Deck 3: Consumer Preferences and the Concept of Utility

Question 1

The assumption that preferences are complete requires the consumer:

A)to rank any two baskets.
B)to say that basket C is preferred to basket A if basket B is preferred to basket A and basket C is preferred to basket B.
C)to rank a basket with more units of all goods higher than a basket with fewer units of all goods.
D)to have a diminishing marginal rate of substitution.

Answer 1

A

Question 2

If I prefer steak to burritos, burritos to pasta and pasta to steak:

A)My preferences are irrational.
B)My preferences violate the transitivity assumption.
C)My preferences violate the "more is better assumption.
D)I must have been exhibiting diminishing marginal utility.

Answer 2

B

Question 3

Sally likes Jim twice as much as she likes Bob. This is an example of:

A)ordinal preferences.
B)cardinal preferences.
C)transitivity.
D)diminishing marginal utility.

Answer 3

B

Question 4

Which of the following statements is false?

A)Marginal utility may be negative.
B)Marginal utility is the slope of total utility.
C)If the more is better assumption is satisfied, total utility will increase as consumption increases.
D)If the more is better assumption is satisfied, the marginal utility from consuming the second unit must be greater than the marginal utility from consuming the first unit.

Question 5

Marginal utility is:

A)the slope of the total utility function.
B)the slope of a ray from the origin to the total utility function.
C)always less than average utility.
D)always greater than average utility.

Question 6

If a consumer would rather eat three bars of chocolate than four bars of chocolate, this consumer's preferences violate which of the following key assumptions?

A)Completeness
B)Transitivity
C)More is better
D)Both completeness and transitivity

Question 7

Jacob's estimated utility from pizza is given by 3Z, where Z is the number of pizzas he consumes per month. We can say that:

A)Jacob likes pizza better than steak.
B)Jacob is a vegetarian.
C)Jacob's preferences are transitive.
D)Jacob's marginal utility from pizza is constant.

Question 8

One adhesive having twice the adhesive power of another is an example of:

A)ordinal ranking.
B)Johnson's theory of adhesivity.
C)cardinal ranking.
D)transitivity.

Question 9

Wendy is very indecisive. She can't decide whether she should go on a cruise or spend her vacation at her friend's home. Her preferences violate the assumption of:

A)completeness.
B)transitivity.
C)more is better.
D)both completeness and transitivity.

Question 10

John tends to order pizza once or twice a week to his college dorm room. When his parents come to visit, he always asks them to take him to the local steakhouse. Bob is probably suffering from:

A)veganism
B)transitivity.
C)diminishing marginal utility from pizza consumption.
D)completeness and transitivity.

Question 11

Assume that two baskets and lie on the same indifference curve. Assume that basket contains more of good than basket but less of good than basket. As the consumer moves down and to the right (from basket to basket)along his indifference curve, total utilityL

A)increases.
B)remains constant.
C)decreases.
D)is ambiguous.

Question 12

Indifference curves that intersect are said to be:

A)irrational.
B)non-transitive.
C)inconsistent with our basic assumptions about preferences.
D)complete, but not consistent.

Question 13

Assume that a consumer prefers watching Yu-Gi-Oh to watching Teen Titans Go, and that this same consumer prefers watching Teen Titans Go to watching Sponge Bob. Further assume that this same consumer states, "I would prefer to watch Sponge Bob to watching Yu-Gi-Oh." This consumer's preferences violate which of the following key assumptions?

A)Completeness
B)Transitivity
C)More is better
D)Both completeness and transitivity

Question 14

Marginal utility:

A)is the ratio of total utility to total consumption.
B)is the rate at which total utility changes as the level of consumption rises.
C)will always be equal to the product's price.
D)tells us nothing; we're only concerned with total utility.

Question 15

The assumption that more is better requires the consumer:

A)to rank any two baskets.
B)to say that basket is preferred to basket if basket is preferred to basket and basket is preferred to basket .
C)to rank a basket with more units of all goods higher than a basket with fewer units of all goods.
D)to have a diminishing marginal rate of substitution.

Question 16

Consider the following three market baskets. If Basket A and Basket B are on the same indifference curve, preferences satisfy the usual assumptions, and the indifference curves have a diminishing marginal rate of substitution, which of the following is correct?

A)Basket C is preferred to Basket A
B)Basket A is preferred to Basket C
C)The consumer is indifferent between Basket A and Basket C
D)There is not enough information to determine how the consumer would rank Basket A relative to Basket C.

Question 17

The assumption that more is preferred to less:

A)is called transitivity.
B)implies that if basket lies to the northeast of basket , then basket is preferred to basket .
C)is called completeness.
D)implies that indifference curves are "thick".

Question 18

The assumption that preferences are transitive requires the consumer:

A)to rank any two baskets.
B)to say that basket is preferred to basket if basket is preferred to basket and basket is preferred to basket .
C)to rank a basket with more units of all goods higher than a basket with fewer units of all goods.
D)to have a diminishing marginal rate of substitution.

Question 19

If a consumer is unable to compare two baskets, then this consumer's preferences violate which of the following key assumptions?

A)Completeness.
B)Transitivity.
C)More is better.
D)Both completeness and transitivity.

Question 20

Consumer preferences:

A)are fixed exogenously and unchanging in reality.
B)indicate how a consumer would rank any two possible baskets of goods, taking into account her budget constraint.
C)indicate how a consumer would rank any two possible baskets of goods, taking into account the current prices of those goods.
D)indicate how a consumer would rank any two possible baskets of goods, assuming that the baskets were available to the consumer at no cost.

Question 21

A _____________________ measures the level of satisfaction that a consumer receives from any basket of goods.

A)production function
B)transformation function
C)utility function
D)transitivity function

Question 22

Question 23

Marginal utility is

A)always increasing.
B)maximized when total utility is zero.
C)the slope of the total utility function.
D)always decreasing.

Question 24

A consumer would not generally be represented as deriving utility from:

A)the brand name of a product.
B)the characteristics of a product.
C)the price of a product.
D)the packaging of a product.

Question 25

Suppose that MRSx, .

A)The consumer is willing to substitute 10 units of for 1 unit of to leave utility unchanged.
B)The consumer is willing to substitute 10 units of for 1 unit of to leave utility unchanged.
C)Regardless of prices, the consumer will consume only y.
D)Regardless of prices, the consumer will consume only x.

Question 26

Suppose the marginal rate of substitution of for is given by MRSx, , which of the following is correct?

A)The indifference curves will be bowed away from the origin.
B)The indifference curves will be bowed in towards the origin.
C)The indifference curves will be straight lines.
D)It is not possible to tell the shape of the indifference curves with only this information.

Question 27

Which of the following statements best explains the concept of diminishing marginal utility?

A)As I consume additional ice cream cones, each ice cream cone adds more to my total happiness than the previous one.
B)I must consume ice cream cones until I have a stomach ache.
C)As I consume additional ice cream cones, each ice cream cone adds less to my total happiness than the previous one.
D)I must maximize my consumption of ice cream cones.

Question 28

If one were to draw indifference curves representing preferences over two varieties of red apples, it is likely that one would draw them as:

A)almost straight lines.
B)almost "L-shaped."
C)positively sloped.
D)crossing.

Question 29

Which of the following statements is false?

A)If marginal utility is diminishing, then total utility is increasing but at a decreasing rate.
B)If marginal utility is diminishing, then total utility is concave.
C)If marginal utility is negative, then total utility is downward-sloping.
D)If marginal utility is decreasing, then total utility is decreasing.

Question 30

Indifference curves have a negative slope when:

A)the consumer likes good but dislikes good .
B)the consumer likes good but dislikes good .
C)the consumer likes both good and good .
D)the consumer dislikes both goods.

Question 31

Consider the utility function .The indifference curves for this utility function will be:

A)vertical
B)horizontal
C)upward sloping
D)L-shaped

Question 32

When total utility, U(x)is maximized, marginal utility, MUx is:

A)constant.
B)rising.
C)maximized.
D)zero.

Question 33

An illustration of an indifference curve has:

A)prices of the goods on the axes.
B)quantities of the goods on the axes.
C)price on the vertical axis, quantity on the horizontal axis.
D)Price on the horizontal axis, quantity on the vertical axis.

Question 34

An indifference curve represents:

A)a two-dimensional "slice" of a three-dimensional total utility function.
B)varying levels of a total utility function.
C)constant marginal utility.
D)the slope of marginal utility.

Question 35

A)will have a diminishing marginal rate of substitution of for as x increases.
B)will have a constant marginal rate of substitution of for as x increases.
C)will have an increasing marginal rate of substitution of for as x increases.
D)will be straight lines.

Question 36

Consider the utility function .To increase satisfaction the consumer must consume

A)at least 5 units more of
B)at least 7 units more of y
C)more of both x and y
D)more of either x or y

Question 37

A)The marginal utilities are positive.
B)The marginal rate of substitution is diminishing.
C)The indifference curves are bowed away from the origin.
D)The indifference curves are downwards sloping.

Question 38

Which of the following statements is false?

A)Total utility and marginal utility cannot be plotted on the same graph.
B)The marginal utility is the slope of the (total)utility function.
C)Marginal utility is not the slope of total utility.
D)The relationship between total and marginal functions holds for other measures in economics.

Question 39

If indifference curves are upward sloping, this violates the assumption that preferences:

A)are complete
B)are transitive.
C)are such that more is better
D)Upward sloping indifference curves do not violate any of the assumptions about preferences.

Question 40

The principle of diminishing marginal utility implies:

A)indifference curves are concave.
B)indifference curves are convex.
C)indifference curves are straight lines.
D)as your consumption level increases, the marginal utility received from consumption of an additional unit increases.

Question 41

If a consumer's preferences are quasi-linear, then the consumer's indifference curves will be:

A)straight lines.
B)"L-shaped."
C)concave to the origin.
D)parallel.

Question 42

Consider the utility function . The indifference curves for this utility functionL

A)will be straight lines.
B)will have the same as increases holding constant.
C)will have the same as increases holding constant.
D)will have a diminishing marginal rate of substitution as the consumer substitutes for .

Question 43

Ordinal utility gives us information about which basket the consumer prefers and quantitative information about the intensity of the preference.

Question 44

Which of the following utility functions is an example of preferences for perfect substitutes?

Question 45

Which of the following utility functions is an example of Quasi-linear preferences?

Question 46

Which of the following utility functions is an example of Cobb-Douglas preferences?

Question 47

Two goods are perfect substitutes. The marginal rate of substitution for these two goods is:

A)parabolic.
B)exponential.
C)a constant.
D)shows diminishing marginal utility.

Question 48

Which of the following utility functions is an example of preferences for perfect complements?

Question 49

Marginal utility may be negative.

Question 50

Economists sometimes represent two goods as having right-angled indifference curves (perfect complements). In reality, this violates:

A)the assumption of transitivity.
B)the assumption of completeness.
C)the law of diminishing returns.
D)the "more is better" assumption.

Question 51

Question 52

Question 53

Suppose for a utility function that the marginal utility for good is given by . Which of the following is correct?

A)The more is better assumption is not satisfied for in this utility function.
B)The more is better assumption is satisfied for in this utility function.
C)This shows a positive and increasing marginal utility of x.
D)The marginal rate of substitution must be diminishing.

Question 54

Question 55

Cardinal utility gives us information about which basket the consumer prefers but not about the intensity of those preferences.

Question 56

Suppose the marginal rate of substitution of x for y is constant for all levels of x and y. Goods x and y are:

A)perfect substitutes.
B)perfect complements.
C)normal goods.
D)inferior goods.

Question 57

Marginal utility is the slope of total utility.

Question 58

Suppose for some utility function that . Which of the following is correct?

A)The assumption that more is better is satisfied for both goods.
B)This utility function will violate the assumption that preferences are complete.
C)The indifference curves for this utility function will be straight lines with a slope of -1.
D)The indifference curves will have a diminishing marginal rate of substitution.

Question 59

Imagine an indifference curve graph with units of clothing on the y-axis and visits to the neighborhood pizza joint for dinner on the x-axis. If the indifference curves for this individual are negatively sloped but close to horizontal, it means:

A)the marginal utility from another pizza dinner is high relative to the marginal utility of clothing.
B)the marginal utility from another pizza dinner is low relative to the marginal utility of clothing
C)this person doesn't like pizza at all.
D)this person can spend a lot of money on clothes at times.

Question 60

If MRSx, y is constant at 5, then which of the following is false?

A)The slope of the indifference curve is positive.
B)The goods are perfect substitutes.
C)The indifference curves are linear.
D)The slope of the indifference curve is negative.

Question 61

Marginal utility is the slope of the total utility function.

Question 62

The marginal utility is the slope of the (total)utility function.

Question 63

When marginal utility is negative, total utility is decreasing.

Question 64

Marginal utility is not the slope of total utility.

Question 65

If the more is better assumption is satisfied, the marginal utility from consuming the second unit must be greater than the marginal utility from consuming the first unit.

Question 66

Marginal utility is maximized when total utility is one.

Question 67

Marginal utility can never decrease.

Question 68

If marginal utility is negative, then total utility is downward-sloping.

Question 69

The relationship between total and marginal functions holds for other measures in economics.

Question 70

If the more is better assumption is satisfied, total utility will increase as consumption increases.

Question 71

If marginal utility is decreasing, then total utility is decreasing.

Question 72

Marginal utility is maximized when total utility is zero.

Question 73

Marginal utility is maximized when total utility is infinity.

Question 74

If marginal utility is diminishing, then total utility is concave.

Question 75

Diminishing marginal utility and increasing total utility are incompatible with each other.

Question 76

Because total utility is constant along an indifference curve, the marginal rate of substitution is also constant.

Question 77

Marginal utility is always increasing.

Question 78

If marginal utility is diminishing, then total utility is increasing but at a decreasing rate.

Question 79

Total utility and marginal utility cannot be plotted on the same graph.

Question 80

Marginal utility is always decreasing.