Question 1

Along an indifference curve,as the consumer reduces the quantity of Good A in favor of more Good B the marginal rate of substitution of Good A for Good B will

Accepted Answer

A) fall. 
B) rise. 
C) stay the same. 
D) fall and eventually turn negative. 
A) fall. 
B) rise. 
C) stay the same. 
D) fall and eventually turn negative.

Question 2

The rate of change in total utility equals

Accepted Answer

A) marginal utility. 
B) the change in marginal utility associated with eating all the quantities a person can handle. 
C) the change in marginal utility divided by the change in quantity. 
D) the rate of change in marginal utility divided by the price. 
A) marginal utility. 
B) the change in marginal utility associated with eating all the quantities a person can handle. 
C) the change in marginal utility divided by the change in quantity. 
D) the rate of change in marginal utility divided by the price.

Question 3

The substitution effect argues that a consumer

Accepted Answer

A) will always use the additional purchasing power from a price decrease to purchase more of both goods. 
B) will not purchase more of a good when its price falls. 
C) will purchase more of a good that has become relatively cheaper,and less of a good that has become relatively more expensive. 
D) will purchase less of both goods if his or her real income increases. 
A) will always use the additional purchasing power from a price decrease to purchase more of both goods. 
B) will not purchase more of a good when its price falls. 
C) will purchase more of a good that has become relatively cheaper,and less of a good that has become relatively more expensive. 
D) will purchase less of both goods if his or her real income increases.

Question 4

The fact that the price of diamonds is higher than the price of water

Accepted Answer

A) cannot be explained by behavioral economics or consumer choice theory. 
B) is an outcome of irrational behavior in consumer choice theory. 
C) can be explained only by behavioral economics but not by consumer choice theory. 
D) can be explained as the outcome of a consumer optimum in consumer choice theory. 
A) cannot be explained by behavioral economics or consumer choice theory. 
B) is an outcome of irrational behavior in consumer choice theory. 
C) can be explained only by behavioral economics but not by consumer choice theory. 
D) can be explained as the outcome of a consumer optimum in consumer choice theory.

Question 5

Along an indifference curve,

Accepted Answer

A) the marginal utility of all items is equal. 
B) the total satisfaction is the same. 
C) the prices of all goods are equal. 
D) the marginal utility/price ratios of all items are equal. 
A) the marginal utility of all items is equal. 
B) the total satisfaction is the same. 
C) the prices of all goods are equal. 
D) the marginal utility/price ratios of all items are equal.

Question 6

Which of the following is NOT true of utility?

Accepted Answer

A) It represents the want-satisfying power of a good. 
B) It is measured using a representative unit called a util. 
C) The utility that a good provides depends on a consumer's preferences. 
D) Utility can be measured objectively. 
A) It represents the want-satisfying power of a good. 
B) It is measured using a representative unit called a util. 
C) The utility that a good provides depends on a consumer's preferences. 
D) Utility can be measured objectively.

Question 7

Suppose a consumer is at an optimum.What happens when the price of one good she has been consuming increases?

Accepted Answer

A) The value of the marginal utility of the last unit consumed decreases. 
B) The value of the marginal utility of the last unit consumed increases. 
C) The marginal utility per dollar spent on the last unit consumed of that good increases by the same proportion as the price increases. 
D) The marginal utility per dollar spent on the last unit consumed of that good is now smaller than the marginal utility per dollar spent on other goods the person consumes. 
A) The value of the marginal utility of the last unit consumed decreases. 
B) The value of the marginal utility of the last unit consumed increases. 
C) The marginal utility per dollar spent on the last unit consumed of that good increases by the same proportion as the price increases. 
D) The marginal utility per dollar spent on the last unit consumed of that good is now smaller than the marginal utility per dollar spent on other goods the person consumes.

Question 8

Suppose that Jacob is going to a buffet restaurant that allows him to eat as many chicken wings as he wants at a fixed price.How would you predict the number of chicken wings that Jack will eat using utility theory?

Accepted Answer

Utility theory predicts that Jacob will

Question 9

-Use the above figure.Last week Joe consumed combination "B" of goods "X" and "Y." This week he purchased combination "A." The reason for this change is that the

Accepted Answer

A) price of good X has increased. 
B) price of good X has decreased. 
C) price of good Y has decreased. 
D) price of good Y has increased. 
A) price of good X has increased. 
B) price of good X has decreased. 
C) price of good Y has decreased. 
D) price of good Y has increased.

Question 10

Suppose that indifference curve I1 lies to the right of indifference curve I2.We can conclude that

Accepted Answer

A) some,but not all,points on indifference curve I1 will correspond to higher utility than points along indifference curve I2. 
B) some,but not all,points on indifference curve I1 will correspond to lower utility than points along indifference curve I2. 
C) all points along indifference curve I1 will correspond to higher utility than points along indifference curve I2. 
D) all points along indifference curve I1 will correspond to lower utility than points along indifference curve I2. 
A) some,but not all,points on indifference curve I1 will correspond to higher utility than points along indifference curve I2. 
B) some,but not all,points on indifference curve I1 will correspond to lower utility than points along indifference curve I2. 
C) all points along indifference curve I1 will correspond to higher utility than points along indifference curve I2. 
D) all points along indifference curve I1 will correspond to lower utility than points along indifference curve I2.

Question 11

An indifference map shows

Accepted Answer

A) that money income is constant,but product prices may change. 
B) that utility is at a maximum at the origin. 
C) that curves closer to the origin represent higher levels of utility. 
D) that curves further from the origin represent higher levels of utility. 
A) that money income is constant,but product prices may change. 
B) that utility is at a maximum at the origin. 
C) that curves closer to the origin represent higher levels of utility. 
D) that curves further from the origin represent higher levels of utility.

Question 12

If marginal utility is negative,

Accepted Answer

A) total utility increases at a decreasing rate. 
B) the consumer considers extra units of the commodity to be a "bad." 
C) the consumer will want to consume the unit only if it is free. 
D) the consumer likes the commodity,but not as much as he or she once did. 
A) total utility increases at a decreasing rate. 
B) the consumer considers extra units of the commodity to be a "bad." 
C) the consumer will want to consume the unit only if it is free. 
D) the consumer likes the commodity,but not as much as he or she once did.

Question 13

Restaurants that allow customers to eat as much as they want for a fixed price must make money or they would not remain in business.How can they earn profits when people can always eat more so that the restaurant's costs keep getting higher? What practice that regular restaurants use will not be used by all-you-can-eat places?

Accepted Answer

Restaurants are relying on the principle

Question 14

-Refer to the above figure.Which point represents the second highest level of utility?

Accepted Answer

A) Point A 
B) Point B 
C) Point C 
D) Point D 
A) Point A 
B) Point B 
C) Point C 
D) Point D

Question 15

Based on the material presented in the chapter,can we conclude that people will consume goods until the marginal utility of each good is zero?

Accepted Answer

A) Yes,because at that point total utility is maximum. 
B) Yes,because at that point marginal utility is minimum. 
C) No,because consumption is determined by total utility. 
D) No,because consumption is determined by the marginal utility/price ratio. 
A) Yes,because at that point total utility is maximum. 
B) Yes,because at that point marginal utility is minimum. 
C) No,because consumption is determined by total utility. 
D) No,because consumption is determined by the marginal utility/price ratio.

Question 16

When consumers shift away from relatively higher price goods and services in favor of those that are less expensive,this is known as the

Accepted Answer

A) principle of utility. 
B) principle of substitution. 
C) principle of supply. 
D) principle of increasing opportunity costs. 
A) principle of utility. 
B) principle of substitution. 
C) principle of supply. 
D) principle of increasing opportunity costs.

Question 17

Assuming that the marginal utility of the first four pieces of candy was 30,28,24,and 18 respectively,how much total utility was derived from eating the first three pieces of candy?

Accepted Answer

A) 58 
B) 82 
C) 54 
D) 100 
A) 58 
B) 82 
C) 54 
D) 100

Question 18

Marginal utility can be thought of as

Accepted Answer

A) the incremental change in a person's total satisfaction level from the buying of a good. 
B) the total change in satisfaction from buying a good. 
C) the additional cost of that next good purchased. 
D) the opportunity cost of buying the next good. 
A) the incremental change in a person's total satisfaction level from the buying of a good. 
B) the total change in satisfaction from buying a good. 
C) the additional cost of that next good purchased. 
D) the opportunity cost of buying the next good.

Along an indifference curve,as the consumer reduces the quantity of Good A in favor of more Good B the marginal rate of substitution of Good A for Good B will

The rate of change in total utility equals

The substitution effect argues that a consumer

The fact that the price of diamonds is higher than the price of water

Along an indifference curve,

Which of the following is NOT true of utility?

Suppose a consumer is at an optimum.What happens when the price of one good she has been consuming increases?

Suppose that Jacob is going to a buffet restaurant that allows him to eat as many chicken wings as he wants at a fixed price.How would you predict the number of chicken wings that Jack will eat using utility theory?

-Use the above figure.Last week Joe consumed combination "B" of goods "X" and "Y." This week he purchased combination "A." The reason for this change is that the

Suppose that indifference curve I1 lies to the right of indifference curve I2.We can conclude that

An indifference map shows

If marginal utility is negative,

-Refer to the above figure.Which point represents the second highest level of utility?

Based on the material presented in the chapter,can we conclude that people will consume goods until the marginal utility of each good is zero?

When consumers shift away from relatively higher price goods and services in favor of those that are less expensive,this is known as the

Assuming that the marginal utility of the first four pieces of candy was 30,28,24,and 18 respectively,how much total utility was derived from eating the first three pieces of candy?

Marginal utility can be thought of as

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

Along an indifference curve,as the consumer reduces the quantity of Good A in favor of more Good B the marginal rate of substitution of Good A for Good B will

The rate of change in total utility equals

The substitution effect argues that a consumer

The fact that the price of diamonds is higher than the price of water

Along an indifference curve,

Which of the following is NOT true of utility?

Suppose a consumer is at an optimum.What happens when the price of one good she has been consuming increases?

Suppose that Jacob is going to a buffet restaurant that allows him to eat as many chicken wings as he wants at a fixed price.How would you predict the number of chicken wings that Jack will eat using utility theory?

-Use the above figure.Last week Joe consumed combination "B" of goods "X" and "Y." This week he purchased combination "A." The reason for this change is that the

Suppose that indifference curve I1 lies to the right of indifference curve I2.We can conclude that

An indifference map shows

If marginal utility is negative,

-Refer to the above figure.Which point represents the second highest level of utility?

Based on the material presented in the chapter,can we conclude that people will consume goods until the marginal utility of each good is zero?

When consumers shift away from relatively higher price goods and services in favor of those that are less expensive,this is known as the

Assuming that the marginal utility of the first four pieces of candy was 30,28,24,and 18 respectively,how much total utility was derived from eating the first three pieces of candy?

Marginal utility can be thought of as

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