Question 1

The quantity of good A is measured along the vertical axis, and the quantity of good B is measures along the horizontal axis. If the price of Good A falls

Accepted Answer

A)  the vertical intercept of the budget line moves along the vertical axis away from the origin. 
B)  of the budget line will increase. 
B)  the vertical intercept of the budget line moves along the vertical axis toward the origin. 
C)  the horizontal intercept (along Good 
D)  none of the above 
A)  the vertical intercept of the budget line moves along the vertical axis away from the origin. 
B)  of the budget line will increase. 
B)  the vertical intercept of the budget line moves along the vertical axis toward the origin. 
C)  the horizontal intercept (along Good 
D)  none of the above

Question 2

As more of a product is consumed, total utility increases up to a point at which

Accepted Answer

A)  marginal utility increases at an increasing rate. 
B)  marginal utility increases at a constant rate. 
C)  marginal utility decreases. 
D)  marginal utility will initially decrease, then increase. 
A)  marginal utility increases at an increasing rate. 
B)  marginal utility increases at a constant rate. 
C)  marginal utility decreases. 
D)  marginal utility will initially decrease, then increase.

Question 3

Assume that Jackie concludes that he should eat less and play racquetball more. In this situation, it must be true that the marginal utility of the last dollar spent on food is

Accepted Answer

A)  more than the marginal utility of the last dollar spent on racquetball. 
B)  less than the marginal utility of the last dollar spent on racquetball. 
C)  equal to the marginal utility of the last dollar spent on racquetball. 
D)  negative and less than the marginal utility of the last dollar spent on racquetball. 
A)  more than the marginal utility of the last dollar spent on racquetball. 
B)  less than the marginal utility of the last dollar spent on racquetball. 
C)  equal to the marginal utility of the last dollar spent on racquetball. 
D)  negative and less than the marginal utility of the last dollar spent on racquetball.

Question 4

An increase in consumer income will

Accepted Answer

A)  shift the budget constraint and increase its slope. 
B)  reduce consumption of all normal goods. 
C)  pivot the budget constraint on the axis with the good that has the higher price. 
D)  shift out the budget constraint and increase the consumption of both goods, if they are normal goods. 
A)  shift the budget constraint and increase its slope. 
B)  reduce consumption of all normal goods. 
C)  pivot the budget constraint on the axis with the good that has the higher price. 
D)  shift out the budget constraint and increase the consumption of both goods, if they are normal goods.

Question 5

If the price of a pizza slice falls, Tom can

Accepted Answer

A)  buy more pizza with his paycheck. 
B)  buy more soft drinks with his paycheck. 
C)  no longer afford pizza on his paycheck. 
D)  Either A or B is possible. 
A)  buy more pizza with his paycheck. 
B)  buy more soft drinks with his paycheck. 
C)  no longer afford pizza on his paycheck. 
D)  Either A or B is possible.

Question 6

The marginal rate of substitution measures

Accepted Answer

A)  the impact of product substitution. 
B)  the changes in marginal utility along the indifference curve. 
C)  the consumer's willingness to substitute one product for another so that total utility will remain unchanged. 
D)  the consumer's willingness to substitute one product for another so that marginal utility will remain unchanged. 
A)  the impact of product substitution. 
B)  the changes in marginal utility along the indifference curve. 
C)  the consumer's willingness to substitute one product for another so that total utility will remain unchanged. 
D)  the consumer's willingness to substitute one product for another so that marginal utility will remain unchanged.

Question 7

To remain in consumer optimum

Accepted Answer

A)  a price increase requires an increase in consumption. 
B)  a price decrease requires an increase in consumption. 
C)  a price decrease requires a decrease in consumption. 
D)  prices must remain static. 
A)  a price increase requires an increase in consumption. 
B)  a price decrease requires an increase in consumption. 
C)  a price decrease requires a decrease in consumption. 
D)  prices must remain static.

Question 8

-Use the above figure. Last week Joe consumed combination "B" of goods "X" and "Y." This week he purchased combination "A." The reason for this change is that the

Accepted Answer

A)  price of good X has increased. 
B)  price of good X has decreased. 
C)  price of good Y has decreased. 
D)  price of good Y has increased. 
A)  price of good X has increased. 
B)  price of good X has decreased. 
C)  price of good Y has decreased. 
D)  price of good Y has increased.

Question 9

Your allergies are bad this summer so your allergist writes you a prescription to relieve your symptoms. When you get to the pharmacy, you notice the name brand allergy medicine is more expensive than its generic equivalent. You purchase the generic equivalent and demonstrate all of the following EXCEPT

Accepted Answer

A)  the principle of substitution of one product for another. 
B)  the principle of diminishing marginal utility. 
C)  when price decreases, the quantity demanded increases. 
D)  a price change may affect consumer optimum. 
A)  the principle of substitution of one product for another. 
B)  the principle of diminishing marginal utility. 
C)  when price decreases, the quantity demanded increases. 
D)  a price change may affect consumer optimum.

Question 10

To derive the law of demand, we assume that

Accepted Answer

A)  prices are constant. 
B)  real prices are constant. 
C)  marginal utility is constant. 
D)  tastes are constant. 
A)  prices are constant. 
B)  real prices are constant. 
C)  marginal utility is constant. 
D)  tastes are constant.

Question 11

Utility analysis is the analysis of

Accepted Answer

A)  how consumers decide how to spend their money. 
B)  the formation of tastes and preferences. 
C)  the psychology of decision making. 
D)  consumer decision making based on utility maximization. 
A)  how consumers decide how to spend their money. 
B)  the formation of tastes and preferences. 
C)  the psychology of decision making. 
D)  consumer decision making based on utility maximization.

Question 12

-Refer to the above table If the price of a magazine is $2 and the price of a paperback book is $5 and the consumer has $40, the rational consumer will purchase

Accepted Answer

A)  2 magazines and 2 books. 
B)  2 magazines and 3 books. 
C)  5 magazines and 6 books. 
D)  6 magazines and 6 books. 
A)  2 magazines and 2 books. 
B)  2 magazines and 3 books. 
C)  5 magazines and 6 books. 
D)  6 magazines and 6 books.

Question 13

A decrease in the price of a good causes

Accepted Answer

A)  the utility of the good to decrease. 
B)  the marginal utility of the good to decrease. 
C)  purchasing power of a person's income to increase. 
D)  the nominal wealth of a person to increase. 
A)  the utility of the good to decrease. 
B)  the marginal utility of the good to decrease. 
C)  purchasing power of a person's income to increase. 
D)  the nominal wealth of a person to increase.

Question 14

-Refer to the above figures. Which panel best represents marginal utility?

Accepted Answer

A)  Panel A. 
B)  Panel B. 
C)  Panel C. 
D)  Panel D. 
A)  Panel A. 
B)  Panel B. 
C)  Panel C. 
D)  Panel D.

Question 15

Suppose that indifference curve I1 lies to the left of indifference curve I2. We can conclude that

Accepted Answer

A)  some, but not all, points on indifference curve I1 will correspond to higher utility than points along indifference curve I2. 
B)  some, but not all, points on indifference curve I1 will correspond to lower utility than points along indifference curve I2. 
C)  all points along indifference curve I1 will correspond to higher utility than points along indifference curve I2. 
D)  all points along indifference curve I1 will correspond to lower utility than points along indifference curve I2. 
A)  some, but not all, points on indifference curve I1 will correspond to higher utility than points along indifference curve I2. 
B)  some, but not all, points on indifference curve I1 will correspond to lower utility than points along indifference curve I2. 
C)  all points along indifference curve I1 will correspond to higher utility than points along indifference curve I2. 
D)  all points along indifference curve I1 will correspond to lower utility than points along indifference curve I2.

Question 16

Along an indifference curve,

Accepted Answer

A)  the marginal utility of all items is equal. 
B)  the total satisfaction is the same. 
C)  the prices of all goods are equal. 
D)  the marginal utility/price ratios of all items are equal. 
A)  the marginal utility of all items is equal. 
B)  the total satisfaction is the same. 
C)  the prices of all goods are equal. 
D)  the marginal utility/price ratios of all items are equal.

Question 17

The total utility of consuming 6 units of a good is 255. The marginal utility of the 6th unit is 45 and the marginal utility of the 5th unit is 60. The total utility of consuming 5 units of the good is

Accepted Answer

A)  300. 
B)  150. 
C)  210. 
D)  195. 
A)  300. 
B)  150. 
C)  210. 
D)  195.

Question 18

-Refer to the above table. If the price of Good X is $2, the price of Good Y is $2, and the consumer has $14, the rational consumer will purchase

Accepted Answer

A)  3 units of Good X and 4 units of Good Y. 
B)  6 units of Good X and 6 units of Good Y. 
C)  6 units of Good X and 0 units of Good Y. 
D)  3 units of Good X and 3 units of Good Y. 
A)  3 units of Good X and 4 units of Good Y. 
B)  6 units of Good X and 6 units of Good Y. 
C)  6 units of Good X and 0 units of Good Y. 
D)  3 units of Good X and 3 units of Good Y.

Question 19

Carol is very hungry. She has just sat down to eat. Her first bite gives her a certain level of utility. Her second bite increases her utility by more than the first bite. Her third bite increases her utility by more than the second bite. Carol has 40 bites left before she finishes. Which of the following statements is true about Carol?

Accepted Answer

A)  Carol is being inconsistent with the law of diminishing marginal utility. 
B)  Carol's total utility decreases with each bite. 
C)  Carol's marginal utility will be negative when she takes her last bite. 
D)  Carol will eventually experience diminishing marginal utility by the time she finishes eating, if her marginal utility begins to decline. 
A)  Carol is being inconsistent with the law of diminishing marginal utility. 
B)  Carol's total utility decreases with each bite. 
C)  Carol's marginal utility will be negative when she takes her last bite. 
D)  Carol will eventually experience diminishing marginal utility by the time she finishes eating, if her marginal utility begins to decline.

Question 20

-Adam has 3 apples and 3 oranges. Eve has 2 apples and 2 oranges. The marginal utilities for Adam and Eve are summarized in the above table. Adam asks Eve to exchange one of her apples for an orange.

Accepted Answer

A)  Eve will be willing to make the exchange, because her total satisfaction will remain unchanged. 
B)  Eve will be willing to make the exchange, because her total satisfaction will increase. 
C)  Eve will be unwilling to make the exchange, because she loses 5 utils of satisfaction. 
D)  Eve will be unwilling to make the exchange, because she loses 15 utils of satisfaction. 
A)  Eve will be willing to make the exchange, because her total satisfaction will remain unchanged. 
B)  Eve will be willing to make the exchange, because her total satisfaction will increase. 
C)  Eve will be unwilling to make the exchange, because she loses 5 utils of satisfaction. 
D)  Eve will be unwilling to make the exchange, because she loses 15 utils of satisfaction.

Exam 20: Consumer Choice

The quantity of good A is measured along the vertical axis, and the quantity of good B is measures along the horizontal axis. If the price of Good A falls

As more of a product is consumed, total utility increases up to a point at which

Assume that Jackie concludes that he should eat less and play racquetball more. In this situation, it must be true that the marginal utility of the last dollar spent on food is

An increase in consumer income will

If the price of a pizza slice falls, Tom can

The marginal rate of substitution measures

To remain in consumer optimum

-Use the above figure. Last week Joe consumed combination "B" of goods "X" and "Y." This week he purchased combination "A." The reason for this change is that the

To derive the law of demand, we assume that

Utility analysis is the analysis of

-Refer to the above table If the price of a magazine is $2 and the price of a paperback book is $5 and the consumer has $40, the rational consumer will purchase

A decrease in the price of a good causes

-Refer to the above figures. Which panel best represents marginal utility?

Suppose that indifference curve I1 lies to the left of indifference curve I2. We can conclude that

Along an indifference curve,

The total utility of consuming 6 units of a good is 255. The marginal utility of the 6th unit is 45 and the marginal utility of the 5th unit is 60. The total utility of consuming 5 units of the good is

-Refer to the above table. If the price of Good X is $2, the price of Good Y is $2, and the consumer has $14, the rational consumer will purchase

-Adam has 3 apples and 3 oranges. Eve has 2 apples and 2 oranges. The marginal utilities for Adam and Eve are summarized in the above table. Adam asks Eve to exchange one of her apples for an orange.

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Suppose that indifference curve I₁lies to the left of indifference curve I₂. We can conclude that