Question 1

Which of the following is correct?

Accepted Answer

A)  There is no firm mathematical relationship between marginal utility and total utility. 
B)  Total utility is equal to the change in marginal utility from consuming an additional unit of a product. 
C)  If marginal utility is diminishing and is a positive amount,total utility will increase. 
D)  If marginal utility is diminishing,total utility must also be diminishing. 
A)  There is no firm mathematical relationship between marginal utility and total utility. 
B)  Total utility is equal to the change in marginal utility from consuming an additional unit of a product. 
C)  If marginal utility is diminishing and is a positive amount,total utility will increase. 
D)  If marginal utility is diminishing,total utility must also be diminishing.

Question 2

(Consider This)A topographical map shows successively higher equal-elevation lines,whereas an indifference map shows successively higher levels of total:

Accepted Answer

A)  utility. 
B)  revenue. 
C)  profit. 
D)  cost. 
A)  utility. 
B)  revenue. 
C)  profit. 
D)  cost.

Question 3

(Consider This)Unlike newspaper dispensing devices,soft drink dispensing machines do not permit people to take more than one can or bottle with each payment.The reason is that the:

Accepted Answer

A)  opportunity cost of additional cans or bottles of a soft drink increase very rapidly. 
B)  marginal utility of extra soft drink cans or bottles declines slowly,particularly because they are storable and can be consumed later. 
C)  marginal utility of extra soft drink cans or bottles declines quite rapidly. 
D)  opportunity cost of additional cans or bottles of soft drink increases very slowly. 
A)  opportunity cost of additional cans or bottles of a soft drink increase very rapidly. 
B)  marginal utility of extra soft drink cans or bottles declines slowly,particularly because they are storable and can be consumed later. 
C)  marginal utility of extra soft drink cans or bottles declines quite rapidly. 
D)  opportunity cost of additional cans or bottles of soft drink increases very slowly.

Question 4

The slope of a budget line reflects the:

Accepted Answer

A)  elasticity of demand for the two products. 
B)  price ratio of the two products. 
C)  amount of the consumer's income. 
D)  utility ratio of the two products. 
A)  elasticity of demand for the two products. 
B)  price ratio of the two products. 
C)  amount of the consumer's income. 
D)  utility ratio of the two products.

Question 5

A change in the slope of a budget line is solely the result of a change in:

Accepted Answer

A)  consumer preferences. 
B)  the price of one good relative to the other. 
C)  money income. 
D)  the slope of the indifference curve that is tangent to the budget line. 
A)  consumer preferences. 
B)  the price of one good relative to the other. 
C)  money income. 
D)  the slope of the indifference curve that is tangent to the budget line.

Question 6

Suppose you have a limited money income and you are purchasing products A and B,whose prices happen to be the same.To maximize your utility,you should purchase A and B in such amounts that:

Accepted Answer

A)  their marginal utilities are the same. 
B)  their total utilities are the same. 
C)  their marginal and total utilities are proportionate. 
D)  the income and substitution effects associated with each are equal. 
A)  their marginal utilities are the same. 
B)  their total utilities are the same. 
C)  their marginal and total utilities are proportionate. 
D)  the income and substitution effects associated with each are equal.

Question 7

If marginal utility is diminishing,total utility must also be declining.

Accepted Answer

A) True 
 B)False

Question 8

Assume the price of product Y (the quantity of which is on the vertical axis)is $15 and the price of product X (the quantity of which is on the horizontal axis)is $3.Also assume that money income is $60.The absolute value of the slope of the resulting budget line is:

Accepted Answer

A)  5. 
B)  1/5. 
C)  4. 
D)  20. 
A)  5. 
B)  1/5. 
C)  4. 
D)  20.

Question 9

The marginal utility of the last unit of apples consumed is 12 and the marginal utility of the last unit of bananas consumed is 8.What set of prices for apples and bananas,respectively,would be consistent with consumer equilibrium?

Accepted Answer

A)  $4 and $6 
B)  $6 and $4 
C)  $8 and $12 
D)  $16 and $9 
A)  $4 and $6 
B)  $6 and $4 
C)  $8 and $12 
D)  $16 and $9

Question 10

Marginal utility is the:

Accepted Answer

A)  sensitivity of consumer purchases of a good to changes in the price of that good. 
B)  change in total utility obtained by consuming one more unit of a good. 
C)  change in total utility obtained by consuming another unit of a good divided by the change in the price of that good. 
D)  total utility associated with the consumption of a certain number of units of a good divided by the number of units consumed. 
A)  sensitivity of consumer purchases of a good to changes in the price of that good. 
B)  change in total utility obtained by consuming one more unit of a good. 
C)  change in total utility obtained by consuming another unit of a good divided by the change in the price of that good. 
D)  total utility associated with the consumption of a certain number of units of a good divided by the number of units consumed.

Question 11

Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play.We can conclude that Prashanth:

Accepted Answer

A)  is relatively unappreciative of the arts. 
B)  obtains more marginal utility from the play than from the hockey game. 
C)  has a higher "marginal utility-to-price ratio" for the hockey game than for the play. 
D)  has recently attended several other Broadway plays. 
A)  is relatively unappreciative of the arts. 
B)  obtains more marginal utility from the play than from the hockey game. 
C)  has a higher "marginal utility-to-price ratio" for the hockey game than for the play. 
D)  has recently attended several other Broadway plays.

Question 12

A product has utility if it:

Accepted Answer

A)  takes more and more resources to produce successive units of it. 
B)  violates the law of demand. 
C)  satisfies consumer wants. 
D)  is useful. 
A)  takes more and more resources to produce successive units of it. 
B)  violates the law of demand. 
C)  satisfies consumer wants. 
D)  is useful.

Question 13

Answer the question on the basis of the following total utility data for products L and M.Assume that the prices of L and M are $3 and $4 respectively and that the consumer's income is $18. $\begin{array}{l}
\begin{array}{ccc}
\text { Units}&\text{ Total }\
\text { of L } &  \text { Utility } \
\hline
1 & 9 \
2 & 15 \
3 & 18 \
4 & 20 \
5 & 21
\end{array}
\begin{array}{ccc}
\begin{array}{c}
\text { Units } \
\text { of M }\
\hline
\end{array} &  \begin{array}{c}
\text { Total } \
\text { Utility }\
\hline
\end{array} \
1 & 16 \
2 & 28 \
3 & 36 \
4 & 40 \
5 & 42
\end{array}
\end{array}$ Refer to the data.How many units of the two products will the rational consumer purchase?

Accepted Answer

A)  3 of L and none of M 
B)  4 of L and 2 of M 
C)  3 of L and 5 of M 
D)  2 of L and 3 of M 
A)  3 of L and none of M 
B)  4 of L and 2 of M 
C)  3 of L and 5 of M 
D)  2 of L and 3 of M

Question 14

Marginal utility is total utility divided by the number of units consumed.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is not correct?

Accepted Answer

A)  A reduction in money income will shift the budget line to the right. 
B)  A reduction in money income accompanied by an increase in product prices will necessarily shift the budget line to the left. 
C)  An increase in product prices will shift the budget line to the left. 
D)  An increase in money income will shift the budget line to the right. 
A)  A reduction in money income will shift the budget line to the right. 
B)  A reduction in money income accompanied by an increase in product prices will necessarily shift the budget line to the left. 
C)  An increase in product prices will shift the budget line to the left. 
D)  An increase in money income will shift the budget line to the right.

Question 16

The substitution effect suggests that when consumers judge product quality by price,they will substitute high-priced products for low-priced products.

Accepted Answer

A) True 
 B)False

Question 17

How did Apple overcome consumers' diminishing marginal utility for iPads?

Accepted Answer

A)  Apple lowered the price of iPads so that previous buyers would purchase another unit. 
B)  Apple introduced new features to entice previous buyers to purchase new models. 
C)  Apple ignored the problem and focused solely on attracting new buyers. 
D)  Apple was unable to overcome the problem and has faced steadily declining sales. 
A)  Apple lowered the price of iPads so that previous buyers would purchase another unit. 
B)  Apple introduced new features to entice previous buyers to purchase new models. 
C)  Apple ignored the problem and focused solely on attracting new buyers. 
D)  Apple was unable to overcome the problem and has faced steadily declining sales.

Question 18

The ability of a good or service to satisfy wants is called:

Accepted Answer

A)  utility maximization. 
B)  opportunity cost. 
C)  revenue potential. 
D)  utility. 
A)  utility maximization. 
B)  opportunity cost. 
C)  revenue potential. 
D)  utility.

Question 19

The law of diminishing marginal utility explains why:

Accepted Answer

A)  supply curves slope upward. 
B)  demand curves slope downward. 
C)  addicts can never get enough. 
D)  people will only consume their favorite goods and not try new things. 
A)  supply curves slope upward. 
B)  demand curves slope downward. 
C)  addicts can never get enough. 
D)  people will only consume their favorite goods and not try new things.

Question 20

It is possible for a consumer's indifference curves to intersect.

Accepted Answer

A) True 
 B)False

Which of the following is correct?

(Consider This)A topographical map shows successively higher equal-elevation lines,whereas an indifference map shows successively higher levels of total:

(Consider This)Unlike newspaper dispensing devices,soft drink dispensing machines do not permit people to take more than one can or bottle with each payment.The reason is that the:

The slope of a budget line reflects the:

A change in the slope of a budget line is solely the result of a change in:

Suppose you have a limited money income and you are purchasing products A and B,whose prices happen to be the same.To maximize your utility,you should purchase A and B in such amounts that:

If marginal utility is diminishing,total utility must also be declining.

Assume the price of product Y (the quantity of which is on the vertical axis)is $15 and the price of product X (the quantity of which is on the horizontal axis)is $3.Also assume that money income is $60.The absolute value of the slope of the resulting budget line is:

The marginal utility of the last unit of apples consumed is 12 and the marginal utility of the last unit of bananas consumed is 8.What set of prices for apples and bananas,respectively,would be consistent with consumer equilibrium?

Marginal utility is the:

Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play.We can conclude that Prashanth:

A product has utility if it:

Marginal utility is total utility divided by the number of units consumed.

Which of the following statements is not correct?

The substitution effect suggests that when consumers judge product quality by price,they will substitute high-priced products for low-priced products.

How did Apple overcome consumers' diminishing marginal utility for iPads?

The ability of a good or service to satisfy wants is called:

The law of diminishing marginal utility explains why:

It is possible for a consumer's indifference curves to intersect.

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 is correct?

(Consider This)A topographical map shows successively higher equal-elevation lines,whereas an indifference map shows successively higher levels of total:

(Consider This)Unlike newspaper dispensing devices,soft drink dispensing machines do not permit people to take more than one can or bottle with each payment.The reason is that the:

The slope of a budget line reflects the:

A change in the slope of a budget line is solely the result of a change in:

Suppose you have a limited money income and you are purchasing products A and B,whose prices happen to be the same.To maximize your utility,you should purchase A and B in such amounts that:

If marginal utility is diminishing,total utility must also be declining.

Assume the price of product Y (the quantity of which is on the vertical axis)is $15 and the price of product X (the quantity of which is on the horizontal axis)is $3.Also assume that money income is $60.The absolute value of the slope of the resulting budget line is:

The marginal utility of the last unit of apples consumed is 12 and the marginal utility of the last unit of bananas consumed is 8.What set of prices for apples and bananas,respectively,would be consistent with consumer equilibrium?

Marginal utility is the:

Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play.We can conclude that Prashanth:

A product has utility if it:

Marginal utility is total utility divided by the number of units consumed.

Which of the following statements is not correct?

The substitution effect suggests that when consumers judge product quality by price,they will substitute high-priced products for low-priced products.

How did Apple overcome consumers' diminishing marginal utility for iPads?

The ability of a good or service to satisfy wants is called:

The law of diminishing marginal utility explains why:

It is possible for a consumer's indifference curves to intersect.

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