Question 1

Exhibit 20-4
  
-Refer to Exhibit 20-4. What value goes in blank (C)?

Accepted Answer

A) 25 
B) 5 
C) 15 
D) 20 
E) There is not enough information to answer this question. 
A) 25 
B) 5 
C) 15 
D) 20 
E) There is not enough information to answer this question.

Question 2

Dan is currently consuming 10 Cokes and 5 slices of pizza per week such that the marginal utility of the tenth Coke is 12 utils and that of the fifth slice of pizza is also 12 utils. How should Dan redirect his purchases so as to attain consumer equilibrium?

Accepted Answer

A) He should buy more pizza slices and less Coke. 
B) He should buy fewer pizza slices and more Coke. 
C) He is currently attaining consumer equilibrium and should not redirect his purchases. 
D) He could gain more satisfaction by buying less of both and more of something else. 
E) There is not enough information to answer the question. 
A) He should buy more pizza slices and less Coke. 
B) He should buy fewer pizza slices and more Coke. 
C) He is currently attaining consumer equilibrium and should not redirect his purchases. 
D) He could gain more satisfaction by buying less of both and more of something else. 
E) There is not enough information to answer the question.

Question 3

The results of the "ultimatum game" reveal that people

Accepted Answer

A) always behave irrationally. 
B) tend to be more concerned with their relative income position in a group than with their absolute position in the group. 
C) tend to be more concerned with their absolute position in a group than with their relative position in the group. 
D) always behave rationally. 
E) a and c 
A) always behave irrationally. 
B) tend to be more concerned with their relative income position in a group than with their absolute position in the group. 
C) tend to be more concerned with their absolute position in a group than with their relative position in the group. 
D) always behave rationally. 
E) a and c

Question 4

Assuming only two goods X and Y, if MUX/PX = MUY/PY, then

Accepted Answer

A) the consumer is in equilibrium. 
B) the consumer cannot be made better off by redirecting his purchases. 
C) the consumer is deriving the same marginal utility per dollar spent on both goods. 
D) a and c 
E) a, b and c 
A) the consumer is in equilibrium. 
B) the consumer cannot be made better off by redirecting his purchases. 
C) the consumer is deriving the same marginal utility per dollar spent on both goods. 
D) a and c 
E) a, b and c

Question 5

The law of diminishing marginal utility can be stated as follows:

Accepted Answer

A) As the amount of a good consumed increases, the sum of satisfaction received tends to decrease. 
B) As the amount of a good consumed increases, the additional satisfaction gained from consuming additional units tends to decrease. 
C) As the amount of a good consumed decreases, the additional satisfaction gained from consuming additional units tends to increase. 
D) As the amount of a good consumed increases, the sum of satisfaction received tends to increase but at a diminishing rate. 
E) b and d 
A) As the amount of a good consumed increases, the sum of satisfaction received tends to decrease. 
B) As the amount of a good consumed increases, the additional satisfaction gained from consuming additional units tends to decrease. 
C) As the amount of a good consumed decreases, the additional satisfaction gained from consuming additional units tends to increase. 
D) As the amount of a good consumed increases, the sum of satisfaction received tends to increase but at a diminishing rate. 
E) b and d

Question 6

Exhibit 20-5
  
-Refer to Exhibit 20-5. What value goes in blank (D)?

Accepted Answer

A) 47 
B) 15 
C) 35 
D) 60 
E) There is not enough information to answer this question. 
A) 47 
B) 15 
C) 35 
D) 60 
E) There is not enough information to answer this question.

Question 7

You and your roommate are eating pizza and have already consumed all but the last slice. Your roommate claims that he is hungrier than you and therefore should get the last slice of pizza. Your roommate has made

Accepted Answer

A) a diamond-water paradox. 
B) an interpersonal utility comparison. 
C) an elasticity comparison. 
D) a marginal error. 
A) a diamond-water paradox. 
B) an interpersonal utility comparison. 
C) an elasticity comparison. 
D) a marginal error.

Question 8

Research presented in the textbook shows that people are more concerned with their absolute income position in a group than their relative income position in the group.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 20-7
​
  
-Refer to Exhibit 20-7. For graph (2), if the price of X is $60, what is the consumer's income?

Accepted Answer

A) $1,000 
B) $2,000 
C) $3,000 
D) $6,000 
E) This cannot be determined from the information provided. 
A) $1,000 
B) $2,000 
C) $3,000 
D) $6,000 
E) This cannot be determined from the information provided.

Question 10

If the rate of increase of total utility declines as the quantity consumed of a good increases, it follows that marginal utility must be

Accepted Answer

A) declining. 
B) rising. 
C) staying constant. 
D) negative. 
E) There is not enough information to answer the question. 
A) declining. 
B) rising. 
C) staying constant. 
D) negative. 
E) There is not enough information to answer the question.

Question 11

Ari is currently consuming 10 hot dogs and 8 hamburgers per week. The last hot dog she consumed yielded 20 utils while the last hamburger she ate gave her 25 utils. If hot dogs cost $2 and hamburgers cost $2.50, is Ari consuming the correct quantities of these two goods to be in consumer equilibrium?

Accepted Answer

A) No, she should consume more hamburgers and fewer hot dogs. 
B) No, she should consume more hot dogs and fewer hamburgers. 
C) Yes, so there is no need to change her eating habits. 
D) There is not enough information to answer the question. 
A) No, she should consume more hamburgers and fewer hot dogs. 
B) No, she should consume more hot dogs and fewer hamburgers. 
C) Yes, so there is no need to change her eating habits. 
D) There is not enough information to answer the question.

Question 12

The marginal rate of substitution is illustrated by the

Accepted Answer

A) slope of the indifference curve. 
B) slope of the budget line. 
C) ratio of the marginal utility of the good on the vertical axis to the marginal utility of the good on the horizontal axis. 
D) distance between the indifference curves. 
E) distance between the budget line and the indifference curve. 
A) slope of the indifference curve. 
B) slope of the budget line. 
C) ratio of the marginal utility of the good on the vertical axis to the marginal utility of the good on the horizontal axis. 
D) distance between the indifference curves. 
E) distance between the budget line and the indifference curve.

Question 13

We take one dollar from a millionaire and give it to a pauper. Assuming a diminishing marginal utility of money,

Accepted Answer

A) total utility in the economy must rise. 
B) total utility in the economy must fall. 
C) total utility in the economy must remain the same. 
D) we cannot say whether or not total utility changes. 
A) total utility in the economy must rise. 
B) total utility in the economy must fall. 
C) total utility in the economy must remain the same. 
D) we cannot say whether or not total utility changes.

Question 14

We would expect the total utility of water to be high but its marginal utility to be low. Why?

Accepted Answer

A) Because water is a fluid and we don't need fluids to live as much as we need food. 
B) Because we need water to live and there is so much of it. 
C) Because we need water to live and there is very little of it. 
D) Because water's price is low. 
A) Because water is a fluid and we don't need fluids to live as much as we need food. 
B) Because we need water to live and there is so much of it. 
C) Because we need water to live and there is very little of it. 
D) Because water's price is low.

Question 15

Suppose that there are two cities that are alike in every way except that one city has significantly better weather than the other city. Call the city with good weather Good-Weather City (GWC) and the other Bad-Weather City (BWC). Assume that the median price of a home in the two cities is originally the same. If the marginal utility of living in GWC is 500 and the marginal utility of living in BWC is 300, to make themselves better off economic theory tells us that

Accepted Answer

A) at least some people will move from BWC to GWC, which will make housing prices rise in GWC and BWC. 
B) at least some people will move from GWC to BWC, which make housing prices rise in BWC and GWC. 
C) at least some people will move from BWC to GWC, which will make housing prices rise in GWC and fall in BWC. 
D) at least some people will move from GWC to BWC, which will make housing prices rise in BWC and fall in GWC. 
A) at least some people will move from BWC to GWC, which will make housing prices rise in GWC and BWC. 
B) at least some people will move from GWC to BWC, which make housing prices rise in BWC and GWC. 
C) at least some people will move from BWC to GWC, which will make housing prices rise in GWC and fall in BWC. 
D) at least some people will move from GWC to BWC, which will make housing prices rise in BWC and fall in GWC.

Question 16

An indifference curve shows all

Accepted Answer

A) possible equilibrium positions on an indifference map. 
B) equilibrium combinations of two products that are obtainable with a given money income. 
C) combinations of two products that will yield the same utility to a consumer. 
D) possible combinations of two products that a consumer can purchase, given her income and the prices of the products. 
E) none of the above 
A) possible equilibrium positions on an indifference map. 
B) equilibrium combinations of two products that are obtainable with a given money income. 
C) combinations of two products that will yield the same utility to a consumer. 
D) possible combinations of two products that a consumer can purchase, given her income and the prices of the products. 
E) none of the above

Question 17

Jack receives 30 utils from one apple, 45 utils from two apples, and 55 utils from three apples. It follows that the marginal utility of the third apple is __________ utils and that Jack's __________utility rises as his __________ declines.

Accepted Answer

A) 55; marginal; total 
B) 10; total; marginal 
C) 130; total; marginal 
D) 100; marginal; total 
E) none of the above 
A) 55; marginal; total 
B) 10; total; marginal 
C) 130; total; marginal 
D) 100; marginal; total 
E) none of the above

Question 18

Which of the following statements is true?

Accepted Answer

A) If a consumer is in equilibrium, it does not necessarily follow that he or she is also achieving the greatest total utility. 
B) If a consumer is in equilibrium, it necessarily follows that he or she is also achieving the greatest total utility. 
C) If a consumer is attaining the greatest marginal utility, then it necessarily follows that he or she is also achieving the greatest total utility. 
D) If a consumer is attaining the greatest total utility, then it necessarily follows that he or she is also achieving the greatest marginal utility. 
A) If a consumer is in equilibrium, it does not necessarily follow that he or she is also achieving the greatest total utility. 
B) If a consumer is in equilibrium, it necessarily follows that he or she is also achieving the greatest total utility. 
C) If a consumer is attaining the greatest marginal utility, then it necessarily follows that he or she is also achieving the greatest total utility. 
D) If a consumer is attaining the greatest total utility, then it necessarily follows that he or she is also achieving the greatest marginal utility.

Question 19

Economists assume that the goal of consumers is to maximize total utility.

Accepted Answer

A) True 
 B)False

Question 20

To resolve the diamond-water paradox, it is important to note that under most circumstances,

Accepted Answer

A) the marginal utility of water is lower than the marginal utility of diamonds. 
B) the marginal utilities of water and diamonds are about the same. 
C) the marginal utility of water is higher than the marginal utility of diamonds. 
D) the marginal utilities of water and diamonds are inversely related. 
E) the marginal utilities of water and diamonds are directly related. 
A) the marginal utility of water is lower than the marginal utility of diamonds. 
B) the marginal utilities of water and diamonds are about the same. 
C) the marginal utility of water is higher than the marginal utility of diamonds. 
D) the marginal utilities of water and diamonds are inversely related. 
E) the marginal utilities of water and diamonds are directly related.

Exam 20: Consumer Choice and Behavioral Economics

Exhibit 20-4 -Refer to Exhibit 20-4. What value goes in blank (C)?

Dan is currently consuming 10 Cokes and 5 slices of pizza per week such that the marginal utility of the tenth Coke is 12 utils and that of the fifth slice of pizza is also 12 utils. How should Dan redirect his purchases so as to attain consumer equilibrium?

The results of the "ultimatum game" reveal that people

Assuming only two goods X and Y, if MUX/PX = MUY/PY, then

The law of diminishing marginal utility can be stated as follows:

Exhibit 20-5 -Refer to Exhibit 20-5. What value goes in blank (D)?

You and your roommate are eating pizza and have already consumed all but the last slice. Your roommate claims that he is hungrier than you and therefore should get the last slice of pizza. Your roommate has made

Research presented in the textbook shows that people are more concerned with their absolute income position in a group than their relative income position in the group.

Exhibit 20-7 ​ -Refer to Exhibit 20-7. For graph (2), if the price of X is $60, what is the consumer's income?

If the rate of increase of total utility declines as the quantity consumed of a good increases, it follows that marginal utility must be

The marginal rate of substitution is illustrated by the

We take one dollar from a millionaire and give it to a pauper. Assuming a diminishing marginal utility of money,

We would expect the total utility of water to be high but its marginal utility to be low. Why?

An indifference curve shows all

Jack receives 30 utils from one apple, 45 utils from two apples, and 55 utils from three apples. It follows that the marginal utility of the third apple is __________ utils and that Jack's __________utility rises as his __________ declines.

Which of the following statements is true?

Economists assume that the goal of consumers is to maximize total utility.

To resolve the diamond-water paradox, it is important to note that under most circumstances,

What Economics Is About

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Assuming only two goods X and Y, if MU_X/P_X = MU_Y/P_Y, then

Exhibit 20-7 -Refer to Exhibit 20-7. For graph (2), if the price of X is $60, what is the consumer's income?

Jack receives 30 utils from one apple, 45 utils from two apples, and 55 utils from three apples. It follows that the marginal utility of the third apple is utils and that Jack's utility rises as his __ declines.