Question 1

Kathleen eats three TV dinners. The third TV dinner makes Kathleen sick. This means that for Kathleen

Accepted Answer

A)  the third TV dinner has little utility. 
B)  the third TV dinner has negative utility. 
C)  the opportunity cost of TV dinners is high. 
D)  TV dinners must be inexpensive. 
A)  the third TV dinner has little utility. 
B)  the third TV dinner has negative utility. 
C)  the opportunity cost of TV dinners is high. 
D)  TV dinners must be inexpensive.

Question 2

-Refer to the above table. Which of the four people have utility schedules characterized by the law of diminishing marginal utility?

Accepted Answer

A)  Amy, Robert, and David only 
B)  Michelle only 
C)  Michelle and David only 
D)  Amy and Robert only 
A)  Amy, Robert, and David only 
B)  Michelle only 
C)  Michelle and David only 
D)  Amy and Robert only

Question 3

The price of hamburgers is $2 and the price of movies is $4. The consumer has $16 of income. The consumer is purchasing 3 hamburgers and receiving 20 utils for the last hamburger. He is also purchasing 2 movies and receiving 40 utils for the last movie. This 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 maximized. 
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 maximized. 
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 4

A representative unit that measures the want-satisfying power of a good is

Accepted Answer

A)  a margin. 
B)  purchasing power. 
C)  income. 
D)  a util. 
A)  a margin. 
B)  purchasing power. 
C)  income. 
D)  a util.

Question 5

Regretting a last unit of consumption of cake implies that

Accepted Answer

A)  the total utility from eating cake was negative. 
B)  cake is an inferior good. 
C)  the marginal utility of the last unit of cake consumed was negative. 
D)  the demand curve for cake is horizontal. 
A)  the total utility from eating cake was negative. 
B)  cake is an inferior good. 
C)  the marginal utility of the last unit of cake consumed was negative. 
D)  the demand curve for cake is horizontal.

Question 6

The price of good "a" is $5 and the price of good "b" is $15. If the marginal utility of good "a" is 20 then the marginal utility of good "b" must be ________ to have an optimum combination of goods purchased.

Accepted Answer

A)  4 
B)  20 
C)  60 
D)  80 
A)  4 
B)  20 
C)  60 
D)  80

Question 7

The change in total utility derived when a customer consumes one more unit of a good or service is called

Accepted Answer

A)  total utility. 
B)  marginal utility. 
C)  average utility. 
D)  final utility. 
A)  total utility. 
B)  marginal utility. 
C)  average utility. 
D)  final utility.

Question 8

The law of diminishing marginal utility implies that the marginal utility for a particular product

Accepted Answer

A)  remains constant, regardless of how much of the product is consumed. 
B)  remains constant as long as the product is still considered useful. 
C)  decreases as more of the product is consumed. 
D)  increases as more of the product is consumed. 
A)  remains constant, regardless of how much of the product is consumed. 
B)  remains constant as long as the product is still considered useful. 
C)  decreases as more of the product is consumed. 
D)  increases as more of the product is consumed.

Question 9

-In the above figure, if the budget line is the line DF, the consumer will maximize utility at point

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  G. 
A)  A. 
B)  B. 
C)  C. 
D)  G.

Question 10

Along an indifference curve

Accepted Answer

A)  every combination of goods the consumer can purchase with their income is given. 
B)  the prices of goods will change. 
C)  utility increases as you move to the right. 
D)  every combination of the goods give the same level of satisfaction. 
A)  every combination of goods the consumer can purchase with their income is given. 
B)  the prices of goods will change. 
C)  utility increases as you move to the right. 
D)  every combination of the goods give the same level of satisfaction.

Question 11

Dave is undecided about whether to eat at a restaurant or to order pizza at home. He then obtains a coupon for 20 percent off at the restaurant and decides to go there to eat. This is an example of

Accepted Answer

A)  someone using criteria other than price to make a consumption decision. 
B)  a lower price leading a consumer to substitute more of the less expensive good for the relatively more expensive good. 
C)  a lower price leading a consumer to buy more of a good because of the income effect. 
D)  a consumer making a decision irrationally. 
A)  someone using criteria other than price to make a consumption decision. 
B)  a lower price leading a consumer to substitute more of the less expensive good for the relatively more expensive good. 
C)  a lower price leading a consumer to buy more of a good because of the income effect. 
D)  a consumer making a decision irrationally.

Question 12

An indifference map shows

Accepted Answer

A)  that money income is constant, but product prices may change. 
B)  that utility is at a maximum at the origin. 
C)  that curves closer to the origin represent higher levels of utility. 
D)  that curves further from the origin represent higher levels of utility. 
A)  that money income is constant, but product prices may change. 
B)  that utility is at a maximum at the origin. 
C)  that curves closer to the origin represent higher levels of utility. 
D)  that curves further from the origin represent higher levels of utility.

Question 13

If the commercial is correct that every additional bite tastes as good as the first, the marginal utility from consuming more of the advertised product must be

Accepted Answer

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

Question 14

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income
  
-In the above table, how much total utility does Bob get from consuming 4 beers?

Accepted Answer

A)  10 utils 
B)  45 utils 
C)  125 utils 
D)  115 utils 
A)  10 utils 
B)  45 utils 
C)  125 utils 
D)  115 utils

Question 15

The change in people's purchasing power that occurs when the price of a good they purchase changes, assuming all else is held constant is known as

Accepted Answer

A)  the substitution effect. 
B)  the real income effect. 
C)  the elasticity effect. 
D)  the multiplier effect. 
A)  the substitution effect. 
B)  the real income effect. 
C)  the elasticity effect. 
D)  the multiplier effect.

Question 16

The price of hamburgers is $2 and the price of movies is $4. The consumer has $14 of income. The consumer is purchasing 3 hamburgers and receiving 20 utils for the last hamburger. He is also purchasing 2 movies and receiving 40 utils for the last movie. This 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 17

Suppose that the quantity of hamburgers is measured along the vertical axis and that the quantity of popcorn is measured along the horizontal axis. The vertical intercept is 10 hamburgers, and the slope of the budget line is -2. If the price of popcorn falls from $1 to $0.50, then we know that

Accepted Answer

A)  the vertical intercept shifts to 20 hamburgers. 
B)  the vertical intercept shifts to 5 hamburgers. 
C)  the horizontal intercept shifts to 10 bags of popcorn. 
D)  the horizontal intercept shifts to 20 bags of popcorn. 
A)  the vertical intercept shifts to 20 hamburgers. 
B)  the vertical intercept shifts to 5 hamburgers. 
C)  the horizontal intercept shifts to 10 bags of popcorn. 
D)  the horizontal intercept shifts to 20 bags of popcorn.

Question 18

Newspaper vending machines are often built so that customers can pay to lift a door and take a paper off a pile of daily newspapers. Newspaper distributors are not concerned about customers taking the whole stack of papers because

Accepted Answer

A)  the total utility of a daily newspaper is zero. 
B)  the marginal utility of any one daily newspaper is zero. 
C)  the marginal utility of a second daily newspaper is zero. 
D)  the price of a daily newspaper is relatively low. 
A)  the total utility of a daily newspaper is zero. 
B)  the marginal utility of any one daily newspaper is zero. 
C)  the marginal utility of a second daily newspaper is zero. 
D)  the price of a daily newspaper is relatively low.

Question 19

When economists refer to people making decisions at the margin, they mean that we compare ________ benefits with ________ costs.

Accepted Answer

A)  total; total 
B)  total; incremental 
C)  additional; additional 
D)  additional; marginal 
A)  total; total 
B)  total; incremental 
C)  additional; additional 
D)  additional; marginal

Question 20

-Based on the information in the above table, the price of A is $3, the price of B is $2, and the price of C is $5. If Mary has $22 to spend, what combination of products A, B, and C should she buy in order to maximize her satisfaction?

Accepted Answer

A)  3 units of product A; 3 units of product B; 1 unit of product C 
B)  2 units of product A; 3 units of product B; 2 units of product C 
C)  3 units of product A; 4 units of product B; 0 units of product C 
D)  2 units of product A; 1 unit of product B; 4 units of product C 
A)  3 units of product A; 3 units of product B; 1 unit of product C 
B)  2 units of product A; 3 units of product B; 2 units of product C 
C)  3 units of product A; 4 units of product B; 0 units of product C 
D)  2 units of product A; 1 unit of product B; 4 units of product C

Exam 20: Consumer Choice

Kathleen eats three TV dinners. The third TV dinner makes Kathleen sick. This means that for Kathleen

-Refer to the above table. Which of the four people have utility schedules characterized by the law of diminishing marginal utility?

The price of hamburgers is $2 and the price of movies is $4. The consumer has $16 of income. The consumer is purchasing 3 hamburgers and receiving 20 utils for the last hamburger. He is also purchasing 2 movies and receiving 40 utils for the last movie. This set of goods

A representative unit that measures the want-satisfying power of a good is

Regretting a last unit of consumption of cake implies that

The price of good "a" is $5 and the price of good "b" is $15. If the marginal utility of good "a" is 20 then the marginal utility of good "b" must be ________ to have an optimum combination of goods purchased.

The change in total utility derived when a customer consumes one more unit of a good or service is called

The law of diminishing marginal utility implies that the marginal utility for a particular product

-In the above figure, if the budget line is the line DF, the consumer will maximize utility at point

Along an indifference curve

Dave is undecided about whether to eat at a restaurant or to order pizza at home. He then obtains a coupon for 20 percent off at the restaurant and decides to go there to eat. This is an example of

An indifference map shows

If the commercial is correct that every additional bite tastes as good as the first, the marginal utility from consuming more of the advertised product must be

Bob's Marginal Utility for consuming beer and pizza with $8.00 in income -In the above table, how much total utility does Bob get from consuming 4 beers?

The change in people's purchasing power that occurs when the price of a good they purchase changes, assuming all else is held constant is known as

The price of hamburgers is $2 and the price of movies is $4. The consumer has $14 of income. The consumer is purchasing 3 hamburgers and receiving 20 utils for the last hamburger. He is also purchasing 2 movies and receiving 40 utils for the last movie. This set of goods

Suppose that the quantity of hamburgers is measured along the vertical axis and that the quantity of popcorn is measured along the horizontal axis. The vertical intercept is 10 hamburgers, and the slope of the budget line is -2. If the price of popcorn falls from $1 to $0.50, then we know that

Newspaper vending machines are often built so that customers can pay to lift a door and take a paper off a pile of daily newspapers. Newspaper distributors are not concerned about customers taking the whole stack of papers because

When economists refer to people making decisions at the margin, they mean that we compare ________ benefits with ________ costs.

-Based on the information in the above table, the price of A is $3, the price of B is $2, and the price of C is $5. If Mary has $22 to spend, what combination of products A, B, and C should she buy in order to maximize her satisfaction?

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

Filters

When economists refer to people making decisions at the margin, they mean that we compare benefits with costs.