Question 1

The income effect of a price change is named the way it is because it refers to a change in money income.

Accepted Answer

A) True 
 B)False

Question 2

A budget constraint is:

Accepted Answer

A)  a consumer's restriction on spending. 
B)  a consumer's total utility. 
C)  a consumer's marginal utility. 
D)  the income effect. 
A)  a consumer's restriction on spending. 
B)  a consumer's total utility. 
C)  a consumer's marginal utility. 
D)  the income effect.

Question 3

The substitution effect indicates that the implicit change in income contributes to the inverse relationship between price and quantity demanded.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer question(s):  
-(Exhibit: Utility) Total utility is maximized at the _______ unit.

Accepted Answer

A)  first 
B)  second 
C)  fourth 
D)  sixth 
A)  first 
B)  second 
C)  fourth 
D)  sixth

Question 5

Use the following to answer question(s): Consumer Equilibrium 2
  
-(Exhibit: Consumer Equilibrium 2) Which of the following statements is true?

Accepted Answer

A)  Point F indicates the price of good Y. 
B)  Point L indicates the price of good X. 
C)  Points G and I represent the same level of total utility. 
D)  None of the above statements is true. 
A)  Point F indicates the price of good Y. 
B)  Point L indicates the price of good X. 
C)  Points G and I represent the same level of total utility. 
D)  None of the above statements is true.

Question 6

The substitution and income effects reinforce each other for:

Accepted Answer

A)  complement goods. 
B)  normal goods. 
C)  inferior goods. 
D)  Giffen goods. 
A)  complement goods. 
B)  normal goods. 
C)  inferior goods. 
D)  Giffen goods.

Question 7

Sally Garcia devotes all of her income to the consumption of two goods, apples and Reese's Peanut Butter Cups.She has just discovered that at her current level of consumption the marginal utility of an apple is 6 and the marginal utility of a Reese's Peanut Butter Cup is 8.Suppose the price of an apple is $0.20, while the price of a Reese's Peanut Butter Cup is $0.25.To maximize her total utility, assuming that the goods are divisible, she would:

Accepted Answer

A)  consume more Reese's Butter Cups and fewer apples. 
B)  consume less of both goods. 
C)  consume more apples and fewer Reese's Butter Cups. 
D)  there is not enough information to justify a change in her current level of consumption. 
A)  consume more Reese's Butter Cups and fewer apples. 
B)  consume less of both goods. 
C)  consume more apples and fewer Reese's Butter Cups. 
D)  there is not enough information to justify a change in her current level of consumption.

Question 8

Utility is most closely related to the term:

Accepted Answer

A)  usefulness. 
B)  satisfaction. 
C)  requirement. 
D)  necessity. 
A)  usefulness. 
B)  satisfaction. 
C)  requirement. 
D)  necessity.

Question 9

The law of diminishing marginal utility indicates that the slope of the marginal utility curve eventually becomes:

Accepted Answer

A)  negative. 
B)  vertical. 
C)  horizontal. 
D)  positive. 
A)  negative. 
B)  vertical. 
C)  horizontal. 
D)  positive.

Question 10

If a consumer purchases a combination of commodities a and b such that MUₐ/Pₐ = 50 and MUb/Pb = 30, to maximize utility, the consumer should buy:

Accepted Answer

A)  less of both a and b. 
B)  more of both a and b. 
C)  more of a and less of b. 
D)  less of a and more of b. 
A)  less of both a and b. 
B)  more of both a and b. 
C)  more of a and less of b. 
D)  less of a and more of b.

Question 11

If a consumer purchases a combination of commodities a and b such that MUₐ/Pₐ = 50 and MUb/Pb = 40, to maximize utility, the consumer should buy:

Accepted Answer

A)  less of both a and b. 
B)  more of both a and b. 
C)  more of a and less of b. 
D)  less of a and more of b. 
A)  less of both a and b. 
B)  more of both a and b. 
C)  more of a and less of b. 
D)  less of a and more of b.

Question 12

The amount by which an additional unit of a good or service increases a consumer's total utility, all other things unchanged, is:

Accepted Answer

A)  marginal utility. 
B)  maximum utility. 
C)  average utility. 
D)  required utility. 
A)  marginal utility. 
B)  maximum utility. 
C)  average utility. 
D)  required utility.

Question 13

Which of the following is (are) true?

Accepted Answer

A)  A budget constraint limits what a poor consumer can spend, but there is no similar constraint on rich people. 
B)  Utility maximization requires seeking the greatest utility from a given budget. 
C)  In consumer choice theory, we assume all goods and services are normal. 
D)  All of the above are true. 
A)  A budget constraint limits what a poor consumer can spend, but there is no similar constraint on rich people. 
B)  Utility maximization requires seeking the greatest utility from a given budget. 
C)  In consumer choice theory, we assume all goods and services are normal. 
D)  All of the above are true.

Question 14

When MUₓ/Pₓ > MUᵧ/Pᵧ, the buyer should decrease the quantity of X purchased.

Accepted Answer

A) True 
 B)False

Question 15

The slope of a budget line for a consumer buying two goods is equal to the _______ of the price of the good on the ________ axis divided by the price of the good on the _______ axis.

Accepted Answer

A)  positive; vertical; horizontal 
B)  negative; horizontal; vertical 
C)  positive; horizontal; vertical 
D)  negative; vertical; horizontal 
A)  positive; vertical; horizontal 
B)  negative; horizontal; vertical 
C)  positive; horizontal; vertical 
D)  negative; vertical; horizontal

Question 16

The conceptual measure of the satisfaction a person obtains by consuming a given quantity of a good or service during a given time period is:

Accepted Answer

A)  average product. 
B)  marginal cost. 
C)  marginal revenue. 
D)  total utility. 
A)  average product. 
B)  marginal cost. 
C)  marginal revenue. 
D)  total utility.

Question 17

According to the utility model of consumer demand, the demand curve is downward sloping because of the law of:

Accepted Answer

A)  diminishing marginal utility. 
B)  increasing cost. 
C)  utility minimization. 
D)  diminishing consumer surplus. 
A)  diminishing marginal utility. 
B)  increasing cost. 
C)  utility minimization. 
D)  diminishing consumer surplus.

Question 18

If a good is characterized as a Giffen good it must be an inferior good.

Accepted Answer

A) True 
 B)False

Question 19

Marginal utility is zero at the quantity at which total utility reaches its maximum.

Accepted Answer

A) True 
 B)False

Question 20

For a(n) _______ good, an increase in income will lead to an increase in _______ .

Accepted Answer

A)  inferior; consumption 
B)  normal; supply 
C)  normal; consumption 
D)  inferior; supply 
A)  inferior; consumption 
B)  normal; supply 
C)  normal; consumption 
D)  inferior; supply

The income effect of a price change is named the way it is because it refers to a change in money income.

A budget constraint is:

The substitution effect indicates that the implicit change in income contributes to the inverse relationship between price and quantity demanded.

Use the following to answer question(s): -(Exhibit: Utility) Total utility is maximized at the _______ unit.

Use the following to answer question(s): Consumer Equilibrium 2 -(Exhibit: Consumer Equilibrium 2) Which of the following statements is true?

The substitution and income effects reinforce each other for:

Utility is most closely related to the term:

The law of diminishing marginal utility indicates that the slope of the marginal utility curve eventually becomes:

If a consumer purchases a combination of commodities a and b such that MUₐ/Pₐ = 50 and MUb/Pb = 30, to maximize utility, the consumer should buy:

If a consumer purchases a combination of commodities a and b such that MUₐ/Pₐ = 50 and MUb/Pb = 40, to maximize utility, the consumer should buy:

The amount by which an additional unit of a good or service increases a consumer's total utility, all other things unchanged, is:

Which of the following is (are) true?

When MUₓ/Pₓ > MUᵧ/Pᵧ, the buyer should decrease the quantity of X purchased.

The slope of a budget line for a consumer buying two goods is equal to the _ of the price of the good on the axis divided by the price of the good on the _ axis.

The conceptual measure of the satisfaction a person obtains by consuming a given quantity of a good or service during a given time period is:

According to the utility model of consumer demand, the demand curve is downward sloping because of the law of:

If a good is characterized as a Giffen good it must be an inferior good.

Marginal utility is zero at the quantity at which total utility reaches its maximum.

For a(n) _ good, an increase in income will lead to an increase in _ .

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

Markets, Maximizers, and Efficiency

Production and Cost

Competitive Markets for Goods and Services

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

Exam 7: The Analysis of Consumer Choice

The income effect of a price change is named the way it is because it refers to a change in money income.

A budget constraint is:

The substitution effect indicates that the implicit change in income contributes to the inverse relationship between price and quantity demanded.

Use the following to answer question(s): -(Exhibit: Utility) Total utility is maximized at the _______ unit.

Use the following to answer question(s): Consumer Equilibrium 2 -(Exhibit: Consumer Equilibrium 2) Which of the following statements is true?

The substitution and income effects reinforce each other for:

Utility is most closely related to the term:

The law of diminishing marginal utility indicates that the slope of the marginal utility curve eventually becomes:

If a consumer purchases a combination of commodities a and b such that MUₐ/Pₐ = 50 and MUb/Pb = 30, to maximize utility, the consumer should buy:

If a consumer purchases a combination of commodities a and b such that MUₐ/Pₐ = 50 and MUb/Pb = 40, to maximize utility, the consumer should buy:

The amount by which an additional unit of a good or service increases a consumer's total utility, all other things unchanged, is:

Which of the following is (are) true?

When MUₓ/Pₓ > MUᵧ/Pᵧ, the buyer should decrease the quantity of X purchased.

The slope of a budget line for a consumer buying two goods is equal to the _______ of the price of the good on the ________ axis divided by the price of the good on the _______ axis.

The conceptual measure of the satisfaction a person obtains by consuming a given quantity of a good or service during a given time period is:

According to the utility model of consumer demand, the demand curve is downward sloping because of the law of:

If a good is characterized as a Giffen good it must be an inferior good.

Marginal utility is zero at the quantity at which total utility reaches its maximum.

For a(n) _______ good, an increase in income will lead to an increase in _______ .

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

Markets, Maximizers, and Efficiency

Production and Cost

Competitive Markets for Goods and Services

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

The slope of a budget line for a consumer buying two goods is equal to the _ of the price of the good on the axis divided by the price of the good on the _ axis.

For a(n) _ good, an increase in income will lead to an increase in _ .