Question 1

The marginal rate of substitution increases as the consumer moves from left to right along a given indifference curve.

Accepted Answer

A) True 
 B)False

Question 2

Jill Smith, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream.She had just achieved the utility-maximizing solution in her consumption of the two goods when the price of peanut butter rose.As she adjusts to this event:

Accepted Answer

A)  the marginal utility of peanut butter and of ice cream will rise. 
B)  the marginal utility of peanut butter and of ice cream will fall. 
C)  the marginal utility of peanut butter will fall, and the marginal utility of ice cream will rise. 
D)  the marginal utility of peanut butter will rise, and the marginal utility of ice cream will fall. 
A)  the marginal utility of peanut butter and of ice cream will rise. 
B)  the marginal utility of peanut butter and of ice cream will fall. 
C)  the marginal utility of peanut butter will fall, and the marginal utility of ice cream will rise. 
D)  the marginal utility of peanut butter will rise, and the marginal utility of ice cream will fall.

Question 3

The Case in Point on Changing Lanes and Raising Utility, indicated that the government's decision to allow single-occupancy-vehicle to use former HOV lanes for a fee resulted in:

Accepted Answer

A)  only wealthy drivers using these lanes. 
B)  only poor drivers using these lanes. 
C)  drivers of all income levels using these lanes. 
D)  no statistical evidence on who uses these lanes most frequently. 
A)  only wealthy drivers using these lanes. 
B)  only poor drivers using these lanes. 
C)  drivers of all income levels using these lanes. 
D)  no statistical evidence on who uses these lanes most frequently.

Question 4

If the first four units of a good consumed have marginal utilities of 10, 9, 8, and 7, respectively, this trend is an indication of the:

Accepted Answer

A)  law of diminishing marginal utility. 
B)  minimization of utility. 
C)  law of consumer equilibrium. 
D)  law of diminishing consumer surplus. 
A)  law of diminishing marginal utility. 
B)  minimization of utility. 
C)  law of consumer equilibrium. 
D)  law of diminishing consumer surplus.

Question 5

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

Accepted Answer

A)  G. 
B)  H. 
C)  I. 
D)  J. 
A)  G. 
B)  H. 
C)  I. 
D)  J.

Question 6

If a consumer moves upward along an indifference curve, his or her total utility:

Accepted Answer

A)  remains constant. 
B)  first decreases, then increases. 
C)  increases. 
D)  first increases, then decreases. 
A)  remains constant. 
B)  first decreases, then increases. 
C)  increases. 
D)  first increases, then decreases.

Question 7

The substitution and income effects work in opposite directions for:

Accepted Answer

A)  complement goods. 
B)  substitute goods. 
C)  normal goods. 
D)  inferior goods. 
A)  complement goods. 
B)  substitute goods. 
C)  normal goods. 
D)  inferior goods.

Question 8

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend on both goods, the maximum quantity of Cracker Jacks that you can purchase is _______ boxes.

Accepted Answer

A)  5 
B)  10 
C)  20 
D)  40 
A)  5 
B)  10 
C)  20 
D)  40

Question 9

The budget constraint sets the limits placed on a consumer's choices regarding consumption.

Accepted Answer

A) True 
 B)False

Question 10

Use the following to answer question(s): Consumer Equilibrium 3
  
-(Exhibit: Consumer Equilibrium 3) Assume that you are consuming the combination of goods at point I.Given budget constraint FL, utility can:

Accepted Answer

A)  not be increased. 
B)  be increased by consuming more of good A and less of good B. 
C)  be increased by consuming less of good A and more of good B. 
D)  be increased by consuming more of both goods. 
A)  not be increased. 
B)  be increased by consuming more of good A and less of good B. 
C)  be increased by consuming less of good A and more of good B. 
D)  be increased by consuming more of both goods.

Question 11

Assume that the marginal utilities for the first three units of a good consumed are 200, 150, and 125, respectively.The total utility when 2 units are consumed is:

Accepted Answer

A)  150. 
B)  200. 
C)  350. 
D)  475. 
A)  150. 
B)  200. 
C)  350. 
D)  475.

Question 12

Use the following to answer question(s):  
-(Exhibit: Utility) Marginal utility is zero for the _______ unit.

Accepted Answer

A)  first 
B)  second 
C)  third 
D)  fifth 
A)  first 
B)  second 
C)  third 
D)  fifth

Question 13

The budget line indicates a constraint on a consumer's ability to purchase two goods.

Accepted Answer

A) True 
 B)False

Question 14

If a consumer purchases a combination of commodities x and y such that MUₓ/Pₓ = 20 and MUᵧ/Pᵧ = 10, to maximize utility, the consumers should buy.

Accepted Answer

A)  less of x and more of y. 
B)  more of x and less of y. 
C)  more of both x and y. 
D)  less of both x and y. 
A)  less of x and more of y. 
B)  more of x and less of y. 
C)  more of both x and y. 
D)  less of both x and y.

Question 15

Use the following for questions 61-69.
    
-(Exhibit: Consumer Equilibrium 1) Assume that the price of good X is $2 per unit, the price of good Y is $1 per unit, and you have $10 of income to spend on both goods.To maximize utility, you would consume _______ units of X and _______ units of Y.

Accepted Answer

A)  3; 4 
B)  4; 3 
C)  4; 6 
D)  5; 5 
A)  3; 4 
B)  4; 3 
C)  4; 6 
D)  5; 5

Question 16

Economists believe that consumer choice theory is useless because of its lack of predictive ability.

Accepted Answer

A) True 
 B)False

Question 17

Utility is maximized when:

Accepted Answer

A)  the marginal utility of every good consumed times its price is everywhere equal. 
B)  total outlays equal a varying budget and when the ratios of marginal utilities to prices are equal for all goods and services. 
C)  total outlays equal a given budget and the ratios of marginal utilities to prices are equal for all goods and services. 
D)  A and C occur. 
A)  the marginal utility of every good consumed times its price is everywhere equal. 
B)  total outlays equal a varying budget and when the ratios of marginal utilities to prices are equal for all goods and services. 
C)  total outlays equal a given budget and the ratios of marginal utilities to prices are equal for all goods and services. 
D)  A and C occur.

Question 18

Along an indifference curve, the combination of 10 units of X and 1 unit of Y represents a larger total utility than the combination of 5 units of X and 5 units of Y.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not an explanation as to why the demand curve is negatively sloped?

Accepted Answer

A)  the law of diminishing marginal utility 
B)  the law of increasing total utility 
C)  the substitution effect 
D)  the income effect 
A)  the law of diminishing marginal utility 
B)  the law of increasing total utility 
C)  the substitution effect 
D)  the income effect

Question 20

Explain in some detail how the theory of utility maximization is used to derive demand curves.Be sure to explain in your answer how the law of diminishing marginal utility is used in relation to the utility-maximizing condition.

Accepted Answer

The theory of utility maximization is us

The marginal rate of substitution increases as the consumer moves from left to right along a given indifference curve.

Jill Smith, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream.She had just achieved the utility-maximizing solution in her consumption of the two goods when the price of peanut butter rose.As she adjusts to this event:

The Case in Point on Changing Lanes and Raising Utility, indicated that the government's decision to allow single-occupancy-vehicle to use former HOV lanes for a fee resulted in:

If the first four units of a good consumed have marginal utilities of 10, 9, 8, and 7, respectively, this trend is an indication of the:

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

If a consumer moves upward along an indifference curve, his or her total utility:

The substitution and income effects work in opposite directions for:

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend on both goods, the maximum quantity of Cracker Jacks that you can purchase is _______ boxes.

The budget constraint sets the limits placed on a consumer's choices regarding consumption.

Use the following to answer question(s): Consumer Equilibrium 3 -(Exhibit: Consumer Equilibrium 3) Assume that you are consuming the combination of goods at point I.Given budget constraint FL, utility can:

Assume that the marginal utilities for the first three units of a good consumed are 200, 150, and 125, respectively.The total utility when 2 units are consumed is:

Use the following to answer question(s): -(Exhibit: Utility) Marginal utility is zero for the _______ unit.

The budget line indicates a constraint on a consumer's ability to purchase two goods.

If a consumer purchases a combination of commodities x and y such that MUₓ/Pₓ = 20 and MUᵧ/Pᵧ = 10, to maximize utility, the consumers should buy.

Use the following for questions 61-69. -(Exhibit: Consumer Equilibrium 1) Assume that the price of good X is $2 per unit, the price of good Y is $1 per unit, and you have $10 of income to spend on both goods.To maximize utility, you would consume _ units of X and _ units of Y.

Economists believe that consumer choice theory is useless because of its lack of predictive ability.

Utility is maximized when:

Along an indifference curve, the combination of 10 units of X and 1 unit of Y represents a larger total utility than the combination of 5 units of X and 5 units of Y.

Which of the following is not an explanation as to why the demand curve is negatively sloped?

Explain in some detail how the theory of utility maximization is used to derive demand curves.Be sure to explain in your answer how the law of diminishing marginal utility is used in relation to the utility-maximizing condition.

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 marginal rate of substitution increases as the consumer moves from left to right along a given indifference curve.

Jill Smith, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream.She had just achieved the utility-maximizing solution in her consumption of the two goods when the price of peanut butter rose.As she adjusts to this event:

The Case in Point on Changing Lanes and Raising Utility, indicated that the government's decision to allow single-occupancy-vehicle to use former HOV lanes for a fee resulted in:

If the first four units of a good consumed have marginal utilities of 10, 9, 8, and 7, respectively, this trend is an indication of the:

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

If a consumer moves upward along an indifference curve, his or her total utility:

The substitution and income effects work in opposite directions for:

Suppose that the price of Cracker Jacks is 50 cents a box and the price of M&Ms is 25 cents a bag.If you have $10 to spend on both goods, the maximum quantity of Cracker Jacks that you can purchase is _______ boxes.

The budget constraint sets the limits placed on a consumer's choices regarding consumption.

Use the following to answer question(s): Consumer Equilibrium 3 -(Exhibit: Consumer Equilibrium 3) Assume that you are consuming the combination of goods at point I.Given budget constraint FL, utility can:

Assume that the marginal utilities for the first three units of a good consumed are 200, 150, and 125, respectively.The total utility when 2 units are consumed is:

Use the following to answer question(s): -(Exhibit: Utility) Marginal utility is zero for the _______ unit.

The budget line indicates a constraint on a consumer's ability to purchase two goods.

If a consumer purchases a combination of commodities x and y such that MUₓ/Pₓ = 20 and MUᵧ/Pᵧ = 10, to maximize utility, the consumers should buy.

Use the following for questions 61-69. -(Exhibit: Consumer Equilibrium 1) Assume that the price of good X is $2 per unit, the price of good Y is $1 per unit, and you have $10 of income to spend on both goods.To maximize utility, you would consume _______ units of X and _______ units of Y.

Economists believe that consumer choice theory is useless because of its lack of predictive ability.

Utility is maximized when:

Along an indifference curve, the combination of 10 units of X and 1 unit of Y represents a larger total utility than the combination of 5 units of X and 5 units of Y.

Which of the following is not an explanation as to why the demand curve is negatively sloped?

Explain in some detail how the theory of utility maximization is used to derive demand curves.Be sure to explain in your answer how the law of diminishing marginal utility is used in relation to the utility-maximizing condition.

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

Use the following for questions 61-69. -(Exhibit: Consumer Equilibrium 1) Assume that the price of good X is $2 per unit, the price of good Y is $1 per unit, and you have $10 of income to spend on both goods.To maximize utility, you would consume _ units of X and _ units of Y.