Question 1

The negative relationship between the quantity demanded of a commodity and its price can be explained by the principle of

Accepted Answer

A) increasing total utility. 
B) contingent valuation. 
C) indifference analysis. 
D) diminishing marginal utility. 
A) increasing total utility. 
B) contingent valuation. 
C) indifference analysis. 
D) diminishing marginal utility.

Question 2

$$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Quantity of } \
\text { Hamburgers/Wk }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Utility }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Movies/Wk }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Utility }
\end{array} \
\hline 1 & 40 & 1 & 400 \
2 & 60 & 2 & 700 \
3 & 76 & 3 & 850 \
4 & 86 & 4 & 950 \
5 & 91 & 5 & 1000 \
6 & 93 & 6 & 1025
\end{array}$$
-Refer to the above table.Suppose the price of a hamburger is $2,the price of a movie is $5,and the income of the consumer is $29.What will the consumer's total utility equal at an optimum?

Accepted Answer

A) 70 
B) 1025 
C) 1060 
D) 1118 
A) 70 
B) 1025 
C) 1060 
D) 1118

Question 3

The marginal utility of good A is 6 and the marginal utility of good B is 15.The price of good A is $2.The price of good B must be ________ if the consumer is optimizing her utility.

Accepted Answer

A) $2 
B) $5 
C) $45 
D) $15 
A) $2 
B) $5 
C) $45 
D) $15

Question 4

$$\begin{array} { l c l c } 
\text { Pepsi } & \text { MU of Pepsi } & \text { Pizza } & \text { MU of Pizza } \
\hline \text { 1st can } & 18 & \text { 1st slice } & 7 \
\text { 2nd can } & 15 & \text { 2nd slice } & 6 \
\text { 3rd can } & 12 & \text { 3rd slice } & 4 \
\text { 4th can } & 9 & \text { 4th slice } & 3 \
\text { 5th can } & 6 & \text { 5th slice } & 0 \
\hline
\end{array}$$
-Assume that Jack has the preferences shown in the above table.Also assume that the price of a can of Pepsi is $3.00 and that the price of a slice of pizza is $1.00.If he has $16 available to spend,what combination of Pepsi and pizza will be his consumer optimum?

Accepted Answer

A) 4 cans of Pepsi,1 slice of pizza 
B) 3 cans of Pepsi,2 slices of pizza 
C) 2 cans of Pepsi,4 slices of pizza 
D) 4 cans of Pepsi,4 slices of pizza 
A) 4 cans of Pepsi,1 slice of pizza 
B) 3 cans of Pepsi,2 slices of pizza 
C) 2 cans of Pepsi,4 slices of pizza 
D) 4 cans of Pepsi,4 slices of pizza

Question 5

Suppose that a consumer is at an optimum consuming X and Y.If the price of X falls,then to get to a new equilibrium the consumer must

Accepted Answer

A) purchase less X and more Y. 
B) purchase less Y and less X. 
C) purchase more X. 
D) purchase more Y. 
A) purchase less X and more Y. 
B) purchase less Y and less X. 
C) purchase more X. 
D) purchase more Y.

Question 6

A set of indifference curves on a graph is called

Accepted Answer

A) a difference map. 
B) an indifference map. 
C) a budget map. 
D) a cluster. 
A) a difference map. 
B) an indifference map. 
C) a budget map. 
D) a cluster.

Question 7

If you regularly spend $100 a month on gasoline and the price of gasoline doubles,your purchasing power has

Accepted Answer

A) increased. 
B) remained constant. 
C) became stable. 
D) decreased. 
A) increased. 
B) remained constant. 
C) became stable. 
D) decreased.

Question 8

Utility analysis helps economists understand

Accepted Answer

A) how people make decisions about what they buy and how much. 
B) how to eliminate opportunity costs. 
C) how to eliminate scarcity. 
D) none of the above. 
A) how people make decisions about what they buy and how much. 
B) how to eliminate opportunity costs. 
C) how to eliminate scarcity. 
D) none of the above.

Question 9

An indifference curve

Accepted Answer

A) must slope downward towards the right. 
B) is positively sloped. 
C) is upsloping and is concave to the origin. 
D) may be upsloping or downsloping,depending on whether the two products are complements or substitutes. 
A) must slope downward towards the right. 
B) is positively sloped. 
C) is upsloping and is concave to the origin. 
D) may be upsloping or downsloping,depending on whether the two products are complements or substitutes.

Question 10

Suppose that the quantity of good y is measured along the vertical axis and that the quantity of good x is measured along the horizontal axis.If the price of good x is $5 and the price of good y is $10 when income is $200 per time period,the slope of the consumer's budget constraint will be

Accepted Answer

A) -0.5. 
B) -2. 
C) -5. 
D) -10. 
A) -0.5. 
B) -2. 
C) -5. 
D) -10.

Question 11

All possible combinations of goods that can be purchased at fixed prices with a specific income is

Accepted Answer

A) a marginal utility curve. 
B) a total utility curve. 
C) an indifference curve. 
D) a budget constraint. 
A) a marginal utility curve. 
B) a total utility curve. 
C) an indifference curve. 
D) a budget constraint.

Question 12

The substitution effect shows that

Accepted Answer

A) if the price of a good increases,consumers buy more of that good and less of all others. 
B) if the price of a good falls relative to all other goods,consumers buy less of that good and more of all others. 
C) if the price of a good falls,consumers buy less of all goods. 
D) if the price of a good rises,consumers buy less of that good and more of others. 
A) if the price of a good increases,consumers buy more of that good and less of all others. 
B) if the price of a good falls relative to all other goods,consumers buy less of that good and more of all others. 
C) if the price of a good falls,consumers buy less of all goods. 
D) if the price of a good rises,consumers buy less of that good and more of others.

Question 13

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income
 $$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Quantity } \
\text { of Pizza }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Beer }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Utility }
\end{array} \
\hline 1 & 45 & 1 & 40 \
2 & 40 & 2 & 40 \
3 & 30 & 3 & 35 \
4 & 15 & 4 & 10 \
5 & - 5 & 5 & 0 \
\hline
\end{array}$$
-Referring to the above table,suppose Bob's ratios of marginal utility of beer to the price of beer and the marginal utility of pizza to the price of pizza are equal.If the price of beer increases

Accepted Answer

A) Bob will probably consume more beer and less pizza. 
B) Bob will probably consume less beer and less pizza. 
C) Bob will probably consume less beer and more pizza. 
D) Bob will still consume the same amount of beer and pizza. 
A) Bob will probably consume more beer and less pizza. 
B) Bob will probably consume less beer and less pizza. 
C) Bob will probably consume less beer and more pizza. 
D) Bob will still consume the same amount of beer and pizza.

Question 14

Basket of goods A is on an indifference curve that lies closer to the origin than basket B.From this we know that

Accepted Answer

A) the prices of the goods in A are less than the prices of the goods in B. 
B) the satisfaction from consuming A is more than the satisfaction from consuming B. 
C) the marginal utility from consuming A is less than the marginal utility from consuming B. 
D) the satisfaction from consuming A is less than the satisfaction from consuming B. 
A) the prices of the goods in A are less than the prices of the goods in B. 
B) the satisfaction from consuming A is more than the satisfaction from consuming B. 
C) the marginal utility from consuming A is less than the marginal utility from consuming B. 
D) the satisfaction from consuming A is less than the satisfaction from consuming B.

Question 15

If an individual consumes only two goods and consumption of one good increases,then in order to keep the consumer on the same indifference curve,consumption of the other good must

Accepted Answer

A) increase. 
B) decrease. 
C) increase proportionately. 
D) become negative. 
A) increase. 
B) decrease. 
C) increase proportionately. 
D) become negative.

Question 16

Utility analysis is the analysis of

Accepted Answer

A) how consumers decide how to spend their money. 
B) the formation of tastes and preferences. 
C) the psychology of decision making. 
D) consumer decision making based on utility maximization. 
A) how consumers decide how to spend their money. 
B) the formation of tastes and preferences. 
C) the psychology of decision making. 
D) consumer decision making based on utility maximization.

Question 17

If the price of coffee rises relative to all other prices,consumers are likely to

Accepted Answer

A) buy more coffee. 
B) buy more tea. 
C) buy less coffee and less tea. 
D) buy less tea. 
A) buy more coffee. 
B) buy more tea. 
C) buy less coffee and less tea. 
D) buy less tea.

Question 18

The marginal rate of substitution is

Accepted Answer

A) the change in the quantity of one good that just offsets a one unit change in the consumption of another such that the total satisfaction remains constant. 
B) the additional satisfaction from consuming an additional unit of a good or service. 
C) positively related to the level of income. 
D) the set of goods and services that are available to the consumer given his income. 
A) the change in the quantity of one good that just offsets a one unit change in the consumption of another such that the total satisfaction remains constant. 
B) the additional satisfaction from consuming an additional unit of a good or service. 
C) positively related to the level of income. 
D) the set of goods and services that are available to the consumer given his income.

Question 19

The price of a hamburger is $1 and the price of a movie is $6 and the consumer has $14.A consumer has purchased 2 hamburgers and 2 movies,receiving 20 units of utility for the second hamburger and 100 units of utility for the second movie.The set of goods

Accepted Answer

A) is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good. 
B) is an optimum since the entire income is spent and total utility is maximized. 
C) is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for movies and the consumer is not spending all of his income. 
D) is not an optimum because the marginal utility for each good is not equal. 
A) is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good. 
B) is an optimum since the entire income is spent and total utility is maximized. 
C) is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for movies and the consumer is not spending all of his income. 
D) is not an optimum because the marginal utility for each good is not equal.

Question 20

$$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Quantity of } \
\text { Hamburgers/Wk }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Utility }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Movies/Wk }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Utility }
\end{array} \
\hline 1 & 40 & 1 & 400 \
2 & 60 & 2 & 700 \
3 & 76 & 3 & 850 \
4 & 86 & 4 & 950 \
5 & 91 & 5 & 1000 \
6 & 93 & 6 & 1025\\hline
\end{array}$$
-Refer to the above table.Suppose the price of a movie is $5 and the income of the consumer is $29.What are the quantities demanded of hamburger at prices of $2 and $1 respectively?

Accepted Answer

A) 0; 1 
B) 2; 4 
C) 1; 2 
D) 3; 5 
A) 0; 1 
B) 2; 4 
C) 1; 2 
D) 3; 5

The negative relationship between the quantity demanded of a commodity and its price can be explained by the principle of

The marginal utility of good A is 6 and the marginal utility of good B is 15.The price of good A is $2.The price of good B must be ________ if the consumer is optimizing her utility.

Suppose that a consumer is at an optimum consuming X and Y.If the price of X falls,then to get to a new equilibrium the consumer must

A set of indifference curves on a graph is called

If you regularly spend $100 a month on gasoline and the price of gasoline doubles,your purchasing power has

Utility analysis helps economists understand

An indifference curve

Suppose that the quantity of good y is measured along the vertical axis and that the quantity of good x is measured along the horizontal axis.If the price of good x is $5 and the price of good y is $10 when income is $200 per time period,the slope of the consumer's budget constraint will be

All possible combinations of goods that can be purchased at fixed prices with a specific income is

The substitution effect shows that

Basket of goods A is on an indifference curve that lies closer to the origin than basket B.From this we know that

If an individual consumes only two goods and consumption of one good increases,then in order to keep the consumer on the same indifference curve,consumption of the other good must

Utility analysis is the analysis of

If the price of coffee rises relative to all other prices,consumers are likely to

The marginal rate of substitution is

The price of a hamburger is $1 and the price of a movie is $6 and the consumer has $14.A consumer has purchased 2 hamburgers and 2 movies,receiving 20 units of utility for the second hamburger and 100 units of utility for the second movie.The set of goods

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

Exam 7: Consumer Choice

The negative relationship between the quantity demanded of a commodity and its price can be explained by the principle of

The marginal utility of good A is 6 and the marginal utility of good B is 15.The price of good A is $2.The price of good B must be ________ if the consumer is optimizing her utility.

Suppose that a consumer is at an optimum consuming X and Y.If the price of X falls,then to get to a new equilibrium the consumer must

A set of indifference curves on a graph is called

If you regularly spend $100 a month on gasoline and the price of gasoline doubles,your purchasing power has

Utility analysis helps economists understand

An indifference curve

Suppose that the quantity of good y is measured along the vertical axis and that the quantity of good x is measured along the horizontal axis.If the price of good x is $5 and the price of good y is $10 when income is $200 per time period,the slope of the consumer's budget constraint will be

All possible combinations of goods that can be purchased at fixed prices with a specific income is

The substitution effect shows that

Basket of goods A is on an indifference curve that lies closer to the origin than basket B.From this we know that

If an individual consumes only two goods and consumption of one good increases,then in order to keep the consumer on the same indifference curve,consumption of the other good must

Utility analysis is the analysis of

If the price of coffee rises relative to all other prices,consumers are likely to

The marginal rate of substitution is

The price of a hamburger is $1 and the price of a movie is $6 and the consumer has $14.A consumer has purchased 2 hamburgers and 2 movies,receiving 20 units of utility for the second hamburger and 100 units of utility for the second movie.The set of goods

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