Question 1

Which of the following best describes an interpersonal utility comparison?

Accepted Answer

A) Jones likes computers produced by Dell Computer Corporation and Smith likes computers produced by Apple Computer Inc. 
B) Smith gets more utility from working on his computer than Jones gets from working on his computer. 
C) Smith got less utility from eating the 30th cookie than eating the 29th cookie, and the same holds for Jones. 
D) Usually, Smith seems a lot happier than Jones. 
E) Smith usually eats more in a day than Jones eats in a day.

Question 2

Adam Smith observed that often things that have the greatest value in use, or are the most useful, have a relatively low price, and things that have little or no value in use have a high price.

Accepted Answer

A) True 
 B)False

Question 3

Consider two options: (A)you receive a guaranteed payment of $100; (B)a coin is tossed and if heads comes up, you win nothing; if tails comes up, you win $200. The expected payoff for option A is:

Accepted Answer

A) $200 
B) $100 
C) $300 
D) $75 
E) There is not enough information to answer the question.

Question 4

Explain the difference between total utility and marginal utility.  Give a hypothetical example to help support your answer.

Accepted Answer

The answer of Explain the difference between total utility and...

Question 5

Exhibit 20-5  Refer to Exhibit 20-5.  What value goes in blank (A)?

Accepted Answer

A) 12.0 
B) 13.5 
C) 10.0 
D) 14.0 
E) There is not enough information to answer this question.

Question 6

An indifference curve shows all the combinations of bundles of two goods a person can purchase given a fixed amount of income.

Accepted Answer

A) True 
 B)False

Question 7

Jackson says that his fifth game of chess gave him greater utility than his first, and therefore the law of diminishing marginal utility does not hold. An economist who believes that marginal utility definitely and always declines with the consumption of equal successive units of a good will likely say

Accepted Answer

A) the fifth game of chess is a different good than the first game of chess. 
B) there are exceptions to the law of diminishing marginal utility. 
C) the law of diminishing marginal utility does not apply to board games. 
D) each and every game of chess is identical to one another.

Question 8

To an economist, utility refers to the

Accepted Answer

A) usefulness of a good or service. 
B) satisfaction that results from the consumption of a good. 
C) relative scarcity of a good. 
D) rate of decline in the demand curve.

Question 9

Given two goods, X and Y, and their prices, PX and PY a consumer will maximize total utility by allocating expenditures such that

Accepted Answer

A) MUX\PY = MUY\PX. 
B) PY\MUX = PX\MUY. 
C) MUX\PX = MUY \PY. 
D) MUX = PX = MUY = PY = MU$. 
E) MUX = MUY = PX = PY = MU$.

Question 10

Suppose that the total utility from consuming one unit of good X is 87 utils, the total utility of two units of good X is 150 utils, and the total utility of three units of good X is 180 utils.  The marginal utility of the third unit is

Accepted Answer

A) 30 utils. 
B) 417 utils. 
C) 63 utils. 
D) 139 utils.

Question 11

Indifference curves are generally downward sloping, they are convex to the origin, and they do not cross.

Accepted Answer

A) True 
 B)False

Question 12

If Smith will give up three units of Y to get one additional unit of X, then

Accepted Answer

A) he has transitive preferences. 
B) his budget constraint is upward sloping. 
C) his indifference curve is downward sloping. 
D) the price of X must be three times as high as the price of Y.

Question 13

Exhibit 20-8 ​

Refer to Exhibit 20-8. A move of the budget constraint from 2 to 3 is caused by a

Accepted Answer

A) rise in the price of good X. 
B) fall in the price of good X. 
C) rise in the price of good Y. 
D) fall in income.

Question 14

Which of the following is true?

Accepted Answer

A) It is possible for total utility to rise as marginal utility falls. 
B) Marginal utility is the same as total utility. 
C) As marginal utility falls, total utility always falls. 
D) As marginal utility falls, total utility always rises.

Question 15

Total utility

Accepted Answer

A) is the total amount of satisfaction derived from consuming a particular quantity of a good. 
B) remains constant as the number of units consumed increases. 
C) is the change in satisfaction derived from consuming each extra unit of a good. 
D) declines as the number of units consumed increases.

Question 16

The diamond-water paradox is the observation that

Accepted Answer

A) those things that have the greatest price often have little value in exchange and those things that have the lowest price often have the greatest value in exchange. 
B) those things that have the greatest value in use often have little value in exchange and those things that have little value in use often have the greatest value in exchange. 
C) those things that have the least value in use often have little value in exchange and those things that have the greatest value in use often have the greatest value in exchange. 
D) those things that have the least price often have little value in exchange and those things that have the greatest price often have the greatest value in exchange.

Question 17

Given the choice between a sure-thing option and a gamble option with the same expected payoff, a____________ person will choose the sure thing.

Accepted Answer

A) risk averse 
B) risk loving 
C) risk neutral 
D) risk enjoying

Question 18

Exhibit 20-7 ​

Refer to Exhibit 20-7. For graph (3), if the price of Y is $200, the price of X is

Accepted Answer

A) $50. 
B) $40. 
C) $30. 
D) $25. 
E) $15.

Question 19

Marginal utility is computed by dividing total utility by the quantity consumed of a good.

Accepted Answer

A) True 
 B)False

Question 20

The __________ one's income, the __________ one's budget constraint.

Accepted Answer

A) smaller; further away from the origin 
B) larger; closer to the origin 
C) larger; further away from the origin 
D) smaller; steeper the slope of 
E) larger; steeper the slope of

Exam 7: Consumer Choice: Maximizing Utility and Behavioral Economics

Which of the following best describes an interpersonal utility comparison?

Adam Smith observed that often things that have the greatest value in use, or are the most useful, have a relatively low price, and things that have little or no value in use have a high price.

Consider two options: (A) you receive a guaranteed payment of $100; (B) a coin is tossed and if heads comes up, you win nothing; if tails comes up, you win $200. The expected payoff for option A is:

Explain the difference between total utility and marginal utility. Give a hypothetical example to help support your answer.

Exhibit 20-5 Refer to Exhibit 20-5. What value goes in blank (A) ?

An indifference curve shows all the combinations of bundles of two goods a person can purchase given a fixed amount of income.

To an economist, utility refers to the

Given two goods, X and Y, and their prices, P_X and P_Y a consumer will maximize total utility by allocating expenditures such that

Suppose that the total utility from consuming one unit of good X is 87 utils, the total utility of two units of good X is 150 utils, and the total utility of three units of good X is 180 utils. The marginal utility of the third unit is

Indifference curves are generally downward sloping, they are convex to the origin, and they do not cross.

If Smith will give up three units of Y to get one additional unit of X, then

Exhibit 20-8 Refer to Exhibit 20-8. A move of the budget constraint from 2 to 3 is caused by a

Which of the following is true?

Total utility

The diamond-water paradox is the observation that

Given the choice between a sure-thing option and a gamble option with the same expected payoff, a____________ person will choose the sure thing.

Exhibit 20-7 Refer to Exhibit 20-7. For graph (3) , if the price of Y is $200, the price of X is

Marginal utility is computed by dividing total utility by the quantity consumed of a good.

The one's income, the one's budget constraint.

Exam 7: Consumer Choice: Maximizing Utility and Behavioral Economics

Which of the following best describes an interpersonal utility comparison?

Adam Smith observed that often things that have the greatest value in use, or are the most useful, have a relatively low price, and things that have little or no value in use have a high price.

Consider two options: (A) you receive a guaranteed payment of $100; (B) a coin is tossed and if heads comes up, you win nothing; if tails comes up, you win $200. The expected payoff for option A is:

Explain the difference between total utility and marginal utility. Give a hypothetical example to help support your answer.

Exhibit 20-5 Refer to Exhibit 20-5. What value goes in blank (A) ?

An indifference curve shows all the combinations of bundles of two goods a person can purchase given a fixed amount of income.

To an economist, utility refers to the

Given two goods, X and Y, and their prices, PX and PY a consumer will maximize total utility by allocating expenditures such that

Suppose that the total utility from consuming one unit of good X is 87 utils, the total utility of two units of good X is 150 utils, and the total utility of three units of good X is 180 utils. The marginal utility of the third unit is

Indifference curves are generally downward sloping, they are convex to the origin, and they do not cross.

If Smith will give up three units of Y to get one additional unit of X, then

Exhibit 20-8 ​ Refer to Exhibit 20-8. A move of the budget constraint from 2 to 3 is caused by a

Which of the following is true?

Total utility

The diamond-water paradox is the observation that

Given the choice between a sure-thing option and a gamble option with the same expected payoff, a____________ person will choose the sure thing.

Exhibit 20-7 ​ Refer to Exhibit 20-7. For graph (3) , if the price of Y is $200, the price of X is

Marginal utility is computed by dividing total utility by the quantity consumed of a good.

The __________ one's income, the __________ one's budget constraint.

Given two goods, X and Y, and their prices, P_X and P_Y a consumer will maximize total utility by allocating expenditures such that

Exhibit 20-8 Refer to Exhibit 20-8. A move of the budget constraint from 2 to 3 is caused by a

Exhibit 20-7 Refer to Exhibit 20-7. For graph (3) , if the price of Y is $200, the price of X is

The one's income, the one's budget constraint.