Question 1

The table below shows the total utility associated with various units of goods X and Y.Table 7.5
  
-The demand curve slopes downward because of:

Accepted Answer

A) diminishing marginal utility and consumer equilibrium. 
B) the fact that consumers cannot decide how much they want to pay for goods and services. 
C) the fact that suppliers cannot decide how much to charge for the goods and services they supply. 
D) the fact that consumer tastes and preferences change rapidly. 
E) the fact that consumers are fickle, which makes pricing a good or service very difficult. 
A) diminishing marginal utility and consumer equilibrium. 
B) the fact that consumers cannot decide how much they want to pay for goods and services. 
C) the fact that suppliers cannot decide how much to charge for the goods and services they supply. 
D) the fact that consumer tastes and preferences change rapidly. 
E) the fact that consumers are fickle, which makes pricing a good or service very difficult.

Question 2

The table given below depicts the total utility derived from the consumption of a good.Table 7.1
  
-When marginal utility is positive and increasing, then

Accepted Answer

A) total utility must be negative. 
B) total utility must be increasing at an increasing rate. 
C) total utility must be increasing at a decreasing rate. 
D) total utility is decreasing. 
E) total utility is at its maximum point. 
A) total utility must be negative. 
B) total utility must be increasing at an increasing rate. 
C) total utility must be increasing at a decreasing rate. 
D) total utility is decreasing. 
E) total utility is at its maximum point.

Question 3

The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3
  
-A ten-year-old boy spent his allowance on a soccer ball and a baseball glove. He said he could not be happier buying anything else. The price of the ball was $5, while the price of the glove was $10. If the marginal utility he received from the ball was 15 utils, then:

Accepted Answer

A) the marginal utility he received from expenditure on the glove was 3 utils. 
B) the marginal utility he received from expenditure on the glove was 30 utils. 
C) the total utility per dollar he received from expenditure on the glove was 3 utils. 
D) the total utility per dollar he received from expenditure on the glove was 10 utils. 
E) the marginal utility he received from the expenditure of the glove was 10 utils 
A) the marginal utility he received from expenditure on the glove was 3 utils. 
B) the marginal utility he received from expenditure on the glove was 30 utils. 
C) the total utility per dollar he received from expenditure on the glove was 3 utils. 
D) the total utility per dollar he received from expenditure on the glove was 10 utils. 
E) the marginal utility he received from the expenditure of the glove was 10 utils

Question 4

The table below shows the total utility associated with various units of goods X and Y.Table 7.5
  
-The demand curve for a product can be derived from consumer equilibrium by:

Accepted Answer

A) altering the prices of all other products. 
B) altering consumer incomes. 
C) shifting consumer preferences. 
D) altering the price of the good itself. 
E) knowing the demand curves for all other products. 
A) altering the prices of all other products. 
B) altering consumer incomes. 
C) shifting consumer preferences. 
D) altering the price of the good itself. 
E) knowing the demand curves for all other products.

Question 5

Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2PS1U1B1xS1U1B0. Assume that P = $8, I = 200, and PS1U1B1xS1U1B0 = $10.
-The prices that people are willing to pay for goods and services mostly depend on:

Accepted Answer

A) the total utility derived from the goods and services. 
B) the marginal utility derived from the goods and services. 
C) the availability of raw materials for producing the goods and services. 
D) the cost of producing the goods and services. 
E) whether the goods are legal, since the laws affect the position of both supply and demand curves. 
A) the total utility derived from the goods and services. 
B) the marginal utility derived from the goods and services. 
C) the availability of raw materials for producing the goods and services. 
D) the cost of producing the goods and services. 
E) whether the goods are legal, since the laws affect the position of both supply and demand curves.

Question 6

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3
  
-The theory of bounded rationality states that it is likely for consumers to have perfect information.

Accepted Answer

A) True 
 B)False

Question 7

Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2PS1U1B1xS1U1B0. Assume that P = $8, I = 200, and PS1U1B1xS1U1B0 = $10.
-Suppose you go out with your friend for coffee and donuts at the local donut store. The first donut you eat tastes incredibly good. The second one also tastes pretty good. The third donut seems just okay. With the fourth donut you are turning somewhat green. The fifth donut makes you sick. Your friend, an economist, describes your experience as the principle of:

Accepted Answer

A) utility maximization. 
B) irrationality in consumer behavior. 
C) instant gratification. 
D) differing tastes and preferences. 
E) diminishing marginal utility. 
A) utility maximization. 
B) irrationality in consumer behavior. 
C) instant gratification. 
D) differing tastes and preferences. 
E) diminishing marginal utility.

Question 8

Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2PS1U1B1xS1U1B0. Assume that P = $8, I = 200, and PS1U1B1xS1U1B0 = $10.
-When attempting to explain why a consumer purchases a Ford automobile instead of a Honda automobile, or a Compaq computer instead of an IBM computer, an economist would assert:

Accepted Answer

A) that the consumer is making a decision based on what gives him maximum utility. 
B) that everyone knows Hondas are superior to Fords; the consumer cannot possibly be maximizing his utility. 
C) that everyone knows IBM computers are superior to Compaq computers; the consumer may be maximizing his utility at the margin, but is not maximizing total utility. 
D) that there is no standard explanation for consumer choices because consumers have varied tastes and preferences. 
E) that since rationality is bounded by lack of information, a consumer purchases goods based on convenience rather than on utility maximization. 
A) that the consumer is making a decision based on what gives him maximum utility. 
B) that everyone knows Hondas are superior to Fords; the consumer cannot possibly be maximizing his utility. 
C) that everyone knows IBM computers are superior to Compaq computers; the consumer may be maximizing his utility at the margin, but is not maximizing total utility. 
D) that there is no standard explanation for consumer choices because consumers have varied tastes and preferences. 
E) that since rationality is bounded by lack of information, a consumer purchases goods based on convenience rather than on utility maximization.

Question 9

The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3
  
-Refer to Table 7.3. Which of the following statements is false?

Accepted Answer

A) The consumer prefers the first unit of B to the first unit of A 
B) The consumer prefers the sixth unit of A to the sixth unit of B 
C) The marginal utility from the consumption of the fourth unit of A is 3 
D) The marginal utility from the consumption of the second unit of B is 7 
E) The marginal utility from the consumption of the second unit of A is 9 
A) The consumer prefers the first unit of B to the first unit of A 
B) The consumer prefers the sixth unit of A to the sixth unit of B 
C) The marginal utility from the consumption of the fourth unit of A is 3 
D) The marginal utility from the consumption of the second unit of B is 7 
E) The marginal utility from the consumption of the second unit of A is 9

Question 10

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3
  
-The shorter the period of time being considered, the less rapidly will diminishing marginal utility set in.

Accepted Answer

A) True 
 B)False

Question 11

The table below shows the total utility associated with various units of goods X and Y.Table 7.5
  
-In labor markets, a change in the wage rate has both an income and a substitution effect. An increase in wages causes an increase in real income but at the same time it increases the relative price of leisure for the worker. If an increase in wage rate causes an individual to work less, _____.

Accepted Answer

A) the income effect dominates the substitution effect 
B) the substitution effect dominates the income effect 
C) the substitution and income effects cancel each other out 
D) then leisure will be referred to as an inferior good 
E) the increase in wage rates will cause an increase in the supply of labor 
A) the income effect dominates the substitution effect 
B) the substitution effect dominates the income effect 
C) the substitution and income effects cancel each other out 
D) then leisure will be referred to as an inferior good 
E) the increase in wage rates will cause an increase in the supply of labor

Question 12

The figure given below represents two indifference curves IS1U1B11S1U1B0 and IS1U1B12S1U1B0 of an individual.Figure 7.2
  
-Refer to Figure 7.2. At which point in the figure above, will the consumer maximize satisfaction?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
E) E 
A) A 
B) B 
C) C 
D) D 
E) E

Question 13

Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2PS1U1B1xS1U1B0. Assume that P = $8, I = 200, and PS1U1B1xS1U1B0 = $10.
-When the marginal utility derived from a good is negative, total utility is _____.

Accepted Answer

A) increasing 
B) at a minimum 
C) equal to zero 
D) decreasing 
E) at a maximum 
A) increasing 
B) at a minimum 
C) equal to zero 
D) decreasing 
E) at a maximum

Question 14

The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3
  
-Jason is trying to decide whether to buy a bagel or a muffin for breakfast. The bagel costs $0.50 and has a marginal utility of 5. The muffin costs $1 and has a marginal utility of 20. Which should he buy and why?

Accepted Answer

A) The muffin, because it has a higher marginal utility 
B) The muffin, because it has a lower marginal utility 
C) The bagel, because it costs less 
D) The bagel, because it has a higher marginal utility per dollar 
E) The muffin, because it has a higher marginal utility per dollar 
A) The muffin, because it has a higher marginal utility 
B) The muffin, because it has a lower marginal utility 
C) The bagel, because it costs less 
D) The bagel, because it has a higher marginal utility per dollar 
E) The muffin, because it has a higher marginal utility per dollar

Question 15

The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3
  
-Jen spent her weekly allowance of $110 on clothes and cosmetics. Assume that she had allocated $100 to shoes and $10 to lipsticks and is in equilibrium. What can you conclude from her purchase decisions?

Accepted Answer

A) She likes shoes ten times as much as she likes lipsticks 
B) Jen liked the last pair of shoes ten times as much as the last tube of lipstick 
C) Jen purchased hundred pairs of shoes for each tube of lipstick 
D) She likes lipsticks ten times as much as she likes shoes 
E) She purchased one pair of shoes for each tube of lipstick 
A) She likes shoes ten times as much as she likes lipsticks 
B) Jen liked the last pair of shoes ten times as much as the last tube of lipstick 
C) Jen purchased hundred pairs of shoes for each tube of lipstick 
D) She likes lipsticks ten times as much as she likes shoes 
E) She purchased one pair of shoes for each tube of lipstick

Question 16

The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3
  
-Assume that a consumer purchases a combination of products X and Y and MUx / Px = 75 utils per dollar and MUy / Py = 50 utils per dollar. To maximize utility without spending more dollars, the consumer should buy:

Accepted Answer

A) more of both X and Y. 
B) less of Y only if the price of Y increases. 
C) more of Y and less of X. 
D) more of X and less of Y. 
E) less of both X and Y. 
A) more of both X and Y. 
B) less of Y only if the price of Y increases. 
C) more of Y and less of X. 
D) more of X and less of Y. 
E) less of both X and Y.

Question 17

The table below shows the total utility associated with various units of goods X and Y.Table 7.5
  
-"Throwing good money after bad" is also known as the _____ effect.

Accepted Answer

A) anchoring 
B) sunk-cost 
C) status quo 
D) familiarity 
E) overconfidence 
A) anchoring 
B) sunk-cost 
C) status quo 
D) familiarity 
E) overconfidence

Question 18

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3
  
-As the price of a good declines, a utility-maximizing consumer will respond by purchasing more of that good.

Accepted Answer

A) True 
 B)False

Question 19

The table given below depicts the total utility derived from the consumption of a good.Table 7.1
  
-The total utility of a consumer diminishes whenever:

Accepted Answer

A) he or she buys an additional unit of a good. 
B) his or her marginal utility decreases. 
C) his or her total utility increases at a decreasing rate. 
D) the last unit consumed of a particular good is distasteful or provides dissatisfaction. 
E) other consumers are also purchasing the product. 
A) he or she buys an additional unit of a good. 
B) his or her marginal utility decreases. 
C) his or her total utility increases at a decreasing rate. 
D) the last unit consumed of a particular good is distasteful or provides dissatisfaction. 
E) other consumers are also purchasing the product.

Question 20

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3
  
-Refer to Figure 7.3. The consumer prefers _____ to _____.

Accepted Answer

A) A; C 
B) B; A 
C) B; D 
D) D; E 
E) I1; I2 
A) A; C 
B) B; A 
C) B; D 
D) D; E 
E) I1; I2

The table below shows the total utility associated with various units of goods X and Y.Table 7.5 -The demand curve slopes downward because of:

The table given below depicts the total utility derived from the consumption of a good.Table 7.1 -When marginal utility is positive and increasing, then

The table below shows the total utility associated with various units of goods X and Y.Table 7.5 -The demand curve for a product can be derived from consumer equilibrium by:

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x. Assume that P = $8, I = 200, and P_x = $10. -The prices that people are willing to pay for goods and services mostly depend on:

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3 -The theory of bounded rationality states that it is likely for consumers to have perfect information.

The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3 -Refer to Table 7.3. Which of the following statements is false?

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3 -The shorter the period of time being considered, the less rapidly will diminishing marginal utility set in.

The figure given below represents two indifference curves I₁ and I₂ of an individual.Figure 7.2 -Refer to Figure 7.2. At which point in the figure above, will the consumer maximize satisfaction?

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x. Assume that P = $8, I = 200, and P_x = $10. -When the marginal utility derived from a good is negative, total utility is _____.

The table below shows the total utility associated with various units of goods X and Y.Table 7.5 -"Throwing good money after bad" is also known as the _____ effect.

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3 -As the price of a good declines, a utility-maximizing consumer will respond by purchasing more of that good.

The table given below depicts the total utility derived from the consumption of a good.Table 7.1 -The total utility of a consumer diminishes whenever:

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3 -Refer to Figure 7.3. The consumer prefers _ to _.

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

Markets and the Price System

The Aggregate Economy

Using Economics to Understand the World Around You

Elasticity: Demand and Supply

Supply: the Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Markets and Government

Antitrust and Regulation

Resource Markets

The Labor Market

The Capital Market

The Land Market and Natural Resources

Current Issues: Income, Income Distribution, Poverty, and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

Exam 7: Demand: Consumer Choice

The table below shows the total utility associated with various units of goods X and Y.Table 7.5 -The demand curve slopes downward because of:

The table given below depicts the total utility derived from the consumption of a good.Table 7.1 -When marginal utility is positive and increasing, then

The table below shows the total utility associated with various units of goods X and Y.Table 7.5 -The demand curve for a product can be derived from consumer equilibrium by:

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px. Assume that P = $8, I = 200, and Px = $10. -The prices that people are willing to pay for goods and services mostly depend on:

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3 -The theory of bounded rationality states that it is likely for consumers to have perfect information.

The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3 -Refer to Table 7.3. Which of the following statements is false?

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3 -The shorter the period of time being considered, the less rapidly will diminishing marginal utility set in.

The figure given below represents two indifference curves I1 and I2 of an individual.Figure 7.2 -Refer to Figure 7.2. At which point in the figure above, will the consumer maximize satisfaction?

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px. Assume that P = $8, I = 200, and Px = $10. -When the marginal utility derived from a good is negative, total utility is _____.

The table below shows the total utility associated with various units of goods X and Y.Table 7.5 -"Throwing good money after bad" is also known as the _____ effect.

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3 -As the price of a good declines, a utility-maximizing consumer will respond by purchasing more of that good.

The table given below depicts the total utility derived from the consumption of a good.Table 7.1 -The total utility of a consumer diminishes whenever:

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3 -Refer to Figure 7.3. The consumer prefers _____ to _____.

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

Markets and the Price System

The Aggregate Economy

Using Economics to Understand the World Around You

Elasticity: Demand and Supply

Supply: the Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Markets and Government

Antitrust and Regulation

Resource Markets

The Labor Market

The Capital Market

The Land Market and Natural Resources

Current Issues: Income, Income Distribution, Poverty, and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x. Assume that P = $8, I = 200, and P_x = $10. -The prices that people are willing to pay for goods and services mostly depend on:

The figure given below represents two indifference curves I₁ and I₂ of an individual.Figure 7.2 -Refer to Figure 7.2. At which point in the figure above, will the consumer maximize satisfaction?

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x. Assume that P = $8, I = 200, and P_x = $10. -When the marginal utility derived from a good is negative, total utility is _____.

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3 -Refer to Figure 7.3. The consumer prefers _ to _.