Question 1

-Refer to the above table. If the consumer's equilibrium consists of 4 magazines and 4 books, then we know that

Accepted Answer

A)  the price of a magazine is 5 times more than the price of a book. 
B)  the price of a magazine is 6 times more than the price of a book. 
C)  the price of a book is 5 times more than the price of a magazine. 
D)  the price of a book is 3 times more than the price of a magazine. 
A)  the price of a magazine is 5 times more than the price of a book. 
B)  the price of a magazine is 6 times more than the price of a book. 
C)  the price of a book is 5 times more than the price of a magazine. 
D)  the price of a book is 3 times more than the price of a magazine.

Question 2

The price of hamburgers is $2 and the price of movies is $4. The consumer has $14 of income. The consumer is purchasing 3 hamburgers and receiving 30 utils for the last hamburger. He is also purchasing 2 movies and receiving 40 utils for the last movie. This set of goods

Accepted Answer

A)  is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good. 
B)  is an optimum since the entire income is spent and total utility is maximized. 
C)  is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for movies. 
D)  is not an optimum because the consumer has not spent all of his money. 
A)  is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good. 
B)  is an optimum since the entire income is spent and total utility is maximized. 
C)  is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for movies. 
D)  is not an optimum because the consumer has not spent all of his money.

Question 3

-Use the above figure. The optimal position for the consumer is at

Accepted Answer

A)  J or L 
B)  M 
C)  K 
D)  N 
A)  J or L 
B)  M 
C)  K 
D)  N

Question 4

The diamond-water paradox is an example that shows that

Accepted Answer

A)  necessities like water should have a higher price. 
B)  marginal utility rather than total utility determines what people are willing to pay for a good. 
C)  there are exceptions to the law of diminishing marginal utility. 
D)  marginal utility can initially increase and then decrease. 
A)  necessities like water should have a higher price. 
B)  marginal utility rather than total utility determines what people are willing to pay for a good. 
C)  there are exceptions to the law of diminishing marginal utility. 
D)  marginal utility can initially increase and then decrease.

Question 5

If a consumer is initially at an optimum, and then the price of Y increases, then

Accepted Answer

A)    /      /   . 
C)    /   =   /   . 
D)    /   >   /   . 
A)    /      /   . 
C)    /   =   /   . 
D)    /   >   /   .

Question 6

-Refer to the above figures. Amy's total utility for chocolate chip cookies reaches a maximum at 4 cookies. 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 7

The principle that "as more of a good is consumed, its extra benefit declines" is known as

Accepted Answer

A)  the law of demand. 
B)  the law of diminishing marginal product. 
C)  the law of diminishing marginal utility. 
D)  the law of comparative advantage. 
A)  the law of demand. 
B)  the law of diminishing marginal product. 
C)  the law of diminishing marginal utility. 
D)  the law of comparative advantage.

Question 8

The consumer optimum is defined as

Accepted Answer

A)  the set of goods and services that maximizes marginal utility for each good. 
B)  the set of goods and services such that the marginal utility of each good equals zero. 
C)  the set of goods and services that maximizes the marginal utility of each good consumed. 
D)  the set of goods and services, subject to the limited income of the consumer, that maximizes the total utility of the consumer. 
A)  the set of goods and services that maximizes marginal utility for each good. 
B)  the set of goods and services such that the marginal utility of each good equals zero. 
C)  the set of goods and services that maximizes the marginal utility of each good consumed. 
D)  the set of goods and services, subject to the limited income of the consumer, that maximizes the total utility of the consumer.

Question 9

Utility refers to

Accepted Answer

A)  the usefulness of a good or service. 
B)  the value of a good or service. 
C)  the want-satisfying power of a good or service. 
D)  the degree to which a good or service is needed. 
A)  the usefulness of a good or service. 
B)  the value of a good or service. 
C)  the want-satisfying power of a good or service. 
D)  the degree to which a good or service is needed.

Question 10

What is utility and what are its characteristics?

Accepted Answer

Utility is the want-satisfying power of

Question 11

The expression "getting the most bang for your buck" is an illustration of the

Accepted Answer

A)  total utility/price ratio. 
B)  total utility/marginal utility ratio 
C)  marginal utility/price ratio. 
D)  marginal utility/total utility ratio. 
A)  total utility/price ratio. 
B)  total utility/marginal utility ratio 
C)  marginal utility/price ratio. 
D)  marginal utility/total utility ratio.

Question 12

-Refer to the above figure. Given the indifference map and budget constraint represented above the consumer will maximize utility when she consumes at

Accepted Answer

A)  point A. 
B)  point B. 
C)  point C. 
D)  either points A or B. 
A)  point A. 
B)  point B. 
C)  point C. 
D)  either points A or B.

Question 13

On a hot summer day, a construction worker enters a McDonald's fast-food restaurant. He orders the first Big Mac. He consumes it within 3 minutes. He then orders a second Big Mac and consumes it in 10 minutes. He eats only half of the third one in 18 minutes and throws away the rest. The store manager offers him the fourth for free. The construction worker says: "No thanks." Why?

Accepted Answer

A)  For the construction worker, total utility increased at an increasing rate. 
B)  Marginal utility increased at an increasing rate. 
C)  Marginal utility declined as he consumed additional Big Macs. 
D)  The law of diminishing marginal utility does not apply to consumption of Big Macs. 
A)  For the construction worker, total utility increased at an increasing rate. 
B)  Marginal utility increased at an increasing rate. 
C)  Marginal utility declined as he consumed additional Big Macs. 
D)  The law of diminishing marginal utility does not apply to consumption of Big Macs.

Question 14

Initially, a consumer is at an optimum. Then the price of X increases. Consequently,

Accepted Answer

A)    /      /   . 
C)    /   =   /   . 
D)    >   . 
A)    /      /   . 
C)    /   =   /   . 
D)    >   .

Question 15

An individual's demand curve slopes down because

Accepted Answer

A)  marginal utility falls as price falls. 
B)  the value of the marginal utility falls as the price falls. 
C)  of the rule that the marginal utility of the last unit must equal the price. 
D)  of the law of diminishing marginal utility and the rule of equal marginal utilities per dollar. 
A)  marginal utility falls as price falls. 
B)  the value of the marginal utility falls as the price falls. 
C)  of the rule that the marginal utility of the last unit must equal the price. 
D)  of the law of diminishing marginal utility and the rule of equal marginal utilities per dollar.

Question 16

The quantities of Good M are plotted on the vertical axis while the quantities of Good N are plotted on the horizontal axis. The prices of both M and N fall. The intercepts of the budget line would

Accepted Answer

A)  decline along both axes. 
B)  rise on the vertical axis and also rise on the horizontal axis. 
C)  rise on the horizontal axis but stay unchanged on the vertical axis. 
D)  rise on the vertical axis but stay unchanged along the horizontal axis. 
A)  decline along both axes. 
B)  rise on the vertical axis and also rise on the horizontal axis. 
C)  rise on the horizontal axis but stay unchanged on the vertical axis. 
D)  rise on the vertical axis but stay unchanged along the horizontal axis.

Question 17

John is currently spending all of his income. For the last unit of Good A consumed John gets 20 utils and for the last unit of Good B consumed he gets 10 utils. The price of Good A is $2. The price of Good B is $5. If John wants to maximize his utility he should

Accepted Answer

A)  continue to purchase the same amount of Good A and Good B. 
B)  increase the consumption of Good A and decrease the consumption of Good B. 
C)  decrease the consumption of Good A and increase the consumption of Good B. 
D)  decrease the consumption of Good A and decrease the consumption of Good B. 
A)  continue to purchase the same amount of Good A and Good B. 
B)  increase the consumption of Good A and decrease the consumption of Good B. 
C)  decrease the consumption of Good A and increase the consumption of Good B. 
D)  decrease the consumption of Good A and decrease the consumption of Good B.

Question 18

When you purchase the lower-priced store brand bread instead of the more expensive name brand, you are experiencing

Accepted Answer

A)  the substitution effect. 
B)  the income effect. 
C)  a fall in total utility. 
D)  diminishing marginal product. 
A)  the substitution effect. 
B)  the income effect. 
C)  a fall in total utility. 
D)  diminishing marginal product.

Question 19

If an individual's utility from consuming two goods increases, then there must be

Accepted Answer

A)  a downward rotation of the individual's indifference curve. 
B)  an inward rotation of the individual's indifference curve. 
C)  an outward shift of the individual's indifference curve. 
D)  in inward shift of the individual's indifference curve. 
A)  a downward rotation of the individual's indifference curve. 
B)  an inward rotation of the individual's indifference curve. 
C)  an outward shift of the individual's indifference curve. 
D)  in inward shift of the individual's indifference curve.

Question 20

The concept of marginality is important in economics because

Accepted Answer

A)  individuals make decisions at the margin. 
B)  marginal decisions indicate a lack of importance. 
C)  individuals make decisions based on tastes only. 
D)  large expenditures are the only factor influencing consumption. 
A)  individuals make decisions at the margin. 
B)  marginal decisions indicate a lack of importance. 
C)  individuals make decisions based on tastes only. 
D)  large expenditures are the only factor influencing consumption.

Exam 20: Consumer Choice

-Refer to the above table. If the consumer's equilibrium consists of 4 magazines and 4 books, then we know that

The price of hamburgers is $2 and the price of movies is $4. The consumer has $14 of income. The consumer is purchasing 3 hamburgers and receiving 30 utils for the last hamburger. He is also purchasing 2 movies and receiving 40 utils for the last movie. This set of goods

-Use the above figure. The optimal position for the consumer is at

The diamond-water paradox is an example that shows that

If a consumer is initially at an optimum, and then the price of Y increases, then

-Refer to the above figures. Amy's total utility for chocolate chip cookies reaches a maximum at 4 cookies. Which panel best represents marginal utility?

The principle that "as more of a good is consumed, its extra benefit declines" is known as

The consumer optimum is defined as

Utility refers to

What is utility and what are its characteristics?

The expression "getting the most bang for your buck" is an illustration of the

-Refer to the above figure. Given the indifference map and budget constraint represented above the consumer will maximize utility when she consumes at

Initially, a consumer is at an optimum. Then the price of X increases. Consequently,

An individual's demand curve slopes down because

The quantities of Good M are plotted on the vertical axis while the quantities of Good N are plotted on the horizontal axis. The prices of both M and N fall. The intercepts of the budget line would

John is currently spending all of his income. For the last unit of Good A consumed John gets 20 utils and for the last unit of Good B consumed he gets 10 utils. The price of Good A is $2. The price of Good B is $5. If John wants to maximize his utility he should

When you purchase the lower-priced store brand bread instead of the more expensive name brand, you are experiencing

If an individual's utility from consuming two goods increases, then there must be

The concept of marginality is important in economics because

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

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