Question 1

A consumer who chooses the optimal bundle will go to a point on the highest attainable indifference curve.

Accepted Answer

A) True 
 B)False

Question 2

Utility is the pleasure, satisfaction, or enjoyment derived from consumption.

Accepted Answer

A) True 
 B)False

Question 3

When using the terms "total utility" or "marginal utility," we assume

Accepted Answer

A) the consumer will exchange one commodity for another. 
B) the consumer will part with money for the commodity. 
C) the consumer has declined to purchase the commodity. 
D) the consumer can measure utility in exact monetary terms. 
A) the consumer will exchange one commodity for another. 
B) the consumer will part with money for the commodity. 
C) the consumer has declined to purchase the commodity. 
D) the consumer can measure utility in exact monetary terms.

Question 4

Points along a budget line represent the maximum combinations of two commodities that a consumer can afford.

Accepted Answer

A) True 
 B)False

Question 5

An individual demand curve for a good is ____ her marginal utility curve for the good.

Accepted Answer

A) based on 
B) the mirror image around the vertical axis of 
C) twice as steep as 
D) half as steep as 
A) based on 
B) the mirror image around the vertical axis of 
C) twice as steep as 
D) half as steep as

Question 6

Elaine values the utility of her first cup of coffee at $1; a second cup, $.75; and a third cup, $.50.If Elaine drinks three cups of coffee for breakfast, her marginal utility is equal to

Accepted Answer

A) $.50, the value of her last cup of coffee. 
B) $1.00, the value of her first cup of coffee. 
C) marginal utility. 
D) $2.25. 
E) $1.50. 
A) $.50, the value of her last cup of coffee. 
B) $1.00, the value of her first cup of coffee. 
C) marginal utility. 
D) $2.25. 
E) $1.50.

Question 7

The diamond-water puzzle, described by Adam Smith, suggests that the consumer's surplus of water is high and the consumer's surplus for diamonds is low.

Accepted Answer

A) True 
 B)False

Question 8

Economic behavior is always rational.

Accepted Answer

A) True 
 B)False

Question 9

When the price of one good decreases, such as hot dogs, it may also increase the demand for other, related goods, like mustard.

Accepted Answer

A) True 
 B)False

Question 10

Because the consumer's budget is limited, purchase decisions among available goods must of necessity be interdependent.

Accepted Answer

A) True 
 B)False

Question 11

For most goods and most people, marginal utility probably

Accepted Answer

A) continues to increase as larger quantities are purchased. 
B) plummets after the first few units but soon begins to rise. 
C) declines as consumption increases. 
D) is negative after the first unit of a good is purchased. 
E) is positive and rising for most goods. 
A) continues to increase as larger quantities are purchased. 
B) plummets after the first few units but soon begins to rise. 
C) declines as consumption increases. 
D) is negative after the first unit of a good is purchased. 
E) is positive and rising for most goods.

Question 12

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 13

The budget line represents a consumer's preferences for a commodity.

Accepted Answer

A) True 
 B)False

Question 14

The marginal utility of a unit of good X

Accepted Answer

A) is always greater than the total utility of X. 
B) is always less than the average utility of X. 
C) generally depends on how much X the consumer already has. 
D) is always equal to the price of X. 
A) is always greater than the total utility of X. 
B) is always less than the average utility of X. 
C) generally depends on how much X the consumer already has. 
D) is always equal to the price of X.

Question 15

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 16

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 17

A change in the price of a good will shift the indifference curves.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is characteristic of indifference curves?

Accepted Answer

A) They are negatively sloped. 
B) They never intersect. 
C) They are convex toward the origin. 
D) All of the responses are correct. 
A) They are negatively sloped. 
B) They never intersect. 
C) They are convex toward the origin. 
D) All of the responses are correct.

Question 19

An inferior 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 falls. 
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 falls.

Question 20

Consumer's 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

Exam 5: Consumer Choice: Individual and Market Demand

A consumer who chooses the optimal bundle will go to a point on the highest attainable indifference curve.

Utility is the pleasure, satisfaction, or enjoyment derived from consumption.

When using the terms "total utility" or "marginal utility," we assume

Points along a budget line represent the maximum combinations of two commodities that a consumer can afford.

An individual demand curve for a good is ____ her marginal utility curve for the good.

Elaine values the utility of her first cup of coffee at $1; a second cup, $.75; and a third cup, $.50.If Elaine drinks three cups of coffee for breakfast, her marginal utility is equal to

The diamond-water puzzle, described by Adam Smith, suggests that the consumer's surplus of water is high and the consumer's surplus for diamonds is low.

Economic behavior is always rational.

When the price of one good decreases, such as hot dogs, it may also increase the demand for other, related goods, like mustard.

Because the consumer's budget is limited, purchase decisions among available goods must of necessity be interdependent.

For most goods and most people, marginal utility probably

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

The budget line represents a consumer's preferences for a commodity.

The marginal utility of a unit of good X

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

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

A change in the price of a good will shift the indifference curves.

Which of the following is characteristic of indifference curves?

An inferior good is a good whose quantity demanded

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

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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