Question 1

-According to the above table, what is Michelle's marginal utility of the 8th unit?

Accepted Answer

A)  372 
B)  43 
C)  42 
D)  44 
A)  372 
B)  43 
C)  42 
D)  44

Question 2

-Use the above figure. What would make all possible points attainable for the individual to consume?

Accepted Answer

A)  A decrease in the price of good y. 
B)  An increase in the price of good y. 
C)  An increase in the price of good x. 
D)  A decrease in income. 
A)  A decrease in the price of good y. 
B)  An increase in the price of good y. 
C)  An increase in the price of good x. 
D)  A decrease in income.

Question 3

If the price of a good is zero, a rational consumer will

Accepted Answer

A)  buy all of the units available. 
B)  not consume the good at all since it must not be valuable if it has a zero price. 
C)  stop consuming the good when total utility is maximized. 
D)  consume the good up to the point where total utility is just below zero. 
A)  buy all of the units available. 
B)  not consume the good at all since it must not be valuable if it has a zero price. 
C)  stop consuming the good when total utility is maximized. 
D)  consume the good up to the point where total utility is just below zero.

Question 4

In a restaurant we can observe people consuming coffee, tea, and soft drinks. All are priced the same. If Sally consumes coffee and Ali consumes soft drinks, we can conclude that

Accepted Answer

A)  Bill will be drinking tea. 
B)  Sally likes coffee more than Ali does, and Ali likes soft drinks more than Sally does. 
C)  Sally derives more utility from coffee than from tea or soft drinks, and Ali derives more utility from soft drinks than from tea or coffee. 
D)  the utility Sally receives from coffee consumption equals the utility that Ali receives from consuming soft drinks. 
A)  Bill will be drinking tea. 
B)  Sally likes coffee more than Ali does, and Ali likes soft drinks more than Sally does. 
C)  Sally derives more utility from coffee than from tea or soft drinks, and Ali derives more utility from soft drinks than from tea or coffee. 
D)  the utility Sally receives from coffee consumption equals the utility that Ali receives from consuming soft drinks.

Question 5

If marginal utility is positive but diminishing, then

Accepted Answer

A)  average utility must be negative. 
B)  marginal utility must be above-average utility. 
C)  total utility must be positive. 
D)  marginal utility must be more than total utility. 
A)  average utility must be negative. 
B)  marginal utility must be above-average utility. 
C)  total utility must be positive. 
D)  marginal utility must be more than total utility.

Question 6

The consumer optimum (for two goods, a and b) is reached when

Accepted Answer

A)  TUa = TUb. 
B)  MUa = MUb. 
C)  TUa/Pa = TUb/Pb. 
D)  MUa/Pa = MUb/Pb. 
A)  TUa = TUb. 
B)  MUa = MUb. 
C)  TUa/Pa = TUb/Pb. 
D)  MUa/Pa = MUb/Pb.

Question 7

According to the substitution effect, if the price of a product goes down

Accepted Answer

A)  the consumer will buy more of the good at the lower price than at a higher price, creating a downward sloping demand curve. 
B)  the consumer will buy more of the good at a lower price than at a higher price, creating a horizontal demand curve. 
C)  the consumer will not change the level of purchases of the good when the price changes, making the demand curve a vertical line. 
D)  the real income of the consumer will increase, causing the consumer to want to buy more of the good, creating a downward sloping demand curve. 
A)  the consumer will buy more of the good at the lower price than at a higher price, creating a downward sloping demand curve. 
B)  the consumer will buy more of the good at a lower price than at a higher price, creating a horizontal demand curve. 
C)  the consumer will not change the level of purchases of the good when the price changes, making the demand curve a vertical line. 
D)  the real income of the consumer will increase, causing the consumer to want to buy more of the good, creating a downward sloping demand curve.

Question 8

If total utility is unchanged, then marginal utility is

Accepted Answer

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

Question 9

The consumption possibilities curve is the

Accepted Answer

A)  supply curve. 
B)  demand curve. 
C)  budget constraint. 
D)  indifference curve. 
A)  supply curve. 
B)  demand curve. 
C)  budget constraint. 
D)  indifference curve.

Question 10

-Refer to the above figure. Which point represents the highest level of utility?

Accepted Answer

A)  Point A 
B)  Point B 
C)  Point C 
D)  Point D 
A)  Point A 
B)  Point B 
C)  Point C 
D)  Point D

Question 11

Suppose that a consumer is at an optimum consuming X and Y. If the price of X falls, then to get to a new equilibrium the consumer must

Accepted Answer

A)  purchase less X and more Y. 
B)  purchase less Y and less X. 
C)  purchase more X. 
D)  purchase more Y. 
A)  purchase less X and more Y. 
B)  purchase less Y and less X. 
C)  purchase more X. 
D)  purchase more Y.

Question 12

If we are graphing total utility, then the total utility curve will

Accepted Answer

A)  always be increasing. 
B)  always be decreasing. 
C)  be increasing as long as marginal utility is positive. 
D)  be horizontal if marginal utility is positive. 
A)  always be increasing. 
B)  always be decreasing. 
C)  be increasing as long as marginal utility is positive. 
D)  be horizontal if marginal utility is positive.

Question 13

Basket of goods A is on an indifference curve that lies further from the origin than basket B. From this we know that

Accepted Answer

A)  the prices of the goods in A are more than the prices of the goods in B. 
B)  the satisfaction from consuming A is more than the satisfaction from consuming B. 
C)  the marginal utility from consuming A is more than the marginal utility from consuming B. 
D)  all other consumers would also rank B above A. 
A)  the prices of the goods in A are more than the prices of the goods in B. 
B)  the satisfaction from consuming A is more than the satisfaction from consuming B. 
C)  the marginal utility from consuming A is more than the marginal utility from consuming B. 
D)  all other consumers would also rank B above A.

Question 14

-Refer to the above table. If the consumer's equilibrium consists of 3 magazines and 6 books, then we know that

Accepted Answer

A)  the price of a magazine is 4.5 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 2 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 4.5 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 2 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 15

-Use the above table. Adam has 3 apples and 3 oranges. Eve has 2 apples and 2 oranges. Eve asks Adam to give her an apple in exchange for an orange. Should Eve go through with this exchange?

Accepted Answer

A)  Yes. This way she will have 3 apples, which will give her more total satisfaction. 
B)  Yes. She is indifferent between consuming apples and oranges. 
C)  No. She gives up more satisfaction than she gets. 
D)  No. Adam likes apples more than oranges. 
A)  Yes. This way she will have 3 apples, which will give her more total satisfaction. 
B)  Yes. She is indifferent between consuming apples and oranges. 
C)  No. She gives up more satisfaction than she gets. 
D)  No. Adam likes apples more than oranges.

Question 16

In a map showing three indifference curves a consumer is most well off on

Accepted Answer

A)  the curve which is closest to the origin of the coordinate axes. 
B)  the curve which is most farther away from the coordinate axes. 
C)  The curve that is in the middle. 
D)  none of the above 
A)  the curve which is closest to the origin of the coordinate axes. 
B)  the curve which is most farther away from the coordinate axes. 
C)  The curve that is in the middle. 
D)  none of the above

Question 17

What are the key properties of indifference curves?

Accepted Answer

Indifference curves have a dow

Question 18

The budget constraint shows the

Accepted Answer

A)  combinations of goods that generate the same amount of total satisfaction. 
B)  possible combinations of goods that can be purchased with a specified income. 
C)  changes in consumption of goods that a consumer makes when his income increases. 
D)  amount of a good the consumer will buy at various prices. 
A)  combinations of goods that generate the same amount of total satisfaction. 
B)  possible combinations of goods that can be purchased with a specified income. 
C)  changes in consumption of goods that a consumer makes when his income increases. 
D)  amount of a good the consumer will buy at various prices.

Question 19

If an individual's total utility from consuming two goods decreases, 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)  an 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)  an inward shift of the individual's indifference curve.

Question 20

A consumer is buying the optimal amount of goods when

Accepted Answer

A)  the total utility from the purchases on all the goods purchased is the same. 
B)  the marginal utility from the purchases of all the goods purchased is the same. 
C)  the marginal utility per last dollar spent on all of the goods purchased is the same. 
D)  the marginal utility from the purchases of all the goods is equal to 1. 
A)  the total utility from the purchases on all the goods purchased is the same. 
B)  the marginal utility from the purchases of all the goods purchased is the same. 
C)  the marginal utility per last dollar spent on all of the goods purchased is the same. 
D)  the marginal utility from the purchases of all the goods is equal to 1.

Exam 20: Consumer Choice

-According to the above table, what is Michelle's marginal utility of the 8th unit?

-Use the above figure. What would make all possible points attainable for the individual to consume?

If the price of a good is zero, a rational consumer will

In a restaurant we can observe people consuming coffee, tea, and soft drinks. All are priced the same. If Sally consumes coffee and Ali consumes soft drinks, we can conclude that

If marginal utility is positive but diminishing, then

The consumer optimum (for two goods, a and b) is reached when

According to the substitution effect, if the price of a product goes down

If total utility is unchanged, then marginal utility is

The consumption possibilities curve is the

-Refer to the above figure. Which point represents the highest level of utility?

Suppose that a consumer is at an optimum consuming X and Y. If the price of X falls, then to get to a new equilibrium the consumer must

If we are graphing total utility, then the total utility curve will

Basket of goods A is on an indifference curve that lies further from the origin than basket B. From this we know that

-Refer to the above table. If the consumer's equilibrium consists of 3 magazines and 6 books, then we know that

-Use the above table. Adam has 3 apples and 3 oranges. Eve has 2 apples and 2 oranges. Eve asks Adam to give her an apple in exchange for an orange. Should Eve go through with this exchange?

In a map showing three indifference curves a consumer is most well off on

What are the key properties of indifference curves?

The budget constraint shows the

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

A consumer is buying the optimal amount of goods when

The Nature of Economics

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