Question 1

The slope of the indifference curve for goods X and Y is called the marginal:

Accepted Answer

A)  product rate. 
B)  rate of transformation. 
C)  rate of substitution. 
D)  rate of utility. 
A)  product rate. 
B)  rate of transformation. 
C)  rate of substitution. 
D)  rate of utility.

Question 2

Assume a consumer purchases a combination of goods X and Y such that MUx / −Px = 20 units of utility per dollar and MUy / Py = 10 units of utility per dollar. To maximize utility, the consumers should buy:

Accepted Answer

A)  neither X nor Y. 
B)  less of both X and Y. 
C)  more of both X and Y. 
D)  more of X and less of Y. 
E)  less of X and more of Y. 
A)  neither X nor Y. 
B)  less of both X and Y. 
C)  more of both X and Y. 
D)  more of X and less of Y. 
E)  less of X and more of Y.

Question 3

Which of the following most directly reflects the law of diminishing marginal utility?

Accepted Answer

A)  After watching two football games, Terry decides to watch a third game. 
B)  A sports fan enjoys watching Monday night football rather than going to the theater. 
C)  After listening to three compact discs, Kim decides to go bowling rather than listen to a fourth disc. 
D)  A musician receives the biggest ovation of the evening after playing the final number of a recital. 
A)  After watching two football games, Terry decides to watch a third game. 
B)  A sports fan enjoys watching Monday night football rather than going to the theater. 
C)  After listening to three compact discs, Kim decides to go bowling rather than listen to a fourth disc. 
D)  A musician receives the biggest ovation of the evening after playing the final number of a recital.

Question 4

JoAnn considers cola and plain sparkling water to be good substitutes. Suppose the price of sugar, a key ingredient used to produce cola, falls. According to the substitution effect, which of the following is most likely to occur?

Accepted Answer

A)  JoAnn will purchase less cola and more sparkling water. 
B)  JoAnn will purchase more cola and less sparkling water. 
C)  JoAnn will purchase more of all goods due to her higher real income. 
D)  JoAnn's demand curve will decrease (shift in), causing her to purchase less cola. 
A)  JoAnn will purchase less cola and more sparkling water. 
B)  JoAnn will purchase more cola and less sparkling water. 
C)  JoAnn will purchase more of all goods due to her higher real income. 
D)  JoAnn's demand curve will decrease (shift in), causing her to purchase less cola.

Question 5

The law of diminishing marginal utility states that total utility increases by smaller and smaller increments as more of a good is consumed.

Accepted Answer

A) True 
 B)False

Question 6

Suppose a consumer is spending all of his/her income on two goods, A and B, in a manner where MUa = 15 and MUb = 80, and the Pa = $5 and the Pb = $20. Then the consumer:

Accepted Answer

A)  is maximizing his/her utility. 
B)  should increase his/her purchases of B and decrease the purchases of A. 
C)  should spend more money on both goods. 
D)  should spend less money on both goods. 
E)  should increase the purchases of A and decrease the purchases of B. 
A)  is maximizing his/her utility. 
B)  should increase his/her purchases of B and decrease the purchases of A. 
C)  should spend more money on both goods. 
D)  should spend less money on both goods. 
E)  should increase the purchases of A and decrease the purchases of B.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

If total utility increases from 10 to 15 for the second unit of a good consumed, the marginal utility of the second unit is 25.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 6-8 Bea's total utility of 3-minute telephone calls $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Quantity of } \
\text { 3-Minute Calls }
\end{array} & \begin{array} { c } 
\text { Total Utility of } \
\text { Telephone Calls }
\end{array} \
\hline 0 & 0 \
1 & 15 \
2 & 28 \
3 & 38 \
4 & 45 \
5 & 50 \
6 & 48 \
\hline
\end{array}$$
-Refer to Exhibit 6-8. Diminishing returns set in after which telephone call?

Accepted Answer

A)  The first. 
B)  The second. 
C)  The third. 
D)  The fifth. 
E)  The sixth. 
A)  The first. 
B)  The second. 
C)  The third. 
D)  The fifth. 
E)  The sixth.

Question 10

The MU/P equalization principle means consumers will exhaust their expenditure budget so that, in the end, the MU/P ratio is:

Accepted Answer

A)  zero for each good. 
B)  higher for goods the consumer wants the most. 
C)  maximized for the goods the consumer wants the most. 
D)  higher than TU/P. 
E)  the same for each good. 
A)  zero for each good. 
B)  higher for goods the consumer wants the most. 
C)  maximized for the goods the consumer wants the most. 
D)  higher than TU/P. 
E)  the same for each good.

Question 11

A budget line represents all combinations of bundles of two goods that give a consumer equal total utility.

Accepted Answer

A) True 
 B)False

Question 12

The ability of a good to satisfy a want refers to its:

Accepted Answer

A)  usefulness. 
B)  utility. 
C)  worthiness. 
D)  necessity. 
A)  usefulness. 
B)  utility. 
C)  worthiness. 
D)  necessity.

Question 13

Assume the price of good X is Px, price of good Y is Py, and B is the budget. The formula for the budget line for these two goods is:

Accepted Answer

A)  PyQy / PxOx. 
B)  PxB + PyB = B. 
C)  PxX + PyY = B. 
D)  (1 − Py / 
B)  Px. 
A)  PyQy / PxOx. 
B)  PxB + PyB = B. 
C)  PxX + PyY = B. 
D)  (1 − Py / 
B)  Px.

Question 14

Exhibit 6A-3 Consumer equilibrium
​  
-Given the budget line and indifference curves shown in Exhibit 6A-3, assume the consumer is initially at point Y. To maximize total utility, the consumer should:

Accepted Answer

A)  purchase more of good Y and less of good X. 
B)  remain at point Y. 
C)  move to point X and then point Y. 
D)  purchase more of good X and less of good Y. 
A)  purchase more of good Y and less of good X. 
B)  remain at point Y. 
C)  move to point X and then point Y. 
D)  purchase more of good X and less of good Y.

Question 15

The law of diminishing marginal utility states that marginal utility must diminish after the first unit of consumption of every good or service.

Accepted Answer

A) True 
 B)False

Question 16

A state of consumer equilibrium for two goods consumed exists when the:

Accepted Answer

A)  marginal utility of all goods is the same for the last dollar spent on each good. 
B)  marginal utility per dollar's worth of two goods is the same for the last dollar spent on each good. 
C)  price of two goods is the same for the last dollar spent on each good. 
D)  marginal cost per dollar spent on two goods is the same. 
A)  marginal utility of all goods is the same for the last dollar spent on each good. 
B)  marginal utility per dollar's worth of two goods is the same for the last dollar spent on each good. 
C)  price of two goods is the same for the last dollar spent on each good. 
D)  marginal cost per dollar spent on two goods is the same.

Question 17

If a consumer is spending all of his/her income in a manner where MUa / Pa is greater than MUb / Pb, then the consumer:

Accepted Answer

A)  is maximizing his/her utility. 
B)  should increase his/her purchases of B and decrease the purchases of A. 
C)  should spend more money on both goods. 
D)  should spend less money on both goods. 
E)  should increase the purchases of A and decrease the purchases of B. 
A)  is maximizing his/her utility. 
B)  should increase his/her purchases of B and decrease the purchases of A. 
C)  should spend more money on both goods. 
D)  should spend less money on both goods. 
E)  should increase the purchases of A and decrease the purchases of B.

Question 18

The amount by which an additional unit of a good or service increases a consumer's total utility is:

Accepted Answer

A)  marginal bliss. 
B)  marginal benefit. 
C)  marginal utility. 
D)  marginal. 
A)  marginal bliss. 
B)  marginal benefit. 
C)  marginal utility. 
D)  marginal.

Question 19

The utility of a good measures its usefulness.

Accepted Answer

A) True 
 B)False

Question 20

On Thanksgiving, Jake's mother gives him a huge platter of food. If Jake were to keep eating just to please his mother (even when he really wanted to stop), his marginal utility would be:

Accepted Answer

A)  the same as his total utility. 
B)  large. 
C)  minus one. 
D)  positive. 
E)  negative. 
A)  the same as his total utility. 
B)  large. 
C)  minus one. 
D)  positive. 
E)  negative.

The slope of the indifference curve for goods X and Y is called the marginal:

Assume a consumer purchases a combination of goods X and Y such that MU_x / −P_x = 20 units of utility per dollar and MU_y / P_y = 10 units of utility per dollar. To maximize utility, the consumers should buy:

Which of the following most directly reflects the law of diminishing marginal utility?

JoAnn considers cola and plain sparkling water to be good substitutes. Suppose the price of sugar, a key ingredient used to produce cola, falls. According to the substitution effect, which of the following is most likely to occur?

The law of diminishing marginal utility states that total utility increases by smaller and smaller increments as more of a good is consumed.

Suppose a consumer is spending all of his/her income on two goods, A and B, in a manner where MU_a = 15 and MU_b = 80, and the P_a = $5 and the P_b = $20. Then the consumer:

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

If total utility increases from 10 to 15 for the second unit of a good consumed, the marginal utility of the second unit is 25.

Exhibit 6-8 Bea's total utility of 3-minute telephone calls Quantity of 3-Minute Calls Total Utility of Telephone Calls 0 0 1 15 2 28 3 38 4 45 5 50 6 48 -Refer to Exhibit 6-8. Diminishing returns set in after which telephone call?

The MU/P equalization principle means consumers will exhaust their expenditure budget so that, in the end, the MU/P ratio is:

A budget line represents all combinations of bundles of two goods that give a consumer equal total utility.

The ability of a good to satisfy a want refers to its:

Assume the price of good X is P_x, price of good Y is P_y, and B is the budget. The formula for the budget line for these two goods is:

Exhibit 6A-3 Consumer equilibrium -Given the budget line and indifference curves shown in Exhibit 6A-3, assume the consumer is initially at point Y. To maximize total utility, the consumer should:

The law of diminishing marginal utility states that marginal utility must diminish after the first unit of consumption of every good or service.

A state of consumer equilibrium for two goods consumed exists when the:

If a consumer is spending all of his/her income in a manner where MU_a / P_a is greater than MU_b / P_b, then the consumer:

The amount by which an additional unit of a good or service increases a consumer's total utility is:

The utility of a good measures its usefulness.

On Thanksgiving, Jake's mother gives him a huge platter of food. If Jake were to keep eating just to please his mother (even when he really wanted to stop), his marginal utility would be:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

Exam 6: Consumer Choice Theory

The slope of the indifference curve for goods X and Y is called the marginal:

Assume a consumer purchases a combination of goods X and Y such that MUx / −Px = 20 units of utility per dollar and MUy / Py = 10 units of utility per dollar. To maximize utility, the consumers should buy:

Which of the following most directly reflects the law of diminishing marginal utility?

JoAnn considers cola and plain sparkling water to be good substitutes. Suppose the price of sugar, a key ingredient used to produce cola, falls. According to the substitution effect, which of the following is most likely to occur?

The law of diminishing marginal utility states that total utility increases by smaller and smaller increments as more of a good is consumed.

Suppose a consumer is spending all of his/her income on two goods, A and B, in a manner where MUa = 15 and MUb = 80, and the Pa = $5 and the Pb = $20. Then the consumer:

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

If total utility increases from 10 to 15 for the second unit of a good consumed, the marginal utility of the second unit is 25.

Exhibit 6-8 Bea's total utility of 3-minute telephone calls Quantity of 3-Minute Calls Total Utility of Telephone Calls 0 0 1 15 2 28 3 38 4 45 5 50 6 48 -Refer to Exhibit 6-8. Diminishing returns set in after which telephone call?

The MU/P equalization principle means consumers will exhaust their expenditure budget so that, in the end, the MU/P ratio is:

A budget line represents all combinations of bundles of two goods that give a consumer equal total utility.

The ability of a good to satisfy a want refers to its:

Assume the price of good X is Px, price of good Y is Py, and B is the budget. The formula for the budget line for these two goods is:

Exhibit 6A-3 Consumer equilibrium ​ -Given the budget line and indifference curves shown in Exhibit 6A-3, assume the consumer is initially at point Y. To maximize total utility, the consumer should:

The law of diminishing marginal utility states that marginal utility must diminish after the first unit of consumption of every good or service.

A state of consumer equilibrium for two goods consumed exists when the:

If a consumer is spending all of his/her income in a manner where MUa / Pa is greater than MUb / Pb, then the consumer:

The amount by which an additional unit of a good or service increases a consumer's total utility is:

The utility of a good measures its usefulness.

On Thanksgiving, Jake's mother gives him a huge platter of food. If Jake were to keep eating just to please his mother (even when he really wanted to stop), his marginal utility would be:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

Assume a consumer purchases a combination of goods X and Y such that MU_x / −P_x = 20 units of utility per dollar and MU_y / P_y = 10 units of utility per dollar. To maximize utility, the consumers should buy:

Suppose a consumer is spending all of his/her income on two goods, A and B, in a manner where MU_a = 15 and MU_b = 80, and the P_a = $5 and the P_b = $20. Then the consumer:

Assume the price of good X is P_x, price of good Y is P_y, and B is the budget. The formula for the budget line for these two goods is:

Exhibit 6A-3 Consumer equilibrium -Given the budget line and indifference curves shown in Exhibit 6A-3, assume the consumer is initially at point Y. To maximize total utility, the consumer should:

If a consumer is spending all of his/her income in a manner where MU_a / P_a is greater than MU_b / P_b, then the consumer: