Question 1

There are two goods, X and Y, and the absolute price of good Y falls. It follows that

Accepted Answer

A) a person can now buy more of good Y. 
B) a person cannot buy more of good Y. 
C) the slope of the budget constraint changes. 
D) the indifference curve between goods X and Y changes. 
E) a and c 
A) a person can now buy more of good Y. 
B) a person cannot buy more of good Y. 
C) the slope of the budget constraint changes. 
D) the indifference curve between goods X and Y changes. 
E) a and c

Question 2

Suppose the government provides peanut butter to everyone free of charge and everyone consumes it to the point at which he receives no additional satisfaction from another spoonful. Is this necessarily good?

Accepted Answer

A) Yes, because everyone is satisfied. 
B) No, because there might be some cases where the resources used to produce peanut butter could have been better used to produce more of other products. 
C) Yes, because the law of diminishing marginal utility indicates that in order to get the greatest amount of satisfaction from the use of resources, people should consume as much of every good as they can. 
D) none of the above 
A) Yes, because everyone is satisfied. 
B) No, because there might be some cases where the resources used to produce peanut butter could have been better used to produce more of other products. 
C) Yes, because the law of diminishing marginal utility indicates that in order to get the greatest amount of satisfaction from the use of resources, people should consume as much of every good as they can. 
D) none of the above

Question 3

If income rises, the budget constraint

Accepted Answer

A) moves inward toward the origin. 
B) moves outward away from the origin. 
C) does not move. 
D) moves farther down the vertical axis. 
A) moves inward toward the origin. 
B) moves outward away from the origin. 
C) does not move. 
D) moves farther down the vertical axis.

Question 4

If Dan's marginal utility from eating one apple is 100 utils and Jorge's marginal utility from eating one apple is 200 utils, it follows that Jorge likes apples more than Dan, assuming that Dan and Jorge measure the marginal utility of apples in exactly the same way.

Accepted Answer

A) True 
 B)False

Question 5

The MU/P ratio for good X is greater than the MU/P ratio for good Y. To achieve consumer equilibrium, the consumer reallocates dollars from the purchase of good Y to the purchase of good X. If the law of diminishing marginal utility holds, the marginal utility of good X __________ and the marginal utility of good Y __________.

Accepted Answer

A) falls, rises 
B) rises, falls 
C) rises, stays constant 
D) falls, stays constant 
E) stays constant, rises 
A) falls, rises 
B) rises, falls 
C) rises, stays constant 
D) falls, stays constant 
E) stays constant, rises

Question 6

Exhibit 20-7
​
  
-Refer to Exhibit 20-7. For graph (3), if the price of Y is $200, the price of X is

Accepted Answer

A) $50. 
B) $40. 
C) $30. 
D) $25. 
E) $15. 
A) $50. 
B) $40. 
C) $30. 
D) $25. 
E) $15.

Question 7

The diamond-water paradox is the observation that

Accepted Answer

A) those things that have the greatest price often have little value in exchange and those things that have the lowest price often have the greatest value in exchange. 
B) those things that have the greatest value in use often have little value in exchange and those things that have little value in use often have the greatest value in exchange. 
C) those things that have the least value in use often have little value in exchange and those things that have the greatest value in use often have the greatest value in exchange. 
D) those things that have the least price often have little value in exchange and those things that have the greatest price often have the greatest value in exchange. 
A) those things that have the greatest price often have little value in exchange and those things that have the lowest price often have the greatest value in exchange. 
B) those things that have the greatest value in use often have little value in exchange and those things that have little value in use often have the greatest value in exchange. 
C) those things that have the least value in use often have little value in exchange and those things that have the greatest value in use often have the greatest value in exchange. 
D) those things that have the least price often have little value in exchange and those things that have the greatest price often have the greatest value in exchange.

Question 8

Suppose you are eating slices of pizza and after consuming the first slice you receive 14 utils of total utility, after the second you receive 22 utils of total utility, and after the third 25 utils of total utility. Then

Accepted Answer

A) the law of diminishing marginal utility is not applicable because your total utility is increasing instead of diminishing. 
B) your total utility is 61 utils. 
C) your total utility is 25 utils, and the marginal utility of the first slice is 8 utils (22 - 14). 
D) your total utility is 25 utils, and the marginal utility of the third slice is 3 utils. 
A) the law of diminishing marginal utility is not applicable because your total utility is increasing instead of diminishing. 
B) your total utility is 61 utils. 
C) your total utility is 25 utils, and the marginal utility of the first slice is 8 utils (22 - 14). 
D) your total utility is 25 utils, and the marginal utility of the third slice is 3 utils.

Question 9

Marginal utility is

Accepted Answer

A) the extra satisfaction derived from consuming an additional unit of a good. 
B) the total satisfaction derived from consuming an additional unit of a good. 
C) the total satisfaction derived from consuming a good. 
D) the change in total satisfaction as an additional unit of a good is consumed. 
E) a and d 
A) the extra satisfaction derived from consuming an additional unit of a good. 
B) the total satisfaction derived from consuming an additional unit of a good. 
C) the total satisfaction derived from consuming a good. 
D) the change in total satisfaction as an additional unit of a good is consumed. 
E) a and d

Question 10

Exhibit 20-2
​
  
-Refer to Exhibit 20-2. Total utility for the first three oranges is

Accepted Answer

A) 12 utils. 
B) 62 utils. 
C) 49 utils. 
D) 15 utils. 
E) 42 utils. 
A) 12 utils. 
B) 62 utils. 
C) 49 utils. 
D) 15 utils. 
E) 42 utils.

Question 11

Explain how the conditions for consumer equilibrium help to support the law of demand. Give an example to support your answer.

Accepted Answer

Consumer equilibrium occurs where the ma

Question 12

Exhibit 20-6
​
  
-Refer to Exhibit 20-6. I1, I2 and I3 are indifference curves and line ab is the relevant budget constraint. Point N is

Accepted Answer

A) the consumer's equilibrium position. 
B) unattainable. 
C) inferior to every other labeled point on the diagram. 
D) attainable, but does not exhaust the consumer's income. 
A) the consumer's equilibrium position. 
B) unattainable. 
C) inferior to every other labeled point on the diagram. 
D) attainable, but does not exhaust the consumer's income.

Question 13

Suppose you are consuming a particular good and you could somehow give back the last unit you consumed. What would happen to total and marginal utility (assuming that the marginal utility of the unit given back is positive)?

Accepted Answer

A) Both total and marginal utility would decrease. 
B) Both total and marginal utility would increase. 
C) Total utility would increase but marginal utility would decrease. 
D) Total utility would decrease but marginal utility would increase. 
E) There would be no change in marginal utility but total utility would decrease. 
A) Both total and marginal utility would decrease. 
B) Both total and marginal utility would increase. 
C) Total utility would increase but marginal utility would decrease. 
D) Total utility would decrease but marginal utility would increase. 
E) There would be no change in marginal utility but total utility would decrease.

Question 14

Which of the following statements is true?

Accepted Answer

A) An extra dollar earned by a millionaire necessarily brings him or her less utility than an extra dollar earned by a poor person. 
B) If marginal utility is constant, then total utility for two units of a good is equal to the marginal utility of the second unit of the good. 
C) The marginal and total utility of a good are the same for the first unit of the good. 
D) Total utility will rise if marginal utility is negative. 
E) a and c 
A) An extra dollar earned by a millionaire necessarily brings him or her less utility than an extra dollar earned by a poor person. 
B) If marginal utility is constant, then total utility for two units of a good is equal to the marginal utility of the second unit of the good. 
C) The marginal and total utility of a good are the same for the first unit of the good. 
D) Total utility will rise if marginal utility is negative. 
E) a and c

Question 15

For the consumer, a point on an indifference curve that lies farther from the origin is preferable compared to those points that are closer to the origin.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 20-8
​
  
-Refer to Exhibit 20-8. A move of the budget constraint from 2 to 3 is caused by a

Accepted Answer

A) rise in the price of good X. 
B) fall in the price of good X. 
C) rise in the price of good Y. 
D) fall in income. 
A) rise in the price of good X. 
B) fall in the price of good X. 
C) rise in the price of good Y. 
D) fall in income.

Question 17

Economists use the term utility to mean usefulness.

Accepted Answer

A) True 
 B)False

Question 18

Don receives 100 utils from consuming two oranges. The utility he derives from consuming the second orange equals 30 utils. Which of the following conclusions is derived from the law of diminishing marginal utility?

Accepted Answer

A) The marginal utility Don receives from consuming the third orange will be less than 30 utils. 
B) The marginal utility Don receives from consuming the third orange will be less than 100, but greater than 30 utils. 
C) If the price of oranges decreases, Don will buy fewer oranges, ceteris paribus. 
D) The total utility Don receives from consuming the first orange is less than the marginal utility from consuming the first orange. 
A) The marginal utility Don receives from consuming the third orange will be less than 30 utils. 
B) The marginal utility Don receives from consuming the third orange will be less than 100, but greater than 30 utils. 
C) If the price of oranges decreases, Don will buy fewer oranges, ceteris paribus. 
D) The total utility Don receives from consuming the first orange is less than the marginal utility from consuming the first orange.

Question 19

Consumer equilibrium exists when

Accepted Answer

A) marginal utility for all goods is the same. 
B) total utility is constant. 
C) prices for all goods are the same. 
D) total utility for all goods is the same. 
E) the MU/P ratio for all goods is the same. 
A) marginal utility for all goods is the same. 
B) total utility is constant. 
C) prices for all goods are the same. 
D) total utility for all goods is the same. 
E) the MU/P ratio for all goods is the same.

Exam 20: Consumer Choice and Behavioral Economics

There are two goods, X and Y, and the absolute price of good Y falls. It follows that

Suppose the government provides peanut butter to everyone free of charge and everyone consumes it to the point at which he receives no additional satisfaction from another spoonful. Is this necessarily good?

If income rises, the budget constraint

If Dan's marginal utility from eating one apple is 100 utils and Jorge's marginal utility from eating one apple is 200 utils, it follows that Jorge likes apples more than Dan, assuming that Dan and Jorge measure the marginal utility of apples in exactly the same way.

Exhibit 20-7 ​ -Refer to Exhibit 20-7. For graph (3), if the price of Y is $200, the price of X is

The diamond-water paradox is the observation that

Suppose you are eating slices of pizza and after consuming the first slice you receive 14 utils of total utility, after the second you receive 22 utils of total utility, and after the third 25 utils of total utility. Then

Marginal utility is

Exhibit 20-2 ​ -Refer to Exhibit 20-2. Total utility for the first three oranges is

Explain how the conditions for consumer equilibrium help to support the law of demand. Give an example to support your answer.

Exhibit 20-6 ​ -Refer to Exhibit 20-6. I1, I2 and I3 are indifference curves and line ab is the relevant budget constraint. Point N is

Suppose you are consuming a particular good and you could somehow give back the last unit you consumed. What would happen to total and marginal utility (assuming that the marginal utility of the unit given back is positive)?

Which of the following statements is true?

For the consumer, a point on an indifference curve that lies farther from the origin is preferable compared to those points that are closer to the origin.

Exhibit 20-8 ​ -Refer to Exhibit 20-8. A move of the budget constraint from 2 to 3 is caused by a

Economists use the term utility to mean usefulness.

Don receives 100 utils from consuming two oranges. The utility he derives from consuming the second orange equals 30 utils. Which of the following conclusions is derived from the law of diminishing marginal utility?

Consumer equilibrium exists when

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

Monopoly

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

International Trade

International Finance

The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

Filters

Exhibit 20-7 -Refer to Exhibit 20-7. For graph (3), if the price of Y is $200, the price of X is

Exhibit 20-2 -Refer to Exhibit 20-2. Total utility for the first three oranges is

Exhibit 20-6 -Refer to Exhibit 20-6. I₁, I₂ and I₃ are indifference curves and line ab is the relevant budget constraint. Point N is

Exhibit 20-8 -Refer to Exhibit 20-8. A move of the budget constraint from 2 to 3 is caused by a