Deck 6: Consumer Choice and Behavioural Economics

Question 1

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

A)Petra's utility from her second apple was less than her satisfaction from her first orange.
B)Hudson enjoyed his second slice of pizza more than his first.
C)Sabine's utility from her first granola bar is greater than Rachel's utility from her second granola bar.
D)Wesley enjoyed his second bottle of iced tea less than his first bottle,other things constant.

Answer 1

D

Question 2

Utility is

A)easily measured in units called utils.
B)subjective and difficult to measure.
C)the consumption of a quasi-public good like electricity or natural gas.
D)the production of a quasi-public good like electricity or natural gas.

Answer 2

B

Question 3

Suppose your marginal utility from consuming the 3rd slice of cake is zero;then your total utility from consuming cake is

A)maximised.
B)decreasing.
C)negative.
D)increasing.

Answer 3

A

Question 4

If a consumer receives 20 units of utility from consuming two chocolate bars,and 25 units of utility from consuming three chocolate bars,the marginal utility of the second chocolate bar is

A)25 utility units.
B)20 utility units.
C)5 utility units.
D)unknown as more information is needed to determine the answer.

Question 5

If total utility increases at a decreasing rate as a consumer consumes more coffee,then marginal utility must

A)remain constant.
B)increase also.
C)decrease.
D)be negative.

Question 6

If,when you consume another piece of chocolate,your marginal utility is zero,then

A)you want more chocolate.
B)you have maximised your total utility from consuming chocolate.
C)you have not yet reached the point of diminishing marginal utility.
D)you should consume less chocolate.

Question 7

If a consumer receives 22 units of marginal utility from consuming the first can of lemonade,20 units from consuming the second,and 15 from the third,the total utility of consuming the three units is

A)57 utility units.
B)35 utility units.
C)15 utility units.
D)unknown as more information is needed to determine the answer.

Question 8

As a consumer consumes more and more of a product in a particular time period,eventually marginal utility

A)rises.
B)is constant.
C)declines.
D)fluctuates.

Question 9

Marginal utility can be

A)negative.
B)zero.
C)positive.
D)positive,negative or zero.

Question 10

Total utility

A)cannot decrease as a person consumes more and more of a good.
B)has a constant rate of increase as a person consumes more and more of a good.
C)is equal to the sum of the marginal utilities of all units consumed.
D)is negative when marginal utility is declining.

Question 11

Marginal utility is the

A)total satisfaction received from consuming a given number of units of a product.
B)average satisfaction received from consuming a product.
C)extra satisfaction received from consuming one more unit of a product.
D)satisfaction achieved when a consumer has had enough of a product.

Question 12

Consumers have to make trade-offs in deciding what to consume because

A)not all goods give them the same amount of satisfaction.
B)the prices of goods vary.
C)they are limited by a budget constraint.
D)there are not enough of all goods produced.

Question 13

Table 6-1

Keegan has $30 to spend on Pita Wraps and Bubble Tea.The price of a Pita Wrap is $6 and the price of a glass of Bubble Tea is $3.Table 6-1 shows his total utility from different quantities of the two items.

-Refer to Table 6-1.What is Keegan's optimal consumption bundle?

A)3 pita wraps and 3 bubble teas
B)3 pita wraps and 4 bubble teas
C)4 pita wraps and 2 bubble teas
D)5 pita wraps and 0 bubble teas

Question 14

If your total satisfaction increases when you consume another unit,your marginal utility must be

A)increasing.
B)decreasing.
C)negative.
D)positive.

Question 15

The law of diminishing marginal utility states that

A)eventually total utility falls as more of a good is consumed,other things constant.
B)the extra satisfaction from consuming a good decreases as more of a good is consumed,other things constant.
C)the extra satisfaction from consuming a good increases slowly as more of a good is consumed,other things constant.
D)when the extra satisfaction from consuming a good becomes negative,total utility starts falling,other things constant.

Question 16

An item has utility for a consumer if it

A)is scarce.
B)has a high price.
C)is something everyone else wants.
D)generates enjoyment or satisfaction.

Question 17

If a consumer receives 20 units of utility from consuming two chocolate bars,and 25 units of utility from consuming three chocolate bars,the marginal utility of the third chocolate bar is

A)25 utility units.
B)20 utility units.
C)5 utility units.
D)unknown as more information is needed to determine the answer.

Question 18

If a consumer always buys goods rationally,then

A)the total utilities of the different goods consumed will be equal.
B)the average utilities of the different goods consumed will be equal.
C)the marginal utilities per dollar spent on all goods will be equal.
D)the marginal utilities of the different goods consumed will be equal.

Question 19

Consumers maximise total utility within their budget constraint by

A)buying the cheapest goods they can find.
B)buying whatever they like the best.
C)buying the goods with the largest marginal utility per dollar spent.
D)spending the same dollar amount for each good.

Question 20

If,as a person consumes more and more of a good,each additional unit adds less satisfaction than the previous unit consumed,we are seeing the workings of

A)the law of demand.
B)the law of supply.
C)the law of increasing marginal opportunity cost.
D)the law of diminishing marginal utility.

Question 21

Carolyn spends her income on popular magazines and music CDs.If the price of a CD is four times the price of a magazine and if Carolyn is maximising her utility,she buys

A)both goods until the marginal utility of the last CD purchased is four times the marginal utility of the last magazine purchased.
B)both goods until the marginal utility of the last magazine purchased is four times the marginal utility of the last CD purchased.
C)four times as many magazines as CDs.
D)four times as many CDs as magazines.

Question 22

Consider a downward-sloping demand curve.When the price of an inferior good increases,the income and substitution effects

A)work in the same direction to increase quantity demanded.
B)work in the same direction to decrease quantity demanded.
C)work in opposite directions and quantity demanded increases.
D)work in opposite directions and quantity demanded decreases.

Question 23

The income effect of an increase in the price of salmon

A)is the change in the demand for salmon when income increases.
B)refers to the relative price effect - salmon is more expensive compared to other types of fish - which causes the consumer to buy less salmon.
C)refers to the effect on a consumer's purchasing power,which causes the consumer to buy less salmon,holding all other factors constant.
D)is the change in the demand for other types of fish,say trout,that results from a decrease in purchasing power.

Question 24

If Ewan is consuming his utility maximising bundle and the price of one good falls,what happens to the marginal utility per dollar spent on this good (MU/P),and what should Ewan do?

A)MU/P has increased,and Ewan should buy more of this good.
B)MU/P has increased,and Ewan should buy less of this good.
C)MU/P has decreased,and Ewan should buy more of this good.
D)MU/P has decreased,and Ewan should buy less of this good.

Question 25

The demand curve for canned peas is downward sloping.If the price of canned peas,an inferior good,rises,

A)the income effect which causes you to reduce your canned peas purchases is smaller than the substitution effect which causes you to increase your purchases,resulting in a net increase in quantity demanded.
B)the income effect which causes you to increase your canned peas purchases is smaller than the substitution effect which causes you to reduce your purchases,resulting in a net decrease in quantity demanded.
C)both the income and substitution effects reinforce each other to decrease the quantity demanded.
D)the income and substitution effects offset each other,but the price effect of an inferior good leads you to buy more canned peas.

Question 26

If Callum is consuming his utility maximising bundle and the price of one good rises,what happens to the marginal utility per dollar spent on this good (MU/P),and what should Callum do?

A)MU/P has increased,and Callum should buy more of this good.
B)MU/P has increased,and Callum should buy less of this good.
C)MU/P has decreased,and Callum should buy more of this good.
D)MU/P has decreased,and Callum should buy less of this good.

Question 27

The substitution effect of an increase in the price of Cornflakes refers to

A)the decrease in the demand for Cornflakes when its price rises.
B)the result that consumers will now switch to a substitute good such as Cheerios,and the demand curve for Cornflakes shifts to the left.
C)the fact that the higher price of Cornflakes lowers consumers' purchasing power,holding money income constant.
D)the fact that the higher price of Cornflakes relative to its substitutes,such as Cheerios,causes consumers to buy less Cornflakes.

Question 28

Consider a downward-sloping demand curve.When the price of an inferior good decreases,the income and substitution effects

A)work in the same direction to increase quantity demanded.
B)work in the same direction to decrease quantity demanded.
C)work in opposite directions and quantity demanded increases.
D)work in opposite directions and quantity demanded decreases.

Question 29

The demand curve for corn is downward sloping.If the price of corn,an inferior good,falls,

A)the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases,resulting in a net increase in quantity demanded.
B)the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases,resulting in a net increase in quantity demanded.
C)both the income and substitution effects reinforce each other to increase the quantity demanded.
D)the income and substitution effects offset each other,but the price effect of an inferior good leads you to buy less corn.

Question 30

Consider a downward-sloping demand curve.When the price of a normal good increases,the income and substitution effects

A)work in the same direction to increase quantity demanded.
B)work in the same direction to decrease quantity demanded.
C)work in opposite directions and quantity demanded increases.
D)work in opposite directions and quantity demanded decreases.

Question 31

When the price of summer tank tops falls and you buy more of them because they are relatively less expensive,this is called

A)the substitution effect.
B)the income effect.
C)the deadweight loss effect.
D)the elasticity effect.

Question 32

Table 6-1

Keegan has $30 to spend on Pita Wraps and Bubble Tea.The price of a Pita Wrap is $6 and the price of a glass of Bubble Tea is $3.Table 6-1 shows his total utility from different quantities of the two items.

-Refer to Table 6-1.If Keegan can drink all the bubble tea he wants for free,how many glasses will he consume?

A)4 glasses
B)5 glasses
C)6 glasses
D)7 glasses

Question 33

If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit,and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased,she

A)is maximising total utility and does not want to change her consumption of ankle socks or bandanas.
B)wants to consume more ankle socks and fewer bandanas.
C)wants to consume more of bandanas and fewer ankle socks.
D)wants to consume less of both ankle sock and bandanas.

Question 34

Avner is maximising total utility by buying sports magazines and protein supplements.For him to buy more sports magazines,

A)the price of protein supplements has to fall.
B)the price of sports magazines has to fall.
C)the price of sports magazines has to rise.
D)Since Avner is maximising his utility,nothing can change the consumption of sports magazines.

Question 35

When the price of audio books,a normal good,falls,causing your purchasing power to rise,you buy more of them due to

A)the substitution effect.
B)the income effect.
C)the deadweight loss effect.
D)the elasticity effect.

Question 36

If the price of muffins,a normal good that you enjoy,rises,

A)the income and substitution effects offset each other,but the price effect leads you to buy fewer muffins.
B)both the income and substitution effects lead you to buy fewer muffins.
C)the substitution effect which causes you to decrease your muffin consumption outweighs the income effect which causes you to increase your muffin consumption,resulting in fewer muffins purchased.
D)the income effect which causes you to decrease your muffin consumption outweighs the substitution effect which causes you to increase your muffin consumption,resulting in fewer muffins purchased.

Question 37

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges,then Marlowe

A)is maximising total utility.
B)should buy more apples and fewer oranges.
C)should buy more oranges and fewer apples.
D)should buy fewer oranges and fewer apples.

Question 38

If the price of lattes,a normal good that you enjoy,falls,

A)the income and substitution effects offset each other,but the price effect leads you to buy more lattes.
B)both the income and substitution effects lead you to buy more lattes.
C)the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption,resulting in more lattes purchased.
D)the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption,resulting in more lattes purchased.

Question 39

Suppose Joe is maximising total utility within his budget constraint.If the price of the last pair of jeans purchased is $25 and it yields 100 units of extra satisfaction and the price of the last shirt purchased is $20,then,using the rule of equal marginal utility per dollar spent,the extra satisfaction received from the last shirt must be

A)2000 units of utility.
B)500 units of utility.
C)100 units of utility.
D)80 units of utility.

Question 40

Most people would prefer to drive a luxury car that has all the options,but more people buy less expensive cars even though they could afford the luxury car because

A)car buyers are irrational.
B)the total utility of less expensive cars is greater than that of luxury cars.
C)the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars.
D)luxury cars cost a lot more than non-luxury cars.

Question 41

The word 'util' has been used by economists in the past as an objective measure of utility.Today economists believe that

A)utility cannot be measured objectively.
B)utility can be measured objectively because people can use prices of different goods to measure utility.
C)all of the important conclusions of the economic model of consumer behaviour depend on utility being measured objectively.
D)the util truly is an objective,rather than a subjective,measure of utility.

Question 42

If the marginal utility Ida Mae receives from eating chicken wings is negative,then

A)her total utility from eating chicken wings has fallen.
B)her total utility from eating chicken wings is negative as well.
C)Ida Mae definitely does not like chicken wings.
D)her total utility has risen,but by less from the last chicken wing than from the next to last chicken wing.

Question 43

Consider a downward-sloping demand curve.When the price of a normal good decreases,the income and substitution effects

A)work in the same direction to increase quantity demanded.
B)work in the same direction to decrease quantity demanded.
C)work in opposite directions and quantity demanded increases.
D)work in opposite directions and quantity demanded decreases.

Question 44

Table 6-2
Table 6-2 above shows Keira's utility from soup and sandwiches.The price of soup is $2 per cup and the price of a sandwich is $3.Keira has $18 to spend on these two goods.
Refer to Table 6-2.Holding prices constant,when Keira's income changed from $18 to $23,what happens to her total utility and to the marginal utilities of the last cup of soup and the last sandwich purchased?

A)Her total utility increases,but the marginal utilities of the last cup of soup and the last sandwich consumed decrease.
B)Her total utility,the marginal utility of the last cup of soup consumed and the marginal utility of the last sandwich consumed all increase.
C)Her total utility decreases,but the marginal utilities of the last cup of soup and the last sandwich consumed increase.
D)Her total utility and the marginal utility of the last cup of soup consumed increase,but marginal utility of the last sandwich consumed decreases.

Question 45

Adhira buys chocolates and almonds.She has 3 bars of chocolates and 4 bags of almonds.The marginal utility of the third chocolate bar is 18 units of utility and the marginal utility from the fourth bag of almonds is also 18.Is Adhira maximising her utility?

A)Yes,the marginal utility from the last unit of each good is equal.
B)No,she must buy 1 more chocolate bar to equate her quantities of the two goods.
C)No,she must buy cut back to 3 bags of almonds to equate her quantities of the two goods.
D)Without information on her income and the prices of the two goods,we cannot answer the question.

Question 46

Table 6-2
Table 6-2 above shows Keira's utility from soup and sandwiches.The price of soup is $2 per cup and the price of a sandwich is $3.Keira has $18 to spend on these two goods.
Refer to Table 6-2.Suppose Keira's income increases from $18 to $23 but prices have not changed.What is her utility maximising bundle now?

A)6 cups of soup and 5 sandwiches
B)4 cups of soup and 5 sandwiches
C)5 cups of soup and 4 sandwiches
D)5 cups of soup and 5 sandwiches

Question 47

Table 6-2
Table 6-2 above shows Keira's utility from soup and sandwiches.The price of soup is $2 per cup and the price of a sandwich is $3.Keira has $18 to spend on these two goods.
Refer to Table 6-2.If Keira maximises her utility,how many units of each good should she buy?

A)1 cup of soup and 5 sandwiches
B)3 cups of soup and 4 sandwiches
C)6 cups of soup and 2 sandwiches
D)4 cups of soup and 3.5 sandwiches

Question 48

Table 6-2
Table 6-2 above shows Keira's utility from soup and sandwiches.The price of soup is $2 per cup and the price of a sandwich is $3.Keira has $18 to spend on these two goods.
Refer to Table 6-2.What is Keira's marginal utility per dollar spent on the third cup of soup?

A)72 units of utility
B)36 units of utility
C)12 units of utility
D)6 units of utility

Question 49

The amount of income a consumer has to spend on goods and services is known as

A)purchasing power.
B)effective demand.
C)a budget constraint.
D)wealth.

Question 50

A budget constraint

A)represents the bundles of consumption that make a consumer equally happy.
B)refers to the limited amount of income available to consumers to spend on goods and services.
C)reflects the desire by consumers to increase their income.
D)shows the prices that a consumer chooses to pay for products he consumes.

Question 51

In making decisions about what to consume,a person's goal is to

A)allocate her limited income among all the products she wishes to buy so that she receives the highest total utility.
B)buy low-priced goods rather than high-priced goods.
C)maximise her marginal utility from the goods and services she wishes to buy using her limited income.
D)consume as many necessities as possible and then,if there is money left over,buy luxuries.

Question 52

The additional utility that George receives from consuming one more slice of pizza is called

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

Question 53

Suppose the marginal utilities for the first three cans of coke are 100,80 and 60,respectively.The total utility received from consuming 2 cans is

A)20.
B)80.
C)90.
D)180.

Question 54

If marginal utility of apples is diminishing and is a positive amount,consuming one more apple will cause

A)total utility to decrease.
B)a consumer to get no satisfaction from consuming apples.
C)a consumer's total utility to increase.
D)a consumer to go beyond her optimal consumption of apples.

Question 55

The economic model of consumer behaviour predicts that

A)consumers will try to earn as much income as they can over their lifetimes.
B)consumers will choose to buy the combination of goods and services that make them as well off as possible from those combinations that their budgets allow them to buy.
C)consumers will try to accumulate as many goods and services as they can before they die.
D)consumers will divide their time between consumption and leisure activities in order to maximise social welfare.

Question 56

Table 6-2
Table 6-2 above shows Keira's utility from soup and sandwiches.The price of soup is $2 per cup and the price of a sandwich is $3.Keira has $18 to spend on these two goods.
Refer to Table 6-2.Holding prices constant,when Keira's income changed from $18 to $23,her utility maximising bundle changed.Based on your answers to her optimal choices at the two income levels,what type of goods are soup and sandwiches?

A)Soup is an inferior good and sandwiches are a normal good.
B)Soup is a normal good and sandwiches are an inferior good.
C)Both soup and sandwiches are normal goods.
D)Both soup and sandwiches are inferior goods.

Question 57

Total utility is maximised in the consumption of two goods by

A)equating the marginal utility for each good consumed.
B)equating the marginal utility per dollar for each good consumed.
C)equating the total utility of each good divided by its price.
D)maximising expenditure on each good.

Question 58

Marginal utility is

A)the change in total utility divided by the price of the last unit of a good or service consumed.
B)the change in total utility a person receives from consuming an additional unit of a good or service.
C)the utility from consuming a given quantity of a good or service.
D)the decrease in total utility from consuming more and more units of a good or service.

Question 59

An economist observes two consumers in a supermarket.One of the consumers buys a case of Coca-Cola and the other buys a case of Pepsi-Cola.Both colas sell for the same price and the ages and incomes of the consumers are also the same.Based on this information,how would the economist explain the consumers' choices?

A)One of the consumers made the wrong choice,but it is impossible to say which one.
B)Both consumers should have considered buying other colas that had lower prices.
C)Both consumers should have purchased less than a case because they would be able to buy more later.
D)Apparently,the consumers had different tastes.

Question 60

The satisfaction a person receives from consuming goods and services is called

A)contentment.
B)psychic income.
C)wealth.
D)utility.

Question 61

Table 6-4

Refer to Table 6-4.For steak and cheese and grilled chicken sandwiches,the table contains the values of the marginal utility (MU)and marginal utility per dollar (MU/P)for Mabel Jarvis.Mabel has $14 to spend on steak and cheese and grilled chicken sandwiches.Which of the following statements is false?

A)The price of steak and cheese sandwiches is $4.The price of grilled chicken sandwiches is $2.
B)If Mabel maximises her utility,she will buy three grilled chicken sandwiches.
C)If Mabel maximises her utility,she will buy two steak and cheese sandwiches.
D)We do not have enough information to determine how many sandwiches Mabel will buy to maximise her utility.

Question 62

Table 6-7
Table 6-7 shows Antonio's utility from beer and pizza.
Refer to Table 6-7.Suppose Antonio has $10 to spend and the price of beer = $2 per glass and the price of pizza = $2 per slice.How many of each good will he consume when he maximises his utility?

A)2 glasses of beer,1 slice of pizza
B)2 glasses of beer,3 slices of pizza
C)3 glasses of beer,2 slices of pizza
D)4 glasses of beer,5 slices of pizza

Question 63

Suppose Barry is maximising his utility from consuming used paperback novels and audio books.The price of a used novel = $4 and the price of an audio book = $8.If the marginal utility of the last novel was 32 units of utility (utils)what was the marginal utility of the last audio book purchased?

A)2 utils
B)12 utils
C)16 utils
D)64 utils

Question 64

Terence has $50 per week to spend on Subway sandwiches and milkshakes.The price of a Subway sandwich is $5 and the price of a milkshake is $4.He buys 6 sandwiches and 5 milkshakes.The marginal utility of the 6th sandwich = 25 and the marginal utility of the 5th milkshake = 24.Which of the following is true?

A)He is not maximising his utility and should buy more milkshakes.
B)He is maximising his utility.
C)He is not maximising his utility and should buy more Subway sandwiches.
D)He is not maximising his utility because he is not spending all of his income.

Question 65

Table 6-6
Table 6-6 lists Jay's marginal utilities for burgers and Pepsi.Jay has $7 to spend on these two goods.The price of a burger is $2 and the price of a can of Pepsi is $1.
Refer to Table 6-6.If Jay can eat all the burgers he wants for free,how many burgers will he consume?

A)7 burgers
B)6 burgers
C)5 burgers
D)3 burgers

Question 66

The marginal utility per dollar that Harold Stratton receives from oranges is greater than the marginal utility per dollar Harold receives from pears.To maximise his utility,what should Harold do?

A)He should acquire more income so that he can afford to buy more oranges and pears.
B)He should reduce his consumption of both oranges and pears so that he can buy a greater variety of goods.
C)He should buy fewer pears and more oranges.
D)He should buy fewer oranges and more pears.

Question 67

During a study session for an economics exam with three other students,Peter Daltry commented on an example of a consumer who had to decide the on number of slices of pizza and cups of Coca-Cola he would consume.Peter explained that 'To maximise his utility,this consumer must equate the marginal utility per dollar for pizza and Coca-Cola.' Was Peter's analysis correct?

A)Peter described one of the conditions necessary for utility maximisation.The consumer also must equate the marginal utility of pizza and the marginal utility of cups of Coca-Cola.
B)Peter's statement is correct.
C)Peter's statement is correct but we must also assume that the consumer is rational.
D)Peter describes one of the conditions necessary for utility maximisation.The second condition is that total spending on both goods must equal the amount available to be spent.

Question 68

There are two conditions necessary for a consumer to maximise her utility.One is that the marginal utilities per dollar spent on each good and service consumed are equal.What is the other condition?

A)Total spending on all goods and services must equal the amount available to be spent.
B)The consumer must be satisfied with the choices she makes.
C)The total spent on each good and service is the same.
D)The prices of each good and service consumed must not be too high.

Question 69

Table 6-6
Table 6-6 lists Jay's marginal utilities for burgers and Pepsi.Jay has $7 to spend on these two goods.The price of a burger is $2 and the price of a can of Pepsi is $1.
Refer to Table 6-6.What is Jay's optimal consumption bundle?

A)1 burger and 2 Pepsis
B)2 burgers and 3 Pepsis
C)3 burgers and 1 Pepsi
D)3 burgers and 2 Pepsis

Question 70

Table 6-7
Table 6-7 shows Antonio's utility from beer and pizza.
Refer to Table 6-7.What is Antonio's marginal utility from consuming the fifth beer?

A)4 utils
B)13.6 utils
C)69 utils
D)134 utils

Question 71

Marv Pilson has $50 worth of groceries in a shopping cart at his local Shop 'n Save.Assume that the marginal utility per dollar of the liter bottles of soft drink in Marv's cart equals 50.The marginal utility per dollar of the boxes of cereal in Marv's cart equals 20.Marv has only $50 to spend,but has not yet paid for his groceries.How can Marv increase his total utility without spending more than $50?

A)Marv should substitute his favourite soft drink or the cereal in his cart for generic brands that have lower prices.
B)Marv should buy more boxes of cereal and fewer bottles of soft drink.
C)Marv should buy fewer boxes of cereal and more bottles of soft drink.
D)Marv should buy fewer boxes of cereal and fewer bottles of soft drink.He can then spend more on other items.

Question 72

Table 6-5

Refer to Table 6-5,which lists the values of Harry Taber's marginal utility and marginal utility per dollar for burgers and sushi rolls.Assume that the price of the burgers is $4 and the price of sushi rolls is $2.When Harry's income is $14 he buys two burgers and three sushi rolls.The last column lists the values of the marginal utility per dollar for sushi rolls when the price of sushi rolls decreases to $1.Complete this statement: As a result of the change in price,

A)Harry's purchasing power has increased.He will reduce his consumption of sushi rolls so he can buy one more burger.This is an example of the substitution effect of a price change.
B)Harry's purchasing power has increased.If sushi rolls are a normal good for Harry,he will buy fewer sushi rolls.This is an example of the income effect of a price change.
C)Harry's purchasing power has increased.If sushi rolls are a normal good for Harry he will buy more sushi rolls.This is an example of the income effect of a price change.
D)Harry's purchasing power has increased.Harry buys fewer sushi rolls.This is an example of the substitution effect of a price change.

Question 73

Table 6-3

Refer to Table 6-3.The table above shows Lee's marginal utility per dollar from consuming ice cream cones and cans of Lemonade.The price of an ice cream cone is $2 and the price of Lemonade is $1.Use this information to select the correct statement.

A)We cannot determine how many ice cream cones and cans of Lemonade Lee will consume without knowing what his income is.
B)To maximise his utility,Lee should consume 1 ice cream cone and 5 cans of Lemonade.
C)We cannot determine how many ice cream cones and cans of Lemonade will maximise Lee's utility because we are given only the marginal utility per dollar values.We also need to know the marginal utility for each quantity.
D)If Lee has an unlimited budget,he will maximise his utility by buying only Lemonade.

Question 74

Table 6-4

Refer to Table 6-4.For steak and cheese and grilled chicken sandwiches,the table contains the values of the marginal utility (MU)and marginal utility per dollar (MU/P)for Mabel Jarvis.Mabel has $14 to spend on steak and cheese and grilled chicken sandwiches.Which of the following statements is true?

A)If Mabel maximises her utility,she will buy three steak and cheese sandwiches and two grilled chicken sandwiches.
B)If Mabel was maximising her utility when spending $14 and then received an additional $4,she would receive the most marginal utility per dollar if her next purchase was another grilled chicken sandwich.
C)Mabel will first buy two steak and cheese sandwiches;then with her remaining $6 she will buy three grilled chicken sandwiches.
D)To maximise her utility,Mabel will need a total of $36,the income needed to buy 6 steak and cheese sandwiches and 6 grilled chicken sandwiches.

Question 75

Suppose Renee can increase her total utility from consuming video rentals and books by buying one more book and renting one fewer video.Which of the following is true?

A)The marginal utility of video rentals is negative.
B)The marginal utility per dollar spent on books exceeds that of video rentals.
C)The marginal utility of the last book consumed exceeds the marginal utility of the last video rental consumed.
D)The marginal utility of the last video rental consumed exceeds the marginal utility of the last book consumed.

Question 76

Table 6-5

Refer to Table 6-5,which lists the values of Harry Taber's marginal utility and marginal utility per dollar for burgers and sushi rolls.Assume that the price of the burgers is $4 and the price of sushi rolls is $2.When Harry's income is $14 he buys two burgers and three sushi rolls.The last column lists the values of the marginal utility per dollar for sushi rolls when the price of sushi rolls decreases to $1.Complete this statement: As a result of the change in price,the marginal utility of each sushi roll Harry consumes increases,and

A)the substitution effect of the price change will cause Harry to buy more sushi rolls and fewer burgers.
B)the substitution effect of the price change will cause Harry to buy more sushi rolls if they are a normal good,and fewer sushi rolls if they are an inferior good.
C)the substitution effect will cause Harry to buy another burger because his purchasing power has increased.
D)the substitution effect will cause Harry to buy fewer sushi rolls.

Question 77

Marge buys 5 CDs and 7 DVDs.The marginal utility of the 5th CD and the marginal utility of the 7th DVD are both equal to 30 utils.Can we say that this is the optimal combination of CDs and DVDs for Marge?

A)No.We need to know her preferences for CDs and DVDs.
B)Yes.
C)No.We need to know the prices of the CDs and DVDs.
D)No.If this was the optimal combination,the marginal utility per dollar of the 5th CD and the 7th DVD would be equal.

Question 78

Which of the following is explained by the law of diminishing marginal utility?

A)The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her third bottle of Coca-Cola.
B)The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her third pretzel.
C)The marginal utility of Isabel's second bottle of Coca-Cola is greater than the marginal utility of her friend Margie's third pretzel.
D)The total utility of one bottle of Coca-Cola is greater than the total utility of two bottles of Coca-Cola.

Question 79

The restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

A)maximising behaviour.
B)economising behaviour.
C)the price constraint.
D)the budget constraint.

Question 80

If Lisa spends her income on veggie burgers and pints of soy milk and the price of veggie burgers is three times the price of a pint of soy milk,then when Lisa maximises her utility she will buy

A)both goods until the marginal utility of veggie burgers is three times the marginal utility of soy milk.
B)three times as many veggie burgers as pints of soy milk.
C)three times as many pints of soy milk as veggie burgers.
D)both goods until the marginal utility of a pint of soy milk is three times the marginal utility of veggie burgers.