Deck 6: Consumer Behaviour

Question 1

Marginal utility theory is about

A)the consumer behaviour that underlies the theory of demand.
B)proving that demand curves are always downward sloping.
C)the total satisfaction resulting from the consumption of some good by the consumer.
D)how producers allocate their scarce resources.
E)calculating consumer surplus.

Answer 1

the consumer behaviour that underlies the theory of demand.

Question 2

Economists use the term ʺmarginal utilityʺ to describe the

A)change in total satisfaction caused by consumption of an additional unit of a good.
B)average utility of each unit of a good consumed.
C)inverse of the measure of total utility.
D)total satisfaction received from consumption of a good.
E)price paid for every unit consumed.

Answer 2

change in total satisfaction caused by consumption of an additional unit of a good.

Question 3

The ʺlawʺ of diminishing marginal utility implies that the

A)first unit of a good consumed will contribute most to the consumerʹs satisfaction.
B)last unit of a good consumed will contribute most to the consumerʹs satisfaction.
C)total utility is negative.
D)total utility is constant as more units are consumed.
E)marginal utility of a good diminishes over time.

Answer 3

first unit of a good consumed will contribute most to the consumerʹs satisfaction.

Question 4

If consumption of an extra unit of some good generates a marginal utility of zero,then consumption of that additional unit would mean that total utility would

A)also be zero.
B)not change.
C)be increasing.
D)be decreasing.
E)be negative.

Question 5

If consumption of an extra unit of a product delivers a positive marginal utility,then consumption of that additional unit would mean

A)that total utility is also zero.
B)that total utility would not change.
C)that total utility would be increasing.
D)that total utility would be decreasing.
E)that the consumer would no longer receive any satisfaction from any consumption of this good.

Question 6

Economists usually assume that consumers

A)are motivated to maximize their profit.
B)are poor judges of what is best for them.
C)spend all of their current income.
D)usually save as much as possible of their income.
E)are motivated to maximize their utility.

Question 7

If total utility from the consumption of some product is decreasing as more units are consumed,then marginal utility must be

A)positive.
B)negative.
C)decreasing.
D)decreasing at an increasing rate.
E)increasing at a decreasing rate.

Question 8

The condition required for a consumer to be maximizing utility,for any pair of products,X and Y,is

A)PX(MUX)= PY(MUY).
B)MUX = MUY.
C)MUX/PX = MUY/PY.
D)MUX/PY = MUY/PX.
E)PX = PY.

Question 9

The idea that the utility a consumer derives from successive units of a good diminishes as total consumption of the good increases is known as

A)the paradox of value.
B)the utility theory of demand.
C)utility maximization.
D)diminishing marginal utility.
E)diminishing total utility.

Question 10

The table below shows the quantities of toffee bars and bags of cashews that a consumer could consume over a 1-week period. TABLE 6-1
Refer to Table 6-1.The maximum utility that a consumer can obtain from toffee bars and bags of cashews per week is

A)22.
B)54.
C)56.
D)64.
E)74.

Question 11

The table below shows the quantities of toffee bars and bags of cashews that a consumer could consume over a 1-week period. TABLE 6-1
Refer to Table 6-1.If this consumer purchases 3 toffee bars and 4 bags of cashews per week,his/her total utility will be

A)7.
B)23.
C)31.
D)54.
E)57.

Question 12

The table below shows the quantities of toffee bars and bags of cashews that a consumer could consume over a 1-week period. TABLE 6-1
Refer to Table 6-1.If the price of toffee bars is $1 each,bags of cashews are $2 each,and this consumer has $7 per week to spend on these two snacks,how many of each will he/she purchase to maximize utility?

A)0 toffee bars and 3 bags of cashews
B)1 toffee bars and 3 bags of cashews
C)2 toffee bars and 2 bags of cashews
D)3 toffee bars and 2 bags of cashews
E)7 toffee bars and 0 bags of cashews

Question 13

If a consumer is faced with a choice of products A,B,C,...,and has a given money income,the consumerʹs utility will be maximized when

A)MUA/PA = MUB/PB = MUC/PC = ...
B)PA = PB = PC = ...
C)MUA = MUB = MUC = ...
D)TUA = TUB = TUC = ...
E)MUA = PA; MUB = PB; MUC = PC; ...

Question 14

The table below shows the quantities of toffee bars and bags of cashews that a consumer could consume over a 1-week period. TABLE 6-1
Refer to Table 6-1.If the prices of both toffee bars and bags of cashews are $2 and this consumer has $14 per week to spend on these two snacks,what is the maximum total utility achievable?

A)10
B)15
C)33
D)45
E)57

Question 15

The table below shows the quantities of toffee bars and bags of cashews that a consumer could consume over a 1-week period. TABLE 6-1
Refer to Table 6-1.If the prices of toffee bars and bags of cashews are both $1 and this consumer has $7 per week to spend on these two snacks,how many of each will he/she purchase to maximize utility?

A)2 toffee bars and 5 bags of cashews
B)3 toffee bars and 4 bags of cashews
C)4 toffee bars and 3 bags of cashews
D)5 toffee bars and 2 bags of cashews
E)6 toffee bars and 1 bag of cashews

Question 16

If total utility from the consumption of some product is increasing as more units are consumed,then marginal utility must be

A)decreasing at an increasing rate.
B)negative.
C)increasing.
D)increasing at an increasing rate.
E)positive.

Question 17

The table below shows the quantities of toffee bars and bags of cashews that a consumer could consume over a 1-week period. TABLE 6-1
Refer to Table 6-1.If the prices of toffee bars and bags of cashews are both $1 and this consumer has $11 per week to spend on snacks,how many of each will he/she purchase?

A)3 toffee bars and 8 bags of cashews
B)4 toffee bars and 7 bags of cashews
C)5 toffee bars and 5 bags of cashews
D)5 toffee bars and 6 bags of cashews
E)6 toffee bars and 5 bags of cashews

Question 18

A consumer maximizes his or her utility when expenditures are allocated such that

A)the total utility from each good is equal.
B)the total number of dollars spent on each good is equal.
C)the utility received from the last unit of each good is equal.
D)the utility received per dollar spent on the last unit of each good is equal.
E)the marginal utility is zero for each good consumed utility.

Question 19

A basic hypothesis of marginal utility theory is that the utility a consumer derives from successive units of a good diminishes as total consumption of the good increases.This hypothesis is known as

A)the paradox of value.
B)the utility theory of demand.
C)utility maximization.
D)the law of diminishing marginal utility.
E)the law of diminishing total utility.

Question 20

In economics,the term ʺutilityʺ is defined as the

A)system of basing the price of a good on its usefulness to society.
B)usefulness of a good.
C)total consumer satisfaction received from consumption of a good.
D)usefulness of a theory to explain price determination.
E)a service such as sewer and water or electricity.

Question 21

Laurie spends all of her money buying bread and cheese.The marginal utility she receives from the last loaf of bread is 60 and from the last block of cheese is 30.The price of bread is $3 and the price of cheese is $2.Laurie

A)is buying bread and cheese in utility-maximizing amounts.
B)should buy more bread and less cheese in order to maximize her utility.
C)should buy more cheese and less bread in order to maximize her utility.
D)is spending too much money on bread and cheese.
E)should buy more bread and more cheese in order to maximize her utility.

Question 22

Suppose the price of potatoes falls and we observe a decrease in an individualʹs purchases of potatoes.Which of the following can we infer?

A)The income effect is negative and outweighs the substitution effect.
B)The income effect is negative and reinforces the substitution effect.
C)The income effect just offsets the substitution effect.
D)The income effect is positive and exceeds the substitution effect.
E)The substitution effect outweighs the income effect.

Question 23

If the income effect of a price change is negative and larger in absolute terms than the substitution effect,then the demand curve will be

A)upward sloping.
B)downward sloping.
C)vertical.
D)horizontal.
E)of indeterminate slope.

Question 24

Suppose there are only two goods,A and B,and that consumer income is constant.If the price of good A falls and the consumption of good B rises,we can conclude that

A)A is a normal good.
B)B is a normal good.
C)A is an inferior good.
D)B is an inferior good.
E)both A and B are normal goods.

Question 25

The substitution effect is

A)the change in quantity demanded that occurs as a result of a change in absolute prices,with real income held constant.
B)the change in quantity demanded that occurs as a result of a change in relative prices with money income held constant.
C)the change in quantity demanded that occurs as a result of a change in relative prices with real income held constant.
D)the change in quantity demanded that occurs when one good is substituted for another.
E)the change in the relative prices of two or more goods.

Question 26

The market demand curve is derived from

A)the vertical summation of individual demand curves.
B)the average quantity demanded of all individuals in the economy.
C)a weighted average of the quantity demanded of all individuals in the economy at each price.
D)the horizontal summation of individual demand curves.
E)market data provided by Statistics Canada.

Question 27

If John consumes only two goods,A and B,and he is maximizing his utility subject to his budget constraint,

A)MUA/MUB is at a maximum.
B)MUA/MUB equals the ratio of the total utility of A to the total utility of B.
C)MUA/MUB equals 1.
D)MUA/MUB equals zero.
E)MUA/MUB equals the ratio of the price of A to the price of B.

Question 28

The substitution effect of a price change

A)will result in the consumer buying less of a good at a lower price.
B)will result in the consumer buying less of a good at a higher price.
C)outweighs the income effect for Giffen goods.
D)is equal to the income effect for normal goods.
E)is equal to the income effect for inferior goods.

Question 29

Bjorn is a student with a monthly budget of $500,which he allocates between transportation services and ʺall other goods.ʺ Suppose the price of transportation is $5 per unit,and the price of ʺall other goodsʺ is $20 per unit.The marginal utility he currently receives from his consumption of transportation services is 60.What is his marginal utility from the consumption of ʺall other goodsʺ if he is maximizing his utility?

A)5
B)20
C)25
D)200
E)240

Question 30

If all consumers in an economy have maximized their utility,and they face a given set of market prices,then each consumer will have identical

A)total utilities for each good.
B)marginal utilities for each good.
C)marginal utilities per unit of each good.
D)ratios of marginal utility to price for each good.
E)consumption of each good.

Question 31

A demand curve for a normal good is downward sloping due to

A)the income effect.
B)the substitution effect.
C)the combination of income and substitution effects.
D)neither the substitution effect nor the income effect.
E)the Giffen effect.

Question 32

Marginal utility analysis predicts a downward-sloping demand curve for good X because

A)as PX falls,the ratio MUX/PX becomes smaller,causing the consumer to purchase more of good X.
B)as PX rises,the consumer increases purchases of X such that MUX/PX is equal to MU/P for all other products.
C)utility-maximizing consumers equate marginal utility received for each product consumed.
D)all demand curves are downward sloping,regardless of the behaviour of consumers.
E)as PX falls,the consumer increases purchases of X until MUX/PX is equal to MU/P for all other products.

Question 33

Christine is allocating her household expenditure between cleaning services and gardening services in order to maximize the householdʹs total utility.For the quantities of cleaning and gardening services she has chosen,an increase in the price of cleaning service will,ceteris paribus,

A)increase the marginal utility of a unit of cleaning service.
B)reduce the marginal utility per dollar spent on cleaning service.
C)reduce the marginal utility of a unit of cleaning service.
D)increase the marginal utility per dollar spent on cleaning service.
E)have no effect on the marginal utility per dollar spent on cleaning service.

Question 34

Bjorn is a student with a monthly budget of $500,which he allocates between transportation services and ʺall other goods.ʺ Suppose the price of transportation is $5 per unit,and the price of ʺall other goodsʺ is $20 per unit.The marginal utility he currently receives from his consumption of transportation services is 60.How many units of ʺall other goodsʺ is he consuming if he is maximizing his utility?

A)25
B)60
C)200
D)240
E)There is not enough information to determine.

Question 35

The Smith family is allocating its monthly household expenditure between only two goods,food and clothing.Suppose that the price of food is $12 per unit,and the price of clothing is $16 per unit and that the marginal utility that the family is receiving from its consumption of clothing is currently 200.What is the familyʹs marginal utility from its consumption of food if it is maximizing its utility?

A)200
B)150
C)75
D)16
E)12

Question 36

Consider the income and substitution effects of price changes.For a product with an income elasticity greater than one,a price increase will cause the consumerʹs real income to

A)rise and the quantity purchased to fall.
B)fall and the quantity purchased to fall.
C)rise and the quantity purchased to rise.
D)fall and the quantity purchased to rise.
E)remain constant.

Question 37

Consider a consumer who divides his income between spending on good X and good Y.The opportunity cost of good X in terms of good Y is reflected by the

A)absolute price of good X.
B)absolute price of good Y.
C)ratio of the price of X to the price of Y.
D)ratio of the price of Y to the price of X.
E)price of good X relative to the prices of all other goods.

Question 38

The Smith family is allocating its monthly household expenditure between only two goods,food and clothing.Suppose that the price of food is $5 per unit,and the price of clothing is $10 per unit and that the marginal utility that the family is receiving from its consumption of food is currently 25.What is the familyʹs marginal utility from its consumption of clothing if it is maximizing its utility?

A)5
B)10
C)12.5
D)25
E)50

Question 39

John is allocating his household expenditure between groceries and housing in order to maximize total utility.For the quantities of groceries and housing he has chosen,an increase in the price of housing will,ceteris paribus,

A)increase the marginal utility of a unit of housing.
B)increase the marginal utility per dollar spent on housing.
C)reduce the marginal utility of a unit of housing.
D)reduce the marginal utility per dollar spent on housing.
E)have no effect on the marginal utility per dollar spent on housing.

Question 40

The demand curve for a good with an income elasticity of less than one

A)must be downward sloping.
B)must be upward sloping.
C)will be upward sloping only if the substitution effect outweighs the income effect.
D)will be upward sloping only if the income effect outweighs the substitution effect.
E)indicates a normal good.

Question 41

In which of the following situations will an individualʹs purchasing power be unaffected?

A)money income doubles and the prices of all goods and services are cut in half
B)money income remains constant and the prices of all goods and services double
C)money income is cut in half and the prices of all goods and services double
D)money income is cut in half and the prices of all goods and services remains constant
E)money income doubles and the prices of all goods and services double

Question 42

Consider the substitution and income effects of a 15% increase in the price of a good.Of the goods listed below,which is most likely to have the smallest income effect?

A)groceries
B)restaurant meals
C)gasoline
D)paperclips
E)dishwashers

Question 43

In which of the following situations will an individualʹs purchasing power be unaffected?

A)money income is cut in half and the prices of all goods and services fall by 50%
B)money income falls and the price of one good falls
C)money income doubles and the prices of all goods and services are cut in half
D)money income doubles and the prices of all goods and services remain constant
E)money income is cut in half and prices of all goods and services remain constant

Question 44

Consider the substitution and income effects of a 15% increase in the price of a good.Of the goods listed below,which is most likely to have the largest income effect?

A)salt
B)paperclips
C)socks
D)tennis balls
E)electricity

Question 45

Consider the pizza market,with a downward-sloping demand curve and an upward-sloping supply curve.Suppose 100 pizzas are purchased at the free -market equilibrium price.The consumer surplus on the 100th pizza is

A)positive.
B)negative.
C)non-negative.
D)unknown.
E)zero.

Question 46

Assume you are consuming two goods,X and Y.Suppose the absolute prices for X and Y remain unchanged,but your money income falls by 50%.What happens to your consumption of good X?

A)it increases
B)it stays the same
C)it increases or decreases,depending on whether it is normal or inferior
D)it decreases
E)it decreases by 50%

Question 47

An individualʹs consumer surplus from some product can be eliminated entirely by: 1.raising the price until very few units are bought.
2.charging a price for each unit that is equal to the individualʹs marginal value for each unit.
3.raising the price until zero units are purchased.

A)1 only
B)2 only
C)3 only
D)2 or 3
E)1 or 2,but not 3.

Question 48

Given a typical downward-sloping demand curve in a market that has reached its equilibrium,the consumer surplus

A)is measured by the area above the market price and under the demand curve.
B)is measured by the area below the market price and under the demand curve.
C)is measured by the area immediately above the demand curve.
D)is calculated as the product of market price and quantity consumed.
E)cannot be measured given the information.

Question 49

Assume an individual with a downward-sloping demand curve is paying a single price for each unit of some commodity.He will experience consumer surplus on

A)all units that were not bought at that particular price.
B)all of the units bought.
C)all units bought with the possible exception of the last unit.
D)the first unit only.
E)none of the units.

Question 50

The substitution effect of a price change leads consumers to their demand for goods whose prices have risen.The income effect leads consumers to buy less of all goods whose prices have risen.

A)reduce; normal
B)increase; inferior
C)increase; normal
D)reduce; Giffen
E)reduce; complement

Question 51

Assume a person reveals the following demand conditions.At a price of $10,quantity demanded is zero; and at a price of $1,quantity demanded is 10 units.

A)The consumer surplus will be zero at a price of $10.
B)The consumer surplus will be the area under the entire demand curve.
C)The consumer surplus is zero at a price of $1.
D)Demand decreases as the price decreases.
E)The lower the price the smaller the consumer surplus.

Question 52

Consumer surplus is

A)the sum of the marginal values to the consumer.
B)the total value that a consumer receives from the purchase of a particular good.
C)a measure of the gains that a consumer forgoes by buying this product rather than another.
D)the difference between what the consumer is willing to pay for all the units consumed and what he or she actually paid.
E)the consumption of a commodity above and beyond the amount required by the consumer.

Question 53

Given a particular market demand curve,consumer surplus is

A)less the lower the price and the smaller the output.
B)less the lower the price and the larger the output.
C)greater the higher the price and the smaller the output.
D)greater the lower the price and the smaller the output.
E)greater the lower the price and the larger the output.

Question 54

At a garage sale,Ken purchases a used bicycle for $8 when he was willing to pay $25.If the bicycle costs $75 new,Kenʹs consumer surplus is

A)$0.
B)$17.
C)$33.
D)$50.
E)$67.

Question 55

Suppose a consumer can purchase only two goods,beef and chicken.If the price of beef falls (with all other variables held constant),and the consumption of chicken increases,we can conclude that the increased consumption of chicken is due to

A)neither the income effect nor the substitution effect.
B)both the income effect and the substitution effect.
C)the income effect only.
D)the substitution effect only.
E)a change in the consumerʹs preference toward chicken.

Question 56

Consumer surplus is

A)the same as Karl Marxʹs notion of surplus value.
B)the same as total utility.
C)the sum of the extra value placed on each unit of a commodity above the market price paid for each.
D)the total value that consumers place on their purchases.
E)the marginal value that consumers place on their purchases.

Question 57

At a garage sale,Dominique purchases a sewing machine for $30 when she was willing to pay $55.If the sewing machine costs $200 new,Dominiqueʹs consumer surplus would be

A)$0.
B)$25.
C)$120.
D)$145.
E)$170.

Question 58

Assume you are consuming two goods,X and Y.X and Y are both normal goods but they are not close complements.The price of good X increases but the price of Y remains unchanged.However,you are given enough additional income to ensure that your utility remains unchanged.What happens to your consumption of good X?

A)it increases
B)it stays the same
C)it increases or decreases
D)it decreases
E)it increases over the long run

Question 59

In which of the following situations will an individualʹs purchasing power be unaffected?

A)all absolute prices fall by 15% and money income falls by 15%
B)all relative prices fall by 15% and money income falls by 15%
C)all relative prices rise by 15% and money income falls by 15%
D)all absolute prices remain constant and money income falls by 15%
E)all relative prices remain constant and money income rises by 15%

Question 60

Assume you are consuming two goods,X and Y.Suppose that the money prices for X and Y remain unchanged,but your income increases by 20%.What happens to your consumption of good X?

A)it increases
B)it stays the same
C)it increases or decreases,depending on whether it is normal or inferior
D)it decreases
E)it increases by 20%

Question 61

Suppose Arun consumes only 2 goods - books and CDs - and has a set of downward sloping indifference curves.As Arun moves from one point to another on a particular indifference curve,

A)the combination of books and CDs will vary,but the level of utility remains constant.
B)the combination of books and CDs that Arun prefers will remain constant,but the level of satisfaction will vary.
C)the combination of books and CDs and Arunʹs income level will remain constant.
D)Arunʹs level of satisfaction will vary as the combinations of books and CDs varies.
E)Arun is consuming the same combination of goods,but with varying levels of income.

Question 62

If money income is reduced by half,and the prices of all goods consumed by the household are reduced by half,the householdʹs budget line will

A)not change.
B)shift inward.
C)shift outward.
D)become steeper.
E)become flatter.

Question 63

Assume the quantity of good X is measured on the horizontal axis and the quantity of good Y on the vertical axis.Initial prices are PX = $5 and PY = $10.The consumerʹs income is $100.If PY increases to $20,then

A)the entire budget line shifts parallel toward the origin.
B)the budget line will rotate toward the origin,slope remaining constant.
C)the budget line will rotate toward the origin with the slope changing from 1/2 to 1/4 (in absolute values).
D)the entire budget line shifts parallel away from the origin.
E)the budget line will rotate away from the origin with the slope changing from 1/4 to 1/2 (in absolute values).

Question 64

The marginal rate of substitution

A)always has a positive algebraic value.
B)is constant as one moves along a particular indifference curve.
C)is the amount of one good the consumer is willing to give up in exchange for another so as to keep total satisfaction unchanged.
D)is the amount of one good the consumer is willing to give up in exchange for another so as to keep total expenditure unchanged.
E)is equal to the price ratio on the budget line.

Question 65

The diagram below shows a set of budget lines facing a household.
FIGURE 6-8
Refer to Figure 6-8.The movement of the budget line from ab to ef could be caused by

A)a decrease in real income.
B)an increase in money income.
C)an equal percentage increase in the price of both food and housing.
D)a decrease in the price of either food or housing.
E)an increase in the price of either food or housing.

Question 66

The diagram below shows a set of budget lines facing a household.
FIGURE 6-8
Refer to Figure 6-8.The movement of the budget line from ab to ac could be caused by

A)an increase in money income.
B)an increase in the price of food.
C)an increase in the price of housing.
D)a decrease in the price of food.
E)a decrease in the price of housing.

Question 67

The diagram below shows a set of budget lines facing a household.
FIGURE 6-8
Refer to Figure 6-8.The movement of the budget line from ab to db could be caused by

A)a decrease in money income.
B)an increase in the price of housing.
C)a decrease in the price of housing.
D)an increase in the price of food.
E)a decrease in the price of food.

Question 68

The marginal rate of substitution measures the tradeoff between the

A)prices of two goods along a budget line.
B)different values that two consumers place on a good.
C)amount of one good the consumer is willing to give up in exchange for another good along an indifference curve.
D)different indifference curves.
E)amount of one good the consumer is willing to purchase and its own price.

Question 69

Indifference theory is based on the assumption that

A)consumers are not able to rank consumption bundles in order of preference.
B)consumers can always say which of two consumption bundles they prefer without having to say by how much they prefer it.
C)the consumer has equated the marginal utilities of all products,and is therefore indifferent between consumption bundles.
D)the consumer is able to quantify the difference in total utility received from two different consumption bundles.
E)the consumer receives the same utility and is therefore indifferent between any two consumption bundles.

Question 70

A parallel shift in the consumerʹs budget line must indicate a change in

A)at least one money price.
B)money income.
C)real income.
D)tastes.
E)both prices.

Question 71

In indifference curve analysis,a point to the left of the consumerʹs budget line

A)indicates consumption spending beyond current income.
B)implies the household is paying above-market prices for the goods in question.
C)implies the household is paying below-market prices for the goods in question.
D)implies that the household is not spending all of its income on the goods in question.
E)shows a combination of goods that are beyond the income of the household.

Question 72

Given a particular consumerʹs indifference map,the further the indifference curve is from the origin

A)the lower the marginal rate of substitution.
B)the higher the marginal rate of substitution.
C)the lower the level of satisfaction.
D)the higher the level of satisfaction.
E)the more goods are included.

Question 73

The paradox in ʺthe paradox of valueʺ refers to the

A)confusion between supply curves and demand curves.
B)fact that goods with high total values command high prices.
C)fact that goods with low total values command low prices.
D)situation where a good that is necessary to sustain life is ʺmore valuableʺ than a decorative,luxury item.
E)situation where a good with a low total value can command a high price,while a good with a high total value can command a low price.

Question 74

An equal proportional increase in money income and all money prices will

A)shift the budget line to the left parallel to the original budget line.
B)shift the budget line to the right parallel to the original budget line.
C)leave the position of the budget line unchanged.
D)rotate the budget line inward from the vertical axis.
E)rotate the budget line inward from the horizontal axis.

Question 75

As a consumer moves along an indifference curve

A)the combination of goods will vary but the level of utility remains constant.
B)the combination of goods he prefers will remain constant,but the level of satisfaction will vary.
C)the combination of goods and the consumerʹs income level will remain constant.
D)his level of utility will vary as the combinations of goods varies.
E)the combination of goods will vary,but the level of money income remains constant.

Question 76

For your typical consumption levels of water and diamonds, the good with the higher marginal utility is________; the good with the higher total utility is ________; and the good with the greatest consumer surplus is________.

A)water; diamonds; water
B)water; water; water
C)water; water; diamonds
D)diamonds; water; water
E)diamonds; water; diamonds

Question 77

An indifference curve plotted for two different goods on the axes

A)shifts when real income changes.
B)shows all combinations of the two goods that give the same level of utility.
C)changes its slope as the relative prices of the two goods change.
D)shows the combinations of the two goods that will just use up a consumerʹs income.
E)shows the different combinations of two goods that the same income can purchase.

Question 78

The total value that Doug places on his consumption of computer games equals

A)the price multiplied by quantity demanded.
B)his marginal utility multiplied by quantity demanded.
C)price times marginal value.
D)the total amount he pays for all the games he purchases.
E)his total expenditure on computer games plus his consumer surplus.

Question 79

Suppose a consumer can purchase only two goods,pasta and cheese.Let the quantity of pasta be measured on the vertical axis and the quantity of cheese be measured on the horizontal axis.If the price of pasta falls,with no change in the price of cheese or in the consumerʹs money income,then the budget line for the consumer will rotate

A)toward the origin and become flatter.
B)toward the origin and become steeper.
C)away from the origin and become flatter.
D)away from the origin and become steeper.
E)outward parallel to the existing budget line.

Question 80

The diagram below shows a set of budget lines facing a household.
FIGURE 6-8
Refer to Figure 6-8.The movement of the budget line from ab to ef could be caused by

A)a decrease in money income.
B)a decrease in the price of either food or housing.
C)an equal percentage decrease in the price of both food and housing.
D)an equal percentage increase in the price of both food and housing.
E)an increase in the price of either food or housing.