Question 1

The law of diminishing marginal utility guarantees that demand curves will have positive slopes.

Accepted Answer

A) True 
 B)False

Question 2

What is a budget line? What does its slope indicate?

Accepted Answer

The budget line for a household graphica

Question 3

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.

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

You have five hours left to study for two exams tomorrow. The relationship between hours of study and test scores is as follows: 
     Use the rule for determining optimal purchases to allocate your time, where each point is one "util" of utility.

Accepted Answer

Time is money in this example, so you wa

Question 6

Consumer's surplus can be written as

Accepted Answer

A) total expenditure − total utility. 
B) total utility − total expenditure. 
C) marginal utility − marginal expenditure. 
D) marginal expenditure − marginal utility. 
A) total expenditure − total utility. 
B) total utility − total expenditure. 
C) marginal utility − marginal expenditure. 
D) marginal expenditure − marginal utility.

Question 7

Consumer's surplus is a measure of how much

Accepted Answer

A) less than his income a consumer spends on goods. 
B) more utility a consumer receives from his purchases than he has to pay for them. 
C) a consumer's marginal utility differs from his total utility. 
D) a change in price induces a consumer to substitute other goods. 
A) less than his income a consumer spends on goods. 
B) more utility a consumer receives from his purchases than he has to pay for them. 
C) a consumer's marginal utility differs from his total utility. 
D) a change in price induces a consumer to substitute other goods.

Question 8

Modern economists measure how much utility Fred gets from a hot dog by

Accepted Answer

A) asking Fred how many utils he gets from its consumption. 
B) examining the price of the hamburger Fred chose not to buy. 
C) asking Fred how much of some other good he would give up to get the hot dog. The "other good" can be any good except money. 
D) asking Fred how much of some other good he would give up to get the hot dog. The "other good" can be any good, including money. 
A) asking Fred how many utils he gets from its consumption. 
B) examining the price of the hamburger Fred chose not to buy. 
C) asking Fred how much of some other good he would give up to get the hot dog. The "other good" can be any good except money. 
D) asking Fred how much of some other good he would give up to get the hot dog. The "other good" can be any good, including money.

Question 9

Why is it that the consumer can maximize total net utility only if the purchase quantity brings marginal utility as close as possible to equality with price?

Accepted Answer

The decision to purchase a quantity of a

Question 10

Marginal utility is

Accepted Answer

A) the difference in price between one store and another. 
B) the difference in value between "some" of a thing and "none" of a thing. 
C) the difference between any two successive total utility figures. 
D) acquired only with the first few units of a good or service. 
E) utility that is barely satisfactory. 
A) the difference in price between one store and another. 
B) the difference in value between "some" of a thing and "none" of a thing. 
C) the difference between any two successive total utility figures. 
D) acquired only with the first few units of a good or service. 
E) utility that is barely satisfactory.

Question 11

Figure 5-10
 
In the indifference curve pictured in Figure 5-10, which of the following is clearly true?

Accepted Answer

A) B is preferred to D. 
B) B is preferred to C. 
C) A is preferred to B. 
D) C is preferred to D. 
A) B is preferred to D. 
B) B is preferred to C. 
C) A is preferred to B. 
D) C is preferred to D.

Question 12

Table 5-2   According to Table 5-2, Robinson's total utility from having two coconuts is ____.

Accepted Answer

A) $1.87 
B) $1.66 
C) $3.88 
D) not determinable from the information in the table 
A) $1.87 
B) $1.66 
C) $3.88 
D) not determinable from the information in the table

Question 13

When a consumer has chosen an optimal bundle of goods, this bundle maximizes marginal utility.

Accepted Answer

A) True 
 B)False

Question 14

Plot the demand for caviar given the following information on quantity consumed and total utility; then explain why caviar sells for such a high price.

Accepted Answer

@#IMG-DLM& 
To plot demand, find marginal utility

Question 15

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 16

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 17

The law of demand ensures that a demand curve has a positive slope.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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 20

As a general rule, consumers have

Accepted Answer

A) limited income. 
B) unlimited desires for goods. 
C) many choices of goods facing them. 
D) All of the responses are correct. 
A) limited income. 
B) unlimited desires for goods. 
C) many choices of goods facing them. 
D) All of the responses are correct.

Exam 5: Consumer Choice: Individual and Market Demand

The law of diminishing marginal utility guarantees that demand curves will have positive slopes.

What is a budget line? What does its slope indicate?

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

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

You have five hours left to study for two exams tomorrow. The relationship between hours of study and test scores is as follows: Use the rule for determining optimal purchases to allocate your time, where each point is one "util" of utility.

Consumer's surplus can be written as

Consumer's surplus is a measure of how much

Modern economists measure how much utility Fred gets from a hot dog by

Why is it that the consumer can maximize total net utility only if the purchase quantity brings marginal utility as close as possible to equality with price?

Marginal utility is

Figure 5-10 In the indifference curve pictured in Figure 5-10, which of the following is clearly true?

Table 5-2 According to Table 5-2, Robinson's total utility from having two coconuts is ____.

When a consumer has chosen an optimal bundle of goods, this bundle maximizes marginal utility.

Plot the demand for caviar given the following information on quantity consumed and total utility; then explain why caviar sells for such a high price.

A budget line is defined as

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

The law of demand ensures that a demand curve has a positive slope.

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

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

As a general rule, consumers have

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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