Question 1

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 2

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 3

Total utility increases if one more unit of a product is purchased and marginal utility is negative.

Accepted Answer

A) True 
 B)False

Question 4

An indifference curve is a line showing

Accepted Answer

A) combinations of goods that can be produced if all resources are fully employed. 
B) all combinations of two commodities that are equally desirable to the consumer. 
C) all combinations of goods over which the consumer has no choice. 
D) how decisions are made in a nonmarket economy. 
A) combinations of goods that can be produced if all resources are fully employed. 
B) all combinations of two commodities that are equally desirable to the consumer. 
C) all combinations of goods over which the consumer has no choice. 
D) how decisions are made in a nonmarket economy.

Question 5

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 6

All decisions involve opportunity cost.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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 9

A well-known women's college whose tuition lagged below similar schools found recruiting difficult and enrollment falling.A substantial tuition increase was implemented, and dormitories were soon full again.This can be explained by

Accepted Answer

A) the law of demand. 
B) the fact that education at the school was an inferior good. 
C) the fact that people sometimes base perceptions of quality on price (snob effect). 
D) elastic demand. 
A) the law of demand. 
B) the fact that education at the school was an inferior good. 
C) the fact that people sometimes base perceptions of quality on price (snob effect). 
D) elastic demand.

Question 10

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 11

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 12

When the price of one product falls,

Accepted Answer

A) consumers' real income will increase. 
B) consumers will buy less of that product. 
C) consumers will not change their buying patterns. 
D) consumers' real income will decrease. 
A) consumers' real income will increase. 
B) consumers will buy less of that product. 
C) consumers will not change their buying patterns. 
D) consumers' real income will decrease.

Question 13

A budget line is defined as

Accepted Answer

A) the number of units of a good that can be purchased over a range of prices. 
B) the combinations of a set of two goods that can be purchased, given current income and current prices for the goods. 
C) how a household's budget is allocated to various members of the family. 
D) the maximum amount of money that can be spent. 
E) the combinations of a set of two goods that the household prefers over other combinations. 
A) the number of units of a good that can be purchased over a range of prices. 
B) the combinations of a set of two goods that can be purchased, given current income and current prices for the goods. 
C) how a household's budget is allocated to various members of the family. 
D) the maximum amount of money that can be spent. 
E) the combinations of a set of two goods that the household prefers over other combinations.

Question 14

Suppose that Joan, the only consumer of pork, has a downward-sloping demand curve for pork and faces an upward-sloping supply curve.If her demand curve shifts out because she develops a craving for pork, then at the new equilibrium (everything else equal),

Accepted Answer

A) the price of pork relative to other goods will be higher than before. 
B) Joan's marginal utility from every unit of pork she eats will be higher than before. 
C) Joan's real income will be lower than before. 
D) All of the responses are correct. 
A) the price of pork relative to other goods will be higher than before. 
B) Joan's marginal utility from every unit of pork she eats will be higher than before. 
C) Joan's real income will be lower than before. 
D) All of the responses are correct.

Question 15

A change in the price of one good results in a rotation of the budget line around the point at which the consumer is currently consuming, so that it is steeper or flatter.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

If we graph marginal utility, the curve has a negative slope.This is because of the

Accepted Answer

A) optimal purchase rule. 
B) law of increasing costs. 
C) law of diminishing marginal utility. 
D) marginal rate of substitution. 
A) optimal purchase rule. 
B) law of increasing costs. 
C) law of diminishing marginal utility. 
D) marginal rate of substitution.

Question 18

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 19

-In Figure 5-18, point D for the consumer

Accepted Answer

A) will be chosen because total utility is larger there than at point C. 
B) would not be chosen because it is less desirable than point C. 
C) is unattainable, given the consumer's budget. 
D) has total utility equal to point C. 
A) will be chosen because total utility is larger there than at point C. 
B) would not be chosen because it is less desirable than point C. 
C) is unattainable, given the consumer's budget. 
D) has total utility equal to point C.

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

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

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

Total utility increases if one more unit of a product is purchased and marginal utility is negative.

An indifference curve is a line showing

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

All decisions involve opportunity cost.

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

High price and low total utility indicate

A well-known women's college whose tuition lagged below similar schools found recruiting difficult and enrollment falling.A substantial tuition increase was implemented, and dormitories were soon full again.This can be explained by

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

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

When the price of one product falls,

A budget line is defined as

Suppose that Joan, the only consumer of pork, has a downward-sloping demand curve for pork and faces an upward-sloping supply curve.If her demand curve shifts out because she develops a craving for pork, then at the new equilibrium (everything else equal),

A change in the price of one good results in a rotation of the budget line around the point at which the consumer is currently consuming, so that it is steeper or flatter.

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

If we graph marginal utility, the curve has a negative slope.This is because of the

Economists consider instances of increasing marginal utility to be

-In Figure 5-18, point D for the consumer

Lana spent $5 to see a movie.We know

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

Filters

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