Question 1

What is utility analysis? What is the goal of this analysis?

Accepted Answer

Utility analysis is the analysis of cons

Question 2

The real-income effect is likely to be greater when

Accepted Answer

A) the substitution effect is not very large. 
B) the marginal utility of the last unit is high. 
C) the marginal utility per dollar spent on the last unit is high. 
D) the good is an expensive good. 
A) the substitution effect is not very large. 
B) the marginal utility of the last unit is high. 
C) the marginal utility per dollar spent on the last unit is high. 
D) the good is an expensive good.

Question 3

The slope of the budget line will change

Accepted Answer

A) when the consumer's income increases. 
B) when the consumer's taste changes. 
C) when the total satisfaction changes. 
D) when the price of one of the products changes. 
A) when the consumer's income increases. 
B) when the consumer's taste changes. 
C) when the total satisfaction changes. 
D) when the price of one of the products changes.

Question 4

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Quantity } \
\text { of Pizza }
\end{array} & \begin{array} { c } 
\text { Marginal Utility } \
\text { of Pizza }
\end{array} \
\hline 1 & 50 \
2 & 25 \
3 & 0 \
4 & - 25 \
\hline
\end{array}$$
-Using the above table,what is the maximum number of slices of pizza a rational consumer would buy?

Accepted Answer

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

Question 5

An indifference curve provides the set of consumption alternatives that

Accepted Answer

A) yield the same total amount of satisfaction. 
B) maximize the utility of the consumer. 
C) can be purchased for the same amount of money. 
D) yield the same marginal utility for the last unit consumed of each good. 
A) yield the same total amount of satisfaction. 
B) maximize the utility of the consumer. 
C) can be purchased for the same amount of money. 
D) yield the same marginal utility for the last unit consumed of each good.

Question 6

-In the above figure,if the budget line is the line DE,the consumer will maximize utility at point

Accepted Answer

A) A. 
B) B. 
C) C. 
D) G. 
A) A. 
B) B. 
C) C. 
D) G.

Question 7

What do we know about total utility when marginal utility is zero?

Accepted Answer

Marginal utility is the extra utility fr

Question 8

Suppose a family purchases 10,000 gallons of water a year at 20 cents a gallon and one diamond ring at a price of $1000.Can we conclude that the diamond ring provides more utility to the family than water? Explain.

Accepted Answer

No.In fact,the water provides more total

Question 9

On a hot summer day,a construction worker enters a McDonald's fast-food restaurant.He orders the first Big Mac.He consumes it within 3 minutes.He then orders a second Big Mac and consumes it in 10 minutes.He eats only half of the third one in 18 minutes and throws away the rest.The store manager offers him the fourth for free.The construction worker says: "No thanks." Why?

Accepted Answer

A) For the construction worker,total utility increased at an increasing rate. 
B) Marginal utility increased at an increasing rate. 
C) Marginal utility declined as he consumed additional Big Macs. 
D) The law of diminishing marginal utility does not apply to consumption of Big Macs. 
A) For the construction worker,total utility increased at an increasing rate. 
B) Marginal utility increased at an increasing rate. 
C) Marginal utility declined as he consumed additional Big Macs. 
D) The law of diminishing marginal utility does not apply to consumption of Big Macs.

Question 10

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

Accepted Answer

A) Michelle: 50; Robert: 50 
B) Michelle: 15; Robert: 20 
C) Michelle: 10; Robert: 10 
D) Michelle: -10; Robert: 10 
A) Michelle: 50; Robert: 50 
B) Michelle: 15; Robert: 20 
C) Michelle: 10; Robert: 10 
D) Michelle: -10; Robert: 10

Question 11

Which of the following is NOT true about indifference curves?

Accepted Answer

A) Indifference curves slope downward. 
B) Indifference curves show equally preferred combinations of two goods. 
C) Indifference curves are not straight lines because the marginal rate of substitution falls. 
D) Indifference curves shift when prices change. 
A) Indifference curves slope downward. 
B) Indifference curves show equally preferred combinations of two goods. 
C) Indifference curves are not straight lines because the marginal rate of substitution falls. 
D) Indifference curves shift when prices change.

Question 12

$$\begin{array} { c c } 
\hline \text { Quantity } & \text { Total Utility } \
0 & 0 \
1 & 10 \
2 & 25 \
3 & 35 \
4 & 42 \
5 & 47 \
6 & 49 \
\hline
\end{array}$$
-Refer to the above table.At what quantity does diminishing marginal utility set in?

Accepted Answer

A) After 0. 
B) After 1. 
C) After 2. 
D) After 10. 
A) After 0. 
B) After 1. 
C) After 2. 
D) After 10.

Question 13

The reason that all-you-can-eat restaurants can make a profit is due to

Accepted Answer

A) the law of demand. 
B) the law of increasing relative costs. 
C) the law of diminishing marginal utility. 
D) the law of diminishing marginal returns. 
A) the law of demand. 
B) the law of increasing relative costs. 
C) the law of diminishing marginal utility. 
D) the law of diminishing marginal returns.

Question 14

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

Accepted Answer

A) 15 units of utility. 
B) 20 units of utility. 
C) 35 units of utility. 
D) 435 units of utility. 
A) 15 units of utility. 
B) 20 units of utility. 
C) 35 units of utility. 
D) 435 units of utility.

Question 15

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

Accepted Answer

A) Michelle: -10; Robert: 20 
B) Michelle: 75; Robert: 75 
C) Michelle: 75; Robert: 80 
D) Michelle: 270; Robert: 270 
A) Michelle: -10; Robert: 20 
B) Michelle: 75; Robert: 75 
C) Michelle: 75; Robert: 80 
D) Michelle: 270; Robert: 270

Question 16

Using indifference curve analysis,an optimum is characterized by

Accepted Answer

A) the marginal rate of substitution of one good divided by its price equal to the marginal rate of substitution of the other good divided by its price. 
B) the marginal rate of substitution being equal to one. 
C) the marginal rate of substitution being equal to zero. 
D) the marginal rate of substitution being equal to the ratio of the prices of the two goods. 
A) the marginal rate of substitution of one good divided by its price equal to the marginal rate of substitution of the other good divided by its price. 
B) the marginal rate of substitution being equal to one. 
C) the marginal rate of substitution being equal to zero. 
D) the marginal rate of substitution being equal to the ratio of the prices of the two goods.

Question 17

The change in people's purchasing power that occurs when the price of one good that they purchase changes is the

Accepted Answer

A) law of diminishing marginal utility. 
B) real-income effect. 
C) substitution effect. 
D) price income effect. 
A) law of diminishing marginal utility. 
B) real-income effect. 
C) substitution effect. 
D) price income effect.

Question 18

When Bonnie increases the consumption of Good A and decrease the consumption of Good B,her marginal utility of

Accepted Answer

A) A falls and the marginal utility of B will increase. 
B) both A and B will decrease. 
C) A increases and the marginal utility of B will fall. 
D) both A and B will increase. 
A) A falls and the marginal utility of B will increase. 
B) both A and B will decrease. 
C) A increases and the marginal utility of B will fall. 
D) both A and B will increase.

Question 19

$$\begin{array} { l c l c } 
\text { Pepsi } & \text { MU of Pepsi } & \text { Pizza } & \text { MU of Pizza } \
\hline \text { 1st can } & 18 & \text { 1st slice } & 7 \
\text { 2nd can } & 15 & \text { 2nd slice } & 6 \
\text { 3rd can } & 12 & \text { 3rd slice } & 4 \
\text { 4th can } & 9 & \text { 4th slice } & 3 \
\text { 5th can } & 6 & \text { 5th slice } & 0 \
\hline
\end{array}$$
-Assume that Catherine 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 $2.00.If she has $16 available to spend,what combination of Pepsi and pizza will be her consumer optimum?

Accepted Answer

A) 1 can of Pepsi,4 slices of pizza 
B) 2 cans of Pepsi,5 slices of pizza 
C) 4 cans of Pepsi,2 slices of pizza 
D) 6 cans of Pepsi,0 slices of pizza 
A) 1 can of Pepsi,4 slices of pizza 
B) 2 cans of Pepsi,5 slices of pizza 
C) 4 cans of Pepsi,2 slices of pizza 
D) 6 cans of Pepsi,0 slices of pizza

Question 20

Which English philosopher set out to develop an arithmetic formula for measuring happiness and along the way invented the util?

Accepted Answer

A) John Maynard Keynes 
B) Milton Friedman 
C) Jeremy Bentham 
D) Adam Smith 
A) John Maynard Keynes 
B) Milton Friedman 
C) Jeremy Bentham 
D) Adam Smith

What is utility analysis? What is the goal of this analysis?

The real-income effect is likely to be greater when

The slope of the budget line will change

Quantity of Pizza Marginal Utility of Pizza 1 50 2 25 3 0 4 -25 -Using the above table,what is the maximum number of slices of pizza a rational consumer would buy?

An indifference curve provides the set of consumption alternatives that

-In the above figure,if the budget line is the line DE,the consumer will maximize utility at point

What do we know about total utility when marginal utility is zero?

Suppose a family purchases 10,000 gallons of water a year at 20 cents a gallon and one diamond ring at a price of $1000.Can we conclude that the diamond ring provides more utility to the family than water? Explain.

Which of the following is NOT true about indifference curves?

Quantity Total Utility 0 0 1 10 2 25 3 35 4 42 5 47 6 49 -Refer to the above table.At what quantity does diminishing marginal utility set in?

The reason that all-you-can-eat restaurants can make a profit is due to

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 7th movie for Michelle is

Using indifference curve analysis,an optimum is characterized by

The change in people's purchasing power that occurs when the price of one good that they purchase changes is the

When Bonnie increases the consumption of Good A and decrease the consumption of Good B,her marginal utility of

Which English philosopher set out to develop an arithmetic formula for measuring happiness and along the way invented the util?

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

What is utility analysis? What is the goal of this analysis?

The real-income effect is likely to be greater when

The slope of the budget line will change

Quantity of Pizza Marginal Utility of Pizza 1 50 2 25 3 0 4 -25 -Using the above table,what is the maximum number of slices of pizza a rational consumer would buy?

An indifference curve provides the set of consumption alternatives that

-In the above figure,if the budget line is the line DE,the consumer will maximize utility at point

What do we know about total utility when marginal utility is zero?

Suppose a family purchases 10,000 gallons of water a year at 20 cents a gallon and one diamond ring at a price of $1000.Can we conclude that the diamond ring provides more utility to the family than water? Explain.

Which of the following is NOT true about indifference curves?

Quantity Total Utility 0 0 1 10 2 25 3 35 4 42 5 47 6 49 -Refer to the above table.At what quantity does diminishing marginal utility set in?

The reason that all-you-can-eat restaurants can make a profit is due to

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 7th movie for Michelle is

Using indifference curve analysis,an optimum is characterized by

The change in people's purchasing power that occurs when the price of one good that they purchase changes is the

When Bonnie increases the consumption of Good A and decrease the consumption of Good B,her marginal utility of

Which English philosopher set out to develop an arithmetic formula for measuring happiness and along the way invented the util?

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