Question 1

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 2

An increase in income shifts indifference curves outward.

Accepted Answer

A) True 
 B)False

Question 3

What is the relationship between marginal utility and an individual demand curve?

Accepted Answer

The marginal utility reveals how much of

Question 4

Consumer choice theory generally concludes that is based on the hypothesis that each consumer wants to

Accepted Answer

A) maximize her total utility. 
B) maximize her marginal utility. 
C) minimize the rate at which her marginal utility diminishes. 
D) minimize the percentage of her consumption diverted to inferior goods. 
A) maximize her total utility. 
B) maximize her marginal utility. 
C) minimize the rate at which her marginal utility diminishes. 
D) minimize the percentage of her consumption diverted to inferior goods.

Question 5

If a person receives a consumer's surplus from the purchase of a good, it must be that

Accepted Answer

A) the amount that the person paid minus the amount that this person values that good is greater than zero. 
B) the amount that the person values the good minus the amount that this person paid for that good is greater than zero. 
C) the value is negative because consumers have diminishing marginal utility. 
D) result is based solely on the supply of the good. 
A) the amount that the person paid minus the amount that this person values that good is greater than zero. 
B) the amount that the person values the good minus the amount that this person paid for that good is greater than zero. 
C) the value is negative because consumers have diminishing marginal utility. 
D) result is based solely on the supply of the good.

Question 6

The slope of an indifference curve represents the maximum amount of one commodity that a consumer is willing to give up in exchange for one more unit of another commodity.

Accepted Answer

A) True 
 B)False

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

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

Accepted Answer

A) True 
 B)False

Question 9

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 10

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

Accepted Answer

A) True 
 B)False

Question 11

The market demand curve is the vertical summation of all individual demand curves.

Accepted Answer

A) True 
 B)False

Question 12

Consumer's surplus exists only for the last unit of a good that a buyer has purchased.

Accepted Answer

A) True 
 B)False

Question 13

If point A on an indifference curve lies higher (measured vertically)than point B on the same curve, Point A automatically represents higher total utility than point B.

Accepted Answer

A) True 
 B)False

Question 14

Alice has $10 to spend on wine and cheese. If wine is $2.50 a glass and cheese $2, draw the corresponding budget line. Then draw three indifference curves, one showing the amount of wine and cheese Alice would choose, one showing less preferred combinations of wine and cheese, and the last showing preferred but unaffordable combinations. 
​

Accepted Answer

See Figure

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Voluntary exchange requires that there must be mutual gain.

Accepted Answer

A) True 
 B)False

Question 17

An increase in income produces a parallel, outward shift in the budget line.

Accepted Answer

A) True 
 B)False

Question 18

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 19

The marginal rate of substitution represents the maximum amount of one commodity a consumer is willing to give up in exchange for one more unit of another commodity.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is correct?

Accepted Answer

A) The "law" of diminishing marginal utility implies that demand curves slope upward and to the right. 
B) If the price of a good falls, the utility-maximizing consumer will assure that marginal utility rises. 
C) If the price of a good falls, the consumer will purchase more of the good in order to maximize total utility. 
D) MU and demand have different underlying consumer behavior assumptions. 
A) The "law" of diminishing marginal utility implies that demand curves slope upward and to the right. 
B) If the price of a good falls, the utility-maximizing consumer will assure that marginal utility rises. 
C) If the price of a good falls, the consumer will purchase more of the good in order to maximize total utility. 
D) MU and demand have different underlying consumer behavior assumptions.

Exam 5: Consumer Choice: Individual and Market Demand

In Figure 5-18, point D for the consumer

An increase in income shifts indifference curves outward.

What is the relationship between marginal utility and an individual demand curve?

Consumer choice theory generally concludes that is based on the hypothesis that each consumer wants to

If a person receives a consumer's surplus from the purchase of a good, it must be that

The slope of an indifference curve represents the maximum amount of one commodity that a consumer is willing to give up in exchange for one more unit of another commodity.

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.

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

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

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

The market demand curve is the vertical summation of all individual demand curves.

Consumer's surplus exists only for the last unit of a good that a buyer has purchased.

If point A on an indifference curve lies higher (measured vertically)than point B on the same curve, Point A automatically represents higher total utility than point B.

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

Voluntary exchange requires that there must be mutual gain.

An increase in income produces a parallel, outward shift in the budget line.

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.

The marginal rate of substitution represents the maximum amount of one commodity a consumer is willing to give up in exchange for one more unit of another commodity.

Which of the following statements is correct?

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

Filters

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

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