Question 1

Consumers should purchase quantities of a good to the point where MU > P.

Accepted Answer

A) True 
 B)False

Question 2

Consumer's surplus can be written as

Accepted Answer

A)  total expenditure - total utility. 
B)  total utility - total expenditure. 
C)  marginal utility - marginal expenditure. 
D)  marginal expenditure - marginal utility. 
A)  total expenditure - total utility. 
B)  total utility - total expenditure. 
C)  marginal utility - marginal expenditure. 
D)  marginal expenditure - marginal utility.

Question 3

The budget line and the indifference curve are geometric devices used to provide a closer look at consumer choice.

Accepted Answer

A) True 
 B)False

Question 4

Figure 5-6
  
-In Figure 5-6, a shift in the budget line from AC to AB indicates

Accepted Answer

A)  the price of wine coolers has risen. 
B)  income has increased. 
C)  the price of beer has fallen. 
D)  the price of wine coolers has fallen. 
E)  All of the above are correct. 
A)  the price of wine coolers has risen. 
B)  income has increased. 
C)  the price of beer has fallen. 
D)  the price of wine coolers has fallen. 
E)  All of the above are correct.

Question 5

Which of the following factors is always present in consumer decision making?

Accepted Answer

A)  taxes 
B)  high prices 
C)  scarcity 
D)  changing consumer tastes 
E)  cost-of-living adjustments to income 
A)  taxes 
B)  high prices 
C)  scarcity 
D)  changing consumer tastes 
E)  cost-of-living adjustments to income

Question 6

Consumer surplus is what one consumer is willing to pay for a commodity over what another consumer is willing to pay for the same commodity.

Accepted Answer

A) True 
 B)False

Question 7

If I use 1,000 gallons of water a month at a price of $.01 a gallon, is my consumer surplus likely to be large or small? Explain.

Accepted Answer

The 1,000th gallon will yield no consume

Question 8

Jason considers a crystal bowl, a silver dish, and a pewter figurine, each priced $45 at the local gift shop.He chooses the silver dish because, according to economic theory

Accepted Answer

A)  his marginal utility per dollar is greatest. 
B)  his total utility is minimized. 
C)  his marginal utility is equal to his total utility. 
D)  silver costs more per ounce than pewter. 
A)  his marginal utility per dollar is greatest. 
B)  his total utility is minimized. 
C)  his marginal utility is equal to his total utility. 
D)  silver costs more per ounce than pewter.

Question 9

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." From his comments, we deduce that Justin

Accepted Answer

A)  is an alcoholic. 
B)  may think that a sixth beer would make him sick. 
C)  is irrational. 
D)  wrongly estimates the marginal utility of the fifth beer. 
A)  is an alcoholic. 
B)  may think that a sixth beer would make him sick. 
C)  is irrational. 
D)  wrongly estimates the marginal utility of the fifth beer.

Question 10

High price and low total utility indicate

Accepted Answer

A)  low marginal utility. 
B)  large quantities are sold. 
C)  high marginal utility. 
D)  a high price/marginal utility ratio. 
A)  low marginal utility. 
B)  large quantities are sold. 
C)  high marginal utility. 
D)  a high price/marginal utility ratio.

Question 11

You have five hours left to study for two exams tomorrow.The relationship between hours of study and test scores is as follows:
 $\begin{array}{cccc}
& \text { Economics } &&&&  { \text { Sociology } } \
 \underline {  \text { Hours }}&& \underline { \text { Scare } } &\quad\quad& \underline {  \text { Hours }}&& \underline { \text { Scare } } \
1 && 50 &\quad\quad\quad& 1 && 75 \
2 && 65 &\quad\quad& 2 && 85 \
3 && 75 &\quad\quad& 3 && 90 \
4 && 80 &\quad\quad& 4 && 93 \
5 && 85 &\quad\quad& 5 && 5
\end{array}$ 
Use the rule for determining optimal purchases to allocate your time, where each point is one "util" of utility.

Accepted Answer

Time is money in this example, so you wa

Question 12

Scarcity

Accepted Answer

A)  necessitates choice among consumer goods. 
B)  of income renders purchase decisions interdependent. 
C)  affects all consumer decisions. 
D)  may involve forgoing the pleasure of one good in order to enjoy another. 
E)  All of the above answers are correct. 
A)  necessitates choice among consumer goods. 
B)  of income renders purchase decisions interdependent. 
C)  affects all consumer decisions. 
D)  may involve forgoing the pleasure of one good in order to enjoy another. 
E)  All of the above answers are correct.

Question 13

Figure 5-16
  
-In Figure 5-16, a decrease in the price of apples will

Accepted Answer

A)  shift Adam's budget constraint out. 
B)  make Adam's budget constraint steeper. 
C)  shift Adam's indifference curves out. 
D)  make Adam's budget constraint flatter. 
A)  shift Adam's budget constraint out. 
B)  make Adam's budget constraint steeper. 
C)  shift Adam's indifference curves out. 
D)  make Adam's budget constraint flatter.

Question 14

Figure 5-17
  
-In Figure 5-17, the consumer would prefer

Accepted Answer

A)  D to C. 
B)  B to D. 
C)  C to B or A. 
D)  D to A but not B. 
A)  D to C. 
B)  B to D. 
C)  C to B or A. 
D)  D to A but not B.

Question 15

The law of demand holds that as prices of goods decrease, people are willing to buy more.

Accepted Answer

A) True 
 B)False

Question 16

Table 5-3
 $\begin{array}{cc}
\underline { \text { Ice Cream Cones }}&\underline { \text { Total Utility }}\
1 & 50 \
2 & 80 \
3 & 95 \
4 & 95
\end{array}$
-Using Table 5-3, graph the marginal utility curve.

Accepted Answer

The answer of Table 5-3
 \(\begin{array}{cc}
\underline { \text { Ice...

Question 17

Total utility can be objectively measured in numbers that indicate usefulness or benefit to the consumer.

Accepted Answer

A) True 
 B)False

Question 18

If the marginal net utility of beer is negative, the consumer should buy more beer in order to increase the total utility.

Accepted Answer

A) True 
 B)False

Question 19

An increase in a consumer's income will always increase the demand for a good.

Accepted Answer

A) True 
 B)False

Question 20

Why is gold very expensive, even though it is not essential to life, while water, which is essential to life, is inexpensive?

Accepted Answer

Because there is a lower supply of gold

Exam 5: Consumer Choice: Individual and Market Demand

Consumers should purchase quantities of a good to the point where MU > P.

Consumer's surplus can be written as

The budget line and the indifference curve are geometric devices used to provide a closer look at consumer choice.

Figure 5-6 -In Figure 5-6, a shift in the budget line from AC to AB indicates

Which of the following factors is always present in consumer decision making?

Consumer surplus is what one consumer is willing to pay for a commodity over what another consumer is willing to pay for the same commodity.

If I use 1,000 gallons of water a month at a price of $.01 a gallon, is my consumer surplus likely to be large or small? Explain.

Jason considers a crystal bowl, a silver dish, and a pewter figurine, each priced $45 at the local gift shop.He chooses the silver dish because, according to economic theory

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." From his comments, we deduce that Justin

High price and low total utility indicate

Scarcity

Figure 5-16 -In Figure 5-16, a decrease in the price of apples will

Figure 5-17 -In Figure 5-17, the consumer would prefer

The law of demand holds that as prices of goods decrease, people are willing to buy more.

Table 5-3 1 50 2 80 3 95 4 95 -Using Table 5-3, graph the marginal utility curve.

Total utility can be objectively measured in numbers that indicate usefulness or benefit to the consumer.

If the marginal net utility of beer is negative, the consumer should buy more beer in order to increase the total utility.

An increase in a consumer's income will always increase the demand for a good.

Why is gold very expensive, even though it is not essential to life, while water, which is essential to life, is inexpensive?

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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