Question 1

-Use the above figure.The consumer's choice changes from YB to YA.Which of the following statements about good Y is true?

Accepted Answer

A) price has increased and the quantity demanded has risen.. 
B) price has decreased and the quantity demanded has risen.. 
C) price has decreased and the quantity demanded has fallen. 
D) price has increased and the quantity demanded has fallen. 
A) price has increased and the quantity demanded has risen.. 
B) price has decreased and the quantity demanded has risen.. 
C) price has decreased and the quantity demanded has fallen. 
D) price has increased and the quantity demanded has fallen.

Question 2

The indifference curve between eggs and dozens of eggs would be

Accepted Answer

A) bowed in to the origin. 
B) bowed out from the origin. 
C) a rectangular hyperbola. 
D) a downward sloping straight line with a slope of -12. 
A) bowed in to the origin. 
B) bowed out from the origin. 
C) a rectangular hyperbola. 
D) a downward sloping straight line with a slope of -12.

Question 3

Indifference curves

Accepted Answer

A) are vertical. 
B) are horizontal. 
C) slope upward. 
D) slope downward. 
A) are vertical. 
B) are horizontal. 
C) slope upward. 
D) slope downward.

Question 4

Given the utility-optimizing rule and the presence of diminishing marginal utility for a good,

Accepted Answer

A) the demand curve for the good will be vertical. 
B) there will not be a well-defined demand curve. 
C) there will not be a substitution effect. 
D) the demand curve for the good will be negatively sloped. 
A) the demand curve for the good will be vertical. 
B) there will not be a well-defined demand curve. 
C) there will not be a substitution effect. 
D) the demand curve for the good will be negatively sloped.

Question 5

If marginal utility is positive but decreasing,total utility is

Accepted Answer

A) decreasing. 
B) negative. 
C) increasing. 
D) constant. 
A) decreasing. 
B) negative. 
C) increasing. 
D) constant.

Question 6

If the price of a good is zero,a rational consumer will

Accepted Answer

A) buy all of the units available. 
B) not consume the good at all since it must not be valuable if it has a zero price. 
C) stop consuming the good when total utility is maximized. 
D) consume the good up to the point where total utility is just below zero. 
A) buy all of the units available. 
B) not consume the good at all since it must not be valuable if it has a zero price. 
C) stop consuming the good when total utility is maximized. 
D) consume the good up to the point where total utility is just below zero.

Question 7

The marginal rate of substitution is the

Accepted Answer

A) rate at which the consumer will give up one good for an additional unit of the other good,such that total satisfaction is constant. 
B) rate at which the consumer can trade one good for the other in the marketplace. 
C) change in the quantity of one good that changes the utility received by one unit. 
D) same thing as the marginal utility of a good. 
A) rate at which the consumer will give up one good for an additional unit of the other good,such that total satisfaction is constant. 
B) rate at which the consumer can trade one good for the other in the marketplace. 
C) change in the quantity of one good that changes the utility received by one unit. 
D) same thing as the marginal utility of a good.

Question 8

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 $10.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 9

$$\begin{array}{l}
\text { Glasses of }\
\begin{array} { c c c } 
\text { Water } & \text { Total Utility } & \text { Marginal Utility } \
\hline 1 & 100 & \
2 & 175 & \
3 & 225 & \
4 & 250 & \
5 & 260 & \
6 & 255 &
\end{array}
\end{array}$$
-Using the above table,the marginal utility for the sixth glass of water is

Accepted Answer

A) -5 utils. 
B) 255 utils. 
C) 5 utils. 
D) 260 utils. 
A) -5 utils. 
B) 255 utils. 
C) 5 utils. 
D) 260 utils.

Question 10

Consumers are most satisfied when

Accepted Answer

A) all of their income has been saved. 
B) the total level of utility is as high as possible. 
C) goods are bought "on sale." 
D) they save more than they spend. 
A) all of their income has been saved. 
B) the total level of utility is as high as possible. 
C) goods are bought "on sale." 
D) they save more than they spend.

Question 11

$$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Quantity of } \
\text { Magazines/Wk }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Utility }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Paperbacks/Wk }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Utility }
\end{array} \
\hline 0 & 0 & 0 & 0 \
1 & 60 & 1 & 200 \
2 & 100 & 2 & 400 \
3 & 130 & 3 & 500 \
4 & 140 & 4 & 550 \
5 & 142 & 5 & 575 \
6 & 142 & 6 & 580
\end{array}$$
-Refer to the above table.If the price of a magazine is $2 and the price of a paperback book is $5 and the consumer has $33,the rational consumer will purchase

Accepted Answer

A) 2 magazines and 2 books. 
B) 2 magazines and 3 books. 
C) 5 magazines and 6 books. 
D) 4 magazines and 5 books. 
A) 2 magazines and 2 books. 
B) 2 magazines and 3 books. 
C) 5 magazines and 6 books. 
D) 4 magazines and 5 books.

Question 12

In a map showing three indifference curves a consumer is most well off on

Accepted Answer

A) the curve which is closest to the origin of the coordinate axes. 
B) the curve which is most farther away from the coordinate axes. 
C) The curve that is in the middle. 
D) none of the above 
A) the curve which is closest to the origin of the coordinate axes. 
B) the curve which is most farther away from the coordinate axes. 
C) The curve that is in the middle. 
D) none of the above

Question 13

As an individual consumes more of a particular commodity,the total level of utility derived from that consumption will

Accepted Answer

A) increase at an increasing rate. 
B) increase at a decreasing rate. 
C) increase at a constant rate. 
D) remain constant. 
A) increase at an increasing rate. 
B) increase at a decreasing rate. 
C) increase at a constant rate. 
D) remain constant.

Question 14

If we are graphing total utility,then the total utility curve will

Accepted Answer

A) always be increasing. 
B) always be decreasing. 
C) be increasing as long as marginal utility is positive. 
D) be horizontal if marginal utility is positive. 
A) always be increasing. 
B) always be decreasing. 
C) be increasing as long as marginal utility is positive. 
D) be horizontal if marginal utility is positive.

Question 15

When DVDs and hamburgers were the same price,Mavis consumed 3 hamburgers and 5 DVDs,and Mavis received 10 utils from the last hamburger and 15 utils from the last DVD consumed.What should be Mavis' consumption strategy?

Accepted Answer

A) consume more DVDs and fewer burgers 
B) consume more burgers and fewer DVDs 
C) consume more of both items 
D) consume less of both items 
A) consume more DVDs and fewer burgers 
B) consume more burgers and fewer DVDs 
C) consume more of both items 
D) consume less of both items

Question 16

If a person claims,"I wouldn't eat liver if you paid me," we can assume that his marginal utility of liver is

Accepted Answer

A) positive. 
B) positive,but decreasing. 
C) zero. 
D) negative. 
A) positive. 
B) positive,but decreasing. 
C) zero. 
D) negative.

Question 17

-Refer to the above figure.Given the indifference map and budget constraint represented above,what are all possible points at which that the individual can consume?

Accepted Answer

A) Points A and C only 
B) Point B only 
C) Point D only 
D) Points A,B and C only 
A) Points A and C only 
B) Point B only 
C) Point D only 
D) Points A,B and C only

Question 18

Which of the following statements is FALSE,with respect to what economist Adam Smith called the diamond-water paradox?

Accepted Answer

A) The total utility of water greatly exceeds the total utility derived from diamonds. 
B) Total utility does not determine what people are willing to pay for a unit of a particular commodity; marginal utility does. 
C) The demand for water is much smaller than the demand for diamonds. 
D) There are relatively few diamonds,so the marginal utility of the last diamond consumed is relatively high. 
A) The total utility of water greatly exceeds the total utility derived from diamonds. 
B) Total utility does not determine what people are willing to pay for a unit of a particular commodity; marginal utility does. 
C) The demand for water is much smaller than the demand for diamonds. 
D) There are relatively few diamonds,so the marginal utility of the last diamond consumed is relatively high.

Question 19

Your annual review is given to you at your place of employment,and you get a raise of 3 percent for the next year.On the subway home though,you read an article stating the price of homes in the area you are looking to buy will increase by 6 percent during the coming year.You determine from the article that if you buy in your favorite neighborhood

Accepted Answer

A) your purchasing power declines. 
B) consumer optimum is reached. 
C) your real income actually increases. 
D) quantity demanded will increase. 
A) your purchasing power declines. 
B) consumer optimum is reached. 
C) your real income actually increases. 
D) quantity demanded will increase.

Question 20

$$\begin{array} { c l c r c c } 
\hline \text { Quantities } & \text { MU } _ { \text {apples } } \text { (Adam) } & \text { MU } _ { \text {oranges } } \text { (Adam) } & \text { Quantities } & \text { MU } _ { \text {apples } } \text { (Eve) } & \text { MU } _ { \text {oranges } } \text { (Eve) } \
\hline 1 & 40 & 30 & 1 & 15 & 20 \
2 & 30 & 20 & 2 & 10 & 15 \
3 & 25 & 15 & 3 & 8 & 12 \
4 & 20 & 12 & 4 & 5 & 10 \
\hline
\end{array}$$
-Adam has 3 apples and 3 oranges.Eve has 2 apples and 2 oranges.The marginal utilities for Adam and Eve are summarized in the above table.Adam asks Eve to exchange one of her apples for an orange.

Accepted Answer

A) Eve will be willing to make the exchange,because her total satisfaction will remain unchanged. 
B) Eve will be willing to make the exchange,because her total satisfaction will increase. 
C) Eve will be unwilling to make the exchange,because she loses 5 utils of satisfaction. 
D) Eve will be unwilling to make the exchange,because she loses 15 utils of satisfaction. 
A) Eve will be willing to make the exchange,because her total satisfaction will remain unchanged. 
B) Eve will be willing to make the exchange,because her total satisfaction will increase. 
C) Eve will be unwilling to make the exchange,because she loses 5 utils of satisfaction. 
D) Eve will be unwilling to make the exchange,because she loses 15 utils of satisfaction.

-Use the above figure.The consumer's choice changes from YB to YA.Which of the following statements about good Y is true?

The indifference curve between eggs and dozens of eggs would be

Indifference curves

Given the utility-optimizing rule and the presence of diminishing marginal utility for a good,

If marginal utility is positive but decreasing,total utility is

If the price of a good is zero,a rational consumer will

The marginal rate of substitution is the

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 $10.The price of Good B is $1.If John wants to maximize his utility he should

Glasses of Water Total Utility Marginal Utility 1 100 2 175 3 225 4 250 5 260 6 255 -Using the above table,the marginal utility for the sixth glass of water is

Consumers are most satisfied when

In a map showing three indifference curves a consumer is most well off on

As an individual consumes more of a particular commodity,the total level of utility derived from that consumption will

If we are graphing total utility,then the total utility curve will

When DVDs and hamburgers were the same price,Mavis consumed 3 hamburgers and 5 DVDs,and Mavis received 10 utils from the last hamburger and 15 utils from the last DVD consumed.What should be Mavis' consumption strategy?

If a person claims,"I wouldn't eat liver if you paid me," we can assume that his marginal utility of liver is

-Refer to the above figure.Given the indifference map and budget constraint represented above,what are all possible points at which that the individual can consume?

Which of the following statements is FALSE,with respect to what economist Adam Smith called the diamond-water paradox?

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

-Use the above figure.The consumer's choice changes from YB to YA.Which of the following statements about good Y is true?

The indifference curve between eggs and dozens of eggs would be

Indifference curves

Given the utility-optimizing rule and the presence of diminishing marginal utility for a good,

If marginal utility is positive but decreasing,total utility is

If the price of a good is zero,a rational consumer will

The marginal rate of substitution is the

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 $10.The price of Good B is $1.If John wants to maximize his utility he should

Glasses of Water Total Utility Marginal Utility 1 100 2 175 3 225 4 250 5 260 6 255 -Using the above table,the marginal utility for the sixth glass of water is

Consumers are most satisfied when

In a map showing three indifference curves a consumer is most well off on

As an individual consumes more of a particular commodity,the total level of utility derived from that consumption will

If we are graphing total utility,then the total utility curve will

When DVDs and hamburgers were the same price,Mavis consumed 3 hamburgers and 5 DVDs,and Mavis received 10 utils from the last hamburger and 15 utils from the last DVD consumed.What should be Mavis' consumption strategy?

If a person claims,"I wouldn't eat liver if you paid me," we can assume that his marginal utility of liver is

-Refer to the above figure.Given the indifference map and budget constraint represented above,what are all possible points at which that the individual can consume?

Which of the following statements is FALSE,with respect to what economist Adam Smith called the diamond-water paradox?

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