Question 1

The reason that diamonds cost more than water is

Accepted Answer

A) the marginal utility of each diamond a consumer purchases is quite high due to the small amount of diamonds that most consumers purchase. 
B) most consumers consume little water. 
C) diamonds are more beautiful than water. 
D) water is a necessity. 
A) the marginal utility of each diamond a consumer purchases is quite high due to the small amount of diamonds that most consumers purchase. 
B) most consumers consume little water. 
C) diamonds are more beautiful than water. 
D) water is a necessity.

Question 2

Kathleen eats three TV dinners.The third TV dinner makes Kathleen sick.This means that for Kathleen

Accepted Answer

A) the third TV dinner has little utility. 
B) the third TV dinner has negative utility. 
C) the opportunity cost of TV dinners is high. 
D) TV dinners must be inexpensive. 
A) the third TV dinner has little utility. 
B) the third TV dinner has negative utility. 
C) the opportunity cost of TV dinners is high. 
D) TV dinners must be inexpensive.

Question 3

If an individual's total utility from consuming two goods decreases,then there must be

Accepted Answer

A) a downward rotation of the individual's indifference curve. 
B) an inward rotation of the individual's indifference curve. 
C) an outward shift of the individual's indifference curve. 
D) an inward shift of the individual's indifference curve. 
A) a downward rotation of the individual's indifference curve. 
B) an inward rotation of the individual's indifference curve. 
C) an outward shift of the individual's indifference curve. 
D) an inward shift of the individual's indifference curve.

Question 4

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Quantity of Movies } \
\text { Watched per Week }
\end{array} & \begin{array} { c } 
\text { Michelle's Total } \
\text { Utility per Week }
\end{array} & \begin{array} { c } 
\text { Robert's Total } \
\text { Utility per Week }
\end{array} \
\hline 0 & 0 & 0 \
1 & 100 & 100 \
2 & 195 & 190 \
3 & 270 & 270 \
4 & 340 & 340 \
5 & 390 & 400 \
6 & 420 & 350 \
7 & 435 & 390 \
8 & 445 & 420 \
9 & 450 & 440 \
10 & 440 & 450 \
\hline
\end{array}$$
-Refer to the above table.The marginal utility of the 5th movie for Michelle is

Accepted Answer

A) 40 units of utility. 
B) 50 units of utility. 
C) 60 units of utility. 
D) 390 units of utility. 
A) 40 units of utility. 
B) 50 units of utility. 
C) 60 units of utility. 
D) 390 units of utility.

Question 5

$$\begin{array} { c c c } 
\text { Slices of Pizza } & \text { Total Utility } & \text { Marginal Utility } \
0 & 0 & - \
1 & 20 & \
2 & 50 & \
3 & & 20 \
4 & & 10 \
5 & & 0
\end{array}$$
-In the above table,marginal utility begins to diminish after consumption of the

Accepted Answer

A) second slice of pizza. 
B) third slice of pizza. 
C) fourth slice of pizza. 
D) fifth slice of pizza. 
A) second slice of pizza. 
B) third slice of pizza. 
C) fourth slice of pizza. 
D) fifth slice of pizza.

Question 6

The real-income effect refers to

Accepted Answer

A) the law of diminishing marginal utility. 
B) the want-satisfying power of a good or service. 
C) substitution of less expensive commodities for more expensive commodities. 
D) the change in purchasing power when the price of a good changes. 
A) the law of diminishing marginal utility. 
B) the want-satisfying power of a good or service. 
C) substitution of less expensive commodities for more expensive commodities. 
D) the change in purchasing power when the price of a good changes.

Question 7

-Refer to the above figures.Which panel best represents an indifference curve?

Accepted Answer

A) Panel A. 
B) Panel B. 
C) Panel C. 
D) Panel D. 
A) Panel A. 
B) Panel B. 
C) Panel C. 
D) Panel D.

Question 8

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Quantity of } \
\text { Movies }
\end{array} & \begin{array} { c } 
\text { Total Utility } \
\text { Mary }
\end{array} & \begin{array} { c } 
\text { Total Utility } \
\text { John }
\end{array} \
\hline 3 & 100 & 190 \
4 & 140 & 250 \
5 & 170 & 300 \
6 & 190 & 340 \
7 & 200 & 370 \
8 & 210 & 390 \
9 & 210 & 405 \
10 & 200 & 415 \
11 & 190 & 420 \
\hline
\end{array}$$
-According to the above table,John's marginal utility from watching the 9th movie is

Accepted Answer

A) 405 units of utility. 
B) 0 units of utility. 
C) 15 units of utility. 
D) 10 units of utility. 
A) 405 units of utility. 
B) 0 units of utility. 
C) 15 units of utility. 
D) 10 units of utility.

Question 9

The equation for the calculation of marginal utility is

Accepted Answer

A) total utility/number of units consumed. 
B) change in total utility/number of units consumed. 
C) change in total utility/change in number of units consumed. 
D) total utility/change in number of units consumed. 
A) total utility/number of units consumed. 
B) change in total utility/number of units consumed. 
C) change in total utility/change in number of units consumed. 
D) total utility/change in number of units consumed.

Question 10

Consumers do not buy as many units of each good as they want because

Accepted Answer

A) of the law of diminishing marginal utility. 
B) they have limited incomes. 
C) they do not know what they want in all situations. 
D) eventually marginal utility equals zero. 
A) of the law of diminishing marginal utility. 
B) they have limited incomes. 
C) they do not know what they want in all situations. 
D) eventually marginal utility equals zero.

Question 11

Which of the following is FALSE?

Accepted Answer

A) A consumer is maximizing total utility when he or she gets the same amount of marginal utility from the last dollar spent on each good purchased. 
B) As additional units of a good or service are consumed,marginal utility diminishes. 
C) Utility is want-satisfying power. 
D) Assuming that the law of diminishing marginal utility holds,the demand curve must be upward sloping. 
A) A consumer is maximizing total utility when he or she gets the same amount of marginal utility from the last dollar spent on each good purchased. 
B) As additional units of a good or service are consumed,marginal utility diminishes. 
C) Utility is want-satisfying power. 
D) Assuming that the law of diminishing marginal utility holds,the demand curve must be upward sloping.

Question 12

The consumer optimum is defined as

Accepted Answer

A) the set of goods and services that maximizes marginal utility for each good. 
B) the set of goods and services such that the marginal utility of each good equals zero. 
C) the set of goods and services that maximizes the marginal utility of each good consumed. 
D) the set of goods and services,subject to the limited income of the consumer,that maximizes the total utility of the consumer. 
A) the set of goods and services that maximizes marginal utility for each good. 
B) the set of goods and services such that the marginal utility of each good equals zero. 
C) the set of goods and services that maximizes the marginal utility of each good consumed. 
D) the set of goods and services,subject to the limited income of the consumer,that maximizes the total utility of the consumer.

Question 13

One piece of evidence that possibly supports the bounded-rationality assumption of behavioral economics is that experiments appear to have shown that

Accepted Answer

A) people make different decisions in calm situations than in situations in which emotions come into play. 
B) people make the same decisions in calm situations than in situations in which emotions come into play. 
C) total utility is maximized when marginal utility is equal to zero. 
D) total utility is declining when marginal utility is negative. 
A) people make different decisions in calm situations than in situations in which emotions come into play. 
B) people make the same decisions in calm situations than in situations in which emotions come into play. 
C) total utility is maximized when marginal utility is equal to zero. 
D) total utility is declining when marginal utility is negative.

Question 14

In a restaurant we can observe people consuming coffee,tea,and soft drinks.All are priced the same.If Sally consumes coffee and Ali consumes soft drinks,we can conclude that

Accepted Answer

A) Bill will be drinking tea. 
B) Sally likes coffee more than Ali does,and Ali likes soft drinks more than Sally does. 
C) Sally derives more utility from coffee than from tea or soft drinks,and Ali derives more utility from soft drinks than from tea or coffee. 
D) the utility Sally receives from coffee consumption equals the utility that Ali receives from consuming soft drinks. 
A) Bill will be drinking tea. 
B) Sally likes coffee more than Ali does,and Ali likes soft drinks more than Sally does. 
C) Sally derives more utility from coffee than from tea or soft drinks,and Ali derives more utility from soft drinks than from tea or coffee. 
D) the utility Sally receives from coffee consumption equals the utility that Ali receives from consuming soft drinks.

Question 15

To derive the demand curve from the indifference map,

Accepted Answer

A) vary the price of one good while holding the price of the other good and income constant. 
B) vary the prices of both goods while holding income constant. 
C) vary the price of one good and income while holding the price of the other good constant. 
D) vary income while holding the prices constant. 
A) vary the price of one good while holding the price of the other good and income constant. 
B) vary the prices of both goods while holding income constant. 
C) vary the price of one good and income while holding the price of the other good constant. 
D) vary income while holding the prices constant.

Question 16

The change in the consumption of one good that just offsets a one-unit change in the consumption of another good is the

Accepted Answer

A) marginal utility. 
B) marginal rate of consumption. 
C) marginal rate of substitution. 
D) marginal rate of satisfaction. 
A) marginal utility. 
B) marginal rate of consumption. 
C) marginal rate of substitution. 
D) marginal rate of satisfaction.

Question 17

The price of a hamburger is $1,and the price of a movie is $6.The consumer has purchased 2 hamburgers and 2 movies,and her marginal utility from the second hamburger is 20 and from the second movie is 120.The consumer has an income of $21.This combination of goods

Accepted Answer

A) maximizes utility and is an optimum because the marginal utility of the last dollar spent on each good is the same. 
B) maximizes utility because the marginal utility of the last dollar spent on each good is the same,but it is not an equilibrium because marginal utility is not zero. 
C) is not an optimum because the consumer has not spent all of her money. 
D) is not an optimum because the marginal utility of the last dollar spent on each good is not the same. 
A) maximizes utility and is an optimum because the marginal utility of the last dollar spent on each good is the same. 
B) maximizes utility because the marginal utility of the last dollar spent on each good is the same,but it is not an equilibrium because marginal utility is not zero. 
C) is not an optimum because the consumer has not spent all of her money. 
D) is not an optimum because the marginal utility of the last dollar spent on each good is not the same.

Question 18

$$\begin{array} { c r c c c } 
\text { Quantity } &  \text { Total Utility } \
\hline\text { Per Week } & \text { Amy } & \text { Robert } & \text { David } & \text { Michelle } \
\hline 0 & 0 & 0 & 0 & 0 \
1 & 5.0 & 100 & 600 & 60 \
2 & 9.9 & 190 & 1200 & 130 \
3 & 14.7 & 270 & 1800 & 220 \
4 & 19.4 & 340 & 2400 & 310 \
5 & 24.0 & 400 & 3000 & 425 \
6 & 28.5 & 450 & 3600 & 575 \
7 & 32.9 & 490 & 4200 & 900 \
8 & 37.2 & 520 & 4800 & 1275 \
9 & 41.4 & 510 & 5400 & 1770
\end{array}$$
-Refer to the above table.Which of the four people have utility schedules characterized by the law of diminishing marginal utility?

Accepted Answer

A) Amy,Robert,and David only 
B) Michelle only 
C) Michelle and David only 
D) Amy and Robert only 
A) Amy,Robert,and David only 
B) Michelle only 
C) Michelle and David only 
D) Amy and Robert only

Question 19

Assume that Jackie concludes that he should eat less and play racquetball more.In this situation,it must be true that the marginal utility of the last dollar spent on food is

Accepted Answer

A) more than the marginal utility of the last dollar spent on racquetball. 
B) less than the marginal utility of the last dollar spent on racquetball. 
C) equal to the marginal utility of the last dollar spent on racquetball. 
D) negative and less than the marginal utility of the last dollar spent on racquetball. 
A) more than the marginal utility of the last dollar spent on racquetball. 
B) less than the marginal utility of the last dollar spent on racquetball. 
C) equal to the marginal utility of the last dollar spent on racquetball. 
D) negative and less than the marginal utility of the last dollar spent on racquetball.

Question 20

The marginal utility derived from viewing the next movie DVD is the

Accepted Answer

A) average utility per minute of viewing. 
B) additional utility from viewing the DVD. 
C) average utility per hour of viewing. 
D) additional utility from viewing the first minute of the DVD. 
A) average utility per minute of viewing. 
B) additional utility from viewing the DVD. 
C) average utility per hour of viewing. 
D) additional utility from viewing the first minute of the DVD.

The reason that diamonds cost more than water is

Kathleen eats three TV dinners.The third TV dinner makes Kathleen sick.This means that for Kathleen

If an individual's total utility from consuming two goods decreases,then there must be

Quantity of Movies Watched per Week Michelle's Total Utility per Week Robert's Total Utility per Week 0 0 0 1 100 100 2 195 190 3 270 270 4 340 340 5 390 400 6 420 350 7 435 390 8 445 420 9 450 440 10 440 450 -Refer to the above table.The marginal utility of the 5th movie for Michelle is

Slices of Pizza Total Utility Marginal Utility 0 0 - 1 20 2 50 3 20 4 10 5 0 -In the above table,marginal utility begins to diminish after consumption of the

The real-income effect refers to

-Refer to the above figures.Which panel best represents an indifference curve?

Quantity of Movies Total Utility Mary Total Utility John 3 100 190 4 140 250 5 170 300 6 190 340 7 200 370 8 210 390 9 210 405 10 200 415 11 190 420 -According to the above table,John's marginal utility from watching the 9th movie is

The equation for the calculation of marginal utility is

Consumers do not buy as many units of each good as they want because

Which of the following is FALSE?

The consumer optimum is defined as

One piece of evidence that possibly supports the bounded-rationality assumption of behavioral economics is that experiments appear to have shown that

In a restaurant we can observe people consuming coffee,tea,and soft drinks.All are priced the same.If Sally consumes coffee and Ali consumes soft drinks,we can conclude that

To derive the demand curve from the indifference map,

The change in the consumption of one good that just offsets a one-unit change in the consumption of another good is the

The price of a hamburger is $1,and the price of a movie is $6.The consumer has purchased 2 hamburgers and 2 movies,and her marginal utility from the second hamburger is 20 and from the second movie is 120.The consumer has an income of $21.This combination of goods

Assume that Jackie concludes that he should eat less and play racquetball more.In this situation,it must be true that the marginal utility of the last dollar spent on food is

The marginal utility derived from viewing the next movie DVD is the

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

The reason that diamonds cost more than water is

Kathleen eats three TV dinners.The third TV dinner makes Kathleen sick.This means that for Kathleen

If an individual's total utility from consuming two goods decreases,then there must be

Quantity of Movies Watched per Week Michelle's Total Utility per Week Robert's Total Utility per Week 0 0 0 1 100 100 2 195 190 3 270 270 4 340 340 5 390 400 6 420 350 7 435 390 8 445 420 9 450 440 10 440 450 -Refer to the above table.The marginal utility of the 5th movie for Michelle is

Slices of Pizza Total Utility Marginal Utility 0 0 - 1 20 2 50 3 20 4 10 5 0 -In the above table,marginal utility begins to diminish after consumption of the

The real-income effect refers to

-Refer to the above figures.Which panel best represents an indifference curve?

Quantity of Movies Total Utility Mary Total Utility John 3 100 190 4 140 250 5 170 300 6 190 340 7 200 370 8 210 390 9 210 405 10 200 415 11 190 420 -According to the above table,John's marginal utility from watching the 9th movie is

The equation for the calculation of marginal utility is

Consumers do not buy as many units of each good as they want because

Which of the following is FALSE?

The consumer optimum is defined as

One piece of evidence that possibly supports the bounded-rationality assumption of behavioral economics is that experiments appear to have shown that

In a restaurant we can observe people consuming coffee,tea,and soft drinks.All are priced the same.If Sally consumes coffee and Ali consumes soft drinks,we can conclude that

To derive the demand curve from the indifference map,

The change in the consumption of one good that just offsets a one-unit change in the consumption of another good is the

The price of a hamburger is $1,and the price of a movie is $6.The consumer has purchased 2 hamburgers and 2 movies,and her marginal utility from the second hamburger is 20 and from the second movie is 120.The consumer has an income of $21.This combination of goods

Assume that Jackie concludes that he should eat less and play racquetball more.In this situation,it must be true that the marginal utility of the last dollar spent on food is

The marginal utility derived from viewing the next movie DVD is the

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