Question 1

"As an individual consumes more units of a good, her total utility falls because of the law of diminishing marginal utility." Do you agree or disagree? Explain.

Accepted Answer

Disagree. The law of diminishing margina

Question 2

-Refer to the above figures. Which panel best represents an indifference curve?

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 3

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

Accepted Answer

A)  fewer units of J and fewer units of K will be purchased. 
B)  more units of J and more units of K will be purchased. 
C)  fewer units of J and more units of K will be purchased. 
D)  more units of J and fewer units of K will be purchased. 
A)  fewer units of J and fewer units of K will be purchased. 
B)  more units of J and more units of K will be purchased. 
C)  fewer units of J and more units of K will be purchased. 
D)  more units of J and fewer units of K will be purchased.

Question 4

The total utility of water is

Accepted Answer

A)  lower than the total and marginal utility of diamonds. 
B)  lower than the total utility of diamonds, but the marginal utility is higher. 
C)  higher than the total utility of diamonds, but the marginal utility of diamonds is higher. 
D)  the same as the total utility of diamonds, but the marginal utilities are the same. 
A)  lower than the total and marginal utility of diamonds. 
B)  lower than the total utility of diamonds, but the marginal utility is higher. 
C)  higher than the total utility of diamonds, but the marginal utility of diamonds is higher. 
D)  the same as the total utility of diamonds, but the marginal utilities are the same.

Question 5

Which English philosopher set out to develop an arithmetic formula for measuring happiness and along the way invented the util?

Accepted Answer

A)  John Maynard Keynes 
B)  Milton Friedman 
C)  Jeremy Bentham 
D)  Adam Smith 
A)  John Maynard Keynes 
B)  Milton Friedman 
C)  Jeremy Bentham 
D)  Adam Smith

Question 6

The utility that people experience from the consumption of a good depends on

Accepted Answer

A)  their income level. 
B)  their tastes and preferences. 
C)  total sales of the good. 
D)  how much shopping time they spent obtaining the good. 
A)  their income level. 
B)  their tastes and preferences. 
C)  total sales of the good. 
D)  how much shopping time they spent obtaining the good.

Question 7

The budget line

Accepted Answer

A)  shifts to the left as income increases. 
B)  has a positive slope. 
C)  is a vertical line. 
D)  shows the combination of goods that can be purchased at fixed prices and with a given income. 
A)  shifts to the left as income increases. 
B)  has a positive slope. 
C)  is a vertical line. 
D)  shows the combination of goods that can be purchased at fixed prices and with a given income.

Question 8

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

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 9

Suppose a consumer is at an optimum. What happens when the price of one good she has been consuming increases?

Accepted Answer

A)  The value of the marginal utility of the last unit consumed decreases. 
B)  The value of the marginal utility of the last unit consumed increases. 
C)  The marginal utility per dollar spent on the last unit consumed of that good increases by the same proportion as the price increases. 
D)  The marginal utility per dollar spent on the last unit consumed of that good is now smaller than the marginal utility per dollar spent on other goods the person consumes. 
A)  The value of the marginal utility of the last unit consumed decreases. 
B)  The value of the marginal utility of the last unit consumed increases. 
C)  The marginal utility per dollar spent on the last unit consumed of that good increases by the same proportion as the price increases. 
D)  The marginal utility per dollar spent on the last unit consumed of that good is now smaller than the marginal utility per dollar spent on other goods the person consumes.

Question 10

Indifference curves

Accepted Answer

A)  are vertical. 
B)  are horizontal. 
C)  slope upward. 
D)  slope downward. 
A)  are vertical. 
B)  are horizontal. 
C)  slope upward. 
D)  slope downward.

Question 11

-Using the above table, what is the marginal utility of the 4th soda?

Accepted Answer

A)  23.2 
B)  5 
C)  10 
D)  15 
A)  23.2 
B)  5 
C)  10 
D)  15

Question 12

If an individual consumes only two goods and consumption of one good increases, then in order to keep the consumer on the same indifference curve, consumption of the other good must

Accepted Answer

A)  increase. 
B)  decrease. 
C)  increase proportionately. 
D)  become negative. 
A)  increase. 
B)  decrease. 
C)  increase proportionately. 
D)  become negative.

Question 13

The reason that all-you-can-eat restaurants can make a profit is due to

Accepted Answer

A)  the law of demand. 
B)  the law of increasing relative costs. 
C)  the law of diminishing marginal utility. 
D)  the law of diminishing marginal returns. 
A)  the law of demand. 
B)  the law of increasing relative costs. 
C)  the law of diminishing marginal utility. 
D)  the law of diminishing marginal returns.

Question 14

In economics, utility is defined as

Accepted Answer

A)  the want-satisfying power of a good or service. 
B)  the usefulness of a good or service. 
C)  the utilitarian value of a good or service. 
D)  the objective measure of the desirability of a good or service. 
A)  the want-satisfying power of a good or service. 
B)  the usefulness of a good or service. 
C)  the utilitarian value of a good or service. 
D)  the objective measure of the desirability of a good or service.

Question 15

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

Accepted Answer

A)  the prices of the goods in A are less 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 less than the marginal utility from consuming B. 
D)  the satisfaction from consuming A is less than the satisfaction from consuming B. 
A)  the prices of the goods in A are less 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 less than the marginal utility from consuming B. 
D)  the satisfaction from consuming A is less than the satisfaction from consuming B.

Question 16

When a consumer shifts his purchases from product A to product B, the 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 17

Which of the following statements is true with respect to total utility and marginal utility?

Accepted Answer

A)  Marginal utility always rises as total utility increases. 
B)  Marginal utility can decline as total utility rises. 
C)  Total utility is not related to marginal utility. 
D)  Total utility can decline while marginal utility rises. 
A)  Marginal utility always rises as total utility increases. 
B)  Marginal utility can decline as total utility rises. 
C)  Total utility is not related to marginal utility. 
D)  Total utility can decline while marginal utility rises.

Question 18

-Using the above table, if the price of Pepsi is $3, how many cans of Pepsi would have to be consumed in order to have a marginal utility to price ratio of 3?

Accepted Answer

A)  one can 
B)  two cans 
C)  three cans 
D)  four cans 
A)  one can 
B)  two cans 
C)  three cans 
D)  four cans

Question 19

Which of the following is NOT true about indifference curves?

Accepted Answer

A)  Indifference curves slope downward. 
B)  Indifference curves show equally preferred combinations of two goods. 
C)  Indifference curves are not straight lines because the marginal rate of substitution falls. 
D)  Indifference curves shift when prices change. 
A)  Indifference curves slope downward. 
B)  Indifference curves show equally preferred combinations of two goods. 
C)  Indifference curves are not straight lines because the marginal rate of substitution falls. 
D)  Indifference curves shift when prices change.

Question 20

-Refer to the above table. At what quantity does diminishing marginal utility set in?

Accepted Answer

A)  After 0. 
B)  After 1. 
C)  After 2. 
D)  After 10. 
A)  After 0. 
B)  After 1. 
C)  After 2. 
D)  After 10.

Exam 20: Consumer Choice

"As an individual consumes more units of a good, her total utility falls because of the law of diminishing marginal utility." Do you agree or disagree? Explain.

-Refer to the above figures. Which panel best represents an indifference curve?

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

The total utility of water is

Which English philosopher set out to develop an arithmetic formula for measuring happiness and along the way invented the util?

The utility that people experience from the consumption of a good depends on

The budget line

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

Suppose a consumer is at an optimum. What happens when the price of one good she has been consuming increases?

Indifference curves

-Using the above table, what is the marginal utility of the 4th soda?

If an individual consumes only two goods and consumption of one good increases, then in order to keep the consumer on the same indifference curve, consumption of the other good must

The reason that all-you-can-eat restaurants can make a profit is due to

In economics, utility is defined as

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

When a consumer shifts his purchases from product A to product B, the marginal utility of

Which of the following statements is true with respect to total utility and marginal utility?

-Using the above table, if the price of Pepsi is $3, how many cans of Pepsi would have to be consumed in order to have a marginal utility to price ratio of 3?

Which of the following is NOT true about indifference curves?

-Refer to the above table. At what quantity does diminishing marginal utility set in?

The Nature of Economics

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Public Spending and Public Choice

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The Macroeconomy: Unemployment, Inflation, and Deflation

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The Firm: Cost and Output Determination

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The Labor Market: Demand, Supply and Outsourcing

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