Question 1

Which of the following represents the substitution effect of an increase in the price of apples?

Accepted Answer

A) A decrease in the consumer's real income 
B) A decrease in the quantity of apples purchased 
C) A decrease in the quantities of all goods purchased by the consumer 
D) A shift of consumption from other goods to apples 
E) A decrease in the opportunity cost of consuming apples 
A) A decrease in the consumer's real income 
B) A decrease in the quantity of apples purchased 
C) A decrease in the quantities of all goods purchased by the consumer 
D) A shift of consumption from other goods to apples 
E) A decrease in the opportunity cost of consuming apples

Question 2

Suppose music CDs and movie DVDs give the same utility to Jane,and she has $200 to spend on music CDs and movie DVDs.The price of a movie DVD is $15,and the price of a music CD is $10.Which of the following is the most affordable bundle for maximizing her utility?

Accepted Answer

A) 10 music CDs and 5 movie DVDs 
B) 10 music CDs and 10 movie DVDs 
C) 5 music CDs and 5 movie DVDs 
D) 15 music CDs and 5 movie DVDs 
E) 5 music CDs and 10 movie DVDs 
A) 10 music CDs and 5 movie DVDs 
B) 10 music CDs and 10 movie DVDs 
C) 5 music CDs and 5 movie DVDs 
D) 15 music CDs and 5 movie DVDs 
E) 5 music CDs and 10 movie DVDs

Question 3

The additional satisfaction gained from consuming one more unit of a product or service is

Accepted Answer

A) marginal utility. 
B) total utility. 
C) the same for every person. 
D) average utility. 
E) not measurable. 
A) marginal utility. 
B) total utility. 
C) the same for every person. 
D) average utility. 
E) not measurable.

Question 4

Exhibit 5-6  
-Exhibit 5-6 shows Andy's marginal benefit from latte consumption.If the price of one cup of latte is $2.50,then which of the following is true?

Accepted Answer

A) Andy will consume 1 cup of latte. 
B) Andy will consume 2 cups of latte. 
C) Andy will consume 3 cups of latte. 
D) Andy will consume 4 cups of latte. 
E) Andy will not consume any latte. 
A) Andy will consume 1 cup of latte. 
B) Andy will consume 2 cups of latte. 
C) Andy will consume 3 cups of latte. 
D) Andy will consume 4 cups of latte. 
E) Andy will not consume any latte.

Question 5

The term utility maximization means that

Accepted Answer

A) individuals consume to gain as much utility as possible,given the limits of the budget constraint. 
B) total utility does not change with a change in income. 
C) once utility is at its maximum,leftover income can be saved. 
D) individuals consume the maximum amount of a good that the budget constraint makes possible. 
E) individuals maximize their usefulness to society. 
A) individuals consume to gain as much utility as possible,given the limits of the budget constraint. 
B) total utility does not change with a change in income. 
C) once utility is at its maximum,leftover income can be saved. 
D) individuals consume the maximum amount of a good that the budget constraint makes possible. 
E) individuals maximize their usefulness to society.

Question 6

The income effect of an increase in the price of computers may include all of the following except a decrease in

Accepted Answer

A) the number of computers the consumer will purchase. 
B) other goods that the consumer will purchase. 
C) the consumer's actual,or nominal,budget. 
D) the consumer's real income. 
E) most goods that the consumer will purchase. 
A) the number of computers the consumer will purchase. 
B) other goods that the consumer will purchase. 
C) the consumer's actual,or nominal,budget. 
D) the consumer's real income. 
E) most goods that the consumer will purchase.

Question 7

Marginal utility is used to compare behavior among different consumers.

Accepted Answer

A) True 
 B)False

Question 8

Only demand curves from individuals with similar preferences can be summed to obtain a market demand curve.

Accepted Answer

A) True 
 B)False

Question 9

Consumer surplus is the difference between

Accepted Answer

A) the supply curve and the equilibrium price line in a supply/demand diagram. 
B) the minimum quantity consumers are willing to buy and the amount they actually buy. 
C) total utility and marginal utility for every unit of a good consumed. 
D) the total marginal benefit for every unit of a good consumed and total expenditures on the good. 
E) total revenue and total cost in a market for a good. 
A) the supply curve and the equilibrium price line in a supply/demand diagram. 
B) the minimum quantity consumers are willing to buy and the amount they actually buy. 
C) total utility and marginal utility for every unit of a good consumed. 
D) the total marginal benefit for every unit of a good consumed and total expenditures on the good. 
E) total revenue and total cost in a market for a good.

Question 10

Consumer surplus measures the difference between what consumers are willing to pay and what they actually pay for a given quantity of a good.

Accepted Answer

A) True 
 B)False

Question 11

An individual buys more of a good at lower prices than at higher prices because

Accepted Answer

A) at lower prices,total utility is greater than price. 
B) at lower prices,marginal benefit is greater than price over a greater quantity of the good than at higher prices. 
C) at lower prices,marginal utility is greater than price over a greater quantity of the good than at higher prices. 
D) marginal benefit increases. 
E) marginal benefit falls more slowly than price. 
A) at lower prices,total utility is greater than price. 
B) at lower prices,marginal benefit is greater than price over a greater quantity of the good than at higher prices. 
C) at lower prices,marginal utility is greater than price over a greater quantity of the good than at higher prices. 
D) marginal benefit increases. 
E) marginal benefit falls more slowly than price.

Question 12

Which of the following is false about the assumptions that economists make about utility?

Accepted Answer

A) Utility can be used to rank alternative combinations of consumption. 
B) Consumers can be worse off with too much of a good. 
C) Utility levels cannot be used to compare consumer preferences of different people. 
D) Marginal utility increases at a decreasing rate. 
E) The units used to measure utility do not matter. 
A) Utility can be used to rank alternative combinations of consumption. 
B) Consumers can be worse off with too much of a good. 
C) Utility levels cannot be used to compare consumer preferences of different people. 
D) Marginal utility increases at a decreasing rate. 
E) The units used to measure utility do not matter.

Question 13

The budget constraint

Accepted Answer

A) is the combined price of all goods and services an individual can consume. 
B) is the total amount of money an individual can spend on goods and services per period of time. 
C) is the maximum amount of money an individual can gain without earning it. 
D) applies only to society as a whole,not to individuals. 
E) is the total amount of utility an individual can receive from goods and services per period of time. 
A) is the combined price of all goods and services an individual can consume. 
B) is the total amount of money an individual can spend on goods and services per period of time. 
C) is the maximum amount of money an individual can gain without earning it. 
D) applies only to society as a whole,not to individuals. 
E) is the total amount of utility an individual can receive from goods and services per period of time.

Question 14

The reason individual demand slopes downward is that

Accepted Answer

A) market demand slopes downward. 
B) a fall in price causes marginal utility to fall. 
C) when price falls,an individual consumes more in order to use all of his or her income. 
D) when price falls,total utility can be increased when more of the good is purchased. 
E) when price rises,total utility can be increased when more of the good is purchased. 
A) market demand slopes downward. 
B) a fall in price causes marginal utility to fall. 
C) when price falls,an individual consumes more in order to use all of his or her income. 
D) when price falls,total utility can be increased when more of the good is purchased. 
E) when price rises,total utility can be increased when more of the good is purchased.

Question 15

The marginal utility of consuming a good increases at a decreasing rate.

Accepted Answer

A) True 
 B)False

Question 16

Like marginal utility,marginal benefit

Accepted Answer

A) measures satisfaction for a consumer. 
B) is used to analyze government behavior. 
C) decreases with increased consumption of a good. 
D) is a purely theoretical,immeasurable quantity. 
E) is a dollar measure. 
A) measures satisfaction for a consumer. 
B) is used to analyze government behavior. 
C) decreases with increased consumption of a good. 
D) is a purely theoretical,immeasurable quantity. 
E) is a dollar measure.

Question 17

Consider the table below showing Anne's willingness to pay for magazines.   (A)Suppose the price of magazines is $2.00.Calculate the  difference between the willingness to pay and the total payment for one to six magazines.
(B)How many magazines will maximize the willingness to pay minus the payment?
(C)How does the answer to (B)compare to the approach that compares price and marginal benefit?

Accepted Answer

(A) @#IMG-DLM& 
(B)The difference between the will

Question 18

Marginal utility can be positive,zero,or negative.

Accepted Answer

A) True 
 B)False

Question 19

The diamond-water paradox

Accepted Answer

A) is the fact that people get more utility from water than diamonds,but the price of diamonds is much higher than that of water. 
B) occurs whenever someone is willing to pay more for something that is a necessity compared to what he or she is willing to pay for a luxury. 
C) illustrates the ability economists have to measure utility. 
D) occurs when an individual prefers water to diamonds. 
E) occurs when an individual prefers diamonds to water. 
A) is the fact that people get more utility from water than diamonds,but the price of diamonds is much higher than that of water. 
B) occurs whenever someone is willing to pay more for something that is a necessity compared to what he or she is willing to pay for a luxury. 
C) illustrates the ability economists have to measure utility. 
D) occurs when an individual prefers water to diamonds. 
E) occurs when an individual prefers diamonds to water.

Question 20

Diamonds are expensive because they have high marginal benefits.

Accepted Answer

A) True 
 B)False

Exam 5: The Demand Curve and the Behavior of Consumers

Which of the following represents the substitution effect of an increase in the price of apples?

Suppose music CDs and movie DVDs give the same utility to Jane,and she has $200 to spend on music CDs and movie DVDs.The price of a movie DVD is $15,and the price of a music CD is $10.Which of the following is the most affordable bundle for maximizing her utility?

The additional satisfaction gained from consuming one more unit of a product or service is

Exhibit 5-6 -Exhibit 5-6 shows Andy's marginal benefit from latte consumption.If the price of one cup of latte is $2.50,then which of the following is true?

The term utility maximization means that

The income effect of an increase in the price of computers may include all of the following except a decrease in

Marginal utility is used to compare behavior among different consumers.

Only demand curves from individuals with similar preferences can be summed to obtain a market demand curve.

Consumer surplus is the difference between

Consumer surplus measures the difference between what consumers are willing to pay and what they actually pay for a given quantity of a good.

An individual buys more of a good at lower prices than at higher prices because

Which of the following is false about the assumptions that economists make about utility?

The budget constraint

The reason individual demand slopes downward is that

The marginal utility of consuming a good increases at a decreasing rate.

Like marginal utility,marginal benefit

Marginal utility can be positive,zero,or negative.

The diamond-water paradox

Diamonds are expensive because they have high marginal benefits.

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

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