Question 1

What is marginal analysis?

Accepted Answer

Marginal analysis is a method for calcul

Question 2

Any point on the lowest indifference curve is preferable to a point on a higher indifference curve.

Accepted Answer

A) True 
 B)False

Question 3

Figure 5-11
  
-In Figure 5-11, a consumer is initially at point A.There is a price change and she moves to B.It follows that

Accepted Answer

A)  the demand for beer follows the law of demand. 
B)  the demand for beer does not follow the law of demand. 
C)  wine is an inferior good. 
D)  the consumer is confused. 
A)  the demand for beer follows the law of demand. 
B)  the demand for beer does not follow the law of demand. 
C)  wine is an inferior good. 
D)  the consumer is confused.

Question 4

A change in the price of one good, such as staples, may affect the quantity demanded of another good, such as rubber bands.

Accepted Answer

A) True 
 B)False

Question 5

As a rule, the more of a commodity a consumer acquires, the smaller will be her total utility from that good.

Accepted Answer

A) True 
 B)False

Question 6

Total utility can be thought of as the

Accepted Answer

A)  total satisfaction derived from a bundle of goods. 
B)  minimum amount of money a consumer is willing to spend on a bundle of goods. 
C)  additional satisfaction a consumer receives from the marginal unit of a good. 
D)  willingness to pay for the marginal unit of a good. 
A)  total satisfaction derived from a bundle of goods. 
B)  minimum amount of money a consumer is willing to spend on a bundle of goods. 
C)  additional satisfaction a consumer receives from the marginal unit of a good. 
D)  willingness to pay for the marginal unit of a good.

Question 7

Market demand curves may slope downward even if some individual demand curves do not because

Accepted Answer

A)  the law of demand requires that this is true. 
B)  lower prices may bring more purchasers into the market. 
C)  merchants try to sell more at lower prices. 
D)  people believe expensive goods are better goods. 
A)  the law of demand requires that this is true. 
B)  lower prices may bring more purchasers into the market. 
C)  merchants try to sell more at lower prices. 
D)  people believe expensive goods are better goods.

Question 8

The budget line facing a household includes information on

Accepted Answer

A)  prices of two goods and household income. 
B)  household income and the price of money. 
C)  the price of one good and household income. 
D)  the price of two goods but no information on household income. 
E)  preferences of goods at various prices. 
A)  prices of two goods and household income. 
B)  household income and the price of money. 
C)  the price of one good and household income. 
D)  the price of two goods but no information on household income. 
E)  preferences of goods at various prices.

Question 9

Figure 5-13
  
-In Figure 5-13, the consumer is better off

Accepted Answer

A)  at A than at E. 
B)  at B than at D. 
C)  at any point on U₂ than at any point on U₁. 
D)  All of the above are correct. 
A)  at A than at E. 
B)  at B than at D. 
C)  at any point on U₂ than at any point on U₁. 
D)  All of the above are correct.

Question 10

Market demand curves are found by

Accepted Answer

A)  vertically summing individual demand curves. 
B)  horizontally summing individual demand curves. 
C)  summing individual demand curves in a parallel fashion. 
D)  adding the slopes of individual demand curves. 
A)  vertically summing individual demand curves. 
B)  horizontally summing individual demand curves. 
C)  summing individual demand curves in a parallel fashion. 
D)  adding the slopes of individual demand curves.

Question 11

The demand curve can be derived from indifference curves by varying the price of the commodity in question.

Accepted Answer

A) True 
 B)False

Question 12

The market demand curve represents the total quantity demanded at each price.

Accepted Answer

A) True 
 B)False

Question 13

What is the marginal rate of substitution, and what role does it play in determining the consumer's optimum choice?

Accepted Answer

The MRS is the slope of the indifference

Question 14

All points on an indifference curve represent combinations of two goods that are equally desirable to the consumer.

Accepted Answer

A) True 
 B)False

Question 15

Indifference curves show all combinations of commodities that are equally desirable to the consumer.

Accepted Answer

A) True 
 B)False

Question 16

When the price of a commodity rises, we can expect

Accepted Answer

A)  marginal utility of the last unit purchased will rise. 
B)  marginal utility of the last unit purchased will fall. 
C)  marginal utility of the last unit purchased will be unaffected. 
D)  purchases to rise because of the increased marginal utility. 
A)  marginal utility of the last unit purchased will rise. 
B)  marginal utility of the last unit purchased will fall. 
C)  marginal utility of the last unit purchased will be unaffected. 
D)  purchases to rise because of the increased marginal utility.

Question 17

Modern economists measure how much utility Fred gets from a hot dog by

Accepted Answer

A)  asking Fred how many utils he gets from its consumption. 
B)  examining the price of the hamburger Fred chose not to buy. 
C)  asking Fred how much of some other good he would give up to get the hot dog.The "other good" can be any good except money. 
D)  asking Fred how much of some other good he would give up to get the hot dog.The "other good" can be any good, including money. 
A)  asking Fred how many utils he gets from its consumption. 
B)  examining the price of the hamburger Fred chose not to buy. 
C)  asking Fred how much of some other good he would give up to get the hot dog.The "other good" can be any good except money. 
D)  asking Fred how much of some other good he would give up to get the hot dog.The "other good" can be any good, including money.

Question 18

Total utility will be at its maximum when

Accepted Answer

A)  marginal utility is negative. 
B)  marginal utility is positive. 
C)  marginal utility is maximized. 
D)  marginal utility is zero. 
A)  marginal utility is negative. 
B)  marginal utility is positive. 
C)  marginal utility is maximized. 
D)  marginal utility is zero.

Question 19

Resolving Adam Smith's diamond-water puzzle involves

Accepted Answer

A)  realizing that price is not directly related to total utility. 
B)  knowing that at optimal purchase, price will tend to equal marginal utility. 
C)  knowing that, as increasing quantities of a good are consumed, marginal utility diminishes and, conversely, consuming a small quantity of a good produces high marginal utility. 
D)  All of the above are correct. 
A)  realizing that price is not directly related to total utility. 
B)  knowing that at optimal purchase, price will tend to equal marginal utility. 
C)  knowing that, as increasing quantities of a good are consumed, marginal utility diminishes and, conversely, consuming a small quantity of a good produces high marginal utility. 
D)  All of the above are correct.

Question 20

A bottle of wine costs $8 and a quiche costs $5.At Robert's present levels of consumption, he spends all his income and receives marginal utility of $10 from the last bottle of wine and marginal utility of $4 from the last quiche.To maximize his total utility, Robert should

Accepted Answer

A)  buy less wine and more quiche. 
B)  buy more wine and less quiche. 
C)  spend all of his money on wine. 
D)  change his spending pattern until he buys 8/5ths as much wine as quiche. 
A)  buy less wine and more quiche. 
B)  buy more wine and less quiche. 
C)  spend all of his money on wine. 
D)  change his spending pattern until he buys 8/5ths as much wine as quiche.

Exam 5: Consumer Choice: Individual and Market Demand

What is marginal analysis?

Any point on the lowest indifference curve is preferable to a point on a higher indifference curve.

Figure 5-11 -In Figure 5-11, a consumer is initially at point A.There is a price change and she moves to B.It follows that

A change in the price of one good, such as staples, may affect the quantity demanded of another good, such as rubber bands.

As a rule, the more of a commodity a consumer acquires, the smaller will be her total utility from that good.

Total utility can be thought of as the

Market demand curves may slope downward even if some individual demand curves do not because

The budget line facing a household includes information on

Figure 5-13 -In Figure 5-13, the consumer is better off

Market demand curves are found by

The demand curve can be derived from indifference curves by varying the price of the commodity in question.

The market demand curve represents the total quantity demanded at each price.

What is the marginal rate of substitution, and what role does it play in determining the consumer's optimum choice?

All points on an indifference curve represent combinations of two goods that are equally desirable to the consumer.

Indifference curves show all combinations of commodities that are equally desirable to the consumer.

When the price of a commodity rises, we can expect

Modern economists measure how much utility Fred gets from a hot dog by

Total utility will be at its maximum when

Resolving Adam Smith's diamond-water puzzle involves

A bottle of wine costs $8 and a quiche costs $5.At Robert's present levels of consumption, he spends all his income and receives marginal utility of $10 from the last bottle of wine and marginal utility of $4 from the last quiche.To maximize his total utility, Robert should

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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