Question 1

Your willingness to pay additional money for time-saving goods depends primarily on

Accepted Answer

A) the opportunity cost of your time 
B) your wealth and property 
C) your social status 
D) the number of people in your household 
E) the distance between your home and your workplace 
A) the opportunity cost of your time 
B) your wealth and property 
C) your social status 
D) the number of people in your household 
E) the distance between your home and your workplace

Question 2

Basil is maximizing his utility from consuming tea and crumpets.If the marginal utility of the last crumpet was 32 units of utility and the prices of tea and crumpets are $4 and $8, respectively, what was the marginal utility of the last cup of tea Basil consumed?

Accepted Answer

A) 2 units of utility 
B) 12 units of utility 
C) $6 
D) 128 units of utility 
E) 16 units of utility 
A) 2 units of utility 
B) 12 units of utility 
C) $6 
D) 128 units of utility 
E) 16 units of utility

Question 3

If the price of a good is 0, a consumer will

Accepted Answer

A) consume all units that have positive total utility 
B) consume an infinite quantity 
C) consume all units with positive marginal utility 
D) consume the entire amount supplied 
E) consume until total utility becomes 0 
A) consume all units that have positive total utility 
B) consume an infinite quantity 
C) consume all units with positive marginal utility 
D) consume the entire amount supplied 
E) consume until total utility becomes 0

Question 4

Exhibit 6-11   At point b in Exhibit 6-11, total utility is valued at

Accepted Answer

A) $30, consumer expenditure is $20, and consumer surplus is $10 
B) $26, consumer expenditure is $20, and consumer surplus is $6 
C) $20, consumer expenditure is $20, and consumer surplus is $0 
D) $30, consumer expenditure is $4, and consumer surplus is $26 
E) $20, consumer expenditure is $4, and consumer surplus is $16 
A) $30, consumer expenditure is $20, and consumer surplus is $10 
B) $26, consumer expenditure is $20, and consumer surplus is $6 
C) $20, consumer expenditure is $20, and consumer surplus is $0 
D) $30, consumer expenditure is $4, and consumer surplus is $26 
E) $20, consumer expenditure is $4, and consumer surplus is $16

Question 5

If you buy a good, its expected marginal value to you

Accepted Answer

A) is equal to its price 
B) is greater than its price 
C) is less than its price 
D) may be less than or equal to but not greater than its price 
E) may be greater than or equal to but not less than its price 
A) is equal to its price 
B) is greater than its price 
C) is less than its price 
D) may be less than or equal to but not greater than its price 
E) may be greater than or equal to but not less than its price

Question 6

Suppose that for Jason the marginal utility of $50-per-serving caviar is 100 and the marginal utility of $1-per-serving popcorn is 10.For his snack, Jason should buy

Accepted Answer

A) the caviar if he has the $50; otherwise the popcorn 
B) the caviar if he has the $50; otherwise nothing 
C) the popcorn, whether he has the $50 or not 
D) one serving each of the caviar and popcorn, if he has $51 
E) five servings of popcorn for each serving of caviar 
A) the caviar if he has the $50; otherwise the popcorn 
B) the caviar if he has the $50; otherwise nothing 
C) the popcorn, whether he has the $50 or not 
D) one serving each of the caviar and popcorn, if he has $51 
E) five servings of popcorn for each serving of caviar

Question 7

A measure of consumer surplus in any market is

Accepted Answer

A) total expenditure on the good 
B) the area above the supply curve and below the price 
C) the area beneath the demand curve 
D) the area beneath the demand curve and above the price 
E) the market price 
A) total expenditure on the good 
B) the area above the supply curve and below the price 
C) the area beneath the demand curve 
D) the area beneath the demand curve and above the price 
E) the market price

Question 8

Newspaper vending machines illustrate that publishers believe

Accepted Answer

A) the average utility of two identical papers is zero or less 
B) the total utility from two identical newspapers is zero or less 
C) the marginal utility of a second identical newspaper is zero or less 
D) the marginal utility of a second identical newspaper is greater than the marginal utility of the first newspaper 
E) the total utility from two identical newspapers is less than the total utility from the first newspaper 
A) the average utility of two identical papers is zero or less 
B) the total utility from two identical newspapers is zero or less 
C) the marginal utility of a second identical newspaper is zero or less 
D) the marginal utility of a second identical newspaper is greater than the marginal utility of the first newspaper 
E) the total utility from two identical newspapers is less than the total utility from the first newspaper

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.Which of the following statements is true?

Accepted Answer

A) the marginal utility of milk is always positive 
B) the marginal utility of milk first increases, reaches a maximum and then decreases 
C) the marginal utility of milk is diminishing throughout 
D) the marginal utility of the 4th glass of milk is greater than the marginal utility of the 1st glass of milk 
E) the marginal utility of milk while diminishing is always greater than zero 
A) the marginal utility of milk is always positive 
B) the marginal utility of milk first increases, reaches a maximum and then decreases 
C) the marginal utility of milk is diminishing throughout 
D) the marginal utility of the 4th glass of milk is greater than the marginal utility of the 1st glass of milk 
E) the marginal utility of milk while diminishing is always greater than zero

Question 10

Exhibit 6-9   Suppose you have $30 to spend on either bowling or billiards.A game of billiards costs you $4, and bowling costs $2 per game.Using the information in Exhibit 6-9, determine the utility-maximizing combination of bowling and billiards.

Accepted Answer

A) four billiards games, four games of bowling 
B) five billiards games, two games of bowling 
C) three billiards games, eight games of bowling 
D) five billiards games, five games of bowling 
E) twelve games of bowling 
A) four billiards games, four games of bowling 
B) five billiards games, two games of bowling 
C) three billiards games, eight games of bowling 
D) five billiards games, five games of bowling 
E) twelve games of bowling

Question 11

A decrease in price along the elastic segment of a demand curve will

Accepted Answer

A) increase total utility, marginal utility, consumer surplus, and consumer expenditure 
B) decrease total utility, consumer surplus, and consumer expenditure and increase marginal utility 
C) decrease total utility and consumer surplus and increase consumer expenditure and marginal utility 
D) increase consumer surplus through a decrease in consumer expenditure 
E) decrease consumer surplus through an increase in consumer expenditure 
A) increase total utility, marginal utility, consumer surplus, and consumer expenditure 
B) decrease total utility, consumer surplus, and consumer expenditure and increase marginal utility 
C) decrease total utility and consumer surplus and increase consumer expenditure and marginal utility 
D) increase consumer surplus through a decrease in consumer expenditure 
E) decrease consumer surplus through an increase in consumer expenditure

Question 12

In terms of utility theory, "equilibrium" in the real world means that

Accepted Answer

A) households are consuming as much of every commodity as they would like 
B) households have spent their incomes in such a way that their overall satisfaction is maximized 
C) households have spent their incomes in such a way that their marginal utility is maximized 
D) households have spent their incomes in such a way that their marginal utility is zero for every product consumed 
E) households have spent their incomes in such a way that their total utility is zero 
A) households are consuming as much of every commodity as they would like 
B) households have spent their incomes in such a way that their overall satisfaction is maximized 
C) households have spent their incomes in such a way that their marginal utility is maximized 
D) households have spent their incomes in such a way that their marginal utility is zero for every product consumed 
E) households have spent their incomes in such a way that their total utility is zero

Question 13

The market demand curve is

Accepted Answer

A) any individual's demand curve multiplied by the number of consumers in the market 
B) the relationship between income and quantity demanded 
C) the horizontal sum of the individual demand curves for all consumers in the market 
D) the vertical summation of all individual demand curves 
E) the sum of prices paid at each quantity demanded 
A) any individual's demand curve multiplied by the number of consumers in the market 
B) the relationship between income and quantity demanded 
C) the horizontal sum of the individual demand curves for all consumers in the market 
D) the vertical summation of all individual demand curves 
E) the sum of prices paid at each quantity demanded

Question 14

Suppose you have spent your entire budget and, for all the goods you purchase, the marginal utilities per dollar spent are identical.Which of the following is true?

Accepted Answer

A) You are being irrational. 
B) You can increase your utility by reallocating your income. 
C) You will reduce your utility if you allocate income in any other way. 
D) You are minimizing your marginal utility. 
E) You can avoid diminishing marginal utility. 
A) You are being irrational. 
B) You can increase your utility by reallocating your income. 
C) You will reduce your utility if you allocate income in any other way. 
D) You are minimizing your marginal utility. 
E) You can avoid diminishing marginal utility.

Question 15

Suppose you go to a wedding reception that has free drinks.What is likely to be the marginal utility of the last drink you had?

Accepted Answer

A) infinite 
B) 0 
C) 1 
D) less than 0 
E) greater than 1 
A) infinite 
B) 0 
C) 1 
D) less than 0 
E) greater than 1

Question 16

If other things constant, as more bananas are consumed, marginal utility eventually

Accepted Answer

A) decreases at the same rate for all people 
B) decreases at the same rate for all goods for a given person 
C) increases at the same rate for all people 
D) decreases at different rates for different people and for other goods 
E) decreases at different rates for different people but at the same rate as other goods for an individual 
A) decreases at the same rate for all people 
B) decreases at the same rate for all goods for a given person 
C) increases at the same rate for all people 
D) decreases at different rates for different people and for other goods 
E) decreases at different rates for different people but at the same rate as other goods for an individual

Question 17

Exhibit 6-21   Refer to Exhibit 6-21.When this market is in equilibrium, the consumer surplus will be area

Accepted Answer

A) True 
 B)False

Question 18

If MUx/Px > MUy/Pyx, the consumer can increase utility by buying more of good x.

Accepted Answer

A) True 
 B)False

Question 19

A business executive who buys a portable computer so that she can work on airplanes is trying to reduce the cost of traveling.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 6-15   Which area in Exhibit 6-15 represents consumer surplus at market equilibrium?

Accepted Answer

A) area a 
B) area b 
C) area c 
D) areas a + b + c 
E) areas a + b 
A) area a 
B) area b 
C) area c 
D) areas a + b + c 
E) areas a + b

Exam 6: Consumer Choice and Demand

Your willingness to pay additional money for time-saving goods depends primarily on

Basil is maximizing his utility from consuming tea and crumpets.If the marginal utility of the last crumpet was 32 units of utility and the prices of tea and crumpets are $4 and $8, respectively, what was the marginal utility of the last cup of tea Basil consumed?

If the price of a good is 0, a consumer will

Exhibit 6-11 At point b in Exhibit 6-11, total utility is valued at

If you buy a good, its expected marginal value to you

Suppose that for Jason the marginal utility of $50-per-serving caviar is 100 and the marginal utility of $1-per-serving popcorn is 10.For his snack, Jason should buy

A measure of consumer surplus in any market is

Newspaper vending machines illustrate that publishers believe

Exhibit 6-1 Consider Exhibit 6-1 which shows the total utility derived from various numbers of glasses of milk consumed in a day.Which of the following statements is true?

Exhibit 6-9 Suppose you have $30 to spend on either bowling or billiards.A game of billiards costs you $4, and bowling costs $2 per game.Using the information in Exhibit 6-9, determine the utility-maximizing combination of bowling and billiards.

A decrease in price along the elastic segment of a demand curve will

In terms of utility theory, "equilibrium" in the real world means that

The market demand curve is

Suppose you have spent your entire budget and, for all the goods you purchase, the marginal utilities per dollar spent are identical.Which of the following is true?

Suppose you go to a wedding reception that has free drinks.What is likely to be the marginal utility of the last drink you had?

If other things constant, as more bananas are consumed, marginal utility eventually

Exhibit 6-21 Refer to Exhibit 6-21.When this market is in equilibrium, the consumer surplus will be area

If MUx/Px > MUy/Pyx, the consumer can increase utility by buying more of good x.

A business executive who buys a portable computer so that she can work on airplanes is trying to reduce the cost of traveling.

Exhibit 6-15 Which area in Exhibit 6-15 represents consumer surplus at market equilibrium?

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_yx, the consumer can increase utility by buying more of good x.