Question 1

If the price of a good rises, then in the new consumer equilibrium all of the following are true except

Accepted Answer

A) the marginal utility from consuming the good will be higher than before the price rise. 
B) the quantity of the good consumed decreases. 
C) the quantity of substitutes consumed increases. 
D) the marginal utility from substitutes will be lower than before the price rise. 
E) the marginal utility from the good equals its new higher price.

Question 2

Use the table below to answer the following questions.
Table 8.2.3
 
-Refer to Table 8.2.3.To attain consumer equilibrium, the first $4 of income is used to purchase

Accepted Answer

A) 2 units of good X. 
B) 3 units of good X. 
C) 4 units of good Y. 
D) an amount of X and Y that cannot be determined from the table. 
E) 2 units of good Y and 1 unit of X.

Question 3

Ron starts out in consumer equilibrium, consuming two goods, X and Y.The price of X rises.Immediately after the rise in price

Accepted Answer

A) MUX/PX > MUY/PY, and then Ron increases his consumption of X. 
B) MUX/PX > MUY/PY, and then Ron decreases his consumption of X. 
C) MUX/PX  MUY/PY, and then Ron increases his consumption of X and Y.

Question 4

Jim has made his best affordable choice of muffins and coffee.He spends all of his income on 10 muffins at $1 each and 20 cups of coffee at $2 each.Now the price of a muffin rises to $1.50 and the price of coffee falls to $1.75 a cup.Jim can still afford to buy 10 muffins and 20 cups of coffee.Jim will buy ________ muffins and ________ coffee.

Accepted Answer

A) more; fewer 
B) fewer more 
C) more; more 
D) fewer; fewer 
E) the same quantity of; the same quantity of

Question 5

As more of a good is consumed, its

Accepted Answer

A) marginal utility increases. 
B) marginal utility decreases. 
C) marginal utility remains unchanged. 
D) total utility decreases. 
E) total utility increases at an increasing rate.

Question 6

When Kathryn is at her consumer equilibrium, she is

Accepted Answer

A) consuming the combination of goods that is at the midpoint of her budget line. 
B) consuming a combination of goods that is located inside her budget line. 
C) consuming a combination of goods that is located outside her budget line. 
D) consuming a combination such that the marginal utility from good X divided by the marginal utility from good Y equals the price of good X divided by the price of good Y. 
E) on the midpoint of her demand curve.

Question 7

The paradox of value

Accepted Answer

A) is that values are the same for different people. 
B) is that economists can calculate marginal utility, even though utility is unmeasurable. 
C) is resolved by an appeal to the law of diminishing total utility. 
D) remains unresolved by economists. 
E) is resolved by an appeal to the difference between marginal utility and total utility.

Question 8

Samir consumes apples and bananas and is in consumer equilibrium.The marginal utility from his last apple is 10 and the marginal utility from his last banana is 5.If the price of an apple is $0.50, then what is the price of a banana?

Accepted Answer

A) $0.05 
B) $0.10 
C) $0.25 
D) $0.50 
E) $1.00

Question 9

Other things remaining the same, marginal utility theory implies that a rise in the price of a good

Accepted Answer

A) increases the consumer surplus. 
B) decreases the consumer surplus. 
C) leaves consumer surplus unchanged. 
D) has an effect on consumer surplus that cannot be determined. 
E) decreases consumer surplus by the amount equal to the total utility of all goods consumed before the price rise but not after the price rise.

Question 10

Beverly is currently in consumer equilibrium.An increase in her income

Accepted Answer

A) increases her total utility. 
B) decreases her total utility. 
C) increases her marginal utility from all goods. 
D) decreases her marginal utility from all goods. 
E) increases her consumption of all goods.

Question 11

Bikes and roller blades are substitutes.Marginal utility theory predicts that when the price of a bike rises, the quantity of bikes demanded

Accepted Answer

A) decreases and the demand curve for roller blades shifts rightward. 
B) decreases and the demand curve for roller blades shifts leftward. 
C) decreases and a movement occurs down along the demand curve for roller blades. 
D) increases and the demand curve for roller blades shifts rightward. 
E) increases and the demand curve for roller blades shifts leftward.

Question 12

Childcare workers often get paid fairly low wages, yet it is said that they have "the most important job in the world." This paradox can be resolved by

Accepted Answer

A) distinguishing between price and value. 
B) distinguishing between marginal utility and total utility. 
C) noting that childcare yields no utility since it is a service. 
D) noting that marginal utility does not diminish for childcare. 
E) noting that marginal utility is constant for childcare.

Question 13

Advise Sarah how to maximize her utility if MUA = 8, MUB = 20, PA = 4 and PB = 5.

Accepted Answer

A) Consume equal amounts of both goods. 
B) Consume more of good A and less of good B. 
C) Consume more of good B and less of good A. 
D) Lower the price of good B. 
E) Raise the price of good A.

Question 14

Utility is similar to temperature because

Accepted Answer

A) both are positive. 
B) both are negative. 
C) both have units of measurement that are arbitrary. 
D) both are observable. 
E) both are measured in the same scale.

Question 15

Bianca consumes pizza.Marginal utility theory predicts that when the price of pizza increases,

Accepted Answer

A) Bianca's total utility from pizza will increase. 
B) Bianca's marginal utility from pizza will not change. 
C) Bianca's demand curve for pizza will shift leftward. 
D) Bianca will buy less pizza. 
E) Bianca will buy more pizza.

Question 16

Which one of the following statements is true?

Accepted Answer

A) Since consumers of a good consume this good until the price equals the value of the last unit, they clearly get no benefit from consuming this good. 
B) Consumers choosing between goods X and Y will set MUX = MUY. 
C) The value of a good to a consumer is measured by the price. 
D) Consumer surplus on a unit of a good will never be zero. 
E) If the marginal utility per dollar of good X is less than the marginal utility per dollar of good Y, then the consumer should shift some spending from X to Y.

Question 17

A budget line is drawn with

Accepted Answer

A) quantity of one good on the vertical axis and the quantity of the second good on the horizontal axis. 
B) price of one good on the vertical axis and the price of the second good on the horizontal axis. 
C) quantity of one good on the vertical axis and its price on the horizontal axis. 
D) quantity of one good on the horizontal axis and its price on the vertical axis. 
E) quantity of one good on the horizontal axis and its total utility on the vertical axis.

Question 18

If Ms.Petersen is maximizing her utility in the consumption of goods A and B, which one of the following statements must be true?

Accepted Answer

A) MUA = MUB 
B) MUA/PA = MUB/PB 
C) MUA/PB = MUB/PA 
D) TUA = TUB 
E) TUA/PA = TUB/PB

Question 19

The total utility from owning three skirts is equal to

Accepted Answer

A) total income divided by the price of one skirt. 
B) total income divided by the amount spent to buy the three skirts. 
C) the sum of the marginal utility from the first skirt plus the marginal utility from the second skirt plus the marginal utility from the third skirt. 
D) three times the marginal utility from the first skirt. 
E) the total amount spent to buy the three skirts.

Question 20

Marginal utility theory predicts that a rise in the price of a banana results in

Accepted Answer

A) the demand curve for bananas shifting rightward. 
B) the demand curve for bananas shifting leftward. 
C) a movement upward along the demand curve for bananas. 
D) a movement downward along the demand curve for bananas. 
E) the demand curve for bananas shifting rightward and the supply curve for bananas shifting rightward.

Exam 8: Utility and Demand