Question 1

Which of the following best describes an interpersonal utility comparison?

Accepted Answer

A) Jones likes computers produced by Dell Computer Corporation and Smith likes computers produced by Apple Computer Inc. 
B) Smith gets more utility from working on his computer than Jones gets from working on his computer. 
C) Smith got less utility from eating the 30th cookie than eating the 29th cookie, and the same holds for Jones. 
D) Usually, Smith seems a lot happier than Jones. 
E) Smith usually eats more in a day than Jones eats in a day. 
A) Jones likes computers produced by Dell Computer Corporation and Smith likes computers produced by Apple Computer Inc. 
B) Smith gets more utility from working on his computer than Jones gets from working on his computer. 
C) Smith got less utility from eating the 30th cookie than eating the 29th cookie, and the same holds for Jones. 
D) Usually, Smith seems a lot happier than Jones. 
E) Smith usually eats more in a day than Jones eats in a day.

Question 2

Which of the following statements is true?

Accepted Answer

A) The less you have of any one good, the less you would be willing to pay for one more unit of it. 
B) The less you have of any one good, the more you would be willing to pay for one more unit of it. 
C) The amount you have of any one good does not influence the price you would be willing to pay for it, but it does affect the marginal utility received from consuming a particular unit. 
D) none of the above 
A) The less you have of any one good, the less you would be willing to pay for one more unit of it. 
B) The less you have of any one good, the more you would be willing to pay for one more unit of it. 
C) The amount you have of any one good does not influence the price you would be willing to pay for it, but it does affect the marginal utility received from consuming a particular unit. 
D) none of the above

Question 3

If, as a person consumes additional units of a good, total utility rises by a constant amount, it follows that

Accepted Answer

A) marginal utility is rising. 
B) marginal utility is falling. 
C) total utility and marginal utility are equal. 
D) marginal utility is constant. 
E) marginal utility is negative. 
A) marginal utility is rising. 
B) marginal utility is falling. 
C) total utility and marginal utility are equal. 
D) marginal utility is constant. 
E) marginal utility is negative.

Question 4

Consider two options: (A) you receive a guaranteed payment of $100; (B) a coin is tossed and if heads comes up, you win nothing; if tails comes up, you win $200. The expected payoff for option B is:

Accepted Answer

A) $200 
B) $100 
C) $300 
D) $75 
E) There is not enough information to answer the question. 
A) $200 
B) $100 
C) $300 
D) $75 
E) There is not enough information to answer the question.

Question 5

Behavioral economists contend that the traditional economic framework always accurately depicts human behavior.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 20-6
​
  
-Refer to Exhibit 20-6. I1, I2 and I3 are indifference curves and line ab is the relevant budget constraint. If the consumer is initially at point R, he should

Accepted Answer

A) strive for point N by obtaining a larger money income. 
B) purchase more of X and less of Y. 
C) remain at that point in order to maximize utility. 
D) purchase more of Y and less of X. 
E) none of the above 
A) strive for point N by obtaining a larger money income. 
B) purchase more of X and less of Y. 
C) remain at that point in order to maximize utility. 
D) purchase more of Y and less of X. 
E) none of the above

Question 7

The law of diminishing marginal utility helps to explain

Accepted Answer

A) why people trade. 
B) the law of demand. 
C) why the production possibilities frontier is typically bowed-out. 
D) a and b 
E) all of the above 
A) why people trade. 
B) the law of demand. 
C) why the production possibilities frontier is typically bowed-out. 
D) a and b 
E) all of the above

Question 8

The marginal utility curve for units 6 through 8 of good Z lies below the horizontal axis. What does this imply must be true about the total utility curve for units 6 through 8 of good Z?

Accepted Answer

A) That portion of good Z's total utility curve must be upward sloping. 
B) That portion of good Z's total utility curve must be downward sloping. 
C) That portion of good Z's total utility curve must be horizontal. 
D) That portion of good Z's total utility curve must also lie below the horizontal axis. 
A) That portion of good Z's total utility curve must be upward sloping. 
B) That portion of good Z's total utility curve must be downward sloping. 
C) That portion of good Z's total utility curve must be horizontal. 
D) That portion of good Z's total utility curve must also lie below the horizontal axis.

Question 9

Suppose you are eating buffalo wings at a local happy hour. The total utils from doing so after the fourth, fifth, sixth, and seventh wings are 80, 116, 136, 146, respectively. The marginal utility of the seventh wing is __________ utils.

Accepted Answer

A) 14 
B) 146 
C) 10 
D) 20.9 
A) 14 
B) 146 
C) 10 
D) 20.9

Question 10

Brain researchers think that the best reason the brain might weight the present high and the future low when faced with a present-future tradeoff is that:

Accepted Answer

A) responding quickly and definitively to present rewards might have come with an evolutionary advantage. 
B) people are naturally short-run thinkers. 
C) the future is harder to visualize than the present. 
D) people naturally think they may die in the future. 
E) a and c 
A) responding quickly and definitively to present rewards might have come with an evolutionary advantage. 
B) people are naturally short-run thinkers. 
C) the future is harder to visualize than the present. 
D) people naturally think they may die in the future. 
E) a and c

Question 11

Economist David Friedman pointed out that

Accepted Answer

A) the endowment effect is not limited to humans. 
B) the law of diminishing marginal utility does not hold for money. 
C) the diamond-water paradox would not exist if water was scarce and diamonds were plentiful. 
D) the government should provide the necessities of life for free. 
A) the endowment effect is not limited to humans. 
B) the law of diminishing marginal utility does not hold for money. 
C) the diamond-water paradox would not exist if water was scarce and diamonds were plentiful. 
D) the government should provide the necessities of life for free.

Question 12

Suppose people are in consumer equilibrium buying 10,000 units of good X at a given price. Then the price of good X falls to $0. It follows that people will buy more of good X and that the marginal utility of the last additional unit they buy will be __________ the __________ of the 10,000th unit.

Accepted Answer

A) lower than; marginal utility 
B) greater than; average utility 
C) the same as; marginal utility 
D) greater than; marginal utility 
E) none of the above 
A) lower than; marginal utility 
B) greater than; average utility 
C) the same as; marginal utility 
D) greater than; marginal utility 
E) none of the above

Question 13

The endowment effect

Accepted Answer

A) states that we value an item more highly if we own it than if we do not own it. 
B) is the same as compartmentalizing. 
C) states that people are often willing to make themselves worse off in order to make someone else worse off. 
D) states that people are often willing to make themselves worse off in order to make someone else better off. 
E) a and d 
A) states that we value an item more highly if we own it than if we do not own it. 
B) is the same as compartmentalizing. 
C) states that people are often willing to make themselves worse off in order to make someone else worse off. 
D) states that people are often willing to make themselves worse off in order to make someone else better off. 
E) a and d

Question 14

We take one dollar from a pauper and give it to a millionaire. 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 15

A util is an artificial construct used as a means of measuring the

Accepted Answer

A) price of a good. 
B) satisfaction one receives from the consumption of a good. 
C) costs of producing a good. 
D) difference between the price and the value of a good. 
A) price of a good. 
B) satisfaction one receives from the consumption of a good. 
C) costs of producing a good. 
D) difference between the price and the value of a good.

Question 16

Economists usually assume that money has __________ marginal utility.

Accepted Answer

A) increasing 
B) constant 
C) decreasing 
D) zero 
A) increasing 
B) constant 
C) decreasing 
D) zero

Question 17

Suppose you could quantify the amount of satisfaction you receive from consuming ice cream in money terms. You might say, "I expect to get $3 worth of satisfaction from this ice cream cone." According to traditional economic theory, if the price of this ice cream cone were $3.25, would you buy one?

Accepted Answer

A) Ye, since the marginal benefit from consuming the ice cream cone is greater than the marginal cost. 
B) Yes, since the marginal cost of consuming the ice cream cone is greater than the marginal benefit. 
C) No, since the marginal cost of consuming the ice cream cone is greater than the marginal benefit. 
D) No, since the marginal benefit from consuming the ice cream cone is greater than the marginal cost. 
A) Ye, since the marginal benefit from consuming the ice cream cone is greater than the marginal cost. 
B) Yes, since the marginal cost of consuming the ice cream cone is greater than the marginal benefit. 
C) No, since the marginal cost of consuming the ice cream cone is greater than the marginal benefit. 
D) No, since the marginal benefit from consuming the ice cream cone is greater than the marginal cost.

Question 18

We would expect the total utility of diamonds to be __________ than the total utility of water and the marginal utility of diamonds to be __________ than the marginal utility of water.

Accepted Answer

A) higher; higher 
B) lower; lower 
C) higher; lower 
D) lower; higher 
A) higher; higher 
B) lower; lower 
C) higher; lower 
D) lower; higher

Question 19

Marginal utility is defined as the

Accepted Answer

A) change in marginal utility a person derives from the consumption of a good. 
B) change in total utility a person derives from the consumption of a good divided by the price of that good. 
C) change in total utility a person derives from the consumption of a good divided by the change in the quantity of the good consumed. 
D) sum of the amounts of satisfaction a person receives from consuming a good. 
E) change in total utility a person derives from the consumption of a good divided by the value in use of that good. 
A) change in marginal utility a person derives from the consumption of a good. 
B) change in total utility a person derives from the consumption of a good divided by the price of that good. 
C) change in total utility a person derives from the consumption of a good divided by the change in the quantity of the good consumed. 
D) sum of the amounts of satisfaction a person receives from consuming a good. 
E) change in total utility a person derives from the consumption of a good divided by the value in use of that good.

Question 20

Smith says she gets 5 utils from consuming the fifth unit of a good whereas Jones says he gets 10 utils from consuming the fifth unit of a good. It follows that

Accepted Answer

A) the fifth unit of the good means more to Jones than Smith. 
B) the fifth unit of the good means more to Smith than Jones. 
C) the fifth unit of the good means twice as much to Jones as it means to Smith. 
D) if the law of diminishing marginal utility holds, both Smith and Jones will get less utility from the sixth unit of the good than the fifth. 
E) a and d 
A) the fifth unit of the good means more to Jones than Smith. 
B) the fifth unit of the good means more to Smith than Jones. 
C) the fifth unit of the good means twice as much to Jones as it means to Smith. 
D) if the law of diminishing marginal utility holds, both Smith and Jones will get less utility from the sixth unit of the good than the fifth. 
E) a and d

Exam 20: Consumer Choice and Behavioral Economics

Which of the following best describes an interpersonal utility comparison?

Which of the following statements is true?

If, as a person consumes additional units of a good, total utility rises by a constant amount, it follows that

Consider two options: (A) you receive a guaranteed payment of $100; (B) a coin is tossed and if heads comes up, you win nothing; if tails comes up, you win $200. The expected payoff for option B is:

Behavioral economists contend that the traditional economic framework always accurately depicts human behavior.

Exhibit 20-6 ​ -Refer to Exhibit 20-6. I1, I2 and I3 are indifference curves and line ab is the relevant budget constraint. If the consumer is initially at point R, he should

The law of diminishing marginal utility helps to explain

The marginal utility curve for units 6 through 8 of good Z lies below the horizontal axis. What does this imply must be true about the total utility curve for units 6 through 8 of good Z?

Suppose you are eating buffalo wings at a local happy hour. The total utils from doing so after the fourth, fifth, sixth, and seventh wings are 80, 116, 136, 146, respectively. The marginal utility of the seventh wing is __________ utils.

Brain researchers think that the best reason the brain might weight the present high and the future low when faced with a present-future tradeoff is that:

Economist David Friedman pointed out that

Suppose people are in consumer equilibrium buying 10,000 units of good X at a given price. Then the price of good X falls to $0. It follows that people will buy more of good X and that the marginal utility of the last additional unit they buy will be __________ the __________ of the 10,000th unit.

The endowment effect

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

A util is an artificial construct used as a means of measuring the

Economists usually assume that money has __________ marginal utility.

Suppose you could quantify the amount of satisfaction you receive from consuming ice cream in money terms. You might say, "I expect to get $3 worth of satisfaction from this ice cream cone." According to traditional economic theory, if the price of this ice cream cone were $3.25, would you buy one?

We would expect the total utility of diamonds to be __________ than the total utility of water and the marginal utility of diamonds to be __________ than the marginal utility of water.

Marginal utility is defined as the

Smith says she gets 5 utils from consuming the fifth unit of a good whereas Jones says he gets 10 utils from consuming the fifth unit of a good. It follows that

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II Gdp and Real Gdp

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability a Critique of the Self Regulating Economy

Fiscal Policy and the Federal Budget

Money Banking and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth Resources Technology Ideas and Institutions

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Production and Costs

Perfect Competition

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Monopolistic Competition Oligopoly and Game Theory

Government and Product Markets Antitrust and Regulation

Factor Markets With Emphasis on the Labor Market

Wages Unions and Labor

The Distribution of Income and Poverty

Interest Rent and Profit

Market Failure Externalities Public Goods and Asymmetric Information

Public Choice and Special Interest Group Politics

Building Theories to Explain Everyday Life From Observations to Questions to Theories to Predictions

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The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

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Exhibit 20-6 -Refer to Exhibit 20-6. I₁, I₂ and I₃ are indifference curves and line ab is the relevant budget constraint. If the consumer is initially at point R, he should

Suppose people are in consumer equilibrium buying 10,000 units of good X at a given price. Then the price of good X falls to $0. It follows that people will buy more of good X and that the marginal utility of the last additional unit they buy will be the of the 10,000th unit.

We would expect the total utility of diamonds to be than the total utility of water and the marginal utility of diamonds to be than the marginal utility of water.