifference curve than at the lower end.

When the price of a normal good increases, the substitution effect will:

Use the following to answer question(s): Consumer Equilibrium 3 -(Exhibit: Consumer Equilibrium 3) The highest level of utility shown in the exhibit is associated with:

Marginal utility of a good eventually decreases as the level of consumption increases.

The larger the substitution effect the _______ the absolute value of the price elasticity of demand.

If the combination of two goods is a point of tangency between the budget line and an indifference curve, then:

Which of the following is true?

Total utility is at a maximum when marginal utility is zero.

You decide to decrease the quantity of ice cream purchased each month when the price increases in part because the higher price causes an implicit reduction in your income.This is an indication of the:

A change in the ability to purchase a good because its price has increased is most closely related to the:

If there is an increase in the price of good Z and the quantity demanded of Z goes down, a possible explanation for this is:

The marginal utility of a good will eventually fall as more of it is consumed.

If you are willing to give up 5 units of good Y (on the vertical axis) for 5 units of good X (on the horizontal axis), and your level of satisfaction is unchanged, the marginal rate of substitution is:

Use the following to answer question(s): -(Exhibit: Utility) The marginal utility for the sixth unit is:

Marginal utility is at a maximum when it is zero.

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 increase in quantity demanded due to a price reduction is a result of the _ and the __.