Question 1

An inferior good is one that consumers buy in smaller quantities when incomes rise.

Accepted Answer

A) True 
 B)False

Question 2

Rolls Royce may actually sell fewer cars at lower prices due to the "snob effect."

Accepted Answer

A) True 
 B)False

Question 3

The authors state that mutual gains must exist from trade.Explain their reasoning.

Accepted Answer

The authors note that trade is voluntary

Question 4

Marginal utility can fall even as total utility from the consumption of a good is rising.

Accepted Answer

A) True 
 B)False

Question 5

Table 5-4
 $ \begin{array}{cc}\text { Price } & \text { Quantity } \ \text { in \$ } & \text { Demanded } \ 80 & 1 \ 70 & 2 \ 60 & 3 \ 50 & 4 \ 40 & 5 \ 30 & 6 \ 20 & 7 \ 10 & 8\end{array} $
-Table 5-4 shows the demand schedule for concert tickets for a particular consumer.What will be this consumer's surplus if the price of tickets is $50?

Accepted Answer

A)  $200 
B)  $60 
C)  $260 
D)  $210 
A)  $200 
B)  $60 
C)  $260 
D)  $210

Question 6

An increase in income shifts indifference curves outward.

Accepted Answer

A) True 
 B)False

Question 7

The market demand curve

Accepted Answer

A)  and the individual demand curve are synonymous. 
B)  is calculated by multiplying the number of consumers by the individual demand curve. 
C)  shows how the total quantity demanded of some good changes as price changes, other things held constant. 
D)  can be calculated even if individual demand curves are unknown. 
A)  and the individual demand curve are synonymous. 
B)  is calculated by multiplying the number of consumers by the individual demand curve. 
C)  shows how the total quantity demanded of some good changes as price changes, other things held constant. 
D)  can be calculated even if individual demand curves are unknown.

Question 8

Even if all individual demand curves are downwardly sloped, the market demand curve may slope upward.

Accepted Answer

A) True 
 B)False

Question 9

The slope of the budget line is the amount of one commodity that a consumer must give up in order to obtain an additional unit of the other commodity.

Accepted Answer

A) True 
 B)False

Question 10

A consumer will go to a point on the highest attainable indifference curve.

Accepted Answer

A) True 
 B)False

Question 11

Figure 5-19
  
-In Figure 5-19, the consumer experiences at point C

Accepted Answer

A)  greater total utility than at point D. 
B)  greater total utility than at point E. 
C)  less total utility than at point D. 
D)  total utility equal to that experienced at point D. 
A)  greater total utility than at point D. 
B)  greater total utility than at point E. 
C)  less total utility than at point D. 
D)  total utility equal to that experienced at point D.

Question 12

Figure 5-6
  
-A shift in the budget line in Figure 5-6 from AB to AC 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 13

When the price of a good changes but the price of the only other good bought by a consumer stays constant, his

Accepted Answer

A)  budget line shifts. 
B)  indifference curves shift. 
C)  budget line changes slope. 
D)  indifference curves change slope. 
A)  budget line shifts. 
B)  indifference curves shift. 
C)  budget line changes slope. 
D)  indifference curves change slope.

Question 14

Tom is buying a quantity of wheat at which the marginal utility (in dollars) exceeds price.He should

Accepted Answer

A)  reduce wheat consumption, thus raising P to the level at which MU = P. 
B)  reduce wheat consumption, thus raising MU to the level at which MU = P. 
C)  increase wheat consumption, thus raising P to the level at which MU = P. 
D)  increase wheat consumption, thus lowering MU to the level at which MU = P. 
A)  reduce wheat consumption, thus raising P to the level at which MU = P. 
B)  reduce wheat consumption, thus raising MU to the level at which MU = P. 
C)  increase wheat consumption, thus raising P to the level at which MU = P. 
D)  increase wheat consumption, thus lowering MU to the level at which MU = P.

Question 15

The real cost of a decision is the opportunity cost measured in the commodities forgone.

Accepted Answer

A) True 
 B)False

Question 16

If a commodity is inexpensive and its total utility great,

Accepted Answer

A)  it is an inferior good. 
B)  it is plentiful. 
C)  its marginal utility is high. 
D)  the ratio of price to marginal utility is very high. 
A)  it is an inferior good. 
B)  it is plentiful. 
C)  its marginal utility is high. 
D)  the ratio of price to marginal utility is very high.

Question 17

The law of diminishing marginal utility holds that at some point consumption of additional units of a commodity adds less to total utility.

Accepted Answer

A) True 
 B)False

Question 18

Total utility

Accepted Answer

A)  diminishes as the quantity consumed of a good increases. 
B)  increases as long as more goods are acquired. 
C)  increases as long as marginal utility increases. 
D)  increases as long as marginal utility is positive. 
E)  diminishes as consumption of some good rises. 
A)  diminishes as the quantity consumed of a good increases. 
B)  increases as long as more goods are acquired. 
C)  increases as long as marginal utility increases. 
D)  increases as long as marginal utility is positive. 
E)  diminishes as consumption of some good rises.

Question 19

Figure 5-3
  
-Assume the market consists of three consumers with the demand curves in Figure 5-3.At a price of 1, the total market demand is

Accepted Answer

A)  40. 
B)  80. 
C)  140. 
D)  150. 
A)  40. 
B)  80. 
C)  140. 
D)  150.

Question 20

Define the following terms.Give a complete and precise definition in one sentence.
a.total utility
b.marginal utility
c.consumer's surplus
d."law" of demand

Accepted Answer

a.Total utility of a good is the satisfa

Exam 5: Consumer Choice: Individual and Market Demand

An inferior good is one that consumers buy in smaller quantities when incomes rise.

Rolls Royce may actually sell fewer cars at lower prices due to the "snob effect."

The authors state that mutual gains must exist from trade.Explain their reasoning.

Marginal utility can fall even as total utility from the consumption of a good is rising.

Table 5-4 Price Quantity in \ Demanded 80 1 70 2 60 3 50 4 40 5 30 6 20 7 10 8 -Table 5-4 shows the demand schedule for concert tickets for a particular consumer.What will be this consumer's surplus if the price of tickets is $50?

An increase in income shifts indifference curves outward.

The market demand curve

Even if all individual demand curves are downwardly sloped, the market demand curve may slope upward.

The slope of the budget line is the amount of one commodity that a consumer must give up in order to obtain an additional unit of the other commodity.

A consumer will go to a point on the highest attainable indifference curve.

Figure 5-19 -In Figure 5-19, the consumer experiences at point C

Figure 5-6 -A shift in the budget line in Figure 5-6 from AB to AC indicates

When the price of a good changes but the price of the only other good bought by a consumer stays constant, his

Tom is buying a quantity of wheat at which the marginal utility (in dollars) exceeds price.He should

The real cost of a decision is the opportunity cost measured in the commodities forgone.

If a commodity is inexpensive and its total utility great,

The law of diminishing marginal utility holds that at some point consumption of additional units of a commodity adds less to total utility.

Total utility

Figure 5-3 -Assume the market consists of three consumers with the demand curves in Figure 5-3.At a price of 1, the total market demand is

Define the following terms.Give a complete and precise definition in one sentence. a.total utility b.marginal utility c.consumer's surplus d."law" of demand

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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