Question 1

A consumer will consume the combination of goods at the crossing point of a budget line and indifference curve.

Accepted Answer

A) True 
 B)False

Question 2

An individual's demand curve for a good is ____ her marginal utility curve for the good.

Accepted Answer

A)  based on 
B)  the mirror image around the vertical axis of 
C)  twice as steep as 
D)  half as steep as 
A)  based on 
B)  the mirror image around the vertical axis of 
C)  twice as steep as 
D)  half as steep as

Question 3

If a good has "snob appeal," consumers may purchases less when the price falls.

Accepted Answer

A) True 
 B)False

Question 4

The law of diminishing marginal utility explains why

Accepted Answer

A)  most individual demand curves are straight lines. 
B)  the consumer's optimal purchase is at the tangency of an indifference curve and the budget line. 
C)  most individual demand curves slope downward. 
D)  marginal utility falls when total utility falls. 
A)  most individual demand curves are straight lines. 
B)  the consumer's optimal purchase is at the tangency of an indifference curve and the budget line. 
C)  most individual demand curves slope downward. 
D)  marginal utility falls when total utility falls.

Question 5

Total utility always decreases when additional amounts of a commodity are consumed.

Accepted Answer

A) True 
 B)False

Question 6

The slope of an indifference curve is called the

Accepted Answer

A)  bliss gradient. 
B)  happiness slope. 
C)  average transformation rate. 
D)  marginal rate of substitution. 
A)  bliss gradient. 
B)  happiness slope. 
C)  average transformation rate. 
D)  marginal rate of substitution.

Question 7

As a general rule, consumers have

Accepted Answer

A)  limited income. 
B)  unlimited desires for goods. 
C)  many choices of goods facing them. 
D)  All of the above are correct. 
E)  None of the above are correct. 
A)  limited income. 
B)  unlimited desires for goods. 
C)  many choices of goods facing them. 
D)  All of the above are correct. 
E)  None of the above are correct.

Question 8

An inferior good is a good whose quantity demanded

Accepted Answer

A)  rises when its price falls. 
B)  falls when the price of a related good falls. 
C)  falls when the consumer's total utility rises. 
D)  rises when the consumer's real income falls. 
A)  rises when its price falls. 
B)  falls when the price of a related good falls. 
C)  falls when the consumer's total utility rises. 
D)  rises when the consumer's real income falls.

Question 9

The resolution of Adam Smith's diamond-water puzzle is based on the distinction between marginal and total utility.

Accepted Answer

A) True 
 B)False

Question 10

If total utility declines as an additional unit of a commodity is purchased,

Accepted Answer

A)  marginal utility must be rising. 
B)  marginal utility is negative. 
C)  marginal utility is positive but falling. 
D)  its price must have risen. 
E)  marginal utility is zero. 
A)  marginal utility must be rising. 
B)  marginal utility is negative. 
C)  marginal utility is positive but falling. 
D)  its price must have risen. 
E)  marginal utility is zero.

Question 11

Figure 5-12
  
-In Figure 5-12, the move in the consumer equilibrium from A to B shows that

Accepted Answer

A)  beer is an inferior good, but wine is a normal good. 
B)  wine is an inferior good, but beer is a normal good. 
C)  both beer and wine are normal goods. 
D)  both beer and wine are inferior goods. 
A)  beer is an inferior good, but wine is a normal good. 
B)  wine is an inferior good, but beer is a normal good. 
C)  both beer and wine are normal goods. 
D)  both beer and wine are inferior goods.

Question 12

A decrease in the price of one good results in a parallel shift in the budget line.

Accepted Answer

A) True 
 B)False

Question 13

As a rule, as a consumer acquires more and more of a good, the marginal utility declines.

Accepted Answer

A) True 
 B)False

Question 14

The law of demand states that as the price

Accepted Answer

A)  increases, total quantity demanded will increase. 
B)  decreases, total quantity demanded will decrease. 
C)  increases, total quantity demanded will decrease. 
D)  increases, total quantity demanded will stay the same. 
A)  increases, total quantity demanded will increase. 
B)  decreases, total quantity demanded will decrease. 
C)  increases, total quantity demanded will decrease. 
D)  increases, total quantity demanded will stay the same.

Question 15

The marginal rate of substitution represents the maximum amount of one commodity a consumer is willing to give up in exchange for one more unit of another commodity.

Accepted Answer

A) True 
 B)False

Question 16

The law of diminishing marginal utility is consistent with the consumer behavior that produces a negatively sloped demand curve.

Accepted Answer

A) True 
 B)False

Question 17

Marginal utility is

Accepted Answer

A)  the difference in price between one store and another. 
B)  the difference in value between "some" of a thing and "none" of a thing. 
C)  the difference between any two successive total utility figures. 
D)  acquired only with the first few units of a good or service. 
E)  utility that is barely satisfactory. 
A)  the difference in price between one store and another. 
B)  the difference in value between "some" of a thing and "none" of a thing. 
C)  the difference between any two successive total utility figures. 
D)  acquired only with the first few units of a good or service. 
E)  utility that is barely satisfactory.

Question 18

Because the consumer's budget is limited, purchase decisions among available goods must of necessity be interdependent.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is correct?

Accepted Answer

A)  The "law" of diminishing marginal utility implies that demand curves slope upward and to the right. 
B)  If the price of a good falls, the utility-maximizing consumer will assure that marginal utility rises. 
C)  If the price of a good falls, the consumer will purchase more of the good in order to maximize total utility. 
D)  MU and demand have different underlying consumer behavior assumptions. 
A)  The "law" of diminishing marginal utility implies that demand curves slope upward and to the right. 
B)  If the price of a good falls, the utility-maximizing consumer will assure that marginal utility rises. 
C)  If the price of a good falls, the consumer will purchase more of the good in order to maximize total utility. 
D)  MU and demand have different underlying consumer behavior assumptions.

Question 20

Figure 5-14
  
-Martha initially buys the combination of pens and pencils shown as A in Figure 5-14.After the prices of both goods change, she buys combination B.It must be true that

Accepted Answer

A)  Martha prefers A to B. 
B)  Martha prefers B to A. 
C)  Martha is indifferent between A and B. 
D)  Martha's preferences between A and B cannot be determined from the information given. 
A)  Martha prefers A to B. 
B)  Martha prefers B to A. 
C)  Martha is indifferent between A and B. 
D)  Martha's preferences between A and B cannot be determined from the information given.

Exam 5: Consumer Choice: Individual and Market Demand

A consumer will consume the combination of goods at the crossing point of a budget line and indifference curve.

An individual's demand curve for a good is ____ her marginal utility curve for the good.

If a good has "snob appeal," consumers may purchases less when the price falls.

The law of diminishing marginal utility explains why

Total utility always decreases when additional amounts of a commodity are consumed.

The slope of an indifference curve is called the

As a general rule, consumers have

An inferior good is a good whose quantity demanded

The resolution of Adam Smith's diamond-water puzzle is based on the distinction between marginal and total utility.

If total utility declines as an additional unit of a commodity is purchased,

Figure 5-12 -In Figure 5-12, the move in the consumer equilibrium from A to B shows that

A decrease in the price of one good results in a parallel shift in the budget line.

As a rule, as a consumer acquires more and more of a good, the marginal utility declines.

The law of demand states that as the price

The marginal rate of substitution represents the maximum amount of one commodity a consumer is willing to give up in exchange for one more unit of another commodity.

The law of diminishing marginal utility is consistent with the consumer behavior that produces a negatively sloped demand curve.

Marginal utility is

Because the consumer's budget is limited, purchase decisions among available goods must of necessity be interdependent.

Which of the following statements is correct?

Figure 5-14 -Martha initially buys the combination of pens and pencils shown as A in Figure 5-14.After the prices of both goods change, she buys combination B.It must be true that

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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