Question 1

Which of the following statements is true?

Accepted Answer

A)  Because total utility is constant along an indifference curve, the marginal rate of substitution is also constant. 
B)  If an indifference curve is convex, the marginal rate of substitution varies along the curve. 
C)  The slope of an indifference curve measures the consumer's marginal rate of substitution. 
D)  Both b) and c) are true. 
A)  Because total utility is constant along an indifference curve, the marginal rate of substitution is also constant. 
B)  If an indifference curve is convex, the marginal rate of substitution varies along the curve. 
C)  The slope of an indifference curve measures the consumer's marginal rate of substitution. 
D)  Both b) and c) are true.

Question 2

Which of the following utility functions is an example of preferences for perfect substitutes?

Accepted Answer

A)  $U ( x , y ) = y \sqrt { x }$ 
B)  $U ( x , y ) = \min \{ 2 x , y \}$ 
C)  $U ( x , y ) = 3 x + 5 y$ 
D)  $U ( x , y ) = 2 x ^ { 2 } + 4 y$ 
A)  $U ( x , y ) = y \sqrt { x }$ 
B)  $U ( x , y ) = \min \{ 2 x , y \}$ 
C)  $U ( x , y ) = 3 x + 5 y$ 
D)  $U ( x , y ) = 2 x ^ { 2 } + 4 y$

Question 3

Which of the following statements is false?

Accepted Answer

A)  If marginal utility is diminishing, then total utility is increasing but at a decreasing rate. 
B)  If marginal utility is diminishing, then total utility is concave. 
C)  If marginal utility is negative, then total utility is downward-sloping. 
D)  If marginal utility is decreasing, then total utility is decreasing. 
A)  If marginal utility is diminishing, then total utility is increasing but at a decreasing rate. 
B)  If marginal utility is diminishing, then total utility is concave. 
C)  If marginal utility is negative, then total utility is downward-sloping. 
D)  If marginal utility is decreasing, then total utility is decreasing.

Question 4

Suppose that MRSx, y = 10.

Accepted Answer

A)  The consumer is willing to substitute 10 units of x for 1 unit of y to leave utility unchanged. 
B)  The consumer is willing to substitute 10 units of y  for 1 unit of x to leave utility unchanged. 
C)  Regardless of prices, the consumer will consume only y . 
D)  Regardless of prices, the consumer will consume only x . 
A)  The consumer is willing to substitute 10 units of x for 1 unit of y to leave utility unchanged. 
B)  The consumer is willing to substitute 10 units of y  for 1 unit of x to leave utility unchanged. 
C)  Regardless of prices, the consumer will consume only y . 
D)  Regardless of prices, the consumer will consume only x .

Question 5

An indifference curve represents

Accepted Answer

A)  a two-dimensional "slice" of a three-dimensional total utility function. 
B)  varying levels of a total utility function. 
C)  constant marginal utility. 
D)  the slope of marginal utility. 
A)  a two-dimensional "slice" of a three-dimensional total utility function. 
B)  varying levels of a total utility function. 
C)  constant marginal utility. 
D)  the slope of marginal utility.

Question 6

Consider the following three market baskets. $\begin{array} { c c c } 
\hline \text { Basket } & \text { Good } x & \text { Good } y \
\hline \mathrm { A } & 2 & 8 \
\mathrm {~B} & 10 & 2 \
\mathrm { C } & 6 & 5 \
\hline
\end{array}$
 If Basket A and Basket B are on the same indifference curve, preferences satisfy the usual assumptions, and the indifference curves have a diminishing marginal rate of substitution,

Accepted Answer

A)  Basket C is preferred to Basket A 
B)  Basket A is preferred to Basket C 
C)  The consumer is indifferent between Basket A and Basket C 
D)  There is not enough information to determine how the consumer would rank Basket A relative to Basket C. 
A)  Basket C is preferred to Basket A 
B)  Basket A is preferred to Basket C 
C)  The consumer is indifferent between Basket A and Basket C 
D)  There is not enough information to determine how the consumer would rank Basket A relative to Basket C.

Question 7

If one were to draw indifference curves representing preferences over two varieties of red apples, it is likely that one would draw them as:
a) almost straight lines.
b) almost "L-shaped."
c) positively sloped.
d) crossing.

Accepted Answer

The answer of If one were to draw indifference curves...

Question 8

Indifference curves that intersect are said to be:

Accepted Answer

A)  Irrational. 
B)  Non-transitive. 
C)  Inconsistent with our basic assumptions about preferences. 
D)  Complete, but not consistent. 
A)  Irrational. 
B)  Non-transitive. 
C)  Inconsistent with our basic assumptions about preferences. 
D)  Complete, but not consistent.

Question 9

Identify the truthfulness of the following statements. I. Ordinal utility gives us information about which basket the consumer prefers and quantitative information about the intensity of the preference.
II) Cardinal utility gives us information about which basket the consumer prefers but not about the intensity of those preferences.

Accepted Answer

A)  Both I and II are true. 
B)  Both I and II are false. 
C)  I is true; II is false. 
D)  I is false; II is true. 
A)  Both I and II are true. 
B)  Both I and II are false. 
C)  I is true; II is false. 
D)  I is false; II is true.

Question 10

Marginal utility

Accepted Answer

A)  is the ratio of total utility to total consumption. 
B)  is the rate at which total utility changes as the level of consumption rises. 
C)  will always be equal to the product's price. 
D)  tells us nothing; we're only concerned with total utility. 
A)  is the ratio of total utility to total consumption. 
B)  is the rate at which total utility changes as the level of consumption rises. 
C)  will always be equal to the product's price. 
D)  tells us nothing; we're only concerned with total utility.

Question 11

The assumption that more is preferred to less:

Accepted Answer

A)  is called transitivity. 
B)  implies that if basket A lies to the northeast of basket B, then basket A is preferred to basket B . 
C)  is called completeness. 
D)  implies that indifference curves are "thick". 
A)  is called transitivity. 
B)  implies that if basket A lies to the northeast of basket B, then basket A is preferred to basket B . 
C)  is called completeness. 
D)  implies that indifference curves are "thick".

Question 12

Two goods are perfect substitutes. The marginal rate of substitution for these two goods is:

Accepted Answer

A)  parabolic. 
B)  exponential. 
C)  a constant. 
D)  shows diminishing marginal utility. 
A)  parabolic. 
B)  exponential. 
C)  a constant. 
D)  shows diminishing marginal utility.

Question 13

If a consumer is unable to compare two baskets, then this consumer's preferences violate which of the following key assumptions?

Accepted Answer

A)  Completeness. 
B)  Transitivity. 
C)  More is better. 
D)  Both completeness and transitivity. 
A)  Completeness. 
B)  Transitivity. 
C)  More is better. 
D)  Both completeness and transitivity.

Question 14

Economists sometimes represent two goods as having right-angled indifference curves (perfect complements). In reality, this violates:

Accepted Answer

A)  the assumption of transitivity. 
B)  the assumption of completeness. 
C)  the law of diminishing returns. 
D)  the "more is better" assumption. 
A)  the assumption of transitivity. 
B)  the assumption of completeness. 
C)  the law of diminishing returns. 
D)  the "more is better" assumption.

Question 15

Suppose that a consumer has utility function U(x, y) with MUx = 5y2x and MUy = 2x2y. What is the marginal rate of substitution?

Accepted Answer

A)  10y3x3 
B)  2x/5y 
C)  5y/2x 
D)  5y2x2 
A)  10y3x3 
B)  2x/5y 
C)  5y/2x 
D)  5y2x2

Question 16

Assume that two baskets A and B  lie on the same indifference curve. Assume that basket A contains more of good B than basket B but less of good X than basket B . As the consumer moves down and to the right (from basket A to basket B ) along his indifference curve, total utility

Accepted Answer

A)  increases. 
B)  remains constant. 
C)  decreases. 
D)  is ambiguous. 
A)  increases. 
B)  remains constant. 
C)  decreases. 
D)  is ambiguous.

Question 17

Consider the utility function U = min (5x, 7y). The indifference curves for this utility function will be

Accepted Answer

A)  vertical 
B)  horizontal 
C)  upward sloping 
D)  L-shaped 
A)  vertical 
B)  horizontal 
C)  upward sloping 
D)  L-shaped

Question 18

Consider the utility function U = min (5x, 7y). To increase satisfaction the consumer must consume

Accepted Answer

A)  at least 5 units more of $x$ 
B)  at least 7 units more of y 
C)  more of both x and y 
D)  more of either x or y 
A)  at least 5 units more of $x$ 
B)  at least 7 units more of y 
C)  more of both x and y 
D)  more of either x or y

Question 19

Suppose for some utility function that MUx = 5y and MUy = 7x

Accepted Answer

A)  The assumption that more is better is satisfied for both goods. 
B)  This utility function will violate the assumption that preferences are complete. 
C)  The indifference curves for this utility function will be straight lines with a slope of -1. 
D)  The indifference curves will have a diminishing marginal rate of substitution. 
A)  The assumption that more is better is satisfied for both goods. 
B)  This utility function will violate the assumption that preferences are complete. 
C)  The indifference curves for this utility function will be straight lines with a slope of -1. 
D)  The indifference curves will have a diminishing marginal rate of substitution.

Question 20

If I prefer steak to burritos, burritos to pasta and pasta to steak:

Accepted Answer

A)  My preferences are irrational. 
B)  My preferences violate the transitivity assumption. 
C)  My preferences violate the "more is better assumption. 
D)  I must have been exhibiting diminishing marginal utility. 
A)  My preferences are irrational. 
B)  My preferences violate the transitivity assumption. 
C)  My preferences violate the "more is better assumption. 
D)  I must have been exhibiting diminishing marginal utility.

Which of the following statements is true?

Which of the following utility functions is an example of preferences for perfect substitutes?

Which of the following statements is false?

Suppose that MRS_{x, y}= 10.

An indifference curve represents

Consider the following three market baskets. Basket Good x Good y 2 8 10 2 6 5 If Basket A and Basket B are on the same indifference curve, preferences satisfy the usual assumptions, and the indifference curves have a diminishing marginal rate of substitution,

If one were to draw indifference curves representing preferences over two varieties of red apples, it is likely that one would draw them as: a) almost straight lines. b) almost "L-shaped." c) positively sloped. d) crossing.

Indifference curves that intersect are said to be:

Marginal utility

The assumption that more is preferred to less:

Two goods are perfect substitutes. The marginal rate of substitution for these two goods is:

If a consumer is unable to compare two baskets, then this consumer's preferences violate which of the following key assumptions?

Economists sometimes represent two goods as having right-angled indifference curves (perfect complements). In reality, this violates:

Suppose that a consumer has utility function U(x, y) with MU_x = 5y²x and MU_y = 2x²y. What is the marginal rate of substitution?

Assume that two baskets A and B lie on the same indifference curve. Assume that basket A contains more of good B than basket B but less of good X than basket B . As the consumer moves down and to the right (from basket A to basket B ) along his indifference curve, total utility

Consider the utility function U = min (5x, 7y). The indifference curves for this utility function will be

Consider the utility function U = min (5x, 7y). To increase satisfaction the consumer must consume

Suppose for some utility function that MU_x = 5y and MU_y = 7x

If I prefer steak to burritos, burritos to pasta and pasta to steak:

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

Exam 3: Consumer Preferences and the Concept of Utility

Which of the following statements is true?

Which of the following utility functions is an example of preferences for perfect substitutes?

Which of the following statements is false?

Suppose that MRSx, y = 10.

An indifference curve represents

Consider the following three market baskets. Basket Good x Good y 2 8 10 2 6 5 If Basket A and Basket B are on the same indifference curve, preferences satisfy the usual assumptions, and the indifference curves have a diminishing marginal rate of substitution,

If one were to draw indifference curves representing preferences over two varieties of red apples, it is likely that one would draw them as: a) almost straight lines. b) almost "L-shaped." c) positively sloped. d) crossing.

Indifference curves that intersect are said to be:

Marginal utility

The assumption that more is preferred to less:

Two goods are perfect substitutes. The marginal rate of substitution for these two goods is:

If a consumer is unable to compare two baskets, then this consumer's preferences violate which of the following key assumptions?

Economists sometimes represent two goods as having right-angled indifference curves (perfect complements). In reality, this violates:

Suppose that a consumer has utility function U(x, y) with MUx = 5y2x and MUy = 2x2y. What is the marginal rate of substitution?

Assume that two baskets A and B lie on the same indifference curve. Assume that basket A contains more of good B than basket B but less of good X than basket B . As the consumer moves down and to the right (from basket A to basket B ) along his indifference curve, total utility

Consider the utility function U = min (5x, 7y). The indifference curves for this utility function will be

Consider the utility function U = min (5x, 7y). To increase satisfaction the consumer must consume

Suppose for some utility function that MUx = 5y and MUy = 7x

If I prefer steak to burritos, burritos to pasta and pasta to steak:

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

Suppose that MRS_{x, y}= 10.

Suppose that a consumer has utility function U(x, y) with MU_x = 5y²x and MU_y = 2x²y. What is the marginal rate of substitution?

Suppose for some utility function that MU_x = 5y and MU_y = 7x