Question 1

What are the properties of indifference curves?

Accepted Answer

a.Every point on an indifference curve f

Question 2

Why is it that the consumer can maximize total net utility only if the purchase quantity brings marginal utility as close as possible to equality with price?

Accepted Answer

The decision to purchase a quantity of a

Question 3

Since price tends to equal marginal utility, the price of water is low and the price of diamonds is high.

Accepted Answer

A) True 
 B)False

Question 4

The host at a party offers Justin a sixth beer.Justin says, "No thanks, man.The marginal utility of that fifth beer was, like, 20 cents, but the marginal utility of the sixth would be minus 10 cents." If Justin consumes the sixth beer, his total utility will

Accepted Answer

A)  rise by 10 cents. 
B)  reach a plateau and remain constant. 
C)  fall by 10 cents. 
D)  fall below his marginal utility. 
A)  rise by 10 cents. 
B)  reach a plateau and remain constant. 
C)  fall by 10 cents. 
D)  fall below his marginal utility.

Question 5

Figure 5-15
  
-Hal initially consumes the combination marked as A in Figure 5-15.After his income increases, Hal consumes combination B.We can conclude that Hal views

Accepted Answer

A)  X as an inferior good and Y as a noninferior good. 
B)  X as a noninferior good and Y as an inferior good. 
C)  both X and Y as noninferior goods. 
D)  both X and Y as inferior goods. 
A)  X as an inferior good and Y as a noninferior good. 
B)  X as a noninferior good and Y as an inferior good. 
C)  both X and Y as noninferior goods. 
D)  both X and Y as inferior goods.

Question 6

In Poland's free market, Felix Siemienas is making a fortune in cold cuts.Prices are much higher than formerly.Siemienas says, "Yes, my prices are high.If nobody buys, I bring my prices down.That is the market rule." This "rule" best describes

Accepted Answer

A)  the law of diminishing returns. 
B)  opportunity cost. 
C)  the law of increasing costs. 
D)  the law of demand. 
A)  the law of diminishing returns. 
B)  opportunity cost. 
C)  the law of increasing costs. 
D)  the law of demand.

Question 7

If indifference curves and budget lines are used to analyze consumer choice, an inferior good will

Accepted Answer

A)  escape detection when income rises. 
B)  be easily identified because the quantity purchased will fall as income rises. 
C)  be easily identified because the quantity purchased will rise as income rises. 
D)  be easily identified because it will change the slope of the budget line. 
E)  escape detection because this model does not show that relationship. 
A)  escape detection when income rises. 
B)  be easily identified because the quantity purchased will fall as income rises. 
C)  be easily identified because the quantity purchased will rise as income rises. 
D)  be easily identified because it will change the slope of the budget line. 
E)  escape detection because this model does not show that relationship.

Question 8

Figure 5-17
  
-In Figure 5-17, which of the marked points would an economist use to help him construct a single demand curve for X?

Accepted Answer

A)  A and B 
B)  C and D 
C)  A and C 
D)  A and D 
A)  A and B 
B)  C and D 
C)  A and C 
D)  A and D

Question 9

The optimal combination of goods for a consumer to purchase is shown by

Accepted Answer

A)  any intersection of the indifference curve and the budget line. 
B)  the point where the budget line touches the vertical axis. 
C)  a point of tangency between the budget line and the indifference curve. 
D)  the point at which the indifference curve parallels the horizontal axis. 
E)  the intersection of two indifference curves. 
A)  any intersection of the indifference curve and the budget line. 
B)  the point where the budget line touches the vertical axis. 
C)  a point of tangency between the budget line and the indifference curve. 
D)  the point at which the indifference curve parallels the horizontal axis. 
E)  the intersection of two indifference curves.

Question 10

When the price of a commodity falls, we can expect

Accepted Answer

A)  total utility will fall. 
B)  marginal utility of the last unit purchased will fall. 
C)  marginal utility of the last unit purchased will rise. 
D)  purchases will fall because of a change in marginal utility. 
A)  total utility will fall. 
B)  marginal utility of the last unit purchased will fall. 
C)  marginal utility of the last unit purchased will rise. 
D)  purchases will fall because of a change in marginal utility.

Question 11

If marginal net utility is positive, the consumer must be buying too small a quantity to maximize total net utility.Why?

Accepted Answer

Because marginal utility exceeds price,

Question 12

An inferior good is one

Accepted Answer

A)  produced by American industries. 
B)  whose quantity demanded falls when the purchaser's income rises. 
C)  ordinarily bought by college students from college-town merchants. 
D)  suitable for a garage sale. 
A)  produced by American industries. 
B)  whose quantity demanded falls when the purchaser's income rises. 
C)  ordinarily bought by college students from college-town merchants. 
D)  suitable for a garage sale.

Question 13

Since price tends to equal total utility, the price of water is low and the price of diamonds is high.

Accepted Answer

A) True 
 B)False

Question 14

A change in consumer preferences will shift the budget line.

Accepted Answer

A) True 
 B)False

Question 15

Use the law of diminishing marginal utility to explain why Domino's and Pizza Hut allow the purchase of a second pizza for only $4 when one pays full price (around $10) for the first pizza.Why not simply charge $7 a pizza instead?

Accepted Answer

The second pizza gives less marginal uti

Question 16

What is a budget line? What does its slope indicate?

Accepted Answer

The budget line for a household graphica

Question 17

Consumers should purchase a good up to the point where MU = P.

Accepted Answer

A) True 
 B)False

Question 18

Figure 5-9
  
-In Figure 5-9, the consumer's marginal rate of substitution at his optimum choice of X and Y is

Accepted Answer

A)  -1. 
B)  16. 
C)  8. 
D)  -8. 
A)  -1. 
B)  16. 
C)  8. 
D)  -8.

Question 19

What is the relationship between marginal utility and an individual demand curve?

Accepted Answer

The marginal utility reveals how much of

Question 20

Lana spent $5 to see a movie.We know

Accepted Answer

A)  the movie was worth 500 utils. 
B)  Lana's total utility from movies was $5. 
C)  the movie was worth at least $5 worth of other goods. 
D)  the movie increased marginal utility. 
A)  the movie was worth 500 utils. 
B)  Lana's total utility from movies was $5. 
C)  the movie was worth at least $5 worth of other goods. 
D)  the movie increased marginal utility.

Exam 5: Consumer Choice: Individual and Market Demand

What are the properties of indifference curves?

Why is it that the consumer can maximize total net utility only if the purchase quantity brings marginal utility as close as possible to equality with price?

Since price tends to equal marginal utility, the price of water is low and the price of diamonds is high.

The host at a party offers Justin a sixth beer.Justin says, "No thanks, man.The marginal utility of that fifth beer was, like, 20 cents, but the marginal utility of the sixth would be minus 10 cents." If Justin consumes the sixth beer, his total utility will

Figure 5-15 -Hal initially consumes the combination marked as A in Figure 5-15.After his income increases, Hal consumes combination B.We can conclude that Hal views

In Poland's free market, Felix Siemienas is making a fortune in cold cuts.Prices are much higher than formerly.Siemienas says, "Yes, my prices are high.If nobody buys, I bring my prices down.That is the market rule." This "rule" best describes

If indifference curves and budget lines are used to analyze consumer choice, an inferior good will

Figure 5-17 -In Figure 5-17, which of the marked points would an economist use to help him construct a single demand curve for X?

The optimal combination of goods for a consumer to purchase is shown by

When the price of a commodity falls, we can expect

If marginal net utility is positive, the consumer must be buying too small a quantity to maximize total net utility.Why?

An inferior good is one

Since price tends to equal total utility, the price of water is low and the price of diamonds is high.

A change in consumer preferences will shift the budget line.

Use the law of diminishing marginal utility to explain why Domino's and Pizza Hut allow the purchase of a second pizza for only $4 when one pays full price (around $10) for the first pizza.Why not simply charge $7 a pizza instead?

What is a budget line? What does its slope indicate?

Consumers should purchase a good up to the point where MU = P.

Figure 5-9 -In Figure 5-9, the consumer's marginal rate of substitution at his optimum choice of X and Y is

What is the relationship between marginal utility and an individual demand curve?

Lana spent $5 to see a movie.We know

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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