Question 1

When Bonnie increases the consumption of Good A and decrease the consumption of Good B, her marginal utility of

Accepted Answer

A)  A falls and the marginal utility of B will increase. 
B)  both A and B will decrease. 
C)  A increases and the marginal utility of B will fall. 
D)  both A and B will increase. 
A)  A falls and the marginal utility of B will increase. 
B)  both A and B will decrease. 
C)  A increases and the marginal utility of B will fall. 
D)  both A and B will increase.

Question 2

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income
  
-Referring to the above table, suppose Bob's ratios of marginal utility of beer to the price of beer and the marginal utility of pizza to the price of pizza are equal. If the price of beer increases

Accepted Answer

A)  Bob will probably consume more beer and less pizza. 
B)  Bob will probably consume less beer and less pizza. 
C)  Bob will probably consume less beer and more pizza. 
D)  Bob will still consume the same amount of beer and pizza. 
A)  Bob will probably consume more beer and less pizza. 
B)  Bob will probably consume less beer and less pizza. 
C)  Bob will probably consume less beer and more pizza. 
D)  Bob will still consume the same amount of beer and pizza.

Question 3

The set of goods and services that maximizes the level of satisfaction for each consumer subject to limited income is

Accepted Answer

A)  the consumer optimum. 
B)  diminishing marginal utility. 
C)  increasing marginal utility. 
D)  substitution effect. 
A)  the consumer optimum. 
B)  diminishing marginal utility. 
C)  increasing marginal utility. 
D)  substitution effect.

Question 4

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

Accepted Answer

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

Question 5

Dr. Rodriguez is consuming beer and wine. At his current level of consumption, the marginal utility per dollar is 30 units for beer and 15 units for wine. Dr. Rodriguez should

Accepted Answer

A)  consume twice as much beer as wine. 
B)  consume twice as much wine as beer. 
C)  increase his consumption of beer relative to wine. 
D)  increase his consumption of wine relative to beer. 
A)  consume twice as much beer as wine. 
B)  consume twice as much wine as beer. 
C)  increase his consumption of beer relative to wine. 
D)  increase his consumption of wine relative to beer.

Question 6

If the marginal utility of each good is constant as consumption increases, the indifference curves are

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  straight lines. 
D)  positively sloped. 
A)  horizontal. 
B)  vertical. 
C)  straight lines. 
D)  positively sloped.

Question 7

If Frank has been consuming 5 hamburgers per week at a consumer optimum, and the price of hamburgers falls, how will Frank respond?

Accepted Answer

A)  He will save more income. 
B)  He will buy more of everything. 
C)  He will buy more burgers. 
D)  He will buy more of everything except burgers. 
A)  He will save more income. 
B)  He will buy more of everything. 
C)  He will buy more burgers. 
D)  He will buy more of everything except burgers.

Question 8

What is marginal utility? Why is the term "marginal" important in utility analysis?

Accepted Answer

Marginal utility is the change in total

Question 9

-The price of product A is $3, the price of product B is $2, and you have $18 to spend. What combination of product A and product B will give you the most satisfaction?

Accepted Answer

A)  5 units of product A; 1 unit of product B 
B)  4 units of product A and 3 units of product B 
C)  2 units of product A and 5 units of product B 
D)  3 units of product A and 5 units of product B 
A)  5 units of product A; 1 unit of product B 
B)  4 units of product A and 3 units of product B 
C)  2 units of product A and 5 units of product B 
D)  3 units of product A and 5 units of product B

Question 10

The want-satisfying power of a good or service is known as

Accepted Answer

A)  purchasing power. 
B)  utility. 
C)  consumer optimum. 
D)  principle of substitution. 
A)  purchasing power. 
B)  utility. 
C)  consumer optimum. 
D)  principle of substitution.

Question 11

The indifference curve between eggs and dozens of eggs would be

Accepted Answer

A)  bowed in to the origin. 
B)  bowed out from the origin. 
C)  a rectangular hyperbola. 
D)  a downward sloping straight line with a slope of -12. 
A)  bowed in to the origin. 
B)  bowed out from the origin. 
C)  a rectangular hyperbola. 
D)  a downward sloping straight line with a slope of -12.

Question 12

Which of the following statements is FALSE regarding consumer choice?

Accepted Answer

A)  Each change in price has a substitution effect and a real income effect. 
B)  When price falls, the consumer chooses in favor of the cheaper good. 
C)  Diminishing marginal utility is one reason for a downward sloping demand curve. 
D)  Purchasing power has an inverse relationship with the rise in income. 
A)  Each change in price has a substitution effect and a real income effect. 
B)  When price falls, the consumer chooses in favor of the cheaper good. 
C)  Diminishing marginal utility is one reason for a downward sloping demand curve. 
D)  Purchasing power has an inverse relationship with the rise in income.

Question 13

-Use the above figure. When the budget line rotates from "b" to "c"

Accepted Answer

A)  the price of product J increases. 
B)  the price of product J decreases. 
C)  the price of product K increases. 
D)  the price of product K decreases. 
A)  the price of product J increases. 
B)  the price of product J decreases. 
C)  the price of product K increases. 
D)  the price of product K decreases.

Question 14

The fact that consumers will purchase more of a good that has become relatively cheaper

Accepted Answer

A)  is called the nominal income effect. 
B)  is called the substitution effect. 
C)  leads to an upward sloping demand curve. 
D)  leads to negative marginal utility. 
A)  is called the nominal income effect. 
B)  is called the substitution effect. 
C)  leads to an upward sloping demand curve. 
D)  leads to negative marginal utility.

Question 15

If total utility is decreasing, then marginal utility is

Accepted Answer

A)  negative. 
B)  positive. 
C)  zero. 
D)  increasing. 
A)  negative. 
B)  positive. 
C)  zero. 
D)  increasing.

Question 16

-Refer to the above table. What is the marginal utility for the 3rd unit for Michelle and for Robert?

Accepted Answer

A)  Michelle: -10; Robert: 20 
B)  Michelle: 75; Robert: 75 
C)  Michelle: 75; Robert: 80 
D)  Michelle: 270; Robert: 270 
A)  Michelle: -10; Robert: 20 
B)  Michelle: 75; Robert: 75 
C)  Michelle: 75; Robert: 80 
D)  Michelle: 270; Robert: 270

Question 17

The real-income effect is typically small because

Accepted Answer

A)  the change in price of one particular item has little effect on total purchasing power. 
B)  income has no relation to consumption. 
C)  price changes tend to balance out over time. 
D)  real-incomes are always rising. 
A)  the change in price of one particular item has little effect on total purchasing power. 
B)  income has no relation to consumption. 
C)  price changes tend to balance out over time. 
D)  real-incomes are always rising.

Question 18

Karen has decided that she would enjoy eating another cookie. Which of the following statements is consistent with Karen's decision?

Accepted Answer

A)  Karen's marginal utility has decreased with a corresponding decrease in total utility. 
B)  Karen's marginal and total utility remain unchanged. 
C)  Karen's marginal utility has decreased but it is unclear what has happened to total utility. 
D)  Karen's total utility has increased but it is unclear what has happened to her marginal utility. 
A)  Karen's marginal utility has decreased with a corresponding decrease in total utility. 
B)  Karen's marginal and total utility remain unchanged. 
C)  Karen's marginal utility has decreased but it is unclear what has happened to total utility. 
D)  Karen's total utility has increased but it is unclear what has happened to her marginal utility.

Question 19

-Refer to the above table. The marginal utility of the 5th movie for Michelle is

Accepted Answer

A)  40 units of utility. 
B)  50 units of utility. 
C)  60 units of utility. 
D)  390 units of utility. 
A)  40 units of utility. 
B)  50 units of utility. 
C)  60 units of utility. 
D)  390 units of utility.

Question 20

-Use the above figure. What does point N represent?

Accepted Answer

A)  A consumer maximizing her satisfaction. 
B)  A consumer not maximizing her satisfaction. 
C)  A consumer is spending more than her current income. 
D)  A less satisfying point than compared to point J. 
A)  A consumer maximizing her satisfaction. 
B)  A consumer not maximizing her satisfaction. 
C)  A consumer is spending more than her current income. 
D)  A less satisfying point than compared to point J.

Exam 20: Consumer Choice

When Bonnie increases the consumption of Good A and decrease the consumption of Good B, her marginal utility of

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income -Referring to the above table, suppose Bob's ratios of marginal utility of beer to the price of beer and the marginal utility of pizza to the price of pizza are equal. If the price of beer increases

The set of goods and services that maximizes the level of satisfaction for each consumer subject to limited income is

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

Dr. Rodriguez is consuming beer and wine. At his current level of consumption, the marginal utility per dollar is 30 units for beer and 15 units for wine. Dr. Rodriguez should

If the marginal utility of each good is constant as consumption increases, the indifference curves are

If Frank has been consuming 5 hamburgers per week at a consumer optimum, and the price of hamburgers falls, how will Frank respond?

What is marginal utility? Why is the term "marginal" important in utility analysis?

-The price of product A is $3, the price of product B is $2, and you have $18 to spend. What combination of product A and product B will give you the most satisfaction?

The want-satisfying power of a good or service is known as

The indifference curve between eggs and dozens of eggs would be

Which of the following statements is FALSE regarding consumer choice?

-Use the above figure. When the budget line rotates from "b" to "c"

The fact that consumers will purchase more of a good that has become relatively cheaper

If total utility is decreasing, then marginal utility is

-Refer to the above table. What is the marginal utility for the 3rd unit for Michelle and for Robert?

The real-income effect is typically small because

Karen has decided that she would enjoy eating another cookie. Which of the following statements is consistent with Karen's decision?

-Refer to the above table. The marginal utility of the 5th movie for Michelle is

-Use the above figure. What does point N represent?

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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