Question 1

A higher price for a good implies that

Accepted Answer

A)  the marginal utility of the good has declined. 
B)  the total value of the good to the consumer has increased. 
C)  the sacrifice of utility of another good has increased. 
D)  the marginal utility of another good has decreased. 
A)  the marginal utility of the good has declined. 
B)  the total value of the good to the consumer has increased. 
C)  the sacrifice of utility of another good has increased. 
D)  the marginal utility of another good has decreased.

Question 2

The marginal rate of substitution is measured along

Accepted Answer

A)  the demand curve. 
B)  the total utility curve. 
C)  a given indifference curve. 
D)  a given budget line. 
A)  the demand curve. 
B)  the total utility curve. 
C)  a given indifference curve. 
D)  a given budget line.

Question 3

When marginal utility is negative, total utility is

Accepted Answer

A)  increasing at a decreasing rate. 
B)  zero. 
C)  at its maximum. 
D)  decreasing. 
A)  increasing at a decreasing rate. 
B)  zero. 
C)  at its maximum. 
D)  decreasing.

Question 4

Explain how a consumer maximizes utility.

Accepted Answer

To maximize utility, the consumer alloca

Question 5

-Refer to the above table. The marginal utility of the 2nd movie for Robert is

Accepted Answer

A)  95 units of utility. 
B)  90 units of utility. 
C)  80 units of utility. 
D)  190 units of utility. 
A)  95 units of utility. 
B)  90 units of utility. 
C)  80 units of utility. 
D)  190 units of utility.

Question 6

-In the above table, what is the marginal utility of the second slice of pizza consumed?

Accepted Answer

A)  10 
B)  90 
C)  30 
D)  40 
A)  10 
B)  90 
C)  30 
D)  40

Question 7

The budget constraint shows that

Accepted Answer

A)  the consumer faces a trade-off in the consumption of goods. 
B)  the consumer can have as many goods as he wants. 
C)  as consumers spend more on one good, they spend more on others. 
D)  total income equals total spending on one good. 
A)  the consumer faces a trade-off in the consumption of goods. 
B)  the consumer can have as many goods as he wants. 
C)  as consumers spend more on one good, they spend more on others. 
D)  total income equals total spending on one good.

Question 8

-In the above table, the marginal utility of the second slice of pizza is

Accepted Answer

A)  20. 
B)  30. 
C)  50. 
D)  10. 
A)  20. 
B)  30. 
C)  50. 
D)  10.

Question 9

If the total utility derived from consuming three oysters was 40 utils and the total utility derived from consuming four oysters was 52 utils, what was the marginal utility derived from the consumption of the fourth oyster?

Accepted Answer

A)  92 utils 
B)  52 utils 
C)  12 utils 
D)  It is impossible to determine. 
A)  92 utils 
B)  52 utils 
C)  12 utils 
D)  It is impossible to determine.

Question 10

In economic utility analysis, consumer tastes and preferences are assumed

Accepted Answer

A)  to be determined by income. 
B)  to be influenced by the prices of goods. 
C)  given and stable for an individual. 
D)  given but rapidly changeable. 
A)  to be determined by income. 
B)  to be influenced by the prices of goods. 
C)  given and stable for an individual. 
D)  given but rapidly changeable.

Question 11

The law of demand is derived under the assumption of

Accepted Answer

A)  constant prices. 
B)  constant real incomes. 
C)  constant consumer tastes and preferences. 
D)  constant marginal utility. 
A)  constant prices. 
B)  constant real incomes. 
C)  constant consumer tastes and preferences. 
D)  constant marginal utility.

Question 12

Peter consumes bags of potato chips and cans of soft drink. The marginal utility of bags of potato chips is 10 utils per bag and the marginal utility of cans of soft drink is 50 utils per can. Potato chips cost $0.50 a bag, and a can of soft drink costs $1.00. What should Peter do?

Accepted Answer

A)  Peter should eat more chips, because they cost less. 
B)  Peter should buy more chips and less soft drink. 
C)  Peter should buy more soft drink, because it costs less. 
D)  Peter should buy more soft drink and fewer potato chips. 
A)  Peter should eat more chips, because they cost less. 
B)  Peter should buy more chips and less soft drink. 
C)  Peter should buy more soft drink, because it costs less. 
D)  Peter should buy more soft drink and fewer potato chips.

Question 13

-Refer to the above table. Robert's utility schedule shows

Accepted Answer

A)  diminishing marginal utility throughout the entire schedule. 
B)  initially increasing marginal utility and then decreasing marginal utility. 
C)  initially decreasing marginal utility and then increasing marginal utility. 
D)  increasing marginal utility throughout the entire schedule. 
A)  diminishing marginal utility throughout the entire schedule. 
B)  initially increasing marginal utility and then decreasing marginal utility. 
C)  initially decreasing marginal utility and then increasing marginal utility. 
D)  increasing marginal utility throughout the entire schedule.

Question 14

The price of a hamburger is $1 and the price of a movie is $4 and the consumer has $10. A consumer has purchased 2 hamburgers and 2 movies, receiving 25 units of utility for the second hamburger and 100 units of utility for the second movie. The 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 minimized. 
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 minimized. 
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 15

When marginal utility is positive, total utility is

Accepted Answer

A)  increasing. 
B)  zero. 
C)  at its minimum. 
D)  decreasing. 
A)  increasing. 
B)  zero. 
C)  at its minimum. 
D)  decreasing.

Question 16

If you regularly spend $100 a month on gasoline and the price of gasoline doubles, your purchasing power has

Accepted Answer

A)  increased. 
B)  remained constant. 
C)  became stable. 
D)  decreased. 
A)  increased. 
B)  remained constant. 
C)  became stable. 
D)  decreased.

Question 17

If price of a product falls

Accepted Answer

A)  the marginal utility of the product also falls. 
B)  the budget line rotates to the right. 
C)  the budget line rotates to the left. 
D)  the indifference curve will shift to the left. 
A)  the marginal utility of the product also falls. 
B)  the budget line rotates to the right. 
C)  the budget line rotates to the left. 
D)  the indifference curve will shift to the left.

Question 18

Marginal utility is

Accepted Answer

A)  the utility received from consuming one unit of a good. 
B)  the change in total utility due to a one-unit change in the quantity of a good consumed. 
C)  the total utility received from consuming a certain quantity of a good divided by the quantity. 
D)  the utility received by the last consumer of a good. 
A)  the utility received from consuming one unit of a good. 
B)  the change in total utility due to a one-unit change in the quantity of a good consumed. 
C)  the total utility received from consuming a certain quantity of a good divided by the quantity. 
D)  the utility received by the last consumer of a good.

Question 19

Suppose that the quantity of hamburgers is measured along the vertical axis and that the number of bags of popcorn is measured along the horizontal axis. The budget constraint has a vertical intercept of 10 hamburgers, and the slope of the line is -1. If the price of popcorn doubles, we know that

Accepted Answer

A)  the consumer will buy half as many bags of popcorn as before. 
B)  the new equilibrium will have a marginal rate of substitution of -2. 
C)  the new equilibrium will have a marginal rate of substitution of -0.5. 
D)  the vertical axis of the budget line shifts to 5 hamburgers. 
A)  the consumer will buy half as many bags of popcorn as before. 
B)  the new equilibrium will have a marginal rate of substitution of -2. 
C)  the new equilibrium will have a marginal rate of substitution of -0.5. 
D)  the vertical axis of the budget line shifts to 5 hamburgers.

Question 20

Suppose that Usher derives 45 utils of total utility from eating 6 hotdogs and 55 utils of total utility from eating 7 hotdogs. What is Usher's marginal utility from eating the 7th hotdog?

Accepted Answer

A)  10 
B)  45 
C)  55 
D)  100 
A)  10 
B)  45 
C)  55 
D)  100

Exam 20: Consumer Choice

A higher price for a good implies that

The marginal rate of substitution is measured along

When marginal utility is negative, total utility is

Explain how a consumer maximizes utility.

-Refer to the above table. The marginal utility of the 2nd movie for Robert is

-In the above table, what is the marginal utility of the second slice of pizza consumed?

The budget constraint shows that

-In the above table, the marginal utility of the second slice of pizza is

If the total utility derived from consuming three oysters was 40 utils and the total utility derived from consuming four oysters was 52 utils, what was the marginal utility derived from the consumption of the fourth oyster?

In economic utility analysis, consumer tastes and preferences are assumed

The law of demand is derived under the assumption of

Peter consumes bags of potato chips and cans of soft drink. The marginal utility of bags of potato chips is 10 utils per bag and the marginal utility of cans of soft drink is 50 utils per can. Potato chips cost $0.50 a bag, and a can of soft drink costs $1.00. What should Peter do?

-Refer to the above table. Robert's utility schedule shows

The price of a hamburger is $1 and the price of a movie is $4 and the consumer has $10. A consumer has purchased 2 hamburgers and 2 movies, receiving 25 units of utility for the second hamburger and 100 units of utility for the second movie. The set of goods

When marginal utility is positive, total utility is

If you regularly spend $100 a month on gasoline and the price of gasoline doubles, your purchasing power has

If price of a product falls

Marginal utility is

Suppose that the quantity of hamburgers is measured along the vertical axis and that the number of bags of popcorn is measured along the horizontal axis. The budget constraint has a vertical intercept of 10 hamburgers, and the slope of the line is -1. If the price of popcorn doubles, we know that

Suppose that Usher derives 45 utils of total utility from eating 6 hotdogs and 55 utils of total utility from eating 7 hotdogs. What is Usher's marginal utility from eating the 7th hotdog?

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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