Question 1

The idea that people will substitute cheaper commodities for more expensive commodities is called

Accepted Answer

A) the marginal effect. 
B) the real-income effect. 
C) the substitution effect. 
D) the utility effect. 
A) the marginal effect. 
B) the real-income effect. 
C) the substitution effect. 
D) the utility effect.

Question 2

In order to maximize utility,a consumer should allocate money income so that

Accepted Answer

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

Question 3

If marginal utility is positive but diminishing,then

Accepted Answer

A) average utility must be negative. 
B) marginal utility must be above-average utility. 
C) total utility must be positive. 
D) marginal utility must be more than total utility. 
A) average utility must be negative. 
B) marginal utility must be above-average utility. 
C) total utility must be positive. 
D) marginal utility must be more than total utility.

Question 4

According to the substitution effect,if the price of a product goes down

Accepted Answer

A) the consumer will buy more of the good at the lower price than at a higher price,creating a downward sloping demand curve. 
B) the consumer will buy more of the good at a lower price than at a higher price,creating a horizontal demand curve. 
C) the consumer will not change the level of purchases of the good when the price changes,making the demand curve a vertical line. 
D) the real income of the consumer will increase,causing the consumer to want to buy more of the good,creating a downward sloping demand curve. 
A) the consumer will buy more of the good at the lower price than at a higher price,creating a downward sloping demand curve. 
B) the consumer will buy more of the good at a lower price than at a higher price,creating a horizontal demand curve. 
C) the consumer will not change the level of purchases of the good when the price changes,making the demand curve a vertical line. 
D) the real income of the consumer will increase,causing the consumer to want to buy more of the good,creating a downward sloping demand curve.

Question 5

$$\begin{array} { c c c } 
\text { Combination } & \text { Good A } & \text { Good B } \
\hline \text { A } & 17 & 4 \
\text { B } & 13 & 5 \
\text { C } & 10 & 6 \
\text { D } & 8 & 7\\hline
\end{array}$$
-Refer to the above table.The table gives the various combinations of Good A and Good B along Jane's indifference curve.The marginal rate of substitution when Jane goes from combination A to combination B is

Accepted Answer

A) 4:1. 
B) 3:1. 
C) 2:1. 
D) 0. 
A) 4:1. 
B) 3:1. 
C) 2:1. 
D) 0.

Question 6

If price of a product falls

Accepted Answer

A) the marginal utility of the product also falls. 
B) the budget line rotates to the right. 
C) the budget line rotates to the left. 
D) the indifference curve will shift to the left. 
A) the marginal utility of the product also falls. 
B) the budget line rotates to the right. 
C) the budget line rotates to the left. 
D) the indifference curve will shift to the left.

Question 7

$$\begin{array} { c c c } 
\text { Slices of Pizza } & \text { Total Utility } & \text { Marginal Utility } \
\hline 1 & 50 & \
2 & 90 & \
3 & 120 & \
4 & 130 & \
5 & 137 & \
6 & 120 &
\end{array}$$
-In the above table,what is the marginal utility of the second slice of pizza consumed?

Accepted Answer

A) 10 
B) 90 
C) 30 
D) 40 
A) 10 
B) 90 
C) 30 
D) 40

Question 8

For any two goods,X and Y,if MUX divided by PX equals 2.5 and MUY divided by PY equals 4.0,then with given income and prices the consumer should

Accepted Answer

A) buy more of good X and less of good Y. 
B) buy more of good Y and less of good X. 
C) buy all of good Y and no X. 
D) stop because an equilibrium is achieved. 
A) buy more of good X and less of good Y. 
B) buy more of good Y and less of good X. 
C) buy all of good Y and no X. 
D) stop because an equilibrium is achieved.

Question 9

A consumer has been buying 4 magazines and 3 books a month for many months.The price of magazines then decreases,which directly causes the marginal utility per dollar spent on

Accepted Answer

A) magazines to increase,thereby inducing the consumer to purchase fewer magazines and more books. 
B) magazines to increase,thereby inducing the consumer to purchase more magazines and fewer books. 
C) books to increase,thereby inducing the consumer to purchase fewer magazines and more books. 
D) books to decrease,thereby inducing the consumer to purchase fewer magazines and more books. 
A) magazines to increase,thereby inducing the consumer to purchase fewer magazines and more books. 
B) magazines to increase,thereby inducing the consumer to purchase more magazines and fewer books. 
C) books to increase,thereby inducing the consumer to purchase fewer magazines and more books. 
D) books to decrease,thereby inducing the consumer to purchase fewer magazines and more books.

Question 10

When economists refer to people making decisions at the margin,they mean that we compare ________ benefits with ________ costs.

Accepted Answer

A) total; total 
B) total; incremental 
C) additional; additional 
D) additional; marginal 
A) total; total 
B) total; incremental 
C) additional; additional 
D) additional; marginal

Question 11

Peter consumes bags of potato chips and cans of soft drink.The marginal utility of bags of potato chips is 10 utils per bag and the marginal utility of cans of soft drink is 50 utils per can.Potato chips cost $0.50 a bag,and a can of soft drink costs $1.00.What should Peter do?

Accepted Answer

A) Peter should eat more chips,because they cost less. 
B) Peter should buy more chips and less soft drink. 
C) Peter should buy more soft drink,because it costs less. 
D) Peter should buy more soft drink and fewer potato chips. 
A) Peter should eat more chips,because they cost less. 
B) Peter should buy more chips and less soft drink. 
C) Peter should buy more soft drink,because it costs less. 
D) Peter should buy more soft drink and fewer potato chips.

Question 12

John is currently spending all of his income.For the last unit of Good A consumed John gets 20 utils and for the last unit of Good B consumed he gets 10 utils.The price of Good A is $4.The price of Good B is $1.If John wants to maximize his utility he should

Accepted Answer

A) continue to purchase the same amount of Good A and Good B. 
B) increase the consumption of Good A and decrease the consumption of Good B. 
C) decrease the consumption of Good A and increase the consumption of Good B. 
D) decrease the consumption of Good A and decrease the consumption of Good B 
A) continue to purchase the same amount of Good A and Good B. 
B) increase the consumption of Good A and decrease the consumption of Good B. 
C) decrease the consumption of Good A and increase the consumption of Good B. 
D) decrease the consumption of Good A and decrease the consumption of Good B

Question 13

When marginal utility is positive,total utility is

Accepted Answer

A) increasing. 
B) zero. 
C) at its minimum. 
D) decreasing. 
A) increasing. 
B) zero. 
C) at its minimum. 
D) decreasing.

Question 14

Use the law of diminishing marginal utility to explain the diamond-water paradox.

Accepted Answer

The diamond-water paradox refers to the

Question 15

Dr.Rodriguez is consuming beer and wine.At his current level of consumption,the marginal utility per dollar is 30 units for beer and 15 units for wine.Dr.Rodriguez should

Accepted Answer

A) consume twice as much beer as wine. 
B) consume twice as much wine as beer. 
C) increase his consumption of beer relative to wine. 
D) increase his consumption of wine relative to beer. 
A) consume twice as much beer as wine. 
B) consume twice as much wine as beer. 
C) increase his consumption of beer relative to wine. 
D) increase his consumption of wine relative to beer.

Question 16

The concept of utility is

Accepted Answer

A) subjective so that there can be no true measurement of someone's utility. 
B) subjective so measurement of someone's utility must be done scientifically. 
C) objective so that devices can be developed that would measure a person's utility. 
D) objective so that psychologists can measure utility and compare one person's utility with that of another person. 
A) subjective so that there can be no true measurement of someone's utility. 
B) subjective so measurement of someone's utility must be done scientifically. 
C) objective so that devices can be developed that would measure a person's utility. 
D) objective so that psychologists can measure utility and compare one person's utility with that of another person.

Question 17

If marginal utility is zero,total utility is

Accepted Answer

A) falling. 
B) increasing. 
C) at its maximum. 
D) negative. 
A) falling. 
B) increasing. 
C) at its maximum. 
D) negative.

Question 18

-Use the above figure.When the budget line rotates from "c" to "b"

Accepted Answer

A) the price of product J increases and the quantity demanded of product J decreases. 
B) the price of product J decreases and the quantity demanded of product J increases. 
C) the price of product K increases and the quantity demanded of product K decreases. 
D) the price of product K decreases and the quantity demanded of product K increases. 
A) the price of product J increases and the quantity demanded of product J decreases. 
B) the price of product J decreases and the quantity demanded of product J increases. 
C) the price of product K increases and the quantity demanded of product K decreases. 
D) the price of product K decreases and the quantity demanded of product K increases.

Question 19

When marginal utility is zero,total utility is

Accepted Answer

A) increasing. 
B) at its maximum. 
C) at its minimum. 
D) decreasing. 
A) increasing. 
B) at its maximum. 
C) at its minimum. 
D) decreasing.

Question 20

-Refer to the above figure.Given the indifference map and budget constraint represented above,what would make all possible points attainable for the individual to consume?

Accepted Answer

A) An increase in the price of Good X. 
B) A decrease in income. 
C) An increase in the price of Good Y. 
D) A decrease in the price of Good X. 
A) An increase in the price of Good X. 
B) A decrease in income. 
C) An increase in the price of Good Y. 
D) A decrease in the price of Good X.

Exam 7: Consumer Choice

The idea that people will substitute cheaper commodities for more expensive commodities is called

In order to maximize utility,a consumer should allocate money income so that

If marginal utility is positive but diminishing,then

According to the substitution effect,if the price of a product goes down

Combination Good A Good B A 17 4 B 13 5 C 10 6 D 8 7 -Refer to the above table.The table gives the various combinations of Good A and Good B along Jane's indifference curve.The marginal rate of substitution when Jane goes from combination A to combination B is

If price of a product falls

Slices of Pizza Total Utility Marginal Utility 1 50 2 90 3 120 4 130 5 137 6 120 -In the above table,what is the marginal utility of the second slice of pizza consumed?

For any two goods,X and Y,if MUX divided by PX equals 2.5 and MUY divided by PY equals 4.0,then with given income and prices the consumer should

A consumer has been buying 4 magazines and 3 books a month for many months.The price of magazines then decreases,which directly causes the marginal utility per dollar spent on

When economists refer to people making decisions at the margin,they mean that we compare ________ benefits with ________ costs.

Peter consumes bags of potato chips and cans of soft drink.The marginal utility of bags of potato chips is 10 utils per bag and the marginal utility of cans of soft drink is 50 utils per can.Potato chips cost $0.50 a bag,and a can of soft drink costs $1.00.What should Peter do?

John is currently spending all of his income.For the last unit of Good A consumed John gets 20 utils and for the last unit of Good B consumed he gets 10 utils.The price of Good A is $4.The price of Good B is $1.If John wants to maximize his utility he should

When marginal utility is positive,total utility is

Use the law of diminishing marginal utility to explain the diamond-water paradox.

Dr.Rodriguez is consuming beer and wine.At his current level of consumption,the marginal utility per dollar is 30 units for beer and 15 units for wine.Dr.Rodriguez should

The concept of utility is

If marginal utility is zero,total utility is

-Use the above figure.When the budget line rotates from "c" to "b"

When marginal utility is zero,total utility is

-Refer to the above figure.Given the indifference map and budget constraint represented above,what would make all possible points attainable for the individual to consume?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

Demand and Supply Elasticity

Rents, profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

When economists refer to people making decisions at the margin,they mean that we compare benefits with costs.