Question 1

If a rational consumer is in equilibrium,which of the following conditions will hold true?

Accepted Answer

A)  MUa = MUb = MUc = ...= MUn. 
B)  The marginal utility of each good purchased will be zero. 
C)  The marginal utility of the last dollar spent on each good purchased will be the same. 
D)  The total utility obtained from each good purchased will be the same. 
A)  MUa = MUb = MUc = ...= MUn. 
B)  The marginal utility of each good purchased will be zero. 
C)  The marginal utility of the last dollar spent on each good purchased will be the same. 
D)  The total utility obtained from each good purchased will be the same.

Question 2

Indifference curves are linear and budget lines are convex to the origin.

Accepted Answer

A) True 
 B)False

Question 3

In introducing the opportunity cost of time into the theory of consumer behavior,we find that,all else equal:

Accepted Answer

A)  one should consume less of time-intensive goods. 
B)  one should consume more of time-intensive goods. 
C)  the consumer's equilibrium position is not altered. 
D)  the marginal utility derived from each product must be multiplied by consumption time in determining equilibrium. 
A)  one should consume less of time-intensive goods. 
B)  one should consume more of time-intensive goods. 
C)  the consumer's equilibrium position is not altered. 
D)  the marginal utility derived from each product must be multiplied by consumption time in determining equilibrium.

Question 4

Noncash gifts:

Accepted Answer

A)  increase the utility of recipients by introducing them to products they have not consumed before. 
B)  reduce recipient utility relative to a cash gift because noncash gifts often fail to match recipient preferences. 
C)  entail as much utility as do cash gifts. 
D)  increase the utility of recipients because many people are uncertain of their own preferences. 
A)  increase the utility of recipients by introducing them to products they have not consumed before. 
B)  reduce recipient utility relative to a cash gift because noncash gifts often fail to match recipient preferences. 
C)  entail as much utility as do cash gifts. 
D)  increase the utility of recipients because many people are uncertain of their own preferences.

Question 5

Assume the price of product Y (the quantity of which is plotted on the vertical axis)is initially $15 and the price of X (the quantity of which is plotted on the horizontal axis)is initially $3.Assume money income is initially $60.If the prices of Y and X now increase to $30 and $6 respectively and money income increases to $120,then the budget line will:

Accepted Answer

A)  shift rightward and become steeper. 
B)  shift rightward and become flatter. 
C)  shift rightward,but its slope will not change. 
D)  be unchanged. 
A)  shift rightward and become steeper. 
B)  shift rightward and become flatter. 
C)  shift rightward,but its slope will not change. 
D)  be unchanged.

Question 6

With a fixed money income,an increase in the price of one good and a decrease in the price of the other will cause the new budget line to intersect the original budget line.

Accepted Answer

A) True 
 B)False

Question 7

Increases in product prices shift the consumer's:

Accepted Answer

A)  budget line to the right. 
B)  budget line to the left. 
C)  indifference curves to the left. 
D)  indifference curves to the right. 
A)  budget line to the right. 
B)  budget line to the left. 
C)  indifference curves to the left. 
D)  indifference curves to the right.

Question 8

The utility of a good or service:

Accepted Answer

A)  is synonymous with usefulness. 
B)  is the satisfaction or pleasure one gets from consuming it. 
C)  is easy to quantify. 
D)  rarely varies from person to person. 
A)  is synonymous with usefulness. 
B)  is the satisfaction or pleasure one gets from consuming it. 
C)  is easy to quantify. 
D)  rarely varies from person to person.

Question 9

At each point on an indifference curve:

Accepted Answer

A)  money income is the same. 
B)  the prices of the two products are the same. 
C)  total utility is the same. 
D)  marginal utility is the same. 
A)  money income is the same. 
B)  the prices of the two products are the same. 
C)  total utility is the same. 
D)  marginal utility is the same.

Question 10

An indifference map implies that:

Accepted Answer

A)  money income is constant,but the prices of the two products vary directly with the quantities purchased. 
B)  the two products under consideration are perfectly substitutable for one another. 
C)  a consumer is better off to be at some point high on a given curve as opposed to a point low on the same curve. 
D)  curves farther from the origin yield higher levels of total utility. 
A)  money income is constant,but the prices of the two products vary directly with the quantities purchased. 
B)  the two products under consideration are perfectly substitutable for one another. 
C)  a consumer is better off to be at some point high on a given curve as opposed to a point low on the same curve. 
D)  curves farther from the origin yield higher levels of total utility.

Question 11

What do the income effect,the substitution effect,and diminishing marginal utility have in common?

Accepted Answer

A)  All are required to explain the utility-maximizing position of a consumer. 
B)  They are all empirically measurable. 
C)  They all help explain the upsloping supply curve. 
D)  They all help explain the downsloping demand curve. 
A)  All are required to explain the utility-maximizing position of a consumer. 
B)  They are all empirically measurable. 
C)  They all help explain the upsloping supply curve. 
D)  They all help explain the downsloping demand curve.

Question 12

Indifference curve analysis:

Accepted Answer

A)  presumes,as does utility analysis,that satisfaction is numerically measurable. 
B)  presumes,unlike utility analysis,that satisfaction is numerically measurable. 
C)  presumes only that the consumer can say one combination of two goods yields more or less utility than some other combination. 
D)  is in conflict with the idea of a downsloping demand curve. 
A)  presumes,as does utility analysis,that satisfaction is numerically measurable. 
B)  presumes,unlike utility analysis,that satisfaction is numerically measurable. 
C)  presumes only that the consumer can say one combination of two goods yields more or less utility than some other combination. 
D)  is in conflict with the idea of a downsloping demand curve.

Question 13

The fact that most medical care purchases are financed through insurance:

Accepted Answer

A)  has no effect on health care consumption because aggregate costs are the same regardless of payment method. 
B)  reduces the amount of health care consumed by raising the price of additional units of care. 
C)  has decreased health care costs and therefore reduced aggregate health care expenditures. 
D)  increases the amount of health care consumed by reducing the price of additional units of care. 
A)  has no effect on health care consumption because aggregate costs are the same regardless of payment method. 
B)  reduces the amount of health care consumed by raising the price of additional units of care. 
C)  has decreased health care costs and therefore reduced aggregate health care expenditures. 
D)  increases the amount of health care consumed by reducing the price of additional units of care.

Question 14

While eating at Alex's "Pizza by the Slice" restaurant,Kara experiences diminishing marginal utility.She gained 10 units of satisfaction from her first slice of pizza consumed and would only receive 5 units of satisfaction from consuming a second slice,at the same price.Based on this information we can conclude that:

Accepted Answer

A)  Alex may have to lower the price to convince Kara to buy a second slice. 
B)  Kara will not eat a second slice,even if it is given to her at no charge. 
C)  Kara will definitely want to buy a second slice of pizza. 
D)  even if Kara buys a second slice,she will not buy a third slice. 
A)  Alex may have to lower the price to convince Kara to buy a second slice. 
B)  Kara will not eat a second slice,even if it is given to her at no charge. 
C)  Kara will definitely want to buy a second slice of pizza. 
D)  even if Kara buys a second slice,she will not buy a third slice.

Question 15

The income effect explains an exception to the law of demand.

Accepted Answer

A) True 
 B)False

Question 16

A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish.

Accepted Answer

A) True 
 B)False

Question 17

To maximize utility,a consumer should allocate money income so that the:

Accepted Answer

A)  elasticity of demand on all products purchased is the same. 
B)  marginal utility obtained from the last dollar spent on each product is the same. 
C)  total utility derived from each product consumed is the same. 
D)  marginal utility of the last unit of each product consumed is the same. 
A)  elasticity of demand on all products purchased is the same. 
B)  marginal utility obtained from the last dollar spent on each product is the same. 
C)  total utility derived from each product consumed is the same. 
D)  marginal utility of the last unit of each product consumed is the same.

Question 18

Diminishing marginal utility explains why:

Accepted Answer

A)  the income effect exceeds the substitution effect. 
B)  the substitution effect exceeds the income effect. 
C)  supply curves are upsloping. 
D)  demand curves are downsloping. 
A)  the income effect exceeds the substitution effect. 
B)  the substitution effect exceeds the income effect. 
C)  supply curves are upsloping. 
D)  demand curves are downsloping.

Question 19

Marginal utility can be:

Accepted Answer

A)  positive,but not negative. 
B)  positive or negative,but not zero. 
C)  positive,negative,or zero. 
D)  decreasing,but not negative. 
A)  positive,but not negative. 
B)  positive or negative,but not zero. 
C)  positive,negative,or zero. 
D)  decreasing,but not negative.

Question 20

(Last Word)Most people do not steal because:

Accepted Answer

A)  stolen goods are subject to the law of diminishing marginal utility. 
B)  the marginal utilities of stolen goods are negative. 
C)  their marginal costs,including guilt costs,are too high. 
D)  stolen goods can only be sold at deep discounts. 
A)  stolen goods are subject to the law of diminishing marginal utility. 
B)  the marginal utilities of stolen goods are negative. 
C)  their marginal costs,including guilt costs,are too high. 
D)  stolen goods can only be sold at deep discounts.

If a rational consumer is in equilibrium,which of the following conditions will hold true?

Indifference curves are linear and budget lines are convex to the origin.

In introducing the opportunity cost of time into the theory of consumer behavior,we find that,all else equal:

Noncash gifts:

With a fixed money income,an increase in the price of one good and a decrease in the price of the other will cause the new budget line to intersect the original budget line.

Increases in product prices shift the consumer's:

The utility of a good or service:

At each point on an indifference curve:

An indifference map implies that:

What do the income effect,the substitution effect,and diminishing marginal utility have in common?

Indifference curve analysis:

The fact that most medical care purchases are financed through insurance:

The income effect explains an exception to the law of demand.

A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish.

To maximize utility,a consumer should allocate money income so that the:

Diminishing marginal utility explains why:

Marginal utility can be:

(Last Word)Most people do not steal because:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Behavioral Economics

Businesses and the Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

Technology RD and Efficiency

The Demand for Resources

Wage Determination

Rent Interest and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

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Exam 7: Utility Maximization

If a rational consumer is in equilibrium,which of the following conditions will hold true?

Indifference curves are linear and budget lines are convex to the origin.

In introducing the opportunity cost of time into the theory of consumer behavior,we find that,all else equal:

Noncash gifts:

With a fixed money income,an increase in the price of one good and a decrease in the price of the other will cause the new budget line to intersect the original budget line.

Increases in product prices shift the consumer's:

The utility of a good or service:

At each point on an indifference curve:

An indifference map implies that:

What do the income effect,the substitution effect,and diminishing marginal utility have in common?

Indifference curve analysis:

The fact that most medical care purchases are financed through insurance:

The income effect explains an exception to the law of demand.

A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish.

To maximize utility,a consumer should allocate money income so that the:

Diminishing marginal utility explains why:

Marginal utility can be:

(Last Word)Most people do not steal because:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Behavioral Economics

Businesses and the Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

Technology RD and Efficiency

The Demand for Resources

Wage Determination

Rent Interest and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Filters