Question 1

The real-income effect refers to

Accepted Answer

A)  the law of diminishing marginal utility. 
B)  the want-satisfying power of a good or service. 
C)  substitution of less expensive commodities for more expensive commodities. 
D)  the change in purchasing power when the price of a good changes. 
A)  the law of diminishing marginal utility. 
B)  the want-satisfying power of a good or service. 
C)  substitution of less expensive commodities for more expensive commodities. 
D)  the change in purchasing power when the price of a good changes. D

Question 2

A good synonym for "utility" is

Accepted Answer

A)  marginal. 
B)  need. 
C)  necessity. 
D)  satisfaction. 
A)  marginal. 
B)  need. 
C)  necessity. 
D)  satisfaction. D

Question 3

-Use the above figure. Last week Joe consumed combination "B" of goods "X" and "Y." This week he purchased combination "A." The reason for this change is that the

Accepted Answer

A)  price of good X has increased. 
B)  price of good X has decreased. 
C)  price of good Y has decreased. 
D)  price of good Y has increased. 
A)  price of good X has increased. 
B)  price of good X has decreased. 
C)  price of good Y has decreased. 
D)  price of good Y has increased. D

Question 4

The diamond-water paradox was solved by knowing that

Accepted Answer

A)  the total utility of water is greater than the total utility of diamonds. 
B)  the marginal utility of water is greater than the marginal utility of diamonds. 
C)  the price of water and diamonds is determined by total utility received, not marginal utility. 
D)  the price of water and diamonds is determined by marginal utility, not total utility. 
A)  the total utility of water is greater than the total utility of diamonds. 
B)  the marginal utility of water is greater than the marginal utility of diamonds. 
C)  the price of water and diamonds is determined by total utility received, not marginal utility. 
D)  the price of water and diamonds is determined by marginal utility, not total utility.

Question 5

In economics, people make decisions regarding consumption based on comparing

Accepted Answer

A)  additional units of satisfaction with additional costs. 
B)  average satisfaction with additional costs. 
C)  average satisfaction with average costs. 
D)  additional units of satisfaction with average costs. 
A)  additional units of satisfaction with additional costs. 
B)  average satisfaction with additional costs. 
C)  average satisfaction with average costs. 
D)  additional units of satisfaction with average costs.

Question 6

-Refer to the above table. What is the marginal utility for the 10th unit for Michael and for Rosie?

Accepted Answer

A)  Michael: 50; Rosie: 50 
B)  Michael: 15; Rosie: 20 
C)  Michael: 10; Rosie: 10 
D)  Michael: -10; Rosie: 10 
A)  Michael: 50; Rosie: 50 
B)  Michael: 15; Rosie: 20 
C)  Michael: 10; Rosie: 10 
D)  Michael: -10; Rosie: 10

Question 7

Behavioral economics suggests that people face human limitations that prevent them from examining every possible choice available to them, with the implication that

Accepted Answer

A)  the consumer optimum implied by utility theory is an inappropriate approach to deriving demand curves. 
B)  the consumer optimum implied by utility theory is an appropriate approach to deriving demand curves. 
C)  marginal utility is always equal to zero. 
D)  marginal utility is always negative. 
A)  the consumer optimum implied by utility theory is an inappropriate approach to deriving demand curves. 
B)  the consumer optimum implied by utility theory is an appropriate approach to deriving demand curves. 
C)  marginal utility is always equal to zero. 
D)  marginal utility is always negative.

Question 8

When marginal utility is zero, total utility is

Accepted Answer

A)  increasing. 
B)  at its maximum. 
C)  at its minimum. 
D)  decreasing. 
A)  increasing. 
B)  at its maximum. 
C)  at its minimum. 
D)  decreasing.

Question 9

-In the above table, marginal utility begins to diminish after consumption of the

Accepted Answer

A)  second slice of pizza. 
B)  third slice of pizza. 
C)  fourth slice of pizza. 
D)  fifth slice of pizza. 
A)  second slice of pizza. 
B)  third slice of pizza. 
C)  fourth slice of pizza. 
D)  fifth slice of pizza.

Question 10

Initially, a consumer is at an optimum. Then the price of Y decreases. Consequently

Accepted Answer

A)  MUX/PX  MUY/PY. 
C)  MUX/PX = MUY/PY. 
D)  MUX > MUY. 
A)  MUX/PX  MUY/PY. 
C)  MUX/PX = MUY/PY. 
D)  MUX > MUY.

Question 11

Refer to the above table. Suppose the price of a hamburger is $2, the price of a movie is $5, and the income of the consumer is $29. What will the consumer's total utility equal at an optimum?
-Refer to the above table. The price of a hamburger is $2, the price of a movie is $5, and the consumer's income is $29. What is the marginal utility per last dollar spent on movies equal to if the consumer is at an optimum?

Accepted Answer

A)  50 
B)  40 
C)  20 
D)  10 
A)  50 
B)  40 
C)  20 
D)  10

Question 12

When a consumer shifts her purchases from product X to product Y, the marginal utility of

Accepted Answer

A)  X falls and the marginal utility of Y will increase. 
B)  both X and Y will decrease. 
C)  X increases and the marginal utility of Y will fall. 
D)  both X and Y will increase. 
A)  X falls and the marginal utility of Y will increase. 
B)  both X and Y will decrease. 
C)  X increases and the marginal utility of Y will fall. 
D)  both X and Y will increase.

Question 13

If the quantity of tacos is measured along the horizontal axis and the quantity of movies is measured along the vertical axis, and the price of a taco is $2.00 while the price of a movie is $12, then the slope of the budget line is

Accepted Answer

A)  -1/3. 
B)  -3.5 
C)  -1/6. 
D)  -6. 
A)  -1/3. 
B)  -3.5 
C)  -1/6. 
D)  -6.

Question 14

What are the key properties of indifference curves?

Accepted Answer

Indifference curves have a dow

Question 15

Economists once believed utility could be measured. This school of thought, known as utilitarianism, was developed by the English philosopher

Accepted Answer

A)  Jeremy Bentham. 
B)  Henri Leconte. 
C)  John Lennon. 
D)  Bernard Mandeville. 
A)  Jeremy Bentham. 
B)  Henri Leconte. 
C)  John Lennon. 
D)  Bernard Mandeville.

Question 16

Suppose that Jacob is going to a buffet restaurant that allows him to eat as many chicken wings as he wants at a fixed price. How would you predict the number of chicken wings that Jacob will eat using utility theory?

Accepted Answer

Utility theory predicts that Jacob will

Question 17

To derive the demand curve for good X, all the following are constant EXCEPT

Accepted Answer

A)  the price of good X. 
B)  income. 
C)  the price of good Y. 
D)  tastes and preferences. 
A)  the price of good X. 
B)  income. 
C)  the price of good Y. 
D)  tastes and preferences.

Question 18

If a college student stays home and watches a Netflix movie for $2 rather than going out to a $15 movie, this is an example of the

Accepted Answer

A)  utility effect. 
B)  value effect. 
C)  substitution effect. 
D)  income effect. 
A)  utility effect. 
B)  value effect. 
C)  substitution effect. 
D)  income effect.

Question 19

The quantity of good A is measured along the vertical axis, and the quantity of good B is measures along the horizontal axis. If the price of Good A falls

Accepted Answer

A)  the vertical intercept of the budget line moves along the vertical axis away from the origin. 
B)  the vertical intercept of the budget line moves along the vertical axis toward the origin. 
C)  the horizontal intercept (along Good 
B)  of the budget line will increase. 
D)  none of the above 
A)  the vertical intercept of the budget line moves along the vertical axis away from the origin. 
B)  the vertical intercept of the budget line moves along the vertical axis toward the origin. 
C)  the horizontal intercept (along Good 
B)  of the budget line will increase. 
D)  none of the above

Question 20

Peter consumes bags of potato chips and cans of soft drink. The marginal utility of bags of potato chips is 10 utils per bag and the marginal utility of cans of soft drink is 50 utils per can. Potato chips cost $0.50 a bag, and a can of soft drink costs $1.00. What should Peter do?

Accepted Answer

A)  Peter should eat more chips, because they cost less. 
B)  Peter should buy more chips and less soft drink. 
C)  Peter should buy more soft drink, because it costs less. 
D)  Peter should buy more soft drink and fewer potato chips. 
A)  Peter should eat more chips, because they cost less. 
B)  Peter should buy more chips and less soft drink. 
C)  Peter should buy more soft drink, because it costs less. 
D)  Peter should buy more soft drink and fewer potato chips.

Exam 20: Consumer Choice

The real-income effect refers to

A good synonym for "utility" is

-Use the above figure. Last week Joe consumed combination "B" of goods "X" and "Y." This week he purchased combination "A." The reason for this change is that the

The diamond-water paradox was solved by knowing that

In economics, people make decisions regarding consumption based on comparing

-Refer to the above table. What is the marginal utility for the 10th unit for Michael and for Rosie?

Behavioral economics suggests that people face human limitations that prevent them from examining every possible choice available to them, with the implication that

When marginal utility is zero, total utility is

-In the above table, marginal utility begins to diminish after consumption of the

Initially, a consumer is at an optimum. Then the price of Y decreases. Consequently

When a consumer shifts her purchases from product X to product Y, the marginal utility of

If the quantity of tacos is measured along the horizontal axis and the quantity of movies is measured along the vertical axis, and the price of a taco is $2.00 while the price of a movie is $12, then the slope of the budget line is

What are the key properties of indifference curves?

Economists once believed utility could be measured. This school of thought, known as utilitarianism, was developed by the English philosopher

Suppose that Jacob is going to a buffet restaurant that allows him to eat as many chicken wings as he wants at a fixed price. How would you predict the number of chicken wings that Jacob will eat using utility theory?

To derive the demand curve for good X, all the following are constant EXCEPT

If a college student stays home and watches a Netflix movie for $2 rather than going out to a $15 movie, this is an example of the

The quantity of good A is measured along the vertical axis, and the quantity of good B is measures along the horizontal axis. If the price of Good A falls

Peter consumes bags of potato chips and cans of soft drink. The marginal utility of bags of potato chips is 10 utils per bag and the marginal utility of cans of soft drink is 50 utils per can. Potato chips cost $0.50 a bag, and a can of soft drink costs $1.00. What should Peter do?

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

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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

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