Deck 4: Demand: the Benefit Side of the Market

Question 1

Refer to the table above.The total utility of consuming two music CDs is

A) less than 100.
B) more than 235.
C) 175.
D) 160.
E) 75.

Answer 1

175.

Question 2

The relationship between the cost of an activity and the amount of the activity consumers want is

A) positive.
B) negative.
C) direct.
D) upward-sloping.
E) non-existent.

Answer 2

negative.

Question 3

The total utility values for the first five hamburgers consumed are 4,10,15,18,and 19,respectively.The marginal utility of the third hamburger is

A) 15.
B) 10.
C) 5.
D) 3.
E) -3.

Answer 3

5.

Question 4

Consumers' ability to substitute among different goods explains

A) the law of supply.
B) the law of demand.
C) the concept of economic equilibrium.
D) the relationship between income and demand.
E) the law of increasing opportunity costs.

Question 5

Assume that Sandra has $30 in income,and that the price of a loaf of bread is $1.50 and the price of a jar of peanut butter is $3.If Sandra's income increases to $45,she can buy a maximum of _____ loaves of bread or a maximum of _____ jars of peanut butter.

A) 5;25
B) 10;40
C) 15;30
D) 20;20
E) 30;15

Question 6

An important non-monetary cost of university is

A) the cost of parking tickets.
B) the cost of textbooks and study guides.
C) the cost of tickets to university athletic events.
D) the time spent researching the quality of different universities.
E) the cost of a new notebook computer.

Question 7

After subsistence levels of food,shelter,and clothing are provided,

A) all other goods and services are "needs."
B) many goods and services are "needs."
C) all other goods and services are "wants."
D) a few goods and services are "needs."
E) all other goods and services are "luxuries."

Question 8

Moe is a rational consumer with a limited budget.He has rented the DVD Crouching Tiger,Hidden Dragon seventeen times.We can conclude that

A) Moe has little money but has too much time.
B) Moe has a high income.
C) the movie Crouching Tiger,Hidden Dragon must be free.
D) the movie Crouching Tiger,Hidden Dragon yields a relatively higher amount of marginal utility per dollar to Moe than other goods.
E) Moe is insane.

Question 9

Refer to the table above.The marginal utility of the third music CD is

A) 60.
B) 75.
C) 135.
D) 160.
E) 175.

Question 10

Assume that Tina has $30 in income.If the price of a loaf of bread is $1.50 and the price of a jar of peanut butter is $3,Tina can buy a maximum of _____ loaves of bread or a maximum of _____ jars of peanut butter.

A) 20;10
B) 15;15
C) 10;20
D) 10;5
E) 5;10

Question 11

Which of the following goods or services is a "need," not a "want"?

A) Electricity.
B) Gasoline.
C) Air conditioning.
D) A subsistence level of food.
E) Automobile.

Question 12

Which of the following statements is NOT an example of the law of demand?

A) "I think I'll wait to leave for work at 9:30 a.m.so that traffic is not so heavy."
B) "The local record store has all their CDs on sale;I'm going to buy some right now."
C) "With unemployment so high,I can't find a job.I think I'll enrol at the local college."
D) "The increase in apartment rents is causing me to consider renting out our spare bedroom."
E) "The Internet has increased the amount of information I collect before making a purchase."

Question 13

The time one spends researching the performance and fuel economy of new cars on the Internet is an example of a(n)

A) monetary cost.
B) direct cost.
C) information cost.
D) implied cost.
E) non-monetary cost.

Question 14

The extra utility gained from consuming an extra unit of a good measures

A) total utility.
B) average utility.
C) marginal utility.
D) total satisfaction.
E) diminishing utility.

Question 15

If Karen's marginal utility from her 13^th pair of shoes is 15,then the marginal utility from her 14^th pair is likely to be

A) more than 15.
B) exactly 15.
C) less than 15.
D) exactly 14.
E) less than 14.

Question 16

For two goods,A and B,the rational spending rule is expressed as

A) MU_A = MU_B.
B) P_A = P_B.
C) (MU_A/P_B)= (MU_B/P_A).
D) (MU_A/MU_B)= (P_B/P_A).
E) (MU_A/P_A)= (MU_B/P_B).

Question 17

Which of the following is NOT true of the law of demand?

A) It is based on the cost-benefit principle.
B) It predicts a negative relationship between costs and benefits.
C) It applies only to monetary costs.
D) It predicts that consumers will purchase a smaller quantity of a good as the price of that good increases.
E) It requires demand curves to be downward-sloping.

Question 18

The law of demand indicates that,as the cost of an activity

A) falls,less of the activity will occur.
B) falls,the level of the activity will increase at all possible costs.
C) rises,more of the activity will occur.
D) rises,the level of the activity will decrease at all possible costs.
E) falls,more of the activity will occur.

Question 19

The time spent researching the quality and reliability of DVD players

A) is not part of the total cost of a DVD player.
B) has risen due to the Internet,and hence the total cost of purchasing a DVD player has also risen.
C) has not been affected by the Internet.
D) has fallen due to the Internet,and hence the total cost of purchasing a DVD player has also fallen.
E) is only a cost if you do not purchase a DVD player.

Question 20

The tendency for consumers to purchase more of a good or service as its price falls is called the

A) law of supply.
B) law of increasing cost.
C) cost-benefit principle.
D) law of demand.
E) law of diminishing marginal utility.

Question 21

Laura's total utility from consuming eight,nine,and ten candies is 35,42,and 45,respectively.Her marginal utility from the ninth candy is

A) 42.
B) 9.
C) 7.
D) 4.67.
E) 77.

Question 22

In general,if the marginal utility of the last unit of a good is X,then the marginal utility of the next-to-last unit is likely to be

A) less than X.
B) equal to X.
C) equal to (X/(n-1)).
D) greater than X.
E) impossible to gauge without numbers.

Question 23

The rational spending rule is derived from the consumer's efforts to

A) maximize expenditure.
B) maximize utility.
C) minimize expenditure.
D) obtain the lowest possible price.
E) maximize the number of units purchased.

Question 24

Which of the following statements is FALSE?

A) Goods and services are valuable to consumers because they generate utility.
B) Four hamburgers are likely to generate more total utility than three hamburgers.
C) Utility cannot be quantified.
D) The fourth hamburger increases total utility by more than the third hamburger.
E) The marginal utility of a movie is likely to be different from the marginal utility of an automobile.

Question 25

Generally,the lower the marginal utility,the

A) greater the extra satisfaction of an additional unit.
B) lower the total utility.
C) more of the item has been consumed.
D) less of the item has been consumed.
E) more likely that total utility is constant.

Question 26

For most goods,as the number of units consumed increases,total utility ______,while marginal utility ______.

A) increases;decreases
B) decreases;increases
C) increases;increases
D) decreases;decreases
E) peaks;bottoms out

Question 27

Which of the following statements about total utility is FALSE?

A) Total utility cannot be measured.
B) The increase in total utility from the first unit consumed is greater than or equal to the increase from the second unit consumed.
C) Total utility increases as more units of a good are consumed.
D) The increase in total utility from the second unit consumed exceeds the increase from the first unit consumed.
E) At some point,the increase in total utility from consuming an extra unit begins to get smaller.

Question 28

Given that Chris' marginal utility from his first taco is 15 and his marginal utility from the second taco is 12,one can infer that

A) Chris' total utility of two tacos is 27.
B) Chris' marginal utility for the third taco will exceed 12.
C) Chris should not eat two tacos.
D) Chris' average utility for two tacos is 24.
E) Chris should eat two tacos.

Question 29

The total utility to a person from owning nine cars is likely to be ______ the total utility from owning ten cars.

A) greater than
B) greater than or equal to
C) less than
D) less than or equal to
E) equal to

Question 30

If the marginal utility of the third cup of coffee is 23 and the marginal utility of the fourth cup is 15,then

A) it is optimal for the consumer to have three cups of coffee.
B) the price of a cup of coffee must be relatively low.
C) it is optimal for the consumer to have four cups of coffee.
D) the law of diminishing marginal utility is evident.
E) the price of a cup of coffee must be relatively high.

Question 31

Marginal utility is defined as the

A) extra utility gained by consuming an extra unit of a good.
B) total utility from all units consumed of a good.
C) average utility gained by consuming an average amount of the good.
D) total utility gained by consuming an extra unit of a good.
E) change in quantity divided by the change in utility.

Question 32

Brian gets 18,23,and 25 units worth of total utility from consuming 10,11,and 12 raw oysters,respectively,and the price per oyster is 25 cents.Thus,one can infer that Brian

A) is maximizing utility.
B) is not maximizing utility.
C) is experiencing diminishing marginal utility.
D) should consume more oysters.
E) has consumed too many oysters.

Question 33

Refer to the above diagram.Between points A and B,marginal utility is __________,so total utility is __________.

A) increasing;falling
B) positive;increasing
C) positive;falling
D) increasing;at its maximum
E) negative;decreasing

Question 34

Purchasing goods such that the ratio of marginal utility to price is equal across all goods results in the

A) greatest total utility.
B) lowest expenditure on goods.
C) greatest average utility.
D) greatest expenditure on goods.
E) expenditure for all goods being the same.

Question 35

The marginal utility to a person from acquiring his tenth car is likely to be

A) relatively large.
B) the same as the marginal utility of his ninth car.
C) less than the marginal utility of his ninth car.
D) greater than the marginal utility of his ninth car.
E) relatively small.

Question 36

Refer to the above diagram.Between points C and D,marginal utility is __________,so total utility is __________.

A) decreasing;falling
B) positive;increasing
C) positive;falling
D) decreasing;at its maximum
E) indeterminate;indeterminate

Question 37

If a person is consuming two goods,the rational spending rule requires that

A) total expenditure on the two goods be equal.
B) total utility from the two goods be equal.
C) average utility from the two goods be equal.
D) the extra utility from the last dollar spent on one good equals the extra utility from the first dollar spent on the other good.
E) the ratio of marginal utility to price be equal for the two goods.

Question 38

Goods and services are valuable to consumers

A) because consumers need them.
B) only if they were purchased on sale.
C) if they are very expensive.
D) only if they are brand-name items.
E) because they produce utility for the consumer.

Question 39

Refer to the table above.The marginal utility of the fourth music CD is

A) 75.
B) 60.
C) 295.
D) 15.
E) 250.

Question 40

Refer to the table above.Which of the following statements is NOT consistent with the data for music CDs?

A) Total utility increases with each additional CD.
B) Marginal utility decreases with each additional CD.
C) The first CD provides the largest increase in utility.
D) The law of diminishing marginal utility is evident for CDs.
E) The marginal utility of the fifth CD is greater than 15.

Question 41

Refer to the table above.If the price of one frozen dinner is $2 and the price of one dozen jelly donuts is $1,which of the following would Kathy,a utility-maximizing consumer,buy if she has $6 to spend?

A) Three frozen dinners.
B) Two frozen dinners and two dozen jelly donuts.
C) One frozen dinner and four dozen jelly donuts.
D) Six dozen jelly donuts.
E) Four frozen dinners.

Question 42

Refer to the table above.If the price of a dozen jelly donuts is $2 and the price of a frozen dinner is also $2,which of the following would Kathy,a utility-maximizing consumer,buy,if she has $6 to spend?

A) Three frozen dinners.
B) One frozen dinner and four dozen jelly donuts.
C) Two frozen dinners and two dozen jelly donuts.
D) Six dozen jelly donuts.
E) Four frozen dinners.

Question 43

Assume that Vera has $30 in income and that the price of a loaf of bread is $1.50 and the price of a jar of peanut butter is $3.If Vera's income increases from $30 to $45,the rational spending rule would predict that Vera would buy

A) more bread and less peanut butter.
B) more bread and more peanut butter.
C) less bread and more peanut butter.
D) less bread and less peanut butter.
E) more bread and the same amount of peanut butter.

Question 44

Assume that the marginal utility of the third candy bar is 15,the marginal utility of the first tube of toothpaste is 12,the price of a candy bar is $1.50 per bar and the price of toothpaste is $2.00 per tube.If Tom buys three candy bars and one tube of toothpaste,is he applying the rational spending rule correctly?

A) Yes,this is an optimal combination of candy and toothpaste.
B) No,he should spend less on candy and more on toothpaste.
C) No,he should spend more on candy and less on toothpaste.
D) No,he should spend more on both candy and toothpaste.
E) No,he should spend less on both candy and toothpaste.

Question 45

Jack is maximizing utility by consuming soft drinks at $2 each and four pieces of pizza.The last soft drink gave him 100 units of utility and the last piece of pizza gave him 50 units of utility.The price of a piece of pizza is

A) $3.00.
B) $1.50.
C) $1.00.
D) $0.50.
E) $2.00.

Question 46

If the ratio of the marginal utility of bread to the marginal utility of butter is 2,Brad can increase his welfare by consuming

A) more bread.
B) more bread and butter.
C) more butter only.
D) less bread.
E) more bread only if the price of bread is less than twice the price of butter.

Question 47

Refer to the table above.If the price of Good A is $5 and the price of Good B is $4,then the rational spending rule predicts that _____ units of Good A and ______ units of Good B will be purchased.

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

Question 48

Refer to the table above.When the price of Good B decreases from $2 to $1,the extra utility from spending an extra dollar on Good B associated with 1 unit of consumption

A) falls from 33 to 16.5.
B) rises from 20 to 40.
C) rises from 33 to 40.
D) falls from 20 to 13.3.
E) remains constant.

Question 49

Refer to the table above.If the price of Good A is $1 and the price of Good B is $3,then the rational spending rule predicts that _____ units of Good A and ______ units of Good B will be purchased.

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

Question 50

Refer to the table above.If the price of Good B is $2 and the consumer purchases 4 units,then the extra utility from spending an extra dollar on Good B is

A) 14.
B) 4.
C) 7.
D) 21.
E) 6.

Question 51

If the ratios of prices and the ratios of marginal utilities are not equal,then Mary,who has extra money to spend,can increase her welfare by

A) not spending at all.
B) changing the prices of the goods.
C) waiting for the prices to fall before spending on any goods.
D) increasing the consumption of all goods.
E) increasing the consumption of goods that yield relatively higher amounts of marginal utility per dollar.

Question 52

Refer to the table above.If the price of Good A is $2 and the price of Good B is $6,then the rational spending rule predicts that _____ units of Good A and ______ units of Good B will be purchased.

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

Question 53

Assume that the consumer is correctly applying the rational spending rule for goods X and Z.The proper sequence of events is

A) the price of X falls,then purchases of X increase,then MU_x/P_x falls.
B) purchases of X increases,then the price of X falls,then MU_x/P_x falls.
C) MU_x/P_x falls,then the price of X falls,then purchases of X increase.
D) the price of X falls,then MU_x/P_x increases,then purchases of X increase.
E) purchase of X increase,then MU_x/P_x falls,then the price of X falls.

Question 54

If the ratios of prices and the ratios of marginal utilities are not equal,then Mary,with a tight and limited budget for food,can increase her welfare by

A) not spending on food at all.
B) changing the price of food.
C) waiting for the prices to fall before spending on any food.
D) reducing the consumption of foods that yield relatively low amounts of marginal utility per dollar.
E) increasing consumption of all food.

Question 55

Jake applies the rational spending rule and purchases five units of good M and three units of good N.Suppose that the price of N increases.One can predict that Jake will

A) cease purchasing N.
B) reduce purchases of N and increase purchases of M.
C) continue to make the same purchases.
D) reduce purchases of M.
E) increase purchases of N.

Question 56

Assume that the consumer is correctly applying the rational spending rule for normal goods X and Z.If the consumer's income increases,purchases of both X and Z rise because

A) the marginal utility of X decreases.
B) the price of Z falls.
C) the marginal utility of Z decreases.
D) combinations of X and Z that could not be considered before are now available.
E) the price of X increases.

Question 57

Assume that consumers in both Alberta and Quebec have identical incomes and preferences,but the price of ice cream is higher in Quebec.The rational spending rule would predict that consumers in

A) Alberta will eat more ice cream.
B) Quebec will eat more ice cream.
C) both Alberta and Quebec will eat less ice cream.
D) both Alberta and Quebec will eat more ice cream.
E) Alberta will eat less ice cream.

Question 58

Refer to the table above.When the price of Good A increases from $5 to $6,the extra utility from spending an extra dollar on Good A associated with 2 units of consumption

A) falls from 27 to 15.
B) rises from 5.4 to 6.8.
C) rises from 6.8 to 9.
D) falls from 5.4 to 4.5.
E) remains constant.

Question 59

Assume that the ratio of the marginal utility of bread to the marginal utility of butter is 2,and that the price of bread is equal to the price of butter.Brad can increase his welfare by consuming

A) more bread only.
B) more bread and more butter.
C) more butter only.
D) less bread.
E) more bread and less butter.

Question 60

Refer to the table above.If the price of Good A is $3 and the consumer purchases 3 units,then the extra utility from spending an extra dollar on Good A is

A) 15.
B) 5.
C) 45.
D) 3.
E) 9.

Question 61

Which of the following is NOT true of total expenditure?

A) It is calculated as the per-unit price multiplied by the number of units consumed.
B) It is identical to total revenue.
C) It measures the entire amount consumers are spending on a good or service.
D) It is a good measure of social welfare.
E) It may increase or decrease as price rises.

Question 62

When the price of a good falls,the ratio of the marginal utility of that good divided by its price _______ and,as a result,consumers purchase _______of that good.

A) rises;more
B) falls;more
C) rises;less
D) falls;less
E) does not change;the same quantity

Question 63

The market demand curve is

A) the vertical summation of all the demand curves of individuals.
B) positively sloped for some goods.
C) the horizontal summation of all the demand curves of individuals.
D) found by adding up all the different prices consumers would pay for a given quantity.
E) unaffected by changes in consumers' incomes.

Question 64

In the late 1970s,Canadians bought smaller cars that used less gasoline.We can conclude that consumers were responding to the fact that

A) the nominal price of gasoline had risen.
B) the nominal price of gasoline had fallen.
C) the nominal price of gasoline was unchanged.
D) the average price of gasoline had risen.
E) the nominal price of gasoline had risen much more rapidly than the average rate of increase for other nominal prices.

Question 65

The _________ is the change in the quantity demanded of a good that occurs because a change in the price of the good changes the real income of the purchaser.

A) income effect
B) substitution effect
C) price elasticity of demand
D) income elasticity of demand
E) cross-price elasticity of demand

Question 66

Refer to the table above.Market demand for coffee at a price of $5 per kilogram is

A) 11 kilograms.
B) 14 kilograms.
C) 19 kilograms.
D) 26 kilograms.
E) 35 kilograms.

Question 67

A consumer purchases quantities of good A and good B in accordance with the rational spending rule.An increase in the price of good A causes the consumer to

A) buy more A to restore the rational spending rule.
B) buy less B to restore the rational spending rule.
C) do nothing;he is unaffected by the price change.
D) buy less A to restore the rational spending rule.
E) buy more of both A and B to restore the rational spending rule.

Question 68

When the price of a good rises,the ratio of the marginal utility of that good divided by its price _______ and,as a result,consumers purchase _______of that good.

A) rises;more
B) falls;more
C) rises;less
D) falls;less
E) does not change;the same quantity

Question 69

Refer to the table above.The total revenue of coffee producers when the price is $3 per kilogram is

A) $77.
B) $84.
C) $95.
D) $104.
E) $105.

Question 70

If the demand curve for espresso is given by the equation P = 20 - 5Q,what is total expenditure when P = $5?

A) $15.
B) $25.
C) $30.
D) $35.
E) $50.

Question 71

Refer to the table above.At a price of $7 per kilogram,

A) Mark exits the coffee market.
B) a shortage of coffee will develop.
C) Joe's share of market demand declines.
D) Bob enters the coffee market.
E) coffee is "too expensive."

Question 72

Refer to the table above.Total expenditure on coffee when the price is $4 per kilogram is

A) $77.
B) $84.
C) $95.
D) $104.
E) $105.

Question 73

The _________ is the change in the quantity demanded of a good whose relative price has changed while a consumer's real income is held constant.

A) income effect
B) substitution effect
C) price elasticity of demand
D) income elasticity of demand
E) real price

Question 74

Refer to the table above.Market demand for coffee at a price of $6 per kilogram is

A) 11 kilograms.
B) 14 kilograms.
C) 19 kilograms.
D) 26 kilograms.
E) 35 kilograms.

Question 75

On the basis of the above table,it appears that __________ has the highest demand for hamburger and ________ has the lowest.

A) Chris;Mallory
B) Chris;Laura
C) Laura;Mallory
D) Mallory;Chris
E) Laura;Chris

Question 76

In the 1990s,Canadians bought larger vehicles,such as minivans and SUVs,which used more gasoline than smaller cars.We can conclude that consumers were responding to the fact that the

A) nominal price of gasoline had risen.
B) nominal price of gasoline had fallen.
C) nominal price of gasoline was unchanged.
D) average price of gasoline had risen.
E) nominal price of gasoline had risen much less rapidly than the average rate of increase for other goods.

Question 77

Refer to the table above.If the price of coffee increases from $5 per kilogram to $6 per kilogram,

A) producers will sell more.
B) total expenditure on coffee rises.
C) total revenue of coffee producers falls.
D) consumers purchase more coffee.
E) total expenditure on coffee does not change.

Question 78

A change in the price of a good has two effects on quantity demanded;these are the

A) income effect and the utility effect.
B) substitution effect and the utility effect.
C) indifference effect and the substitution effect.
D) income effect and the substitution effect.
E) indifference effect and the income effect.

Question 79

The per-unit price of a good multiplied by the quantity of units sold measures

A) total utility.
B) total costs.
C) total expenditure.
D) average revenue.
E) marginal expenditure.

Question 80

John,Don,and Mary demand 5,7,and 3 cans of cat food,respectively,when the price is $1.50.If they are the only consumers,the market quantity demanded at a price of $1.50 is

A) 15 cans.
B) 10 cans.
C) 7 cans.
D) 5 cans.
E) 3 cans.