Question 1

Which of the following statements is correct?

Accepted Answer

A)  Both cash and noncash gift-giving cause value losses. 
B)  Neither cash nor noncash gift-giving causes value losses. 
C)  Noncash gift-giving creates a value loss,but cash gifts do not. 
D)  Cash gifts create a value loss,but noncash gifts do not. 
A)  Both cash and noncash gift-giving cause value losses. 
B)  Neither cash nor noncash gift-giving causes value losses. 
C)  Noncash gift-giving creates a value loss,but cash gifts do not. 
D)  Cash gifts create a value loss,but noncash gifts do not.

Question 2

Answer the question on the basis of the following marginal utility data for products X and Y.Assume that the prices of X and Y are $4 and $2 respectively and that the consumer's income is $18. $\begin{array}{c}
\begin{array}{c}
\text {Units}\
\underline{\text {of  X }}\
1\
2\
3\
4\
5\
6
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Utility, X}}\
20\
16\
12\
8\
6\
4
\end{array}
\begin{array}{c}
\text {Units}\
\underline{\text {of  Y }}\
1\
2\
3\
4\
5\
6
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Utility, Y}}\
16\
14\
12\
10\
8\
6
\end{array}
\end{array}$
 Refer to the data.What quantities of X and Y should be purchased to maximize utility?

Accepted Answer

A)  2 of X and 1 of Y 
B)  4 of X and 5 of Y 
C)  2 of X and 5 of Y 
D)  2 of X and 6 of Y 
A)  2 of X and 1 of Y 
B)  4 of X and 5 of Y 
C)  2 of X and 5 of Y 
D)  2 of X and 6 of Y

Question 3

"Essential" water is cheaper than "nonessential" diamonds because:

Accepted Answer

A)  new industrial uses for diamonds have been discovered. 
B)  the supply of water is great relative to demand and the supply of diamonds is small relative to demand. 
C)  although the total utility of diamonds is greater,their marginal utility is small. 
D)  the supply of diamonds is great relative to demand and the supply of water is small relative to demand. 
A)  new industrial uses for diamonds have been discovered. 
B)  the supply of water is great relative to demand and the supply of diamonds is small relative to demand. 
C)  although the total utility of diamonds is greater,their marginal utility is small. 
D)  the supply of diamonds is great relative to demand and the supply of water is small relative to demand.

Question 4

In moving along a given budget line:

Accepted Answer

A)  the prices of both products and money income are assumed to be constant. 
B)  each point on the line will be equally satisfactory to consumers. 
C)  money income varies,but the prices of the two goods are constant. 
D)  the prices of both products are assumed to vary,but money income is constant. 
A)  the prices of both products and money income are assumed to be constant. 
B)  each point on the line will be equally satisfactory to consumers. 
C)  money income varies,but the prices of the two goods are constant. 
D)  the prices of both products are assumed to vary,but money income is constant.

Question 5

When total utility is at a maximum,marginal utility is zero.

Accepted Answer

A) True 
 B)False

Question 6

The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility.His total utility from three Pepsis is 38 units of utility.The marginal utility of the third Pepsi is:

Accepted Answer

A)  26 units of utility. 
B)  6 units of utility. 
C)  8 units of utility. 
D)  38 units of utility. 
A)  26 units of utility. 
B)  6 units of utility. 
C)  8 units of utility. 
D)  38 units of utility.

Question 7

According to economists,gift registries,returning gifts for cash refunds,and "recycling gifts":

Accepted Answer

A)  are inefficient because the time spent in these activities is never worth the benefit recipients receive from doing them. 
B)  are equally efficient because the recipient gets exactly what he wants. 
C)  are more efficient than if givers simply gave cash gifts. 
D)  increase the efficiency of gift-giving because they allow the recipient to consume goods that provide greater utility and transfer away those goods that are less satisfying. 
A)  are inefficient because the time spent in these activities is never worth the benefit recipients receive from doing them. 
B)  are equally efficient because the recipient gets exactly what he wants. 
C)  are more efficient than if givers simply gave cash gifts. 
D)  increase the efficiency of gift-giving because they allow the recipient to consume goods that provide greater utility and transfer away those goods that are less satisfying.

Question 8

Any combination of goods lying outside of the budget line:

Accepted Answer

A)  implies that the consumer is not spending all his income. 
B)  yields less utility than any point on the budget line. 
C)  yields less utility than any point inside the budget line. 
D)  is unattainable,given the consumer's income. 
A)  implies that the consumer is not spending all his income. 
B)  yields less utility than any point on the budget line. 
C)  yields less utility than any point inside the budget line. 
D)  is unattainable,given the consumer's income.

Question 9

In moving northeasterly from the origin,we encounter indifference curves that reflect higher and higher levels of total utility.

Accepted Answer

A) True 
 B)False

Question 10

Answer the question on the basis of the following marginal utility data for products X and Y.Assume that the prices of X and Y are $4 and $2 respectively and that the consumer's income is $18. $\begin{array}{c}
\begin{array}{c}
\text {Units}\
\underline{\text {of  X }}\
1\
2\
3\
4\
5\
6
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Utility, X}}\
20\
16\
12\
8\
6\
4
\end{array}
\begin{array}{c}
\text {Units}\
\underline{\text {of  Y }}\
1\
2\
3\
4\
5\
6
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Utility, Y}}\
16\
14\
12\
10\
8\
6
\end{array}
\end{array}$
 Refer to the data.If the price of X decreases to $2,then the utility-maximizing combination of the two products is:

Accepted Answer

A)  2 of X and 5 of Y. 
B)  4 of X and 6 of Y. 
C)  6 of X and 3 of Y. 
D)  4 of X and 5 of Y. 
A)  2 of X and 5 of Y. 
B)  4 of X and 6 of Y. 
C)  6 of X and 3 of Y. 
D)  4 of X and 5 of Y.

Question 11

Graphically,the consumer maximizes total utility where the budget line is tangent to an indifference curve.

Accepted Answer

A) True 
 B)False

Question 12

If MUa/Pa = 100/$35 = MUb/Pb = 300/? = MUc/Pc = 400/?,the prices of products B and C in consumer equilibrium:

Accepted Answer

A)  cannot be determined from the information given. 
B)  are $105 and $140 respectively. 
C)  are $105 and $175 respectively. 
D)  are $100 and $200 respectively. 
A)  cannot be determined from the information given. 
B)  are $105 and $140 respectively. 
C)  are $105 and $175 respectively. 
D)  are $100 and $200 respectively.

Question 13

The diamond-water paradox arises because:

Accepted Answer

A)  essential goods may be cheap while nonessential goods may be expensive. 
B)  the marginal utility of certain products increases,rather than diminishes. 
C)  essential goods are always higher priced than nonessential goods. 
D)  we sometimes fail to use money as a standard of value. 
A)  essential goods may be cheap while nonessential goods may be expensive. 
B)  the marginal utility of certain products increases,rather than diminishes. 
C)  essential goods are always higher priced than nonessential goods. 
D)  we sometimes fail to use money as a standard of value.

Question 14

If you receive a gift whose market price is $20,but you consider it to be worth only $10,then:

Accepted Answer

A)  there is a $10 or 50 percent value gain. 
B)  there may or may not be a value loss. 
C)  there is a $10 or 50 percent value loss. 
D)  you can be relatively certain the giver was a sibling or other close relative. 
A)  there is a $10 or 50 percent value gain. 
B)  there may or may not be a value loss. 
C)  there is a $10 or 50 percent value loss. 
D)  you can be relatively certain the giver was a sibling or other close relative.

Question 15

As a consumer moves down a given indifference curve,his or her total utility will diminish.

Accepted Answer

A) True 
 B)False

Question 16

(Consider This)The lines on a topographical map are analogous to a(n):

Accepted Answer

A)  series of demand curves. 
B)  series of supply curves. 
C)  indifference map. 
D)  series of budget constraints. 
A)  series of demand curves. 
B)  series of supply curves. 
C)  indifference map. 
D)  series of budget constraints.

Question 17

(Consider This)Newspaper dispensing devices seemingly "trust" people to take only a single paper,but the devices actually rely on the law of:

Accepted Answer

A)  supply. 
B)  increasing opportunity costs. 
C)  demand. 
D)  diminishing marginal utility. 
A)  supply. 
B)  increasing opportunity costs. 
C)  demand. 
D)  diminishing marginal utility.

Question 18

Utility refers to the:

Accepted Answer

A)  satisfaction that a consumer derives from a good or service. 
B)  rate of decline in a product demand curve. 
C)  relative scarcity of a product. 
D)  usefulness of a product. 
A)  satisfaction that a consumer derives from a good or service. 
B)  rate of decline in a product demand curve. 
C)  relative scarcity of a product. 
D)  usefulness of a product.

Question 19

When the price of a product falls,the income effect induces the consumer to purchase more of it while the substitution effect prompts her to buy less.

Accepted Answer

A) True 
 B)False

Question 20

Assume MUc and MUd represent the marginal utility that a consumer gets from products C and D,the respective prices of which are Pc and Pd.The consumer will increase his total utility from a specific money outlay by spending more on C and less on D if initially:

Accepted Answer

A) 
$$\mathrm { MU } _ { d }  \frac { \mathrm { MU } _ { d } } { P _ { d } }$$ 
D) 
$$\mathrm { MU } _ { d } > \mathrm { MU } _ { c }$$ 
A) 
$$\mathrm { MU } _ { d }  \frac { \mathrm { MU } _ { d } } { P _ { d } }$$ 
D) 
$$\mathrm { MU } _ { d } > \mathrm { MU } _ { c }$$

Which of the following statements is correct?

"Essential" water is cheaper than "nonessential" diamonds because:

In moving along a given budget line:

When total utility is at a maximum,marginal utility is zero.

The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility.His total utility from three Pepsis is 38 units of utility.The marginal utility of the third Pepsi is:

According to economists,gift registries,returning gifts for cash refunds,and "recycling gifts":

Any combination of goods lying outside of the budget line:

In moving northeasterly from the origin,we encounter indifference curves that reflect higher and higher levels of total utility.

Graphically,the consumer maximizes total utility where the budget line is tangent to an indifference curve.

If MU_a/P_a = 100/$35 = MU_b/P_b = 300/? = MU_c/P_c = 400/?,the prices of products B and C in consumer equilibrium:

The diamond-water paradox arises because:

If you receive a gift whose market price is $20,but you consider it to be worth only $10,then:

As a consumer moves down a given indifference curve,his or her total utility will diminish.

(Consider This)The lines on a topographical map are analogous to a(n):

(Consider This)Newspaper dispensing devices seemingly "trust" people to take only a single paper,but the devices actually rely on the law of:

Utility refers to the:

When the price of a product falls,the income effect induces the consumer to purchase more of it while the substitution effect prompts her to buy less.

Assume MU_c and MU_d represent the marginal utility that a consumer gets from products C and D,the respective prices of which are P_c and P_d.The consumer will increase his total utility from a specific money outlay by spending more on C and less on D if initially:

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

Exam 7: Utility Maximization

Which of the following statements is correct?

"Essential" water is cheaper than "nonessential" diamonds because:

In moving along a given budget line:

When total utility is at a maximum,marginal utility is zero.

The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility.His total utility from three Pepsis is 38 units of utility.The marginal utility of the third Pepsi is:

According to economists,gift registries,returning gifts for cash refunds,and "recycling gifts":

Any combination of goods lying outside of the budget line:

In moving northeasterly from the origin,we encounter indifference curves that reflect higher and higher levels of total utility.

Graphically,the consumer maximizes total utility where the budget line is tangent to an indifference curve.

If MUa/Pa = 100/$35 = MUb/Pb = 300/? = MUc/Pc = 400/?,the prices of products B and C in consumer equilibrium:

The diamond-water paradox arises because:

If you receive a gift whose market price is $20,but you consider it to be worth only $10,then:

As a consumer moves down a given indifference curve,his or her total utility will diminish.

(Consider This)The lines on a topographical map are analogous to a(n):

(Consider This)Newspaper dispensing devices seemingly "trust" people to take only a single paper,but the devices actually rely on the law of:

Utility refers to the:

When the price of a product falls,the income effect induces the consumer to purchase more of it while the substitution effect prompts her to buy less.

Assume MUc and MUd represent the marginal utility that a consumer gets from products C and D,the respective prices of which are Pc and Pd.The consumer will increase his total utility from a specific money outlay by spending more on C and less on D if initially:

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

If MU_a/P_a = 100/$35 = MU_b/P_b = 300/? = MU_c/P_c = 400/?,the prices of products B and C in consumer equilibrium:

Assume MU_c and MU_d represent the marginal utility that a consumer gets from products C and D,the respective prices of which are P_c and P_d.The consumer will increase his total utility from a specific money outlay by spending more on C and less on D if initially: