Question 1

Suppose the price of butter falls because milk price supports are removed.Will people's tastes shift away from margarine and toward butter?

Accepted Answer

No.This change in relative pri

Question 2

The slope of the budget line is determined only by the prices of the commodities purchased.

Accepted Answer

A) True 
 B)False

Question 3

Economists consider instances of increasing marginal utility to be

Accepted Answer

A)  normal. 
B)  impossible. 
C)  unusual, as in the case of addictions. 
D)  irrational. 
A)  normal. 
B)  impossible. 
C)  unusual, as in the case of addictions. 
D)  irrational.

Question 4

Figure 5-13
  
-According to Figure 5-13, if the price of good X falls, a consumer making her optimal decision will move from a point on

Accepted Answer

A)  U₁ to a point on U₃. 
B)  U₂ to a point on U₃. 
C)  U₁ to a point on U₃ 
D)  U₂ to a point on U₁. 
A)  U₁ to a point on U₃. 
B)  U₂ to a point on U₃. 
C)  U₁ to a point on U₃ 
D)  U₂ to a point on U₁.

Question 5

Quantity demanded is not only affected by price but by variables such as income and the prices of other goods.

Accepted Answer

A) True 
 B)False

Question 6

Figure 5-7
  
-In Figure 5-7, budget line B compared to A clearly shows that the

Accepted Answer

A)  price of wine increased. 
B)  price of beer decreased. 
C)  price of beer increased. 
D)  consumers' money income increased. 
A)  price of wine increased. 
B)  price of beer decreased. 
C)  price of beer increased. 
D)  consumers' money income increased.

Question 7

The optimal purchase rule is stated as

Accepted Answer

A)  TU = MU. 
B)  MU = P. 
C)  TU = P. 
D)  MU = 0. 
A)  TU = MU. 
B)  MU = P. 
C)  TU = P. 
D)  MU = 0.

Question 8

How do you calculate consumer's surplus? What happens to consumer's surplus when the price of a commodity rises?

Accepted Answer

Consumer's surplus = Total utility (in m

Question 9

The slope of a consumer's indifference curve between two commodities represents

Accepted Answer

A)  her marginal rate of substitution between the commodities. 
B)  the relative prices of the goods. 
C)  her marginal revenue from selling the commodities. 
D)  her marginal revenue product from consuming the commodities. 
A)  her marginal rate of substitution between the commodities. 
B)  the relative prices of the goods. 
C)  her marginal revenue from selling the commodities. 
D)  her marginal revenue product from consuming the commodities.

Question 10

A consumer cannot gain consumer's surplus if she purchases more than one unit of a good.

Accepted Answer

A) True 
 B)False

Question 11

Figure 5-1
  
-In Figure 5-1 from the text, if the price of pizzas is $8:
a.how many pizzas will the consumer purchase?
b.what is the payment for the optimal number of pizzas?
c.how much consumer surplus will the consumer receive?

Accepted Answer

a.The consumer will purchase 5 pizzas at

Question 12

If point A on an indifference curve lies higher (measured vertically) than point B on the same curve, Point A automatically represents higher total utility than point B.

Accepted Answer

A) True 
 B)False

Question 13

For a consumer to maximize utility, he will choose the

Accepted Answer

A)  point where the slope of the budget line equals the slope of the indifference curve. 
B)  any point where the budget line and indifference curve intersect. 
C)  point where he gets the most of the good he prefers most. 
D)  point where the marginal rate of substitution is greatest. 
E)  the point where marginal utility is zero for both goods 
A)  point where the slope of the budget line equals the slope of the indifference curve. 
B)  any point where the budget line and indifference curve intersect. 
C)  point where he gets the most of the good he prefers most. 
D)  point where the marginal rate of substitution is greatest. 
E)  the point where marginal utility is zero for both goods

Question 14

Voluntary exchange requires that there must be mutual gain.

Accepted Answer

A) True 
 B)False

Question 15

Consumer surplus is the difference between the worth of a commodity to the consumer and the price the consumer pays for the commodity.

Accepted Answer

A) True 
 B)False

Question 16

Figure 5-24
  
-Given the demand curve in Figure 5-24, explain how consumer's surplus is calculated.

Accepted Answer

The area under the demand curve above ma

Question 17

The Wall Street Journal reports that "hard times aid poultry companies as people eat cheaper fowl." In the language of economists, this means

Accepted Answer

A)  chicken is an inferior good. 
B)  chicken has a negative substitution effect. 
C)  chicken has a positive substitution effect. 
D)  people's tastes change during recessions. 
E)  chicken has a positive income effect. 
A)  chicken is an inferior good. 
B)  chicken has a negative substitution effect. 
C)  chicken has a positive substitution effect. 
D)  people's tastes change during recessions. 
E)  chicken has a positive income effect.

Question 18

A normal 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 increases. 
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 increases.

Question 19

The law of diminishing marginal utility states that total utility will increase at a decreasing rate as additional units of a commodity are acquired.

Accepted Answer

A) True 
 B)False

Question 20

The market demand curve is the horizontal summation of all individual demand curves.

Accepted Answer

A) True 
 B)False

Exam 5: Consumer Choice: Individual and Market Demand

Suppose the price of butter falls because milk price supports are removed.Will people's tastes shift away from margarine and toward butter?

The slope of the budget line is determined only by the prices of the commodities purchased.

Economists consider instances of increasing marginal utility to be

Figure 5-13 -According to Figure 5-13, if the price of good X falls, a consumer making her optimal decision will move from a point on

Quantity demanded is not only affected by price but by variables such as income and the prices of other goods.

Figure 5-7 -In Figure 5-7, budget line B compared to A clearly shows that the

The optimal purchase rule is stated as

How do you calculate consumer's surplus? What happens to consumer's surplus when the price of a commodity rises?

The slope of a consumer's indifference curve between two commodities represents

A consumer cannot gain consumer's surplus if she purchases more than one unit of a good.

Figure 5-1 -In Figure 5-1 from the text, if the price of pizzas is $8: a.how many pizzas will the consumer purchase? b.what is the payment for the optimal number of pizzas? c.how much consumer surplus will the consumer receive?

If point A on an indifference curve lies higher (measured vertically) than point B on the same curve, Point A automatically represents higher total utility than point B.

For a consumer to maximize utility, he will choose the

Voluntary exchange requires that there must be mutual gain.

Consumer surplus is the difference between the worth of a commodity to the consumer and the price the consumer pays for the commodity.

Figure 5-24 -Given the demand curve in Figure 5-24, explain how consumer's surplus is calculated.

The Wall Street Journal reports that "hard times aid poultry companies as people eat cheaper fowl." In the language of economists, this means

A normal good is a good whose quantity demanded

The law of diminishing marginal utility states that total utility will increase at a decreasing rate as additional units of a commodity are acquired.

The market demand curve is the horizontal summation of all individual demand curves.

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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