Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

How do you calculate consumer's surplus? What happens to consumer's surplus when the price of a commodity rises?

Accepted Answer

Consumer's surplus = Total utility (in m

Question 3

Figure 5-17
  
-Which of the following statements about Figure 5-17 must be correct?

Accepted Answer

A) The consumer pays a higher dollar price per unit for good Y at A than at D. 
B) The consumer pays the same dollar price per unit for good Y at A and at B. 
C) The consumer pays a higher dollar price per unit for good X at D than at A. 
D) The consumer pays a higher dollar price per unit for good X at A than at C. 
A) The consumer pays a higher dollar price per unit for good Y at A than at D. 
B) The consumer pays the same dollar price per unit for good Y at A and at B. 
C) The consumer pays a higher dollar price per unit for good X at D than at A. 
D) The consumer pays a higher dollar price per unit for good X at A than at C.

Question 4

Total utility can be objectively measured in numbers that indicate usefulness or benefit to the consumer.

Accepted Answer

A) True 
 B)False

Question 5

As a rule, as a consumer acquires more and more of a good, the marginal utility declines.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Figure 5-12
  
-In Figure 5-12, the move in the consumer equilibrium from A to B 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 8

What would happen to the budget line if income as well as prices of both goods increase by the same percentage?

Accepted Answer

A) A rightward parallel shift in the budget line. 
B) A leftward parallel shift in the budget line. 
C) A rightward shift in the budget line. 
D) No shift in the budget line. 
A) A rightward parallel shift in the budget line. 
B) A leftward parallel shift in the budget line. 
C) A rightward shift in the budget line. 
D) No shift in the budget line.

Question 9

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 10

What is marginal analysis?

Accepted Answer

Marginal analysis is a method for calcul

Question 11

An increase in income shifts indifference curves outward.

Accepted Answer

A) True 
 B)False

Question 12

A consumer possesses five pounds of bananas and values their total utility at $2.14.If one additional pound is acquired and marginal utility is 11 cents, total utility will

Accepted Answer

A) rise to $2.25. 
B) fall to $2.03. 
C) stay the same. 
D) fall to $2.11. 
A) rise to $2.25. 
B) fall to $2.03. 
C) stay the same. 
D) fall to $2.11.

Question 13

An inferior good is one that consumers buy in smaller quantities when incomes rise.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Figure 5-16
  
-In Figure 5-16, a decrease in the price of apples will

Accepted Answer

A) shift Adam's budget constraint out. 
B) make Adam's budget constraint steeper. 
C) shift Adam's indifference curves out. 
D) make Adam's budget constraint flatter. 
A) shift Adam's budget constraint out. 
B) make Adam's budget constraint steeper. 
C) shift Adam's indifference curves out. 
D) make Adam's budget constraint flatter.

Question 16

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 17

A consumer cannot gain consumer's surplus if she purchases more than one unit of a good.

Accepted Answer

A) True 
 B)False

Question 18

Market demand curves may slope downward even if some individual demand curves do not because

Accepted Answer

A) the law of demand requires that this is true. 
B) lower prices may bring more purchasers into the market. 
C) merchants try to sell more at lower prices. 
D) people believe expensive goods are better goods. 
A) the law of demand requires that this is true. 
B) lower prices may bring more purchasers into the market. 
C) merchants try to sell more at lower prices. 
D) people believe expensive goods are better goods.

Question 19

A well-known women's college whose tuition lagged below similar schools found recruiting difficult and enrollment falling.A substantial tuition increase was implemented, and dormitories were soon full again.This can be explained by

Accepted Answer

A) the law of demand. 
B) the fact that education at the school was an inferior good. 
C) the fact that people sometimes base perceptions of quality on price (snob effect). 
D) elastic demand. 
A) the law of demand. 
B) the fact that education at the school was an inferior good. 
C) the fact that people sometimes base perceptions of quality on price (snob effect). 
D) elastic demand.

Question 20

Why is gold very expensive, even though it is not essential to life, while water, which is essential to life, is inexpensive?

Accepted Answer

Because there is a lower supply of gold

Exam 5: Consumer Choice: Individual and Market Demand

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

How do you calculate consumer's surplus? What happens to consumer's surplus when the price of a commodity rises?

Figure 5-17 -Which of the following statements about Figure 5-17 must be correct?

Total utility can be objectively measured in numbers that indicate usefulness or benefit to the consumer.

As a rule, as a consumer acquires more and more of a good, the marginal utility declines.

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

Figure 5-12 -In Figure 5-12, the move in the consumer equilibrium from A to B shows that

What would happen to the budget line if income as well as prices of both goods increase by the same percentage?

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

What is marginal analysis?

An increase in income shifts indifference curves outward.

A consumer possesses five pounds of bananas and values their total utility at $2.14.If one additional pound is acquired and marginal utility is 11 cents, total utility will

An inferior good is one that consumers buy in smaller quantities when incomes rise.

An inferior good is a good whose quantity demanded

Figure 5-16 -In Figure 5-16, a decrease in the price of apples will

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

A consumer cannot gain consumer's surplus if she purchases more than one unit of a good.

Market demand curves may slope downward even if some individual demand curves do not because

A well-known women's college whose tuition lagged below similar schools found recruiting difficult and enrollment falling.A substantial tuition increase was implemented, and dormitories were soon full again.This can be explained by

Why is gold very expensive, even though it is not essential to life, while water, which is essential to life, is inexpensive?

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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