Question 1

Explain how it is possible to add individual demand curves,which are ragged and discontinuous,to get a smooth market demand curve.

Accepted Answer

There are many individual demand curves and each reflects different preferences,with some individuals willing to pay more for a given quantity than others.When all these demands are summed,the result is a smooth curve.

Question 2

When marginal utility is positive but decreasing,an increase in quantity decreases total utility.

Accepted Answer

A) True 
 B)False  False

Question 3

The slope of the budget constraint is affected by the

Accepted Answer

A) consumer's income level. 
B) relative price of goods being consumed. 
C) consumer's preferences. 
D) preferences of other consumers. 
E) amount of goods in the market. 
A) consumer's income level. 
B) relative price of goods being consumed. 
C) consumer's preferences. 
D) preferences of other consumers. 
E) amount of goods in the market. B

Question 4

Use the information of utility in the box below to find the quantity of each good the consumer will purchase in each of the three cases to maximize utility.

Accepted Answer

Case A: 3 pounds of apples and

Question 5

The total amount of money that you can spend on goods and services within a month is your monthly

Accepted Answer

A) utility. 
B) income. 
C) budget constraint. 
D) wealth. 
E) quota. 
A) utility. 
B) income. 
C) budget constraint. 
D) wealth. 
E) quota.

Question 6

Suppose that Joe and Jane have been eating hotdogs until only one is left.Jane claims that she should get the last hotdog because she is hungrier.Jane has made a(n)

Accepted Answer

A) price elasticity statement. 
B) positive comparison. 
C) interpersonal utility comparison. 
D) irrational statement. 
E) average comparison. 
A) price elasticity statement. 
B) positive comparison. 
C) interpersonal utility comparison. 
D) irrational statement. 
E) average comparison.

Question 7

What happens to consumer surplus if the price of a good falls? Why?

Accepted Answer

When the price of a good falls,consumer

Question 8

Exhibit 5-9  
-Refer to Exhibit 5-9.When price falls from P2 to P1,the size of consumer surplus

Accepted Answer

A) increases by area 2. 
B) decreases by area 2. 
C) remains the same. 
D) increases by areas 1 + 2. 
E) decreases by areas 1 + 2. 
A) increases by area 2. 
B) decreases by area 2. 
C) remains the same. 
D) increases by areas 1 + 2. 
E) decreases by areas 1 + 2.

Question 9

In looking at the consumption of two or more goods,

Accepted Answer

A) changes in the amount of one good consumed might affect the amount of utility gained from one or more other goods. 
B) the utility from one good is always independent of how much of any other good is consumed. 
C) utility from some goods must be added,whereas utility from others must be subtracted. 
D) utility from all of the goods must be multiplied to get total utility. 
E) a change in the quantity of one good consumed always affects the amount of utility derived from all other goods. 
A) changes in the amount of one good consumed might affect the amount of utility gained from one or more other goods. 
B) the utility from one good is always independent of how much of any other good is consumed. 
C) utility from some goods must be added,whereas utility from others must be subtracted. 
D) utility from all of the goods must be multiplied to get total utility. 
E) a change in the quantity of one good consumed always affects the amount of utility derived from all other goods.

Question 10

Utility is

Accepted Answer

A) the total amount of a good or service a consumer consumes. 
B) social welfare. 
C) the usefulness of a good. 
D) an indicator of individual preferences. 
E) how well something works for its intended purpose. 
A) the total amount of a good or service a consumer consumes. 
B) social welfare. 
C) the usefulness of a good. 
D) an indicator of individual preferences. 
E) how well something works for its intended purpose.

Question 11

Why is an individual willing to buy more of a good when its price falls?

Accepted Answer

Marginal utility decreases with increase

Question 12

Analyze the following data for Julie's utility from consumption of CDs and magazines.   
(A)Determine how much of each good Julie will buy if she has $26,the price of CDs is $10,and the price of magazines is $3.
(B)Suppose the price of magazines goes up to $5.How many copies of magazines will Julie buy now? Why does it change?

Accepted Answer

(A) Julie will buy 2 CDs and 2 magazines

Question 13

For a consumer to maximize utility,

Accepted Answer

A) marginal utility should equal marginal benefit. 
B) price should equal marginal benefit. 
C) marginal benefit should equal total utility. 
D) price should equal marginal utility. 
E) price should equal marginal cost. 
A) marginal utility should equal marginal benefit. 
B) price should equal marginal benefit. 
C) marginal benefit should equal total utility. 
D) price should equal marginal utility. 
E) price should equal marginal cost.

Question 14

Exhibit 5-1  
-Refer to Exhibit 5-1.As the individual consumes each additional can of soda,total utility

Accepted Answer

A) increases by 9 units of utility. 
B) increases at a decreasing rate. 
C) stays constant. 
D) increases at an increasing rate. 
E) decreases by 9 units of utility. 
A) increases by 9 units of utility. 
B) increases at a decreasing rate. 
C) stays constant. 
D) increases at an increasing rate. 
E) decreases by 9 units of utility.

Question 15

Total utility always increases when a person increases the consumption of one good while reducing the consumption of another.

Accepted Answer

A) True 
 B)False

Question 16

The maximum combinations of goods and services a consumer can buy because he or she has a limited amount of money to spend is called the

Accepted Answer

A) production possibilities. 
B) marginal propensity to consume. 
C) maximum total utility curve. 
D) indifference curve. 
E) budget constraint. 
A) production possibilities. 
B) marginal propensity to consume. 
C) maximum total utility curve. 
D) indifference curve. 
E) budget constraint.

Question 17

After consuming five units of a good,the price that a consumer is willing to pay for the sixth unit is equal to the average benefit of the first five units of the good.

Accepted Answer

A) True 
 B)False

Question 18

When utility derived from many goods is multiplied or divided by any number,the new utility measure indicates

Accepted Answer

A) a different set of preferences for the highest and the lowest quantities of goods consumed,but the same preferences for the middle quantities. 
B) the same preferences as before. 
C) a different set of preferences only for the highest quantities of goods consumed. 
D) a different set of preferences only for the lowest quantities of goods consumed. 
E) an entirely different set of preferences. 
A) a different set of preferences for the highest and the lowest quantities of goods consumed,but the same preferences for the middle quantities. 
B) the same preferences as before. 
C) a different set of preferences only for the highest quantities of goods consumed. 
D) a different set of preferences only for the lowest quantities of goods consumed. 
E) an entirely different set of preferences.

Question 19

Consumer surplus is zero when a consumer pays a price equal to the market equilibrium price.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 5-10  
-Refer to Exhibit 5-10.Assume that Stephanie and Roger are the only consumers in the market.Calculate consumer surplus for Stephanie,Roger,and the market as a whole if market price is $1.

Accepted Answer

Stephanie consumes 3 units,with consumer

Exam 5: The Demand Curve and the Behavior of Consumers

Explain how it is possible to add individual demand curves,which are ragged and discontinuous,to get a smooth market demand curve.

When marginal utility is positive but decreasing,an increase in quantity decreases total utility.

The slope of the budget constraint is affected by the

Use the information of utility in the box below to find the quantity of each good the consumer will purchase in each of the three cases to maximize utility.

The total amount of money that you can spend on goods and services within a month is your monthly

Suppose that Joe and Jane have been eating hotdogs until only one is left.Jane claims that she should get the last hotdog because she is hungrier.Jane has made a(n)

What happens to consumer surplus if the price of a good falls? Why?

Exhibit 5-9 -Refer to Exhibit 5-9.When price falls from P2 to P1,the size of consumer surplus

In looking at the consumption of two or more goods,

Utility is

Why is an individual willing to buy more of a good when its price falls?

For a consumer to maximize utility,

Exhibit 5-1 -Refer to Exhibit 5-1.As the individual consumes each additional can of soda,total utility

Total utility always increases when a person increases the consumption of one good while reducing the consumption of another.

The maximum combinations of goods and services a consumer can buy because he or she has a limited amount of money to spend is called the

After consuming five units of a good,the price that a consumer is willing to pay for the sixth unit is equal to the average benefit of the first five units of the good.

When utility derived from many goods is multiplied or divided by any number,the new utility measure indicates

Consumer surplus is zero when a consumer pays a price equal to the market equilibrium price.

Exhibit 5-10 -Refer to Exhibit 5-10.Assume that Stephanie and Roger are the only consumers in the market.Calculate consumer surplus for Stephanie,Roger,and the market as a whole if market price is $1.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors,price Ceilings,and Elasticity

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, transfers, and Income Distribution

Public Goods, externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth and Globalization

International Trade

International Finance

Reading,understanding,and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Present Discounted Value

The Miracle of Compound Growth

Deriving the Growth Accounting Formula

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

Filters

Exhibit 5-9 -Refer to Exhibit 5-9.When price falls from P₂ to P₁,the size of consumer surplus