Question 1

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 2

What are the properties of indifference curves?

Accepted Answer

The answer of What are the properties of indifference curves?...

Question 3

What is the marginal rate of substitution, and what role does it play in determining the consumer's optimum choice?

Accepted Answer

The MRS is the slope of the indifference

Question 4

-Along a single indifference curve,

Accepted Answer

A) the slope remains constant. 
B) the slope increases as the quantity of a good increases. 
C) the slope is negative. 
D) the slope is always between 0 and 1. 
A) the slope remains constant. 
B) the slope increases as the quantity of a good increases. 
C) the slope is negative. 
D) the slope is always between 0 and 1.

Question 5

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 6

Figure 5-13  
-If a consumer is currently at Point E on Figure 5-13, she will

Accepted Answer

A) choose to move to the combination at C to make herself better off. 
B) choose to move to the combination at D to make herself better off. 
C) reduce expenditures to make herself better off. 
D) stay at Point E, since that combination is the cheapest alternative to be on indifference curve U1. 
A) choose to move to the combination at C to make herself better off. 
B) choose to move to the combination at D to make herself better off. 
C) reduce expenditures to make herself better off. 
D) stay at Point E, since that combination is the cheapest alternative to be on indifference curve U1.

Question 7

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 8

Lisa is buying bread and at her current purchases, the marginal utility (in dollars) is less than price.If she wants to optimize, she should

Accepted Answer

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

Question 9

If the prices of both goods increase by 10 percent, the budget line

Accepted Answer

A) shifts to the right in parallel fashion. 
B) shifts to the left in parallel fashion. 
C) is unaffected since only relative price changes matter. 
D) pivots on the axis of the more expensive good. 
A) shifts to the right in parallel fashion. 
B) shifts to the left in parallel fashion. 
C) is unaffected since only relative price changes matter. 
D) pivots on the axis of the more expensive good.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Given a typical demand curve and a decline in price, the consumer who wishes to maximize total utility must increase the quantity purchased of a good to arrive at an optimal MU = P point.

Accepted Answer

A) True 
 B)False

Question 12

Possible causes of an upward-sloping demand curve are

Accepted Answer

A) consumers judge the quality of a product based on quality. 
B) consumers judge the quality of a product based on price. 
C) consumers judge the quality of a product based on recommendations by friends. 
D) consumers judge the quality of a product based on reviewer ratings. 
A) consumers judge the quality of a product based on quality. 
B) consumers judge the quality of a product based on price. 
C) consumers judge the quality of a product based on recommendations by friends. 
D) consumers judge the quality of a product based on reviewer ratings.

Question 13

The law of diminishing marginal utility explains why

Accepted Answer

A) most individual demand curves are straight lines. 
B) the consumer's optimal purchase is at the tangency of an indifference curve and the budget line. 
C) most individual demand curves slope downward. 
D) marginal utility falls when total utility falls. 
A) most individual demand curves are straight lines. 
B) the consumer's optimal purchase is at the tangency of an indifference curve and the budget line. 
C) most individual demand curves slope downward. 
D) marginal utility falls when total utility falls.

Question 14

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 15

Figure 5-13  
-In Figure 5-13, the consumer can afford any combination of X and Y represented by a point

Accepted Answer

A) on line AB only. 
B) on or below line AB. 
C) on or above line AB. 
D) anywhere on the graph. 
A) on line AB only. 
B) on or below line AB. 
C) on or above line AB. 
D) anywhere on the graph.

Question 16

Consumer's 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 17

An inferior good is one that consumers buy in smaller quantities when the price of that good rises.

Accepted Answer

A) True 
 B)False

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

Figure 5-13  
-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 20

Figure 5-13  
-In Figure 5-13, the line AB is

Accepted Answer

A) an indifference curve. 
B) a budget line. 
C) a marginal utility curve. 
D) a demand curve. 
A) an indifference curve. 
B) a budget line. 
C) a marginal utility curve. 
D) a demand curve.

Exam 5: Consumer Choice: Individual and Market Demand

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

What are the properties of indifference curves?

What is the marginal rate of substitution, and what role does it play in determining the consumer's optimum choice?

-Along a single indifference curve,

An inferior good is one

Figure 5-13 -If a consumer is currently at Point E on Figure 5-13, she will

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

Lisa is buying bread and at her current purchases, the marginal utility (in dollars) is less than price.If she wants to optimize, she should

If the prices of both goods increase by 10 percent, the budget line

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

Given a typical demand curve and a decline in price, the consumer who wishes to maximize total utility must increase the quantity purchased of a good to arrive at an optimal MU = P point.

Possible causes of an upward-sloping demand curve are

The law of diminishing marginal utility explains why

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

Figure 5-13 -In Figure 5-13, the consumer can afford any combination of X and Y represented by a point

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

An inferior good is one that consumers buy in smaller quantities when the price of that good rises.

A normal good is a good whose quantity demanded

Figure 5-13 -When the price of a good changes but the price of the only other good bought by a consumer stays constant, his

Figure 5-13 -In Figure 5-13, the line AB is

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

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