Question 1

What is the relationship between marginal utility and total utility? What happens to total utility as marginal utility declines?

Accepted Answer

Marginal utility is the change in total

Question 2

$$\begin{array} { l c } 
\hline \text { Pizza } & \text { Marginal Utility } \
\hline \text { 1st Slice } & 7 \text { utils } \
\text { 2nd Slice } & 6 \text { utils } \
\text { 3rd Slice } & 4 \text { utils } \
\text { 4th Slice } & 3 \text { utils } \
\hline
\end{array}$$
-Suppose the price of pizza falls to $1 per slice.Assuming that Tom's preferences continue to be those shown in the above table,and assuming that MU/P = 3 is still the point at which his consumer optimum is reached,how many slices will Tom now buy?

Accepted Answer

A) 1 slice 
B) 2 slices 
C) 3 slices 
D) 4 slices 
A) 1 slice 
B) 2 slices 
C) 3 slices 
D) 4 slices

Question 3

The idea that consumers continue to adjust their purchases until the marginal utility per last dollar spent on all items is equal is called the

Accepted Answer

A) law of increasing costs. 
B) law of diminishing marginal utility. 
C) rule of 72. 
D) consumer optimum. 
A) law of increasing costs. 
B) law of diminishing marginal utility. 
C) rule of 72. 
D) consumer optimum.

Question 4

In economic utility analysis,consumer tastes and preferences are assumed

Accepted Answer

A) to be determined by income. 
B) to be influenced by the prices of goods. 
C) given and stable for an individual. 
D) given but rapidly changeable. 
A) to be determined by income. 
B) to be influenced by the prices of goods. 
C) given and stable for an individual. 
D) given but rapidly changeable.

Question 5

A consumer's optimum is found when

Accepted Answer

A) prices of goods go down. 
B) the consumer is achieving the maximum level of utility given market prices and their limited income. 
C) the marginal utility of the last dollar spent equals 0 for every good. 
D) the consumer saves part of their income. 
A) prices of goods go down. 
B) the consumer is achieving the maximum level of utility given market prices and their limited income. 
C) the marginal utility of the last dollar spent equals 0 for every good. 
D) the consumer saves part of their income.

Question 6

-Use the above figure.What does point N represent?

Accepted Answer

A) A consumer maximizing her satisfaction. 
B) A consumer not maximizing her satisfaction. 
C) A consumer is spending more than her current income. 
D) A less satisfying point than compared to point J. 
A) A consumer maximizing her satisfaction. 
B) A consumer not maximizing her satisfaction. 
C) A consumer is spending more than her current income. 
D) A less satisfying point than compared to point J.

Question 7

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income
 $$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Quantity } \
\text { of Pizza }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Beer }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Utility }
\end{array} \
\hline 1 & 45 & 1 & 40 \
2 & 40 & 2 & 40 \
3 & 30 & 3 & 35 \
4 & 15 & 4 & 10 \
5 & - 5 & 5 & 0 \
\hline
\end{array}$$
-According to the above table,how much total utility does Bob get from 3 pieces of pizza?

Accepted Answer

A) 30 utils 
B) 85 utils 
C) 115 utils 
D) 130 utils 
A) 30 utils 
B) 85 utils 
C) 115 utils 
D) 130 utils

Question 8

If a college student stays home and watches a rented DVD for $5 rather than going out to a $10 movie,this is an example of the

Accepted Answer

A) utility effect. 
B) value effect. 
C) substitution effect. 
D) income effect. 
A) utility effect. 
B) value effect. 
C) substitution effect. 
D) income effect.

Question 9

What is the marginal rate of substitution between two goods and how is it related to the indifference curve?

Accepted Answer

The marginal rate of substitution betwee

Question 10

The consumer optimum (for two goods,a and b)is reached when

Accepted Answer

A) TUa = TUb. 
B) MUa = MUb. 
C) TUa/Pa = TUb/Pb. 
D) MUa/Pa = MUb/Pb. 
A) TUa = TUb. 
B) MUa = MUb. 
C) TUa/Pa = TUb/Pb. 
D) MUa/Pa = MUb/Pb.

Question 11

$$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Quantity of } \
\text { Magazines/Wk }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Utility }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Paperback Books/Wk }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Utility }
\end{array} \
\hline 0 & 0 & 0 & 0 \
1 & 50 & 1 & 300 \
2 & 90 & 2 & 500 \
3 & 120 & 3 & 600 \
4 & 130 & 4 & 650 \
5 & 132 & 5 & 675 \
6 & 132 & 6 & 680
\end{array}$$
-Refer to the above table.If a consumer's optimum consists of 3 magazines and 6 books,then

Accepted Answer

A) the price of a magazine is six times more than the price of a book. 
B) the price of a magazine is three times more than the price of a book. 
C) the price of a book is more than five times more than the price of a magazine. 
D) the price of a book is six times more than the price of a magazine. 
A) the price of a magazine is six times more than the price of a book. 
B) the price of a magazine is three times more than the price of a book. 
C) the price of a book is more than five times more than the price of a magazine. 
D) the price of a book is six times more than the price of a magazine.

Question 12

$$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Quantity of } \
\text { Hamburgers/Wk }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Utility }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Broadway Shows/Wk }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Utility }
\end{array} \
\hline 1 & 40 & 1 & 400 \
2 & 60 & 2 & 700 \
3 & 76 & 3 & 850 \
4 & 86 & 4 & 950 \
5 & 91 & 5 & 1000 \
6 & 93 & 6 & 1025 \
\hline
\end{array}$$
-Refer to the above table.If the price of a hamburger is $2,the price of a Broadway Show is $60,and the consumer has $190,what is the consumer optimum?

Accepted Answer

A) 4 hamburgers and 2 Broadway shows. 
B) 5 hamburgers and 3 Broadway shows. 
C) 6 hamburgers and 0 Broadway shows. 
D) 0 hamburgers and 6 Broadway shows. 
A) 4 hamburgers and 2 Broadway shows. 
B) 5 hamburgers and 3 Broadway shows. 
C) 6 hamburgers and 0 Broadway shows. 
D) 0 hamburgers and 6 Broadway shows.

Question 13

To remain in consumer optimum

Accepted Answer

A) a price increase requires an increase in consumption. 
B) a price decrease requires an increase in consumption. 
C) a price decrease requires a decrease in consumption. 
D) prices must remain static. 
A) a price increase requires an increase in consumption. 
B) a price decrease requires an increase in consumption. 
C) a price decrease requires a decrease in consumption. 
D) prices must remain static.

Question 14

Why is water much cheaper than diamonds even though water is essential to human lives while diamonds are not?

Accepted Answer

This is called the diamond-water paradox

Question 15

A consumer has spent all of his income on hamburgers and movies.The price of a hamburger is $1 and the price of a movie is $6.The marginal utility of the last hamburger is 5 and the marginal utility of the last movie is 24.The consumer has

Accepted Answer

A) maximized utility. 
B) not maximized utility.He should cut back on movies and buy more hamburgers. 
C) not maximized utility.He should cut back on hamburgers and buy more movies. 
D) not maximized utility.He should cut back consumption of each good. 
A) maximized utility. 
B) not maximized utility.He should cut back on movies and buy more hamburgers. 
C) not maximized utility.He should cut back on hamburgers and buy more movies. 
D) not maximized utility.He should cut back consumption of each good.

Question 16

$$\begin{array} { c c c c c } 
\text { Quantity } &  \text { Total Utility } \
\hline \text { per Week } & \text { Michelle } & \text { Robert } & \text { David } & \text { Lauren } \
\hline 0 & 0 & 0 & 0 & 0 \
1 & 50 & 1000 & 60 & 60 \
2 & 99 & 1900 & 120 & 130 \
3 & 147 & 2700 & 180 & 220 \
4 & 194 & 3400 & 240 & 310 \
5 & 240 & 4000 & 300 & 425 \
6 & 285 & 4500 & 360 & 575 \
7 & 329 & 4900 & 420 & 900 \
8 & 372 & 5200 & 480 & 1275 \
9 & 414 & 5400 & 540 & 1770 \
\hline
\end{array}$$
-According to the above table,what is Lauren's marginal utility of the 4th unit?

Accepted Answer

A) 90 
B) 220 
C) 310 
D) 115 
A) 90 
B) 220 
C) 310 
D) 115

Question 17

A rational individual will never consume a unit of a good if its

Accepted Answer

A) marginal utility is diminishing. 
B) marginal utility is less than average utility. 
C) marginal utility is increasing. 
D) marginal utility is negative. 
A) marginal utility is diminishing. 
B) marginal utility is less than average utility. 
C) marginal utility is increasing. 
D) marginal utility is negative.

Question 18

-Refer to the above figure.Given the indifference map and budget constraint represented above the consumer will maximize utility when she consumes at

Accepted Answer

A) point A. 
B) point B. 
C) point C. 
D) either points A or B. 
A) point A. 
B) point B. 
C) point C. 
D) either points A or B.

Question 19

Marginal utility is

Accepted Answer

A) the utility received by the last consumer of a good. 
B) the total utility received from consuming a given quantity of a good divided by the number of units consumed. 
C) the change in total utility from consuming an additional unit of a good. 
D) the utility received from consuming the first unit of a good. 
A) the utility received by the last consumer of a good. 
B) the total utility received from consuming a given quantity of a good divided by the number of units consumed. 
C) the change in total utility from consuming an additional unit of a good. 
D) the utility received from consuming the first unit of a good.

Question 20

Other things being equal,when the money price of a good increases,its relative price

Accepted Answer

A) stays the same. 
B) increases. 
C) decreases. 
D) falls to zero. 
A) stays the same. 
B) increases. 
C) decreases. 
D) falls to zero.

What is the relationship between marginal utility and total utility? What happens to total utility as marginal utility declines?

The idea that consumers continue to adjust their purchases until the marginal utility per last dollar spent on all items is equal is called the

In economic utility analysis,consumer tastes and preferences are assumed

A consumer's optimum is found when

-Use the above figure.What does point N represent?

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income Quantity of Pizza Marginal Utility Quantity of Beer Marginal Utility 1 45 1 40 2 40 2 40 3 30 3 35 4 15 4 10 5 -5 5 0 -According to the above table,how much total utility does Bob get from 3 pieces of pizza?

If a college student stays home and watches a rented DVD for $5 rather than going out to a $10 movie,this is an example of the

What is the marginal rate of substitution between two goods and how is it related to the indifference curve?

The consumer optimum (for two goods,a and b)is reached when

Quantity of Magazines/Wk Total Utility Quantity of Paperback Books/Wk Total Utility 0 0 0 0 1 50 1 300 2 90 2 500 3 120 3 600 4 130 4 650 5 132 5 675 6 132 6 680 -Refer to the above table.If a consumer's optimum consists of 3 magazines and 6 books,then

To remain in consumer optimum

Why is water much cheaper than diamonds even though water is essential to human lives while diamonds are not?

A consumer has spent all of his income on hamburgers and movies.The price of a hamburger is $1 and the price of a movie is $6.The marginal utility of the last hamburger is 5 and the marginal utility of the last movie is 24.The consumer has

A rational individual will never consume a unit of a good if its

-Refer to the above figure.Given the indifference map and budget constraint represented above the consumer will maximize utility when she consumes at

Marginal utility is

Other things being equal,when the money price of a good increases,its relative price

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

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Exam 7: Consumer Choice

What is the relationship between marginal utility and total utility? What happens to total utility as marginal utility declines?

The idea that consumers continue to adjust their purchases until the marginal utility per last dollar spent on all items is equal is called the

In economic utility analysis,consumer tastes and preferences are assumed

A consumer's optimum is found when

-Use the above figure.What does point N represent?

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income Quantity of Pizza Marginal Utility Quantity of Beer Marginal Utility 1 45 1 40 2 40 2 40 3 30 3 35 4 15 4 10 5 -5 5 0 -According to the above table,how much total utility does Bob get from 3 pieces of pizza?

If a college student stays home and watches a rented DVD for $5 rather than going out to a $10 movie,this is an example of the

What is the marginal rate of substitution between two goods and how is it related to the indifference curve?

The consumer optimum (for two goods,a and b)is reached when

Quantity of Magazines/Wk Total Utility Quantity of Paperback Books/Wk Total Utility 0 0 0 0 1 50 1 300 2 90 2 500 3 120 3 600 4 130 4 650 5 132 5 675 6 132 6 680 -Refer to the above table.If a consumer's optimum consists of 3 magazines and 6 books,then

To remain in consumer optimum

Why is water much cheaper than diamonds even though water is essential to human lives while diamonds are not?

A consumer has spent all of his income on hamburgers and movies.The price of a hamburger is $1 and the price of a movie is $6.The marginal utility of the last hamburger is 5 and the marginal utility of the last movie is 24.The consumer has

A rational individual will never consume a unit of a good if its

-Refer to the above figure.Given the indifference map and budget constraint represented above the consumer will maximize utility when she consumes at

Marginal utility is

Other things being equal,when the money price of a good increases,its relative price

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