Question 1

By changing the amount of income a consumer has to spend, a change in the price of one good may affect the quantity demanded of another good.

Accepted Answer

A) True 
 B)False

Question 2

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 3

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 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

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 6

The optimal purchase rule is stated as

Accepted Answer

A) TU = MU. 
B) MU = P. 
C) TU = P. 
D) MU = 0. 
A) TU = MU. 
B) MU = P. 
C) TU = P. 
D) MU = 0.

Question 7

All decisions involve opportunity cost.

Accepted Answer

A) True 
 B)False

Question 8

All of the points on a budget line result in combination of goods that expend all of her income.

Accepted Answer

A) True 
 B)False

Question 9

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 10

The consumer maximizes his total utility (measured in money terms)when, at his chosen quantity of every good he buys, marginal utility

Accepted Answer

A) equals zero. 
B) divided by price equals zero. 
C) equals price. 
D) equals total utility. 
A) equals zero. 
B) divided by price equals zero. 
C) equals price. 
D) equals total utility.

Question 11

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 12

As a rule, the more of a commodity a consumer acquires, the smaller will be her total utility from that good.

Accepted Answer

A) True 
 B)False

Question 13

A bottle of wine costs $8 and a quiche costs $5. At Robert's present levels of consumption, he spends all his income and receives marginal utility of $10 from the last bottle of wine and marginal utility of $4 from the last quiche. To maximize his total utility, Robert should

Accepted Answer

A) buy less wine and more quiche. 
B) buy more wine and less quiche. 
C) spend all of his money on wine. 
D) change his spending pattern until he buys 8\5ths as much wine as quiche. 
A) buy less wine and more quiche. 
B) buy more wine and less quiche. 
C) spend all of his money on wine. 
D) change his spending pattern until he buys 8\5ths as much wine as quiche.

Question 14

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 15

In general, as a consumer acquires more and more of a good, the marginal utility remains constant.

Accepted Answer

A) True 
 B)False

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

Suppose the price of butter falls because milk price supports are removed. Will people's tastes shift away from margarine and toward butter?

Accepted Answer

No. This change in relative prices will

Question 18

Figure 5-12
 
In Figure 5-12, if a consumer equilibrium moves from B to A, this shows that

Accepted Answer

A) beer is an inferior good, but wine is a normal good. 
B) wine is an inferior good, but beer is a normal good. 
C) both beer and wine are normal goods. 
D) both beer and wine are inferior goods. 
A) beer is an inferior good, but wine is a normal good. 
B) wine is an inferior good, but beer is a normal good. 
C) both beer and wine are normal goods. 
D) both beer and wine are inferior goods.

Question 19

At the end points on a budget line, the consumer is not spending all of his budget, since one of the goods is not being purchased.

Accepted Answer

A) True 
 B)False

Question 20

A budget line is a straight line designed to show

Accepted Answer

A) how income is related to hours worked. 
B) all combinations of two goods that can be purchased with a given income. 
C) the way a homemaker should divide money among several commodities. 
D) that if more money is spent on one good, the breadwinner must work all the harder to maintain a satisfactory level of living. 
E) preferences for goods and services. 
A) how income is related to hours worked. 
B) all combinations of two goods that can be purchased with a given income. 
C) the way a homemaker should divide money among several commodities. 
D) that if more money is spent on one good, the breadwinner must work all the harder to maintain a satisfactory level of living. 
E) preferences for goods and services.

Exam 5: Consumer Choice: Individual and Market Demand

By changing the amount of income a consumer has to spend, a change in the price of one good may affect the quantity demanded of another 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

An indifference curve is a line showing

Along a single indifference curve,

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

The optimal purchase rule is stated as

All decisions involve opportunity cost.

All of the points on a budget line result in combination of goods that expend all of her income.

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

The consumer maximizes his total utility (measured in money terms)when, at his chosen quantity of every good he buys, marginal utility

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,

As a rule, the more of a commodity a consumer acquires, the smaller will be her total utility from that good.

A bottle of wine costs $8 and a quiche costs $5. At Robert's present levels of consumption, he spends all his income and receives marginal utility of $10 from the last bottle of wine and marginal utility of $4 from the last quiche. To maximize his total utility, Robert should

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

In general, as a consumer acquires more and more of a good, the marginal utility remains constant.

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

Suppose the price of butter falls because milk price supports are removed. Will people's tastes shift away from margarine and toward butter?

Figure 5-12 In Figure 5-12, if a consumer equilibrium moves from B to A, this shows that

At the end points on a budget line, the consumer is not spending all of his budget, since one of the goods is not being purchased.

A budget line is a straight line designed to show

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

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

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

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