Question 1

Choices that maximize total utility generally produce demand curves that are:

Accepted Answer

A)  horizontal. 
B)  upward sloping. 
C)  downward sloping. 
D)  linear. 
A)  horizontal. 
B)  upward sloping. 
C)  downward sloping. 
D)  linear.

Question 2

If income falls, normal goods will experience an increase in consumption.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer question(s): Consumer Equilibrium 3
  
-(Exhibit: Consumer Equilibrium 3) The highest attainable level of utility, given budget constraint FL, is at point:

Accepted Answer

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

Question 4

If a consumer buys more of good X and less of good Y, the _______ of good X will _______ , and the ________ of good Y will _______ .

Accepted Answer

A)  marginal utility; fall; marginal utility; rise 
B)  marginal utility; rise; marginal utility; fall 
C)  total utility; fall; marginal utility; rise 
D)  marginal utility; rise; total utility; rise 
A)  marginal utility; fall; marginal utility; rise 
B)  marginal utility; rise; marginal utility; fall 
C)  total utility; fall; marginal utility; rise 
D)  marginal utility; rise; total utility; rise

Question 5

Consumer equilibrium is achieved at the point of tangency between the budget line and the highest attainable indifference curve.

Accepted Answer

A) True 
 B)False

Question 6

The income effect of a price change is described by which of the following statements?

Accepted Answer

A)  When the price of a good falls, consumers have an implicit increase in income and can now buy more of the good. 
B)  When the price of a good falls, consumers will now substitute this lower priced good for more higher priced goods. 
C)  The income effect is the relative change in the amount of a good consumed when the price of another good changes. 
D)  The income effect shows how a change in income at a given price will affect the quantity of a good purchased. 
A)  When the price of a good falls, consumers have an implicit increase in income and can now buy more of the good. 
B)  When the price of a good falls, consumers will now substitute this lower priced good for more higher priced goods. 
C)  The income effect is the relative change in the amount of a good consumed when the price of another good changes. 
D)  The income effect shows how a change in income at a given price will affect the quantity of a good purchased.

Question 7

A curve that represents combinations of two goods that yield equal levels of satisfaction is a(n):

Accepted Answer

A)  indifference curve. 
B)  budget curve. 
C)  marginal utility curve. 
D)  price-consumption curve. 
A)  indifference curve. 
B)  budget curve. 
C)  marginal utility curve. 
D)  price-consumption curve.

Question 8

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. Marginal utility eventually decreases with the consumption of additional units of good A because of the law of:

Accepted Answer

A)  increasing costs. 
B)  decreasing total returns. 
C)  diminishing average returns. 
D)  diminishing marginal utility. 
A)  increasing costs. 
B)  decreasing total returns. 
C)  diminishing average returns. 
D)  diminishing marginal utility.

Question 9

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. Marginal utility of good A is found by:

Accepted Answer

A)  dividing total utility by the number of units consumed of good A. 
B)  dividing the change in the number of units of A by the change in total utility of A. 
C)  computing the change in total utility of A resulting from the consumption of one more unit of A. 
D)  doing none of the above. 
A)  dividing total utility by the number of units consumed of good A. 
B)  dividing the change in the number of units of A by the change in total utility of A. 
C)  computing the change in total utility of A resulting from the consumption of one more unit of A. 
D)  doing none of the above.

Question 10

If a consumer purchases a combination of commodities a and b such that MUₐ/Pₐ = 100 and MUb/Pb = 80, to maximize utility, the consumer should buy:

Accepted Answer

A)  less of both a and b. 
B)  more of a and less of b. 
C)  less of a and more of b. 
D)  more of both a and b. 
A)  less of both a and b. 
B)  more of a and less of b. 
C)  less of a and more of b. 
D)  more of both a and b.

Question 11

The consumption of normal goods will increase because of the income effect when their prices increase.

Accepted Answer

A) True 
 B)False

Question 12

The marginal rate of substitution assumes that:

Accepted Answer

A)  prices remain unchanged. 
B)  money income remains unchanged. 
C)  satisfaction remains unchanged. 
D)  the quantities of both goods remain unchanged. 
A)  prices remain unchanged. 
B)  money income remains unchanged. 
C)  satisfaction remains unchanged. 
D)  the quantities of both goods remain unchanged.

Question 13

Use the following to answer question(s): Consumer Equilibrium 3
  
-(Exhibit: Consumer Equilibrium 3) The lowest 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 X or Y. 
A)  indifference curve X. 
B)  indifference curve Y. 
C)  indifference curve Z. 
D)  either indifference curve X or Y.

Question 14

In terms of indifference curves, the equilibrium-purchase combination is determined by the:

Accepted Answer

A)  intersection of a budget line and an indifference curve. 
B)  tangency of a budget line and an indifference curve. 
C)  tangency of a price consumption curve and an income consumption curve. 
D)  intersection of an income consumption curve and a price consumption curve. 
A)  intersection of a budget line and an indifference curve. 
B)  tangency of a budget line and an indifference curve. 
C)  tangency of a price consumption curve and an income consumption curve. 
D)  intersection of an income consumption curve and a price consumption curve.

Question 15

Total utility falls as marginal utility declines.

Accepted Answer

A) True 
 B)False

Question 16

A consumer's downward-sloping demand curve for a good reflects the fact that the marginal utility of the good increases as more of it is consumed.

Accepted Answer

A) True 
 B)False

Question 17

A consumer is in equilibrium along the portion of an indifference curve that lies below a budget line.

Accepted Answer

A) True 
 B)False

Question 18

Marginal utility is negative when total utility is increasing.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is true because of the law of diminishing marginal utility?

Accepted Answer

A)  When a customer continues to eat more pie at the Pie Palace, each additional piece of pie gives a larger amount of marginal utility. 
B)  When a customer continues to eat more pie at the Pie Palace, each additional piece of pie gives a smaller amount of marginal utility. 
C)  The marginal utility of a piece of pie is maximum when the total utility of pie is zero. 
D)  The total utility of pie is at a maximum while the marginal utility of pie is still increasing. 
A)  When a customer continues to eat more pie at the Pie Palace, each additional piece of pie gives a larger amount of marginal utility. 
B)  When a customer continues to eat more pie at the Pie Palace, each additional piece of pie gives a smaller amount of marginal utility. 
C)  The marginal utility of a piece of pie is maximum when the total utility of pie is zero. 
D)  The total utility of pie is at a maximum while the marginal utility of pie is still increasing.

Question 20

The income effect of a normal good will not reinforce the substitution effect.

Accepted Answer

A) True 
 B)False

Choices that maximize total utility generally produce demand curves that are:

If income falls, normal goods will experience an increase in consumption.

Use the following to answer question(s): Consumer Equilibrium 3 -(Exhibit: Consumer Equilibrium 3) The highest attainable level of utility, given budget constraint FL, is at point:

If a consumer buys more of good X and less of good Y, the ___ of good X will _ , and the of good Y will _ .

Consumer equilibrium is achieved at the point of tangency between the budget line and the highest attainable indifference curve.

The income effect of a price change is described by which of the following statements?

A curve that represents combinations of two goods that yield equal levels of satisfaction is a(n):

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. Marginal utility eventually decreases with the consumption of additional units of good A because of the law of:

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. Marginal utility of good A is found by:

If a consumer purchases a combination of commodities a and b such that MUₐ/Pₐ = 100 and MUb/Pb = 80, to maximize utility, the consumer should buy:

The consumption of normal goods will increase because of the income effect when their prices increase.

The marginal rate of substitution assumes that:

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

In terms of indifference curves, the equilibrium-purchase combination is determined by the:

Total utility falls as marginal utility declines.

A consumer's downward-sloping demand curve for a good reflects the fact that the marginal utility of the good increases as more of it is consumed.

A consumer is in equilibrium along the portion of an indifference curve that lies below a budget line.

Marginal utility is negative when total utility is increasing.

Which of the following statements is true because of the law of diminishing marginal utility?

The income effect of a normal good will not reinforce the substitution effect.

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

Choices that maximize total utility generally produce demand curves that are:

If income falls, normal goods will experience an increase in consumption.

Use the following to answer question(s): Consumer Equilibrium 3 -(Exhibit: Consumer Equilibrium 3) The highest attainable level of utility, given budget constraint FL, is at point:

If a consumer buys more of good X and less of good Y, the _______ of good X will _______ , and the ________ of good Y will _______ .

Consumer equilibrium is achieved at the point of tangency between the budget line and the highest attainable indifference curve.

The income effect of a price change is described by which of the following statements?

A curve that represents combinations of two goods that yield equal levels of satisfaction is a(n):

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. Marginal utility eventually decreases with the consumption of additional units of good A because of the law of:

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. Marginal utility of good A is found by:

If a consumer purchases a combination of commodities a and b such that MUₐ/Pₐ = 100 and MUb/Pb = 80, to maximize utility, the consumer should buy:

The consumption of normal goods will increase because of the income effect when their prices increase.

The marginal rate of substitution assumes that:

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

In terms of indifference curves, the equilibrium-purchase combination is determined by the:

Total utility falls as marginal utility declines.

A consumer's downward-sloping demand curve for a good reflects the fact that the marginal utility of the good increases as more of it is consumed.

A consumer is in equilibrium along the portion of an indifference curve that lies below a budget line.

Marginal utility is negative when total utility is increasing.

Which of the following statements is true because of the law of diminishing marginal utility?

The income effect of a normal good will not reinforce the substitution effect.

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

If a consumer buys more of good X and less of good Y, the ___ of good X will _ , and the of good Y will _ .