Question 1

Utility is

Accepted Answer

A) easily measured because all people derive the same utility from consumption 
B) easily measured because it is an objective concept 
C) easily measured because it is a subjective concept 
D) hard to measure because it is a subjective concept 
E) hard to measure because it is an objective concept 
A) easily measured because all people derive the same utility from consumption 
B) easily measured because it is an objective concept 
C) easily measured because it is a subjective concept 
D) hard to measure because it is a subjective concept 
E) hard to measure because it is an objective concept

Question 2

As a consumer buys more of a good, total utility eventually becomes negative.

Accepted Answer

A) True 
 B)False

Question 3

Diminishing marginal utility means that

Accepted Answer

A) as you consume more of a good, other things constant, the total satisfaction you obtain from consuming this good tends to fall 
B) as you hire more labor, other things constant, the total amount produced begins to fall 
C) as you hire more labor, other things constant, the marginal product begins to fall 
D) as you consume more of a good, other things constant, the additional satisfaction you obtain from each additional unit of the good tends to fall 
E) as you consume more of a good, other things constant, the extra satisfaction you obtain from each extra good becomes negative 
A) as you consume more of a good, other things constant, the total satisfaction you obtain from consuming this good tends to fall 
B) as you hire more labor, other things constant, the total amount produced begins to fall 
C) as you hire more labor, other things constant, the marginal product begins to fall 
D) as you consume more of a good, other things constant, the additional satisfaction you obtain from each additional unit of the good tends to fall 
E) as you consume more of a good, other things constant, the extra satisfaction you obtain from each extra good becomes negative

Question 4

If the price of a good falls, the marginal utility per dollar received from consuming a specific unit of that good

Accepted Answer

A) also falls 
B) stays the same 
C) rises 
D) will rise or fall, depending on the consumer 
E) remains unchanged, provided the consumer buys no more of the good 
A) also falls 
B) stays the same 
C) rises 
D) will rise or fall, depending on the consumer 
E) remains unchanged, provided the consumer buys no more of the good

Question 5

Suppose that Hannah spends $3 to buy five biscuits.The marginal utility of the fifth biscuit is valued at $0.60; total utility of the five biscuits is valued at $4.20.Given this information, what do we know about consumer surplus?

Accepted Answer

A) It is impossible to determine consumer surplus without knowing the marginal utility of the first four biscuits. 
B) It is impossible to determine consumer surplus without knowing the price per biscuit. 
C) It is impossible to determine consumer surplus without knowing the price Hannah was willing to pay for the first five biscuits. 
D) Consumer surplus is equal to $2.40. 
E) Consumer surplus is equal to $1.20. 
A) It is impossible to determine consumer surplus without knowing the marginal utility of the first four biscuits. 
B) It is impossible to determine consumer surplus without knowing the price per biscuit. 
C) It is impossible to determine consumer surplus without knowing the price Hannah was willing to pay for the first five biscuits. 
D) Consumer surplus is equal to $2.40. 
E) Consumer surplus is equal to $1.20.

Question 6

Suppose you want to get to Orlando, Florida, for the week-long spring break.You can get there in two and one-half days by bus, and back in another two and one-half days.This will cost you $20 round-trip.You can fly there and back in four hours each way.This will cost $200.Which of the following is not true?

Accepted Answer

A) It may be economically rational for you to go by plane rather than by bus. 
B) Depending on what else you can do that week, it may be economically rational for you to not go at all rather than to go by bus. 
C) The true cost of going to Orlando is either the time or the money you spend traveling, whichever it is you value more. 
D) The more you'd enjoy Orlando, the more economically rational it becomes for you to fly there instead of taking the bus. 
E) It is possible that it is rational for you to fly and rational for others to take the bus. 
A) It may be economically rational for you to go by plane rather than by bus. 
B) Depending on what else you can do that week, it may be economically rational for you to not go at all rather than to go by bus. 
C) The true cost of going to Orlando is either the time or the money you spend traveling, whichever it is you value more. 
D) The more you'd enjoy Orlando, the more economically rational it becomes for you to fly there instead of taking the bus. 
E) It is possible that it is rational for you to fly and rational for others to take the bus.

Question 7

Exhibit 6-11   At point a in Exhibit 6-11, the monetary value that approximates the total utility received is

Accepted Answer

A) $5 
B) $9 
C) $20 
D) $26 
E) $45 
A) $5 
B) $9 
C) $20 
D) $26 
E) $45

Question 8

Exhibit 6-5   In Exhibit 6-5, the marginal utility of consuming the first scone is

Accepted Answer

A) 0 
B) 2 
C) 8 
D) 9 
E) 10 
A) 0 
B) 2 
C) 8 
D) 9 
E) 10

Question 9

When income is allocated to two goods, x and y, consumer equilibrium occurs when

Accepted Answer

A) MUx = MUy 
B) MUx = MUy, and the budget is exhausted 
C) MUx/Py = PUx/Py 
D) MUx/Py = PUx/Py, and some money is not spent 
E) MUx/Py = PUx/Py, and the budget is exhausted 
A) MUx = MUy 
B) MUx = MUy, and the budget is exhausted 
C) MUx/Py = PUx/Py 
D) MUx/Py = PUx/Py, and some money is not spent 
E) MUx/Py = PUx/Py, and the budget is exhausted

Question 10

If by purchasing a little more milk and a little less ice cream you could increase your total utility,

Accepted Answer

A) the MU of milk must be greater than that of ice cream 
B) the MU of ice cream must be greater than that of milk 
C) the MU/P of milk must be greater than that of ice cream 
D) milk must be cheaper than ice cream 
E) the MU of milk will increase 
A) the MU of milk must be greater than that of ice cream 
B) the MU of ice cream must be greater than that of milk 
C) the MU/P of milk must be greater than that of ice cream 
D) milk must be cheaper than ice cream 
E) the MU of milk will increase

Question 11

Different people may have different tastes, but their tastes do not change over time.

Accepted Answer

A) True 
 B)False

Question 12

Consumers derive consumer surplus whenever

Accepted Answer

A) the monetary value of total utility equals total expenditure 
B) the monetary value of total utility is greater than total expenditure 
C) the monetary value of total utility is less than total expenditure 
D) marginal utility is greater than total utility 
E) marginal utility is less than total utility 
A) the monetary value of total utility equals total expenditure 
B) the monetary value of total utility is greater than total expenditure 
C) the monetary value of total utility is less than total expenditure 
D) marginal utility is greater than total utility 
E) marginal utility is less than total utility

Question 13

Exhibit 6-5   In Exhibit 6-5, the marginal utility of consuming the second scone is

Accepted Answer

A) 12 
B) 9 
C) 8 
D) 19 
E) 6 
A) 12 
B) 9 
C) 8 
D) 19 
E) 6

Question 14

If marginal utility is positive, then total utility is

Accepted Answer

A) constant 
B) negative 
C) increasing 
D) decreasing 
E) 0 
A) constant 
B) negative 
C) increasing 
D) decreasing 
E) 0

Question 15

One reason why a consumer might buy from a high-priced local hardware store instead of going to a big discount store several miles away in another community is that

Accepted Answer

A) the local store will still have lower money prices 
B) the time cost of going to the local store is equal to going to the discount store 
C) comparing the sum of money prices and time cost, the local hardware store is a bargain for people who value time highly 
D) comparing the sum of money prices and time cost, the local hardware store is a bargain for people who earn low hourly wages 
E) the time cost of going to the discount store is less than going to the local hardware store 
A) the local store will still have lower money prices 
B) the time cost of going to the local store is equal to going to the discount store 
C) comparing the sum of money prices and time cost, the local hardware store is a bargain for people who value time highly 
D) comparing the sum of money prices and time cost, the local hardware store is a bargain for people who earn low hourly wages 
E) the time cost of going to the discount store is less than going to the local hardware store

Question 16

When residential water users are charged a flat monthly rate for water, the marginal cost of an extra thousand gallons of water to a household is zero.

Accepted Answer

A) True 
 B)False

Question 17

Exhibit 6-19   Refer to Exhibit 6-19, which is a demand curve for Medicare benefits.A $1 payment for services would reduce utilization, yet would still leave beneficiaries with a substantial consumer surplus.

Accepted Answer

A) True 
 B)False

Question 18

People who use drive-through windows at restaurants and eat while on the road tend to

Accepted Answer

A) have a low opportunity cost of time 
B) have a high opportunity cost of time 
C) not maximize their utility 
D) act irrationally 
E) value their money more than their time 
A) have a low opportunity cost of time 
B) have a high opportunity cost of time 
C) not maximize their utility 
D) act irrationally 
E) value their money more than their time

Question 19

Consumer preferences

Accepted Answer

A) do not vary from one consumer to another 
B) have little to do with personal tastes and income 
C) are not influenced by the utility of goods 
D) are individual evaluations of goods and services 
E) can be objectively measured and compared across individuals 
A) do not vary from one consumer to another 
B) have little to do with personal tastes and income 
C) are not influenced by the utility of goods 
D) are individual evaluations of goods and services 
E) can be objectively measured and compared across individuals

Question 20

Exhibit 6-2   Consider Exhibit 6-2 which shows the marginal utility of consuming milk.The total utility from 3 glasses of milk is

Accepted Answer

A) 25 units of utility 
B) 30 units of utility 
C) 35 units of utility 
D) 65 units of utility 
E) 90 units of utility 
A) 25 units of utility 
B) 30 units of utility 
C) 35 units of utility 
D) 65 units of utility 
E) 90 units of utility

Exam 6: Consumer Choice and Demand

Utility is

As a consumer buys more of a good, total utility eventually becomes negative.

Diminishing marginal utility means that

If the price of a good falls, the marginal utility per dollar received from consuming a specific unit of that good

Suppose that Hannah spends $3 to buy five biscuits.The marginal utility of the fifth biscuit is valued at $0.60; total utility of the five biscuits is valued at $4.20.Given this information, what do we know about consumer surplus?

Exhibit 6-11 At point a in Exhibit 6-11, the monetary value that approximates the total utility received is

Exhibit 6-5 In Exhibit 6-5, the marginal utility of consuming the first scone is

When income is allocated to two goods, x and y, consumer equilibrium occurs when

If by purchasing a little more milk and a little less ice cream you could increase your total utility,

Different people may have different tastes, but their tastes do not change over time.

Consumers derive consumer surplus whenever

Exhibit 6-5 In Exhibit 6-5, the marginal utility of consuming the second scone is

If marginal utility is positive, then total utility is

One reason why a consumer might buy from a high-priced local hardware store instead of going to a big discount store several miles away in another community is that

When residential water users are charged a flat monthly rate for water, the marginal cost of an extra thousand gallons of water to a household is zero.

Exhibit 6-19 Refer to Exhibit 6-19, which is a demand curve for Medicare benefits.A $1 payment for services would reduce utilization, yet would still leave beneficiaries with a substantial consumer surplus.

People who use drive-through windows at restaurants and eat while on the road tend to

Consumer preferences

Exhibit 6-2 Consider Exhibit 6-2 which shows the marginal utility of consuming milk.The total utility from 3 glasses of milk is

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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