Question 1

In indifference curve analysis, a line that shows all combinations of two goods a consumer can buy is called a(n):

Accepted Answer

A)  indifference curve. 
B)  utility line. 
C)  budget line. 
D)  income possibility line 
A)  indifference curve. 
B)  utility line. 
C)  budget line. 
D)  income possibility line

Question 2

The utility-maximizing condition is achieved by equating the ratio of marginal utility to price for all goods.

Accepted Answer

A) True 
 B)False

Question 3

In the case of Giffen goods, the income effect dominates the substitution effect.

Accepted Answer

A) True 
 B)False

Question 4

Total utility is maximized when marginal utility per additional dollar spent is the same for all goods.

Accepted Answer

A) True 
 B)False

Question 5

Use the following to answer question(s): Consumer Equilibrium 2
  
-(Exhibit: Consumer Equilibrium 2) Given the exhibit, which of the following statements is (are) true?

Accepted Answer

A)  Point I is the point of utility maximization. 
B)  At the point of utility maximization, the rate at which the consumer is willing to exchange one good for another is less than the rate at which the goods can be exchanged in the market. 
C)  MRSₓ,ᵧ > Pₓ/Pᵧ 
D)  All of the above statements are true. 
A)  Point I is the point of utility maximization. 
B)  At the point of utility maximization, the rate at which the consumer is willing to exchange one good for another is less than the rate at which the goods can be exchanged in the market. 
C)  MRSₓ,ᵧ > Pₓ/Pᵧ 
D)  All of the above statements are true.

Question 6

If a consumer is buying two goods and a decrease in the price of one good results in the consumer buying more of both goods:

Accepted Answer

A)  the income effect resulted in increasing the amounts of both goods purchased. 
B)  the demand curves for the two goods shifted to the right. 
C)  the substitution effect was extremely strong, but the income effect was zero. 
D)  none of the above statements are true. 
A)  the income effect resulted in increasing the amounts of both goods purchased. 
B)  the demand curves for the two goods shifted to the right. 
C)  the substitution effect was extremely strong, but the income effect was zero. 
D)  none of the above statements are true.

Question 7

When there is a difference between the MUₓ/Pₓ and the MUᵧ/Pᵧ, we expect that a consumer will:

Accepted Answer

A)  continue to purchase the quantities generating this outcome. 
B)  buy more of good x. 
C)  buy more of good y. 
D)  change the quantities of good x and y in their current purchase basket. 
A)  continue to purchase the quantities generating this outcome. 
B)  buy more of good x. 
C)  buy more of good y. 
D)  change the quantities of good x and y in their current purchase basket.

Question 8

The theory of consumer choice, generally, examines the insights involved in constrained choices.

Accepted Answer

A) True 
 B)False

Question 9

Michael Kawamura, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream.He had just achieved the utility-maximizing solution in his consumption of the two goods when the price of peanut butter fell.As he 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 10

Which of the following statements is false?

Accepted Answer

A)  The income effect of normal goods counters the substitution effect so the demand curve is upsloping. 
B)  The income effect and the substitution effect reinforce each other when there are price changes for a normal good. 
C)  The income effect represents the decrease in quantity demanded caused by the implicit change in income due to a fall in the price of an inferior good but not for a normal good. 
D)  The substitution effect represents the change in quantity demanded solely due to a change in the relative price of a good. 
A)  The income effect of normal goods counters the substitution effect so the demand curve is upsloping. 
B)  The income effect and the substitution effect reinforce each other when there are price changes for a normal good. 
C)  The income effect represents the decrease in quantity demanded caused by the implicit change in income due to a fall in the price of an inferior good but not for a normal good. 
D)  The substitution effect represents the change in quantity demanded solely due to a change in the relative price of a good.

Question 11

If consumer income, preferences, and the prices of all other goods remain constant while the price of X varies, the amount purchased of X is defined by the:

Accepted Answer

A)  demand curve. 
B)  price-consumption curve. 
C)  income-consumption curve. 
D)  price line. 
A)  demand curve. 
B)  price-consumption curve. 
C)  income-consumption curve. 
D)  price line.

Question 12

The amount by which total utility increases when an additional unit of a good is consumed is called ________ utility.

Accepted Answer

A)  average 
B)  additional 
C)  maximum 
D)  marginal 
A)  average 
B)  additional 
C)  maximum 
D)  marginal

Question 13

Economists assume that consumers behave in a manner consistent with the _______ of utility.

Accepted Answer

A)  maintenance 
B)  minimization 
C)  maximization 
D)  final degree 
A)  maintenance 
B)  minimization 
C)  maximization 
D)  final degree

Question 14

In terms of indifference curves, an increase in total utility is represented by a:

Accepted Answer

A)  shift to the right to a higher indifference curve. 
B)  shift to the left to a lower indifference curve. 
C)  movement upward along an indifference curve. 
D)  movement downward along an indifference curve. 
A)  shift to the right to a higher indifference curve. 
B)  shift to the left to a lower indifference curve. 
C)  movement upward along an indifference curve. 
D)  movement downward along an indifference curve.

Question 15

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:

Accepted Answer

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

Question 16

Discuss in some detail how a consumer will maximize total utility from the consumption of two goods, given the budget constraint, the marginal utilities, and the prices of the two goods.

Accepted Answer

To maximize total utility from the consu

Question 17

When supply and demand are in equilibrium, the price of a good is:

Accepted Answer

A)  greater than the marginal utility of the good. 
B)  equal to the marginal utility of the good. 
C)  less than the marginal utility of the good. 
D)  not necessarily any of the above. 
A)  greater than the marginal utility of the good. 
B)  equal to the marginal utility of the good. 
C)  less than the marginal utility of the good. 
D)  not necessarily any of the above.

Question 18

If the price of a good falls and the consumer decides to buy more of the good solely because it is relatively less expensive, this describes the:

Accepted Answer

A)  income effect. 
B)  substitution effect. 
C)  consumer surplus effect. 
D)  marginal maximizing rule. 
A)  income effect. 
B)  substitution effect. 
C)  consumer surplus effect. 
D)  marginal maximizing rule.

Question 19

Use the following to answer question(s): Consumer Equilibrium 2
  
-(Exhibit: Consumer Equilibrium 2) Given the exhibit, which of the following is (are) true?

Accepted Answer

A)  To increase utility beyond that received at point I requires a change in the preferences of the consumer. 
B)  Point J could be attained with an increase in the consumer's budget. 
C)  An increase in the prices of good X and good Y would allow the consumer to attain point J. 
D)  Both A and B are true. 
A)  To increase utility beyond that received at point I requires a change in the preferences of the consumer. 
B)  Point J could be attained with an increase in the consumer's budget. 
C)  An increase in the prices of good X and good Y would allow the consumer to attain point J. 
D)  Both A and B are true.

Question 20

A Giffen good is one in which the _______ curve is _______ sloped.

Accepted Answer

A)  supply; negatively 
B)  demand; negatively 
C)  supply; positively 
D)  demand; positively 
A)  supply; negatively 
B)  demand; negatively 
C)  supply; positively 
D)  demand; positively

In indifference curve analysis, a line that shows all combinations of two goods a consumer can buy is called a(n):

The utility-maximizing condition is achieved by equating the ratio of marginal utility to price for all goods.

In the case of Giffen goods, the income effect dominates the substitution effect.

Total utility is maximized when marginal utility per additional dollar spent is the same for all goods.

Use the following to answer question(s): Consumer Equilibrium 2 -(Exhibit: Consumer Equilibrium 2) Given the exhibit, which of the following statements is (are) true?

If a consumer is buying two goods and a decrease in the price of one good results in the consumer buying more of both goods:

When there is a difference between the MUₓ/Pₓ and the MUᵧ/Pᵧ, we expect that a consumer will:

The theory of consumer choice, generally, examines the insights involved in constrained choices.

Michael Kawamura, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream.He had just achieved the utility-maximizing solution in his consumption of the two goods when the price of peanut butter fell.As he adjusts to this event:

Which of the following statements is false?

If consumer income, preferences, and the prices of all other goods remain constant while the price of X varies, the amount purchased of X is defined by the:

The amount by which total utility increases when an additional unit of a good is consumed is called ________ utility.

Economists assume that consumers behave in a manner consistent with the _______ of utility.

In terms of indifference curves, an increase in total utility is represented by a:

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:

Discuss in some detail how a consumer will maximize total utility from the consumption of two goods, given the budget constraint, the marginal utilities, and the prices of the two goods.

When supply and demand are in equilibrium, the price of a good is:

If the price of a good falls and the consumer decides to buy more of the good solely because it is relatively less expensive, this describes the:

Use the following to answer question(s): Consumer Equilibrium 2 -(Exhibit: Consumer Equilibrium 2) Given the exhibit, which of the following is (are) true?

A Giffen good is one in which the _ curve is _ sloped.

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

In indifference curve analysis, a line that shows all combinations of two goods a consumer can buy is called a(n):

The utility-maximizing condition is achieved by equating the ratio of marginal utility to price for all goods.

In the case of Giffen goods, the income effect dominates the substitution effect.

Total utility is maximized when marginal utility per additional dollar spent is the same for all goods.

Use the following to answer question(s): Consumer Equilibrium 2 -(Exhibit: Consumer Equilibrium 2) Given the exhibit, which of the following statements is (are) true?

If a consumer is buying two goods and a decrease in the price of one good results in the consumer buying more of both goods:

When there is a difference between the MUₓ/Pₓ and the MUᵧ/Pᵧ, we expect that a consumer will:

The theory of consumer choice, generally, examines the insights involved in constrained choices.

Michael Kawamura, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream.He had just achieved the utility-maximizing solution in his consumption of the two goods when the price of peanut butter fell.As he adjusts to this event:

Which of the following statements is false?

If consumer income, preferences, and the prices of all other goods remain constant while the price of X varies, the amount purchased of X is defined by the:

The amount by which total utility increases when an additional unit of a good is consumed is called ________ utility.

Economists assume that consumers behave in a manner consistent with the _______ of utility.

In terms of indifference curves, an increase in total utility is represented by a:

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:

Discuss in some detail how a consumer will maximize total utility from the consumption of two goods, given the budget constraint, the marginal utilities, and the prices of the two goods.

When supply and demand are in equilibrium, the price of a good is:

If the price of a good falls and the consumer decides to buy more of the good solely because it is relatively less expensive, this describes the:

Use the following to answer question(s): Consumer Equilibrium 2 -(Exhibit: Consumer Equilibrium 2) Given the exhibit, which of the following is (are) true?

A Giffen good is one in which the _______ curve is _______ sloped.

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

A Giffen good is one in which the _ curve is _ sloped.