Question 1

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 2

Use consumer indifference curves and budget lines to show the optimal consumption curves for a normal good and for an inferior good.(Use two graphs.) Be sure your graphs are completely and correctly labeled.

Accepted Answer

The graphs should look like Fi

Question 3

The slope of a consumer's indifference curve between two commodities represents

Accepted Answer

A) her marginal rate of substitution between the commodities. 
B) the relative prices of the goods. 
C) her marginal revenue from selling the commodities. 
D) her marginal revenue product from consuming the commodities. 
A) her marginal rate of substitution between the commodities. 
B) the relative prices of the goods. 
C) her marginal revenue from selling the commodities. 
D) her marginal revenue product from consuming the commodities.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

If you go to a bar tonight and have three beers before going home to study economics, will you likely receive some consumer surplus?
 Explain why or why not.

Accepted Answer

The law of diminishing marginal utility

Question 6

The optimal combination of goods for a consumer to purchase is shown by

Accepted Answer

A) any intersection of the indifference curve and the budget line. 
B) the point where the budget line touches the vertical axis. 
C) a point of tangency between the budget line and the indifference curve. 
D) the point at which the indifference curve parallels the horizontal axis. 
E) the intersection of two indifference curves. 
A) any intersection of the indifference curve and the budget line. 
B) the point where the budget line touches the vertical axis. 
C) a point of tangency between the budget line and the indifference curve. 
D) the point at which the indifference curve parallels the horizontal axis. 
E) the intersection of two indifference curves.

Question 7

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 8

An optimal purchase is one that maximizes total utility.

Accepted Answer

A) True 
 B)False

Question 9

Total utility can be thought of as the

Accepted Answer

A) total satisfaction derived from a bundle of goods. 
B) minimum amount of money a consumer is willing to spend on a bundle of goods. 
C) additional satisfaction a consumer receives from the marginal unit of a good. 
D) willingness to pay for the marginal unit of a good. 
A) total satisfaction derived from a bundle of goods. 
B) minimum amount of money a consumer is willing to spend on a bundle of goods. 
C) additional satisfaction a consumer receives from the marginal unit of a good. 
D) willingness to pay for the marginal unit of a good.

Question 10

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

Accepted Answer

Figure 5-20
 @#IMG-DLM& 
To plot demand, find marg

Question 11

If a commodity is inexpensive and its total utility great,

Accepted Answer

A) it is an inferior good. 
B) it is plentiful. 
C) its marginal utility is high. 
D) the ratio of price to marginal utility is very high. 
A) it is an inferior good. 
B) it is plentiful. 
C) its marginal utility is high. 
D) the ratio of price to marginal utility is very high.

Question 12

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 13

Vicki consumes meatloaf and pizza.To keep her utility constant, you must give her more of one good if you take some of the other away.This information implies that

Accepted Answer

A) Vicki's marginal rate of substitution must be constant along her indifference curve. 
B) Vicki's indifference curve must have a negative slope. 
C) the prices Vicki must pay for meatloaf and pizza are always the same. 
D) Vicki's marginal utility from each good must be constant along her indifference curve. 
A) Vicki's marginal rate of substitution must be constant along her indifference curve. 
B) Vicki's indifference curve must have a negative slope. 
C) the prices Vicki must pay for meatloaf and pizza are always the same. 
D) Vicki's marginal utility from each good must be constant along her indifference curve.

Question 14

If total utility declines as an additional unit of a commodity is purchased,

Accepted Answer

A) marginal utility must be rising. 
B) marginal utility is negative. 
C) marginal utility is positive but falling. 
D) its price must have risen. 
E) marginal utility is zero. 
A) marginal utility must be rising. 
B) marginal utility is negative. 
C) marginal utility is positive but falling. 
D) its price must have risen. 
E) marginal utility is zero.

Question 15

If a good has "snob appeal," consumers may purchases less when the price falls.

Accepted Answer

A) True 
 B)False

Question 16

Table 5-3  
-Using Table 5-3, graph the marginal utility curve.

Accepted Answer

The answer of Table 5-3  
-Using Table 5-3, graph...

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 pri

Question 18

An increase in a consumer's income will always increase the demand for a good.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Marginal utility is measured by the maximum amount of money a consumer is willing to pay for one more unit of a commodity.

Accepted Answer

A) True 
 B)False

Exam 5: Consumer Choice: Individual and Market Demand

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

Use consumer indifference curves and budget lines to show the optimal consumption curves for a normal good and for an inferior good.(Use two graphs.) Be sure your graphs are completely and correctly labeled.

The slope of a consumer's indifference curve between two commodities represents

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

If you go to a bar tonight and have three beers before going home to study economics, will you likely receive some consumer surplus? Explain why or why not.

The optimal combination of goods for a consumer to purchase is shown by

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

An optimal purchase is one that maximizes total utility.

Total utility can be thought of as the

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

If a commodity is inexpensive and its total utility great,

Consumer's surplus can be written as

Vicki consumes meatloaf and pizza.To keep her utility constant, you must give her more of one good if you take some of the other away.This information implies that

If total utility declines as an additional unit of a commodity is purchased,

If a good has "snob appeal," consumers may purchases less when the price falls.

Table 5-3 -Using Table 5-3, graph the marginal utility curve.

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

An increase in a consumer's income will always increase the demand for a good.

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

Marginal utility is measured by the maximum amount of money a consumer is willing to pay for one more unit of a commodity.

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

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

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

He 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

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