Question 1

A budget line shows:

Accepted Answer

A)  the combinations of two goods that yield the same level of utility. 
B)  the relationship between the price and the quantity supplied of a good or service. 
C)  the combinations of two goods that can be purchased at given prices with a given level of income. 
D)  the relationship between the price and the quantity demanded of a good or service. 
A)  the combinations of two goods that yield the same level of utility. 
B)  the relationship between the price and the quantity supplied of a good or service. 
C)  the combinations of two goods that can be purchased at given prices with a given level of income. 
D)  the relationship between the price and the quantity demanded of a good or service.

Question 2

If housing prices have increased for the past 20 years,it is almost certain that prices will increase the following year.

Accepted Answer

A) True 
 B)False

Question 3

If the marginal benefit Isaac derives from the consumption of another candy bar is greater than the price of the candy bar,then:

Accepted Answer

A)  Isaac will not purchase any more candy bars. 
B)  Isaac will increase his total satisfaction by purchasing the candy bar. 
C)  the opportunity cost of the candy bar is less than the price. 
D)  Isaac's total utility will diminish if he purchases the candy bar. 
A)  Isaac will not purchase any more candy bars. 
B)  Isaac will increase his total satisfaction by purchasing the candy bar. 
C)  the opportunity cost of the candy bar is less than the price. 
D)  Isaac's total utility will diminish if he purchases the candy bar.

Question 4

Behavioral economists use findings from psychology to explain complex consumer behavior that cannot always be explained by traditional economic models.

Accepted Answer

A) True 
 B)False

Question 5

The law of diminishing marginal utility states that:

Accepted Answer

A)  total utility decreases as consumption of a good increases. 
B)  total utility increases as consumption of a good increases. 
C)  the increase in total utility from consuming an additional unit decreases as consumption increases. 
D)  the increase in total utility from consuming an additional unit increases as consumption increases. 
A)  total utility decreases as consumption of a good increases. 
B)  total utility increases as consumption of a good increases. 
C)  the increase in total utility from consuming an additional unit decreases as consumption increases. 
D)  the increase in total utility from consuming an additional unit increases as consumption increases.

Question 6

Which of the following violates the law of diminishing marginal utility?

Accepted Answer

A)  Phil's marginal utility from drinking another beer remains positive as he drinks more at a party. 
B)  Phil's marginal utility from drinking becomes negative after 6 beers at a party. 
C)  Phil's total utility from drinking 5 beers at a party is greater than his total utility of drinking 3 beers at a party. 
D)  The more beer Phil drinks, the more he enjoys the next one. 
A)  Phil's marginal utility from drinking another beer remains positive as he drinks more at a party. 
B)  Phil's marginal utility from drinking becomes negative after 6 beers at a party. 
C)  Phil's total utility from drinking 5 beers at a party is greater than his total utility of drinking 3 beers at a party. 
D)  The more beer Phil drinks, the more he enjoys the next one.

Question 7

If two commodities are perfect complements,the indifference curve is a straight line.

Accepted Answer

A) True 
 B)False

Question 8

Rebecca consumes both iced tea and coffee.Iced tea is priced at $1.50 per bottle and coffee at $2.00 per 16-ounce cup.Which of the following marginal utility pairs is consistent with Rebecca's consumer equilibrium at these prices?

Accepted Answer

A)  MU of iced tea = 1; MU of coffee = 1 
B)  MU of iced tea = 1; MU of coffee = 2 
C)  MU of iced tea = 2; MU of coffee = 3 
D)  MU of iced tea = 3; MU of coffee = 4 
A)  MU of iced tea = 1; MU of coffee = 1 
B)  MU of iced tea = 1; MU of coffee = 2 
C)  MU of iced tea = 2; MU of coffee = 3 
D)  MU of iced tea = 3; MU of coffee = 4

Question 9

The total utility from consuming five muffins is 14,24,35,43,and 50 utils,respectively.Marginal utility begins to diminish after consuming the first muffin.

Accepted Answer

A) True 
 B)False

Question 10

Exhibit 10-3   Refer to Exhibit 10-3.Which budget line depicts a decrease in income?

Accepted Answer

A)  (1) 
B)  (2) 
C)  (3) 
D)  (4) 
A)  (1) 
B)  (2) 
C)  (3) 
D)  (4)

Question 11

Marginal utility:

Accepted Answer

A)  generally increases as more of a good is acquired. 
B)  generally remains constant as more of a good is acquired. 
C)  generally decreases as more of a good is acquired. 
D)  begins to fall when total utility reaches its highest point. 
A)  generally increases as more of a good is acquired. 
B)  generally remains constant as more of a good is acquired. 
C)  generally decreases as more of a good is acquired. 
D)  begins to fall when total utility reaches its highest point.

Question 12

Popeye receives a marginal utility of 12 utils for the last can of spinach consumed.If the price of a can of spinach is 50 cents per can,then the marginal utility per dollar spent on the last can of spinach is equal to:

Accepted Answer

A)  6 utils per dollar. 
B)  12 utils per dollar. 
C)  18 utils per dollar. 
D)  24 utils per dollar. 
A)  6 utils per dollar. 
B)  12 utils per dollar. 
C)  18 utils per dollar. 
D)  24 utils per dollar.

Question 13

If a consumer is maximizing utility and then the price of Good A increases:

Accepted Answer

A)  the marginal utility from the consumption of Good A will fall. 
B)  the marginal utility from the consumption of Good A will remain unchanged. 
C)  the marginal utility per dollar spent on Good A will decrease. 
D)  consumption of Good A will increase. 
A)  the marginal utility from the consumption of Good A will fall. 
B)  the marginal utility from the consumption of Good A will remain unchanged. 
C)  the marginal utility per dollar spent on Good A will decrease. 
D)  consumption of Good A will increase.

Question 14

As long as a person had to pay a positive price for a good,he would never consume to the point where his total utility was falling with additional consumption.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true?

Accepted Answer

A)  Total utility is the aggregate level of satisfaction that results from consumption of a given number of goods and services. 
B)  Marginal utility is the additional satisfaction generated by the last unit of a good that is consumed. 
C)  Total utility equals marginal utility of the last unit times the number of units consumed. 
D)  Both a. and b. are true. 
A)  Total utility is the aggregate level of satisfaction that results from consumption of a given number of goods and services. 
B)  Marginal utility is the additional satisfaction generated by the last unit of a good that is consumed. 
C)  Total utility equals marginal utility of the last unit times the number of units consumed. 
D)  Both a. and b. are true.

Question 16

Higher indifference curves represent lesser satisfaction.

Accepted Answer

A) True 
 B)False

Question 17

Traditional economists base their models of human behavior on simplifying assumptions regarding rationality and decision making.

Accepted Answer

A) True 
 B)False

Question 18

Total utility can be determined by:

Accepted Answer

A)  summing the marginal utilities of each unit of a good consumed. 
B)  multiplying the marginal utility of the last unit consumed by the number of units consumed. 
C)  multiplying the marginal utility of the first unit consumed by the number of units consumed. 
D)  multiplying the price of the good times the number of units consumed. 
A)  summing the marginal utilities of each unit of a good consumed. 
B)  multiplying the marginal utility of the last unit consumed by the number of units consumed. 
C)  multiplying the marginal utility of the first unit consumed by the number of units consumed. 
D)  multiplying the price of the good times the number of units consumed.

Question 19

A consumer's budget line will shift to the left in a parallel manner if:

Accepted Answer

A)  the price of the good on the X-axis increases. 
B)  the price of the good on the Y-axis increases. 
C)  the consumer's income increases. 
D)  the consumer's income decreases. 
A)  the price of the good on the X-axis increases. 
B)  the price of the good on the Y-axis increases. 
C)  the consumer's income increases. 
D)  the consumer's income decreases.

Question 20

The total utility from consuming five cups of coffee is 15,27,37,46,and 54 utils,respectively.The marginal utility of the fourth cup of coffee is:

Accepted Answer

A)  48. 
B)  54. 
C)  9. 
D)  6. 
A)  48. 
B)  54. 
C)  9. 
D)  6.

Exam 10: Consumer Choice Theory

A budget line shows:

If housing prices have increased for the past 20 years,it is almost certain that prices will increase the following year.

If the marginal benefit Isaac derives from the consumption of another candy bar is greater than the price of the candy bar,then:

Behavioral economists use findings from psychology to explain complex consumer behavior that cannot always be explained by traditional economic models.

The law of diminishing marginal utility states that:

Which of the following violates the law of diminishing marginal utility?

If two commodities are perfect complements,the indifference curve is a straight line.

Rebecca consumes both iced tea and coffee.Iced tea is priced at $1.50 per bottle and coffee at $2.00 per 16-ounce cup.Which of the following marginal utility pairs is consistent with Rebecca's consumer equilibrium at these prices?

The total utility from consuming five muffins is 14,24,35,43,and 50 utils,respectively.Marginal utility begins to diminish after consuming the first muffin.

Exhibit 10-3 Refer to Exhibit 10-3.Which budget line depicts a decrease in income?

Marginal utility:

Popeye receives a marginal utility of 12 utils for the last can of spinach consumed.If the price of a can of spinach is 50 cents per can,then the marginal utility per dollar spent on the last can of spinach is equal to:

If a consumer is maximizing utility and then the price of Good A increases:

As long as a person had to pay a positive price for a good,he would never consume to the point where his total utility was falling with additional consumption.

Which of the following is true?

Higher indifference curves represent lesser satisfaction.

Traditional economists base their models of human behavior on simplifying assumptions regarding rationality and decision making.

Total utility can be determined by:

A consumer's budget line will shift to the left in a parallel manner if:

The total utility from consuming five cups of coffee is 15,27,37,46,and 54 utils,respectively.The marginal utility of the fourth cup of coffee is:

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

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