Question 1

The cost of consumption has two components:

Accepted Answer

A) the substitution effect and the income effect 
B) the law of demand and the law of diminishing marginal utility 
C) the price effect and the income effect 
D) the money price and the time price 
E) saving and taxes 
A) the substitution effect and the income effect 
B) the law of demand and the law of diminishing marginal utility 
C) the price effect and the income effect 
D) the money price and the time price 
E) saving and taxes

Question 2

The law of diminishing marginal utility implies that the marginal utility of my fifth hot dog is less than the marginal utility of my second soft drink, other things constant.

Accepted Answer

A) True 
 B)False

Question 3

A consumer maximizes utility when the marginal utilities of all goods

Accepted Answer

A) having positive money prices that are equal to zero 
B) are equal 
C) are maximized 
D) are equal to the opportunity costs for all goods that are considered necessities 
E) are exactly proportional to their market prices 
A) having positive money prices that are equal to zero 
B) are equal 
C) are maximized 
D) are equal to the opportunity costs for all goods that are considered necessities 
E) are exactly proportional to their market prices

Question 4

When a service, such as medical care, is provided free of charge,

Accepted Answer

A) most people consume an infinite amount of it 
B) most people do not much care about getting good value for their money 
C) people do not derive any consumer surplus from it 
D) we say that the demand for it is perfectly elastic 
E) we say that the demand for it is perfectly inelastic 
A) most people consume an infinite amount of it 
B) most people do not much care about getting good value for their money 
C) people do not derive any consumer surplus from it 
D) we say that the demand for it is perfectly elastic 
E) we say that the demand for it is perfectly inelastic

Question 5

Exhibit 6-17   Consider Exhibit 6-17 which represents the market demand for DVDs.If the price of DVDs increases from $20 to $25, what happens to consumer's surplus?

Accepted Answer

A) nothing 
B) decreases by $25 
C) decreases by $17.50 
D) increases by $17.50 
E) increases by $25 
A) nothing 
B) decreases by $25 
C) decreases by $17.50 
D) increases by $17.50 
E) increases by $25

Question 6

What happens to consumer surplus as price falls along a given demand curve?

Accepted Answer

A) It always increases. 
B) It always decreases. 
C) It never changes. 
D) It increases only if price increases just a little. 
E) It depends on the elasticity of demand and supply. 
A) It always increases. 
B) It always decreases. 
C) It never changes. 
D) It increases only if price increases just a little. 
E) It depends on the elasticity of demand and supply.

Question 7

Exhibit 6-16   Exhibit 6-16 shows Reggie's demand for apples.If there are 100 people in this economy, and each has the same demand for apples as Reggie, what is the total quantity demanded in the market for apples at P = $6?

Accepted Answer

A) 600 pounds of apples 
B) 200 pounds of apples 
C) the average of all the quantities demanded 
D) the average of all the prices 
E) the average quantity demanded divided by the average price 
A) 600 pounds of apples 
B) 200 pounds of apples 
C) the average of all the quantities demanded 
D) the average of all the prices 
E) the average quantity demanded divided by the average price

Question 8

Consumer surplus is

Accepted Answer

A) the amount by which quantity supplied exceeds quantity demanded at the current market price 
B) the amount by which quantity demanded exceeds quantity supplied at the current market price 
C) the change in total utility derived from a one-unit change in the consumption of a good 
D) the difference between the price of the good paid by the consumer and the costs of production to the seller 
E) the difference between the maximum amount that a consumer is willing to pay for a given amount of a good and the amount that the consumer actually pays 
A) the amount by which quantity supplied exceeds quantity demanded at the current market price 
B) the amount by which quantity demanded exceeds quantity supplied at the current market price 
C) the change in total utility derived from a one-unit change in the consumption of a good 
D) the difference between the price of the good paid by the consumer and the costs of production to the seller 
E) the difference between the maximum amount that a consumer is willing to pay for a given amount of a good and the amount that the consumer actually pays

Question 9

Exhibit 6-1   Consider Exhibit 6-1 which shows the total utility derived from various numbers of glasses of milk consumed in a day.The marginal utility of the second glass of milk is

Accepted Answer

A) 0 units of utility 
B) 5 units of utility 
C) 8 units of utility 
D) 12 units of utility 
E) 14 units of utility 
A) 0 units of utility 
B) 5 units of utility 
C) 8 units of utility 
D) 12 units of utility 
E) 14 units of utility

Question 10

If MUx/Px > MUy/Py, the consumer can increase utility by buying more of good x, which will cause the MUx to rise.

Accepted Answer

A) True 
 B)False

Question 11

If Arnold thinks his last dollar spent golfing yields less satisfaction than the last dollar spent on movies, and Arnold is a utility-maximizing consumer, he should

Accepted Answer

A) golf more so that the total satisfaction from this activity will increase 
B) spend less on movies so that the marginal satisfaction from expenditures in this area will increase 
C) golf less and spend more on movies 
D) eliminate golfing from his schedule 
E) golf more since it costs less 
A) golf more so that the total satisfaction from this activity will increase 
B) spend less on movies so that the marginal satisfaction from expenditures in this area will increase 
C) golf less and spend more on movies 
D) eliminate golfing from his schedule 
E) golf more since it costs less

Question 12

Exhibit 6-20   Refer to Exhibit 6-20.If D, D' and D'' represent the demand curvesfor the only three consumers in a market, then the market demand curve will be more _________ than each of the three individual demand curves.

Accepted Answer

A) steep (slope will be more negative) 
B) elastic 
C) flat (slope will be less negative) 
D) inelastic 
E) both a and d 
A) steep (slope will be more negative) 
B) elastic 
C) flat (slope will be less negative) 
D) inelastic 
E) both a and d

Question 13

If price equals 0, then consumer surplus

Accepted Answer

A) is 0 
B) is maximized 
C) is price times quantity 
D) is equal to marginal utility 
E) cannot be determined 
A) is 0 
B) is maximized 
C) is price times quantity 
D) is equal to marginal utility 
E) cannot be determined

Question 14

Time has a positive value for most people, but their opportunity costs of time differ.

Accepted Answer

A) True 
 B)False

Question 15

If the marginal utility of each good a consumer buys does not diminish but remains constant, we should see consumers

Accepted Answer

A) buying no goods at all 
B) spending all of their income on the good with the highest marginal utility 
C) buying one unit of each good 
D) buying only the least expensive good 
E) leaving the store in total confusion 
A) buying no goods at all 
B) spending all of their income on the good with the highest marginal utility 
C) buying one unit of each good 
D) buying only the least expensive good 
E) leaving the store in total confusion

Question 16

The market demand curve is the sum of individual quantities demanded at each price.

Accepted Answer

A) True 
 B)False

Question 17

In order to derive a demand curve for cheese, we would change

Accepted Answer

A) income and hold other things constant 
B) tastes and hold other things constant 
C) the price of other goods and hold everything else constant 
D) the price of cheese and hold other things constant 
E) the price of all goods, including cheese and hold other things constant 
A) income and hold other things constant 
B) tastes and hold other things constant 
C) the price of other goods and hold everything else constant 
D) the price of cheese and hold other things constant 
E) the price of all goods, including cheese and hold other things constant

Question 18

Exhibit 6-1   Consider Exhibit 6-1 which shows the total utility derived from various numbers of glasses of milk consumed in a day.The total utility curve does not exhibit diminishiung returns.

Accepted Answer

A) True 
 B)False

Question 19

Requiring Medicare participants to pay a small fraction of the cost of their medical care

Accepted Answer

A) reduces the quantity of health care they demand to zero 
B) has no effect on the amount of health care they consume, but does generate revenue for the government 
C) reduces their utilization of health care without compromising their health 
D) actually increases the amount of consumer surplus they receive 
E) amounts to a significant burden for most of those participants 
A) reduces the quantity of health care they demand to zero 
B) has no effect on the amount of health care they consume, but does generate revenue for the government 
C) reduces their utilization of health care without compromising their health 
D) actually increases the amount of consumer surplus they receive 
E) amounts to a significant burden for most of those participants

Question 20

Marginal utility is the

Accepted Answer

A) overall satisfaction obtained from consuming a good 
B) additional satisfaction obtained from consuming one more unit of a good 
C) average satisfaction obtained from consuming a good 
D) the change in satisfaction obtained from consuming 1 percent more of a good 
E) additional cost of one more unit of a good 
A) overall satisfaction obtained from consuming a good 
B) additional satisfaction obtained from consuming one more unit of a good 
C) average satisfaction obtained from consuming a good 
D) the change in satisfaction obtained from consuming 1 percent more of a good 
E) additional cost of one more unit of a good

Exam 6: Consumer Choice and Demand

The cost of consumption has two components:

The law of diminishing marginal utility implies that the marginal utility of my fifth hot dog is less than the marginal utility of my second soft drink, other things constant.

A consumer maximizes utility when the marginal utilities of all goods

When a service, such as medical care, is provided free of charge,

Exhibit 6-17 Consider Exhibit 6-17 which represents the market demand for DVDs.If the price of DVDs increases from $20 to $25, what happens to consumer's surplus?

What happens to consumer surplus as price falls along a given demand curve?

Exhibit 6-16 Exhibit 6-16 shows Reggie's demand for apples.If there are 100 people in this economy, and each has the same demand for apples as Reggie, what is the total quantity demanded in the market for apples at P = $6?

Consumer surplus is

Exhibit 6-1 Consider Exhibit 6-1 which shows the total utility derived from various numbers of glasses of milk consumed in a day.The marginal utility of the second glass of milk is

If MUx/Px > MUy/Py, the consumer can increase utility by buying more of good x, which will cause the MUx to rise.

If Arnold thinks his last dollar spent golfing yields less satisfaction than the last dollar spent on movies, and Arnold is a utility-maximizing consumer, he should

Exhibit 6-20 Refer to Exhibit 6-20.If D, D' and D'' represent the demand curvesfor the only three consumers in a market, then the market demand curve will be more _________ than each of the three individual demand curves.

If price equals 0, then consumer surplus

Time has a positive value for most people, but their opportunity costs of time differ.

If the marginal utility of each good a consumer buys does not diminish but remains constant, we should see consumers

The market demand curve is the sum of individual quantities demanded at each price.

In order to derive a demand curve for cheese, we would change

Exhibit 6-1 Consider Exhibit 6-1 which shows the total utility derived from various numbers of glasses of milk consumed in a day.The total utility curve does not exhibit diminishiung returns.

Requiring Medicare participants to pay a small fraction of the cost of their medical care

Marginal utility is the

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

Filters

If MU_x/P_x > MU_y/P_y, the consumer can increase utility by buying more of good x, which will cause the MU_x to rise.