Question 1

Suppose that a consumer is currently at an optimum when consuming goods A and B. Which of the following must be true?

Accepted Answer

A)  The total utility from A is equal to the total utility from B. 
B)  The price of A is equal to the price of B. 
C)  The marginal utility of A is equal to the marginal utility of B. 
D)  The marginal utility to price ratio of A is equal to the marginal utility to price ratio of B. 
A)  The total utility from A is equal to the total utility from B. 
B)  The price of A is equal to the price of B. 
C)  The marginal utility of A is equal to the marginal utility of B. 
D)  The marginal utility to price ratio of A is equal to the marginal utility to price ratio of B.

Question 2

A consumer is at an optimum when the price of one good she has been consuming decreases. As a result

Accepted Answer

A)  the value of the marginal utility of the last unit consumed has increased. 
B)  the value of the marginal utility of the last unit consumed has decreased. 
C)  the price of the other good must decrease too. 
D)  the marginal utility of the last dollar spent on this good is now greater than the marginal utility of the last dollar spent on other goods. 
A)  the value of the marginal utility of the last unit consumed has increased. 
B)  the value of the marginal utility of the last unit consumed has decreased. 
C)  the price of the other good must decrease too. 
D)  the marginal utility of the last dollar spent on this good is now greater than the marginal utility of the last dollar spent on other goods.

Question 3

One characteristic of indifference curves is that

Accepted Answer

A)  they must intersect at the origin. 
B)  they cannot intersect. 
C)  they have a positive slope. 
D)  they are straight lines. 
A)  they must intersect at the origin. 
B)  they cannot intersect. 
C)  they have a positive slope. 
D)  they are straight lines.

Question 4

The diamond-water paradox was solved by knowing that

Accepted Answer

A)  the total utility of water is greater than the total utility of diamonds. 
B)  the marginal utility of water is greater than the marginal utility of diamonds. 
C)  the price of water and diamonds is determined by total utility received, not marginal utility. 
D)  the price of water and diamonds is determined by marginal utility, not total utility. 
A)  the total utility of water is greater than the total utility of diamonds. 
B)  the marginal utility of water is greater than the marginal utility of diamonds. 
C)  the price of water and diamonds is determined by total utility received, not marginal utility. 
D)  the price of water and diamonds is determined by marginal utility, not total utility.

Question 5

If the price of coffee rises relative to all other prices, consumers are likely to

Accepted Answer

A)  buy more coffee. 
B)  buy more tea. 
C)  buy less coffee and less tea. 
D)  buy less tea. 
A)  buy more coffee. 
B)  buy more tea. 
C)  buy less coffee and less tea. 
D)  buy less tea.

Question 6

If a dinner guest is serious when claiming he just could not get enough of your lasagna and that the more he ate the more he wanted, you would conclude that for him the marginal utility of lasagna was

Accepted Answer

A)  increasing. 
B)  decreasing. 
C)  zero. 
D)  constant. 
A)  increasing. 
B)  decreasing. 
C)  zero. 
D)  constant.

Question 7

Holding all other prices and money income constant, if the price of food rises, then the consumer will adjust her expenditures and

Accepted Answer

A)  reach an optimum on a higher indifference curve. 
B)  reach an optimum on a lower indifference curve. 
C)  reach an optimum on the same indifference curve. 
D)  her level of satisfaction may go up or down. 
A)  reach an optimum on a higher indifference curve. 
B)  reach an optimum on a lower indifference curve. 
C)  reach an optimum on the same indifference curve. 
D)  her level of satisfaction may go up or down.

Question 8

-Refer to the above table. Suppose the price of a hamburger is $2, the price of a movie is $5, and the income of the consumer is $29. How many hamburgers and movies will this consumer buy to be at an optimum?

Accepted Answer

A)  1 hamburger and 5 movies. 
B)  6 hamburgers and 3 movies. 
C)  4 hamburgers and 4 movies. 
D)  2 hamburgers and 5 movies. 
A)  1 hamburger and 5 movies. 
B)  6 hamburgers and 3 movies. 
C)  4 hamburgers and 4 movies. 
D)  2 hamburgers and 5 movies.

Question 9

Why are diamonds more expensive than water?

Accepted Answer

A)  because the last glass of water has higher marginal utility than the last diamond 
B)  because the last diamond has higher marginal utility than the last glass of water 
C)  because you get more total utility from diamonds 
D)  because water is a necessity 
A)  because the last glass of water has higher marginal utility than the last diamond 
B)  because the last diamond has higher marginal utility than the last glass of water 
C)  because you get more total utility from diamonds 
D)  because water is a necessity

Question 10

If your dinner guest said, "Every bite, including the last bite, tasted as good as the first," then the marginal utility for him

Accepted Answer

A)  is decreasing. 
B)  is increasing. 
C)  is constant. 
D)  is positive. 
A)  is decreasing. 
B)  is increasing. 
C)  is constant. 
D)  is positive.

Question 11

-Using the above table, what is the total utility of the first piece of pizza?

Accepted Answer

A)  0 utils 
B)  50 utils 
C)  75 utils 
D)  100 utils 
A)  0 utils 
B)  50 utils 
C)  75 utils 
D)  100 utils

Question 12

Suppose that the quantity of good y is measured along the vertical axis and that the quantity of good x is measured along the horizontal axis. If the price of good x is $5 and the price of good y is $10 when income is $200 per time period, the slope of the consumer's budget constraint will be

Accepted Answer

A)  -0.5. 
B)  -2. 
C)  -5. 
D)  -10. 
A)  -0.5. 
B)  -2. 
C)  -5. 
D)  -10.

Question 13

-Refer to the above table. David's utility schedule is characterized by

Accepted Answer

A)  diminishing marginal utility. 
B)  increasing marginal utility. 
C)  constant marginal utility. 
D)  decreasing marginal utility. 
A)  diminishing marginal utility. 
B)  increasing marginal utility. 
C)  constant marginal utility. 
D)  decreasing marginal utility.

Question 14

-Using the above figure, we can conclude that

Accepted Answer

A)  the consumer will purchase goods at combination M. 
B)  the consumer is indifferent between J and M. 
C)  K is the optimal combination of goods. 
D)  L is preferred to K. 
A)  the consumer will purchase goods at combination M. 
B)  the consumer is indifferent between J and M. 
C)  K is the optimal combination of goods. 
D)  L is preferred to K.

Question 15

Increases in total utility from the consumption of a good decrease as more is consumed. This statement is

Accepted Answer

A)  the law of diminishing marginal utility. 
B)  the law of average utility. 
C)  the consumer optimum. 
D)  false. 
A)  the law of diminishing marginal utility. 
B)  the law of average utility. 
C)  the consumer optimum. 
D)  false.

Question 16

With a given level of money income, when the price of a product that a consumer buys declines, the purchasing power of your money income

Accepted Answer

A)  decreases. 
B)  increases. 
C)  is unchanged. 
D)  can increase or decreases depending on the goods being consumed. 
A)  decreases. 
B)  increases. 
C)  is unchanged. 
D)  can increase or decreases depending on the goods being consumed.

Question 17

The substitution effect shows that

Accepted Answer

A)  if the price of a good increases, consumers buy more of that good and less of all others. 
B)  if the price of a good falls relative to all other goods, consumers buy less of that good and more of all others. 
C)  if the price of a good falls, consumers buy less of all goods. 
D)  if the price of a good rises, consumers buy less of that good and more of others. 
A)  if the price of a good increases, consumers buy more of that good and less of all others. 
B)  if the price of a good falls relative to all other goods, consumers buy less of that good and more of all others. 
C)  if the price of a good falls, consumers buy less of all goods. 
D)  if the price of a good rises, consumers buy less of that good and more of others.

Question 18

The term marginal means

Accepted Answer

A)  total. 
B)  cumulative. 
C)  subjective. 
D)  additional. 
A)  total. 
B)  cumulative. 
C)  subjective. 
D)  additional.

Question 19

Observations of real-world situations that appear to violate a consumer optimum could be offered as evidence favoring

Accepted Answer

A)  utility analysis. 
B)  bounded rationality. 
C)  diminishing marginal utility. 
D)  zero marginal utility at a utility-maximizing point. 
A)  utility analysis. 
B)  bounded rationality. 
C)  diminishing marginal utility. 
D)  zero marginal utility at a utility-maximizing point.

Question 20

-Refer to the above table. The one who likes the good the most is

Accepted Answer

A)  David. 
B)  Michelle. 
C)  Robert. 
D)  uncertain since we cannot compare utility across people. 
A)  David. 
B)  Michelle. 
C)  Robert. 
D)  uncertain since we cannot compare utility across people.

Exam 20: Consumer Choice

Suppose that a consumer is currently at an optimum when consuming goods A and B. Which of the following must be true?

A consumer is at an optimum when the price of one good she has been consuming decreases. As a result

One characteristic of indifference curves is that

The diamond-water paradox was solved by knowing that

If the price of coffee rises relative to all other prices, consumers are likely to

If a dinner guest is serious when claiming he just could not get enough of your lasagna and that the more he ate the more he wanted, you would conclude that for him the marginal utility of lasagna was

Holding all other prices and money income constant, if the price of food rises, then the consumer will adjust her expenditures and

-Refer to the above table. Suppose the price of a hamburger is $2, the price of a movie is $5, and the income of the consumer is $29. How many hamburgers and movies will this consumer buy to be at an optimum?

Why are diamonds more expensive than water?

If your dinner guest said, "Every bite, including the last bite, tasted as good as the first," then the marginal utility for him

-Using the above table, what is the total utility of the first piece of pizza?

Suppose that the quantity of good y is measured along the vertical axis and that the quantity of good x is measured along the horizontal axis. If the price of good x is $5 and the price of good y is $10 when income is $200 per time period, the slope of the consumer's budget constraint will be

-Refer to the above table. David's utility schedule is characterized by

-Using the above figure, we can conclude that

Increases in total utility from the consumption of a good decrease as more is consumed. This statement is

With a given level of money income, when the price of a product that a consumer buys declines, the purchasing power of your money income

The substitution effect shows that

The term marginal means

Observations of real-world situations that appear to violate a consumer optimum could be offered as evidence favoring

-Refer to the above table. The one who likes the good the most is

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