Question 1

The consumption of the composite good is measured by:

Accepted Answer

A) total outlays on all goods included in the group. 
B) adding up the quantities of all goods included in the group. 
C) adding up the prices of all goods included in the group. 
D) the relative prices of the goods included in the group. 
A) total outlays on all goods included in the group. 
B) adding up the quantities of all goods included in the group. 
C) adding up the prices of all goods included in the group. 
D) the relative prices of the goods included in the group.

Question 2

If a consumer is at a corner solution,this means that:

Accepted Answer

A) she is not spending all of his or her income. 
B) MRS is equal to the ratio of the prices of two goods. 
C) she would prefer to buy infinite amounts of one good. 
D) consumption of the first unit of one good is not worth its cost. 
A) she is not spending all of his or her income. 
B) MRS is equal to the ratio of the prices of two goods. 
C) she would prefer to buy infinite amounts of one good. 
D) consumption of the first unit of one good is not worth its cost.

Question 3

Which of the following is true when a consumer is optimizing her consumption choices across two or more goods?

Accepted Answer

A) She is not necessarily on the highest indifference curve in her indifference map. 
B) The budget constraint intersects her indifference curve at her chosen consumption bundle. 
C) She equates the total utility per good for all goods. 
D) She is not necessarily spending all of her budget allotted to the goods. 
A) She is not necessarily on the highest indifference curve in her indifference map. 
B) The budget constraint intersects her indifference curve at her chosen consumption bundle. 
C) She equates the total utility per good for all goods. 
D) She is not necessarily spending all of her budget allotted to the goods.

Question 4

Which of the following statements about the law of diminishing marginal utility is correct?

Accepted Answer

A) As more of a given good is consumed,total utility rises at an increasing rate. 
B) As more of a given good is consumed,marginal utility rises at an increasing rate. 
C) As more of a given good is consumed beyond some level,the marginal utility associated with consumption of additional units tends to decline. 
D) As more of a given good is consumed,total utility rises at a decreasing,then increasing rate. 
A) As more of a given good is consumed,total utility rises at an increasing rate. 
B) As more of a given good is consumed,marginal utility rises at an increasing rate. 
C) As more of a given good is consumed beyond some level,the marginal utility associated with consumption of additional units tends to decline. 
D) As more of a given good is consumed,total utility rises at a decreasing,then increasing rate.

Question 5

Figure 3-1 shows the preferences of a consumer toward reading books and watching movies.
In Figure 3-1,the highest indifference curve is unattainable.Which of the following events would allow the consumer to reach the highest indifference curve,other things unchanged?

Accepted Answer

A) An increase in the price of books 
B) A reduction in the price of movie tickets 
C) A decrease in the income of the consumer 
D) An increase in the price of movie tickets and books 
A) An increase in the price of books 
B) A reduction in the price of movie tickets 
C) A decrease in the income of the consumer 
D) An increase in the price of movie tickets and books

Question 6

The Lagrangian method of optimization results in a new variable,$\lambda$,called the Lagrangian multiplier,which shows the addition to total utility from an additional unit of income.In other words,$\lambda$ expresses the:

Accepted Answer

A) the budget constraint. 
B) the cost of acquiring an additional util of satisfaction. 
C) the marginal utility of income. 
D) the optimal level of utility. 
A) the budget constraint. 
B) the cost of acquiring an additional util of satisfaction. 
C) the marginal utility of income. 
D) the optimal level of utility.

Question 7

Suppose hamburger is on the horizontal axis and pizza on the vertical axis.If you were consuming at a point on a convex indifference curve such that the slope at that point was -4,which of the following best describes your consumption bundle?

Accepted Answer

A) Your marginal utility of hamburger is 20 and for pizza it is 20. 
B) Your marginal utility of hamburger is 5 and for pizza it is 10. 
C) Your marginal utility of hamburger is 20 and for pizza it is 5. 
D) Your marginal utility of hamburger is one-fifth that of pizza. 
A) Your marginal utility of hamburger is 20 and for pizza it is 20. 
B) Your marginal utility of hamburger is 5 and for pizza it is 10. 
C) Your marginal utility of hamburger is 20 and for pizza it is 5. 
D) Your marginal utility of hamburger is one-fifth that of pizza.

Question 8

Tim gets constant marginal utility of 4 utils from eating apples and a constant marginal utility of 5 utils from eating bananas.In other words,he considers them perfect substitutes and is willing to substitute 5 apples for 4 bananas and remain equally well off.He has $10 to spend on apples and bananas.The price of bananas is $1.Assume he can consume fractional amounts.Plot the demand curve for apples.(Hint: consider several different prices for apples. )

Accepted Answer

First,notice that the indifference curve

Question 9

The composite good convention:

Accepted Answer

A) allows three-dimensional analysis. 
B) treats many goods as a group. 
C) cannot be employed in a two-dimensional graph. 
D) incorporates goods that have dual uses in the consumer theory. 
A) allows three-dimensional analysis. 
B) treats many goods as a group. 
C) cannot be employed in a two-dimensional graph. 
D) incorporates goods that have dual uses in the consumer theory.

Question 10

Consumer theory does not specify which goods people consider economic "goods" and which economic "bads".It nonetheless remains useful because:

Accepted Answer

A) people are all different. 
B) some people don't consider anything an economic "bad." 
C) people reveal their preferences through their consumption decisions. 
D) consumers have identical preferences. 
A) people are all different. 
B) some people don't consider anything an economic "bad." 
C) people reveal their preferences through their consumption decisions. 
D) consumers have identical preferences.

Question 11

You buy only apples and bananas.Your budget is such that you can purchase 3 apples and 4 bananas or 9 apples and 2 bananas.Write down the equation for the budget line with bananas on the Y-axis.Is that equation unique?

Accepted Answer

@#IMG-DLM&_TB1826_11 or equivalently, @#IMG-DLM&_TB1826_11

Question 12

Graphically and mathematically illustrate the consumer's optimal choice between two goods,yams and xylophones,which are consumed in positive amounts.

Accepted Answer

Let I = income,P_X = per unit price of xyl

Question 13

Indifference curves cannot intersect because:

Accepted Answer

A) consumers are indifferent between two consumption bundles. 
B) that would violate the assumption of nonsatiation. 
C) each person has a different set of indifference curves. 
D) indifference curves are two-dimensional. 
A) consumers are indifferent between two consumption bundles. 
B) that would violate the assumption of nonsatiation. 
C) each person has a different set of indifference curves. 
D) indifference curves are two-dimensional.

Question 14

The law of diminishing marginal utility states that:

Accepted Answer

A) the additional utility from consuming an additional unit of a good declines as more of the good is consumed. 
B) the additional utility from consuming an additional unit of a good eventually becomes positive as more of the good is consumed. 
C) as less of one good and more of another good is consumed,the marginal utility of the first good eventually declines. 
D) total utility eventually increases because marginal utility eventually increases as more of a good is consumed. 
A) the additional utility from consuming an additional unit of a good declines as more of the good is consumed. 
B) the additional utility from consuming an additional unit of a good eventually becomes positive as more of the good is consumed. 
C) as less of one good and more of another good is consumed,the marginal utility of the first good eventually declines. 
D) total utility eventually increases because marginal utility eventually increases as more of a good is consumed.

Question 15

An indifference curve shows _____.

Accepted Answer

A) all the combinations of two products between which the consumer is indifferent 
B) all possible combinations of the two products available to the consumer that can be purchased with a given level of income 
C) the single best bundle of consumption for the consumer given two products and a particular income level 
D) how the total satisfaction derived from consuming alternative market baskets changes along the curve 
A) all the combinations of two products between which the consumer is indifferent 
B) all possible combinations of the two products available to the consumer that can be purchased with a given level of income 
C) the single best bundle of consumption for the consumer given two products and a particular income level 
D) how the total satisfaction derived from consuming alternative market baskets changes along the curve

Question 16

If the prices of two goods,X and Y,increase by 50 percent and the consumer's income rises by 100 percent:

Accepted Answer

A) the slope of the consumer's budget line will change,becoming flatter to indicate that X and Y are now relatively less expensive. 
B) the consumer's budget line will shift out from the origin,with its slope unchanged. 
C) the consumer's budget line will shift out from the origin and its slope will also change,reflecting the lower prices for X and Y. 
D) the consumer's budget line will remain unchanged as the price and income effects will cancel each other out. 
A) the slope of the consumer's budget line will change,becoming flatter to indicate that X and Y are now relatively less expensive. 
B) the consumer's budget line will shift out from the origin,with its slope unchanged. 
C) the consumer's budget line will shift out from the origin and its slope will also change,reflecting the lower prices for X and Y. 
D) the consumer's budget line will remain unchanged as the price and income effects will cancel each other out.

Question 17

Along an indifference curve,if the MRS of food (F)for clothing (c.is 1F/2C,this means the consumer:

Accepted Answer

A) has a stronger preference for clothes than for food. 
B) would be willing to give up 1 unit of food for 2 units of clothing,and would be better off with the exchange. 
C) would be willing to give up 1 unit of food for 2 units of clothing,but his or her total utility will not increase. 
D) would be willing to give up 2 units of food for 1 unit of clothing. 
A) has a stronger preference for clothes than for food. 
B) would be willing to give up 1 unit of food for 2 units of clothing,and would be better off with the exchange. 
C) would be willing to give up 1 unit of food for 2 units of clothing,but his or her total utility will not increase. 
D) would be willing to give up 2 units of food for 1 unit of clothing.

Question 18

A low-fat decaf vanilla latte is more likely to be an inferior good than coffee in general because:

Accepted Answer

A) the demand for low fat coffees is generally low. 
B) as prices go up,the demand for low-fat decaf vanilla lattes decreases. 
C) it is a relatively narrowly defined category of coffee. 
D) the price of coffee is negatively correlated to its price. 
A) the demand for low fat coffees is generally low. 
B) as prices go up,the demand for low-fat decaf vanilla lattes decreases. 
C) it is a relatively narrowly defined category of coffee. 
D) the price of coffee is negatively correlated to its price.

Question 19

Table 3-1 shows the total utility from the consumption of various units of avocadoes.
Refer to Table 3-1.Diminishing marginal utility sets in from the _____ avocado.

Accepted Answer

A) third 
B) first 
C) fifth 
D) fourth 
A) third 
B) first 
C) fifth 
D) fourth

Question 20

Which of the products described below is mostly likely considered an inferior good?

Accepted Answer

A) At lower prices people consume higher quantities of shredded wheat. 
B) As incomes increase canned meat product consumption falls. 
C) The higher the price of jeans the higher the demand for jeans. 
D) The lower the price of jeans the more the demand for shirts. 
A) At lower prices people consume higher quantities of shredded wheat. 
B) As incomes increase canned meat product consumption falls. 
C) The higher the price of jeans the higher the demand for jeans. 
D) The lower the price of jeans the more the demand for shirts.

The consumption of the composite good is measured by:

If a consumer is at a corner solution,this means that:

Which of the following is true when a consumer is optimizing her consumption choices across two or more goods?

Which of the following statements about the law of diminishing marginal utility is correct?

Figure 3-1 shows the preferences of a consumer toward reading books and watching movies. In Figure 3-1,the highest indifference curve is unattainable.Which of the following events would allow the consumer to reach the highest indifference curve,other things unchanged?

The Lagrangian method of optimization results in a new variable, $\lambda$ ,called the Lagrangian multiplier,which shows the addition to total utility from an additional unit of income.In other words, $\lambda$ expresses the:

Suppose hamburger is on the horizontal axis and pizza on the vertical axis.If you were consuming at a point on a convex indifference curve such that the slope at that point was -4,which of the following best describes your consumption bundle?

The composite good convention:

Consumer theory does not specify which goods people consider economic "goods" and which economic "bads".It nonetheless remains useful because:

You buy only apples and bananas.Your budget is such that you can purchase 3 apples and 4 bananas or 9 apples and 2 bananas.Write down the equation for the budget line with bananas on the Y-axis.Is that equation unique?

Graphically and mathematically illustrate the consumer's optimal choice between two goods,yams and xylophones,which are consumed in positive amounts.

Indifference curves cannot intersect because:

The law of diminishing marginal utility states that:

An indifference curve shows _____.

If the prices of two goods,X and Y,increase by 50 percent and the consumer's income rises by 100 percent:

Along an indifference curve,if the MRS of food (F)for clothing (c.is 1F/2C,this means the consumer:

A low-fat decaf vanilla latte is more likely to be an inferior good than coffee in general because:

Table 3-1 shows the total utility from the consumption of various units of avocadoes. Refer to Table 3-1.Diminishing marginal utility sets in from the _____ avocado.

Which of the products described below is mostly likely considered an inferior good?

An Introduction to Microeconomics

Supply and Demand

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 3: The Theory of Consumer Choice

The consumption of the composite good is measured by:

If a consumer is at a corner solution,this means that:

Which of the following is true when a consumer is optimizing her consumption choices across two or more goods?

Which of the following statements about the law of diminishing marginal utility is correct?

Figure 3-1 shows the preferences of a consumer toward reading books and watching movies. In Figure 3-1,the highest indifference curve is unattainable.Which of the following events would allow the consumer to reach the highest indifference curve,other things unchanged?

The Lagrangian method of optimization results in a new variable, λ\lambdaλ ,called the Lagrangian multiplier,which shows the addition to total utility from an additional unit of income.In other words, λ\lambdaλ expresses the:

Suppose hamburger is on the horizontal axis and pizza on the vertical axis.If you were consuming at a point on a convex indifference curve such that the slope at that point was -4,which of the following best describes your consumption bundle?

The composite good convention:

Consumer theory does not specify which goods people consider economic "goods" and which economic "bads".It nonetheless remains useful because:

You buy only apples and bananas.Your budget is such that you can purchase 3 apples and 4 bananas or 9 apples and 2 bananas.Write down the equation for the budget line with bananas on the Y-axis.Is that equation unique?

Graphically and mathematically illustrate the consumer's optimal choice between two goods,yams and xylophones,which are consumed in positive amounts.

Indifference curves cannot intersect because:

The law of diminishing marginal utility states that:

An indifference curve shows _____.

If the prices of two goods,X and Y,increase by 50 percent and the consumer's income rises by 100 percent:

Along an indifference curve,if the MRS of food (F)for clothing (c.is 1F/2C,this means the consumer:

A low-fat decaf vanilla latte is more likely to be an inferior good than coffee in general because:

Table 3-1 shows the total utility from the consumption of various units of avocadoes. Refer to Table 3-1.Diminishing marginal utility sets in from the _____ avocado.

Which of the products described below is mostly likely considered an inferior good?

An Introduction to Microeconomics

Supply and Demand

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

The Lagrangian method of optimization results in a new variable, $\lambda$ ,called the Lagrangian multiplier,which shows the addition to total utility from an additional unit of income.In other words, $\lambda$ expresses the: