Question 1

The law of diminishing marginal utility explains why an individual's demand curve is elastic.

Accepted Answer

A) True 
 B)False

Question 2

Assume that you allocate your income to calzones and juice and that you have not yet spent your entire budget.If the marginal utility of a fourth calzone is 100 and the marginal utility of a third glass of juice is 50, you would

Accepted Answer

A) eat a fourth calzone because it has a higher marginal utility 
B) drink a third glass of juice because you've had less juice 
C) consider the total utility received so far from calzones and juice before deciding what to consume next 
D) consider the relative prices of calzones and juice before deciding what to consume next 
E) consider whether or not marginal utility is diminishing before deciding what to consume next 
A) eat a fourth calzone because it has a higher marginal utility 
B) drink a third glass of juice because you've had less juice 
C) consider the total utility received so far from calzones and juice before deciding what to consume next 
D) consider the relative prices of calzones and juice before deciding what to consume next 
E) consider whether or not marginal utility is diminishing before deciding what to consume next

Question 3

Which of the following varies along a given demand curve?

Accepted Answer

A) consumer preferences 
B) prices of substitutes 
C) prices of complements 
D) the price of the good itself 
E) income 
A) consumer preferences 
B) prices of substitutes 
C) prices of complements 
D) the price of the good itself 
E) income

Question 4

Exhibit 6-20   Refer to Exhibit 6-20.If D, D' and D'' represents the demand curves for the only three consumers in a market, then the market quantity demanded at a price of $30 will be:

Accepted Answer

A) 40 
B) 60 
C) 80 
D) 100 
E) 120 
A) 40 
B) 60 
C) 80 
D) 100 
E) 120

Question 5

If Ellie Mae spends her income on possum and biscuits and the price of possum is three times the price of biscuits, then when Ellie Mae maximizes total utility, she will buy

Accepted Answer

A) equal quantities of possum and biscuits 
B) three times as much possum as biscuits 
C) three times as many biscuits as portions of possum 
D) biscuits and possum until the marginal utility of possum is three times the marginal utility of biscuits 
E) biscuits and possum until the marginal utility of biscuits is three times the marginal utility of possum 
A) equal quantities of possum and biscuits 
B) three times as much possum as biscuits 
C) three times as many biscuits as portions of possum 
D) biscuits and possum until the marginal utility of possum is three times the marginal utility of biscuits 
E) biscuits and possum until the marginal utility of biscuits is three times the marginal utility of possum

Question 6

When price decreases, consumer surplus

Accepted Answer

A) increases 
B) remains constant 
C) decreases 
D) becomes negative 
E) may increase or decrease 
A) increases 
B) remains constant 
C) decreases 
D) becomes negative 
E) may increase or decrease

Question 7

The fact that the washroom usually has paper towels left (free to the consumer)suggests that the marginal utility of paper towels quickly diminishes to 0 for each consumer.

Accepted Answer

A) True 
 B)False

Question 8

Elvis values the first gravy sandwich at $5, the second at $4.50, the third at $4.If he buys three for $4 each, his consumer surplus is

Accepted Answer

A) $5 
B) $4 
C) $1.50 
D) $9.50 
E) $12 
A) $5 
B) $4 
C) $1.50 
D) $9.50 
E) $12

Question 9

A utility-maximizing consumer equalizes marginal utilities across all goods.

Accepted Answer

A) True 
 B)False

Question 10

The law of diminishing marginal utility may be illustrated by a person

Accepted Answer

A) buying additional goods after getting a pay raise 
B) eating more twinkies but enjoying them less 
C) giving some of income to a needy person 
D) who spends more hours studying than do his fellow students 
E) buying goods so long as their marginal utility is greater than zero 
A) buying additional goods after getting a pay raise 
B) eating more twinkies but enjoying them less 
C) giving some of income to a needy person 
D) who spends more hours studying than do his fellow students 
E) buying goods so long as their marginal utility is greater than zero

Question 11

Exhibit 6-11   If Ken is originally at point a in Exhibit 6-11 and then moves to point b due to a reduction in the price of neckties, his expenditure

Accepted Answer

A) increases from $20 to $25, increasing both consumer surplus and total utility 
B) increases from $20 to $25, decreasing both consumer surplus and total utility 
C) stays at $20, leaving both consumer surplus and total utility unchanged 
D) stays at $20, but both consumer surplus and total utility increase 
E) decreases as price falls, increasing both consumer and surplus and total utility 
A) increases from $20 to $25, increasing both consumer surplus and total utility 
B) increases from $20 to $25, decreasing both consumer surplus and total utility 
C) stays at $20, leaving both consumer surplus and total utility unchanged 
D) stays at $20, but both consumer surplus and total utility increase 
E) decreases as price falls, increasing both consumer and surplus and total utility

Question 12

Negative marginal utility means that

Accepted Answer

A) total utility is also negative 
B) marginal utility increases as additional units are consumed 
C) the price of the product increases as additional units are consumed 
D) the total revenue spent on the product decreases as more of the product is purchased 
E) total utility decreases as additional units are consumed 
A) total utility is also negative 
B) marginal utility increases as additional units are consumed 
C) the price of the product increases as additional units are consumed 
D) the total revenue spent on the product decreases as more of the product is purchased 
E) total utility decreases as additional units are consumed

Question 13

Which of the following people is least likely to clip store coupons?

Accepted Answer

A) a retired person 
B) an unemployed person 
C) a low-income worker 
D) a high-priced consultant 
E) a graduate student on summer break 
A) a retired person 
B) an unemployed person 
C) a low-income worker 
D) a high-priced consultant 
E) a graduate student on summer break

Question 14

Consumer surplus can be used to compare the effects of any of the following except for different

Accepted Answer

A) market structures 
B) tax structures 
C) production technologies, such as capital-intensive versus labor-intensive 
D) public programs 
E) levels of medical care benefits 
A) market structures 
B) tax structures 
C) production technologies, such as capital-intensive versus labor-intensive 
D) public programs 
E) levels of medical care benefits

Question 15

Exhibit 6-3   In Exhibit 6-3, what is the total utility of three pretzels?

Accepted Answer

A) 5 
B) 15 
C) 40 
D) 55 
E) 70 
A) 5 
B) 15 
C) 40 
D) 55 
E) 70

Question 16

Consumers must understand the law of diminishing marginal utility in order to maximize their satisfaction.

Accepted Answer

A) True 
 B)False

Question 17

Marginal utility is negative only when quantity demanded is negative.

Accepted Answer

A) True 
 B)False

Question 18

In most markets, each consumer

Accepted Answer

A) faces the same money price and time price 
B) faces different money prices and different time prices 
C) faces the same money price but different time prices 
D) faces different money prices but the same time price 
E) has the same individual demand curve for the product 
A) faces the same money price and time price 
B) faces different money prices and different time prices 
C) faces the same money price but different time prices 
D) faces different money prices but the same time price 
E) has the same individual demand curve for the product

Question 19

The law of diminishing marginal utility implies it is possible that the marginal utility of my tenth pistachio nut is less than the marginal utility of my third pistachio nut, other things constant.

Accepted Answer

A) True 
 B)False

Question 20

Your marginal utility of a third waffle is 10 and your marginal utility of a second piece of ham is 30.If you eat the third waffle, which of the following must be true?

Accepted Answer

A) You are irrational. 
B) You prefer waffles. 
C) The price of a waffle is less than one third the price of a piece of ham. 
D) The price of a waffle is more than the price of a piece of ham. 
E) The price of a waffle is three times the price of a piece of ham. 
A) You are irrational. 
B) You prefer waffles. 
C) The price of a waffle is less than one third the price of a piece of ham. 
D) The price of a waffle is more than the price of a piece of ham. 
E) The price of a waffle is three times the price of a piece of ham.

Exam 6: Consumer Choice and Demand

The law of diminishing marginal utility explains why an individual's demand curve is elastic.

Assume that you allocate your income to calzones and juice and that you have not yet spent your entire budget.If the marginal utility of a fourth calzone is 100 and the marginal utility of a third glass of juice is 50, you would

Which of the following varies along a given demand curve?

Exhibit 6-20 Refer to Exhibit 6-20.If D, D' and D'' represents the demand curves for the only three consumers in a market, then the market quantity demanded at a price of $30 will be:

If Ellie Mae spends her income on possum and biscuits and the price of possum is three times the price of biscuits, then when Ellie Mae maximizes total utility, she will buy

When price decreases, consumer surplus

The fact that the washroom usually has paper towels left (free to the consumer)suggests that the marginal utility of paper towels quickly diminishes to 0 for each consumer.

Elvis values the first gravy sandwich at $5, the second at $4.50, the third at $4.If he buys three for $4 each, his consumer surplus is

A utility-maximizing consumer equalizes marginal utilities across all goods.

The law of diminishing marginal utility may be illustrated by a person

Exhibit 6-11 If Ken is originally at point a in Exhibit 6-11 and then moves to point b due to a reduction in the price of neckties, his expenditure

Negative marginal utility means that

Which of the following people is least likely to clip store coupons?

Consumer surplus can be used to compare the effects of any of the following except for different

Exhibit 6-3 In Exhibit 6-3, what is the total utility of three pretzels?

Consumers must understand the law of diminishing marginal utility in order to maximize their satisfaction.

Marginal utility is negative only when quantity demanded is negative.

In most markets, each consumer

The law of diminishing marginal utility implies it is possible that the marginal utility of my tenth pistachio nut is less than the marginal utility of my third pistachio nut, other things constant.

Your marginal utility of a third waffle is 10 and your marginal utility of a second piece of ham is 30.If you eat the third waffle, which of the following must be true?

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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